HLL amalgamates subsidiary’s tea business - Views on News from Equitymaster

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HLL amalgamates subsidiary’s tea business

Mar 27, 2000

Hindustan Lever (HLL) plans to amalgamate the tea business of its subsidiary Lipton India Exports' tea business. HLL is the world’s largest tea marketer. Seven HLL tea brands –Red Label, Taaza, A!, 3 Roses, Super Dust, Top Star and Ruby Dust are among the top 10 tea brands in the country. Besides, HLL also markets Yellow Label and Green Label teas.

Lipton India posted a turnover of Rs 4.13 bn in FY 1999, a 17% drop over the previous year. While FY 2000 is not expected to be different, the coming year is expected to be much better.

For one, the domestic tea production is expected to touch a level of 900 m kgs. (it stood at around 835 m kgs. over the last two year’s.) Hence prices at tea auctions (from where HLL buys it tea) are expected to be stable. Secondly, the Russian market is expected to be much better in the current year after a two-year lull in tea exports caused by the currency crisis that hit Russia.

This is bound to lead to a healthy growth in tea exports to Russia and HLL would be a principal beneficiary now that Lipton’s tea business has been amalgamated with the company. With the domestic tea market also due for growth primarily due to the benefits of the withdrawal of the 8% excise on tea, HLL’s turnover from tea could well increase to over 22 bn in the current year.

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