Tata-PepsiCo joint venture to be revised

Tata Global Beverages and PepsiCo have decided to revise the terms of their joint venture agreement a decade after they formed NourishCo Beverages to accommodate the two partners’ individual business expansion plans and tweaks in their strategies, two senior officials directly aware of the developments said.

The key triggers for the revision include the Tata firm’s move to become a larger player in the food and beverages space that could include it stepping into PepsiCo’s turf and the fact that PepsiCo is no longer in the bottling business after selling its bottling operations to the Ravi Jaipuria group, they said.

“The objective is to redraw boundaries of the joint venture; since PepsiCo has an extensive portfolio in snacks, the concern is that the JV should not step on to PepsiCo’s turf with forthcoming launches,” one of the officials said.

Both Tata Global Beverages and Pepsi-Co confirmed the revision in the JV agreement for NourishCo, formed to sell products in the non-carbonated readyto-drink hydration space, and said it was a “regular business exercise”.

“This does not affect the current business of the JV, which primarily includes marketing and distribution of branded products Tata Gluco Plus, Tata Water Plus and Himalayan Natural Mineral Water, within the liquid beverage category,” both the firms said in their email reverts to ET.

In May last year, Tata Group had announced consolidation of all its consumer products business with all branded food businesses of Tata Chemicals that included packaged spices, pulses and salt being merged into Tata Global Beverages in an all-stock deal.

After the acquisition, the company was to be renamed Tata Consumer Products.

Its plan to expand the food and beverages business that currently includes tea, coffee and water risks making its relationship with PepsiCo tenuous, said the officials cited earlier.

Tata Consumer Products is expected to leverage synergies in the combined entity within marketing, sales and distribution, and compete directly with Britannia, ITC, Nestle and PepsiCo in foods business.

Another official said this could be beginning of scaling down of the joint venture, with PepsiCo having franchised its entire bottling business to RJ Corp earlier last year. “The revision the terms of the JV will also have to consider the association with RJ Corp-owned Varun Beverages which now does bottling, sales and distribution for PepsiCo,” the official said.

Tata Consumer Products’ businesses had combined turnover of Rs 9,099 crore for the year ended March 2019 with reach to more than 200 million households. Bringing key brands under a single umbrella would provide value creation for all shareholders through greater scale and synergies, the group had said while announcing the merger. While brands such as Tetley Tea, Eight O’Clock Coffee, Tata Tea Premium, Agni, Spice Mix, and Starbucks India’s franchise were under Tata Global, Tata Sampann pulses and spices and Tata Salt were under Tata Chemicals.

Source:- Economic Times