Tata Coffee to invest Rs 150 cr for plants in CIS

Business Standard - June 15, 2005
Tata Coffee is planning to invest Rs 150 crore this financial year to set up soluble (instant) coffee plants in CIS countries, Uganda and Vietnam. "These investments are to fructify this year with each facility costing around Rs 50 crore," said M H Ashraff, managing director, Tata Coffee. To fund these investments, the company is considering various options to raise resources from existing and new investors. The company's board which met recently decided to take up the issue at the next meet and is also exploring non-equity options to raise money.

The company during 2004-05 saw growth coming from value added products, especially instant coffee, in the global markets. Tata Coffee's instant coffee exports for 2004-05 was at 4,900 tonne, up from 3,700 tonne in 2003-04. Exports from Uganda, being one of the least developed countries, enjoy a special treatment from countries such as the US, the European Union and Japan. Tata Coffee may also leverage its Ugandan operations to foray into the Chinese market.

Seeing this opportunity, the company this year is planning to set up facilities at strategic locations to give a major push to its share of the global trade in coffee. Tata Coffee had earlier decided to set up facilities only in Uganda and Vietnam. But as it is exporting nearly 90 per cent of its instant coffee to Russia and the CIS countries, the company now has decided to set up a facility in the region as well. The choice has finally fallen on Russia as it has increased the import duty for bulk coffee to promote value addition in the country.

"By doing this, the company will be competitive in the region and can consolidate its leadership position," he added. In 2004-05, the company was able to perform better overall due to steady coffee bean prices and good instant coffee sales at Russian and CIS markets. By investing in Vietnam, the company plans to explore trading in organic coffee. Organic coffee being a niche market, the company is looking at exporting mainly to the US and some European countries.