Tata ChemicalsBSE -4.15 %, Tata Global BeveragesBSE 0.21 % and Star Bazaar have stepped up collaboration in the food consumer space as multiple Tata group companies explore opportunities to work together as a cluster, a strategy suggested by Tata Sons’ new chairman N Chandrasekaran.
Chandrasekaran, popularly known as Chandra, is looking to restructure the loosely-held conglomerate into tighter clusters based on industries they operate in to achieve scale and cut costs. His focus is to create a few strong industry leaders rather than have many small companies that are unable to achieve scale. Tata Chemicals’ consumer businesses include salt, pulses and water purifier, while Tata Global Beverages sells tea, coffee and packaged drinking water. Star Bazaar is Tata Group’s hypermarket chain.
“Chandra has, again and again, repeated that scale may lie at the intersection of two companies, may lie when two companies come together. This means greater collaboration, working together and pooling in resources to build that scale,” Tata Chemicals Managing Director and CEO R Mukundan told ET. Tata Chemicals, which is a diversified company, wants half the business to come from non-commoditised businesses by 2020 against 25% at present.
It is no longer a commodity business operating in regulated markets but runs variety of businesses ranging from soda ash, edible salt, fertilisers, marine chemicals, pulses, spices and now nutritional ingredients and nano materials. “Every leader brings in his own personal style and that reflects in how a company reacts to the market place.
“His focus on customer, accountability and performance is extremely important. We have to be bold and have to be really inspiring to provide scale,” Mukundan said.
He said Chandra’s idea of ‘One Tata’ is already making an impact on the mindset of employees, who are usually the main barriers to collaboration between companies.
“This whole working together is going to constantly increase. We are both consumer facing arm, we both learn from each other. We are extremely strong in wholesale, Tata Global Beverages is extremely strong in retail. We have complementary skills,” said Mukundan. “We are beginning this journey. You will see more of this coming out in due course. At the end of the day, we are one group. That is the emphasis by Chandra.”
Tata Chemicals already works on some projects with Tata Global Beverages — nutrition and nourishment, building pesticide-free tea and coffee plantations and rural distribution. In the past, it had collaborated with TCS, Titan to create its water purifier product — Tata Swach. It also sells its fresh produce through Star Bazaar.”There’s a terrific momentum to collaborate and work together today because we know we have to succeed in the marketplace. It is not a competition between me and another company but a competition between Tata and others to satisfy the customer.”
Tata Chemicals is overhauling its organizational culture by winding down its old bureaucratic and hierarchical structure as it bets on future revenues from its younger consumer, branded agri and nutritional solutions business.
“Tata Group companies have built very strong consumer brands in some of the businesses, besides being an overall respected and well-known brand across the country. The Tata Group’s consumer presence is low in our view, and we believe it can leverage these strong brands (and also the large distribution network) to propel its consumer presence,” said Credit Suisse in a report in July.
The Tata Group should harness the unifying Tata identity across its diverse businesses to cement its leadership credentials, Chandrasekaran said in his first town hall with Tata’s top leaders in April. He had stressed on the fact that management needs to cut through verticals to collaborate with their counterparts to benefit from the conglomerate’s scale. “When we built this design of ‘One Tata’, it obviously makes sense to work together. This whole idea can be refreshed every time. In terms of direction, One Tata includes not just operating companies but also Tata Sons and Tata Trusts,” said Mukundan.
