Tata Consumer Bisleri Deal: A Match Made In Heaven

For Tata Consumer, it was just another day when they announced the acquisition of Bisleri International for ₹7,000 crores. Many analysts were surprised at the steep buyout price because its estimated FY23 revenues are pegged at ₹2,500 crores at a profit of ₹220 crores. So, what are we missing, and how will Tata Consumer benefit from the Bisleri acquisition? First, let’s understand the economics of such a deal.

Tata Consumer Bisleri Acquisition

On a closer look, you will find TCPL’s acquisition perfectly fits with their strategy of pursuing inorganic growth to make a mark in India’s burgeoning food & beverages (F&B) industry, which accounts for 3% of India’s GDP.

And over the years, TCPL has made a series of acquisitions, particularly in the beverages segment, following this strategy. Like the acquisition of NourishCo from Pepsico and Mount Everest Mineral Water which owns the Himalayan Natural Mineral Water brand. However, the acquisition is the real game-changer as it will let TCPL spread its feathers rapidly across the country.

Bisleri – The Brand Story

The brand “Bisleri” is not Indian and originated in Italy on November 20th, 1851, and was not initially involved in producing mineral water. Instead, the founders started the company to produce drinks made up of cinchona, herbs, and iron salts for alcohol remedies.

In 1965, Bisleri set up India’s first mineral water plant in Thane, Mumbai, along with its Indian partner Khusroo Suntook, who witnessed a business opportunity in selling bottled mineral water in India. The business recorded tremendous growth in the starting years, but its limited reach hindered its development.

So, to upscale and expand its availability across all customer segments, the founders finalized selling the brand to a large business house. That’s when Ramesh Chauhan of Parle Group bought Bisleri for ₹4 lahks in 1969, just four years after its launch. And the painstaking journey of building the brand as India’s no.1 bottled mineral water started.

Bisleri’s Success

In the packaged water bottle segment, Bisleri has become the genericized trademark, meaning the brand has become the generic term of the product due to its popularity. Just like Xerox is used as a reference for photocopies in India. In other words, the company is the category creator in India.

The very reason you will find many packaged water bottle brands that sound very similar to Bisleri. Despite the launch of many other brands, the water giant has maintained and grown its market share. Only Rail Neer, the packaged water bottle from IRCTC, is closer to the company in brand recall. Still, it’s unavailable outside the railway premises, which gives the brand a clear advantage over competitors.

Bisleri – Tata Consumer Synergy

India’s bottled water market was valued at $2.4 billion in FY2021 and is expected to grow at a CAGR of 13.25% between 2023-2027, as per the report from market research and advisory TechSci Research.

The mineral water giant has a market share of around 32% and competes with Coco Cola’s Kinley, Pepsico’s Aquafina, Parle Agro’s Bailey, and Rail Neer. In FY22, IRCTC’s Rail Neer reported revenues of ₹169.15 crores and produced 19.86 crores of water bottles.

What will TCPL gain from the acquisition?

TCPL is looking to expand its footprint across the country for the beverage business and plans to increase the direct outlet coverage to 1.5 million stores this fiscal to 1.3 million. And the company only sells its products in 45-50% of the addressable market.

So, for TCPL, it’s not just about the bottled mineral water business with Bisleri but its whole distribution and dealership network that it has built. The company has over 4,500 distributors and over 5,000 distribution trucks across India & neighboring countries.

TCPL is building a future-ready portfolio of natural and healthy beverages beyond sugary sodas under its ‘Himalayan’ brand and tap growing non-alcoholic beverages market, which is expected to touch ₹1.47 lakh crores by 2030 from around ₹67,000 crores in 2019.

Therefore, if the acquisition happens, TCPL will gain access to the entry, mid, and premium segment markets spread across retail stores, chemist channels, hotels & restaurants, and airports. Therefore, in the short term, we may see high sales volume for products like Tata Gluco Plus jelly drink, Tata ORS+, Fruski, Tata Copper+, etc. The acquisition is a shot in the arm for TCPL to pursue its ambitious beverage play in the Indian market.

Financial Impact on Tata Consumer

The cost of marriage between India’s two most iconic brands is pegged around ₹6000-7000 crores, and TCPL’s strong balance sheet will absorb the acquisition cost. With ₹3,455 crores of cash in books and a debt-to-equity ratio of 0.02, TCPL is placed comfortably to finance the acquisition through debt or a combination of debt and cash.

There will be a short-term impact on the finances in terms of a rise in interest costs. Still, the deal would give TCPL’s business operations an unprecedented scale by leveraging the water giant’s distribution network.

Tata-Bisleri: A Match Made in Heaven

Many buyers were keen on buying Bisleri and ready to pay a higher price for the deal, but Ramesh Chauhan was looking for a buyer who would nurture and care for the brand. And, preference for Tata over other buyers was much more understandable. In his words: “I like the Tata culture of values and integrity and hence made up my mind despite the aggression shown by other interested buyers.”

And the house of Tata is known for nurturing brands with great care, as we have seen in the Jaguar Land Rover acquisition and the recent Air India acquisition.

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