The future of these iconic British brands under Tata’s ownership. Tata group has officially taken over Air India today. The Ways Tata Overtook British Brands…
Introduction – What are the Ways Tata Overtook British Brands?
India’s largest conglomerate, Tata Group, has been a household name in the country for over a century, known for its consumer goods, IT, steel, and automobile ventures. However, their recent success has led them to expand their horizons internationally, and their strategy has been to acquire iconic British brands. We’ll examine their acquisitions—Jaguar, Land Rover, and Tetley, among others—in more detail and discuss the results of these business endeavors.
Join me as I explore the emotional consequences, financial implications, and the future of these iconic British brands under Tata’s ownership. We’ll also talk about how this practice is influencing the international business scene and how other Indian corporations are emulating Tata.
What are the Ways Tata Overtook British Brands?
Every major country has a brand that’s synonymous with its national identity. In India, it’s Tata group. Tata group is India’s largest conglomerate. But a group has officially taken over Air India today. The 155-year-old conglomerate is India’s leader in consumer goods, I.T., Steel, and Automobiles. And for most of their history, they’ve focused on the Indian consumer. That means hiring Indians, selling them products, and sponsoring the local cricket league. But their enormous success has increased their ambition and led them to expand their sights internationally.
And their strategy has been to buy iconic brands from different countries. India’s former Colonial rulers, the British. Imagine what the Indians must have felt like on that day in 2008. Tata Group acquired two iconic car brands: Jaguar and Land Rover. But that wasn’t the first time that India’s largest conglomerate had added an iconic British brand to its portfolio. In this Article, we’ll break down the brands that Tata has taken over, the success that they’ve found post-acquisition, and the other Indian companies following in their footsteps. But first, we need to talk macroeconomics.
India’s economy has grown substantially faster than the British economy over the last 30 years. Over the last three decades, Indian gross domestic product has grown by an average of 6.4 percent every single year. But during that same period, British GDP has grown by just 2.1 percent. And they’ve been forced to Pivot their economy away from manufacturing towards Services. Back in 1993, India’s GDP was just half the size of the UK, but by 2023, it’s estimated that India’s economy will be 10 percent larger. India’s rapid economic growth has been driven by three major factors.
First, their population is large and relatively young, meaning that there’s lots of workers able to fill roles, build products, and provide services. A large portion of those workers contribute to the second driver, which is India’s middle class. With more Indians than ever having disposable income to spend on goods and services, India’s economy can start to feed on itself. And finally, the third driver is government policy. Over the last three decades, India has been relatively business-friendly, not getting in the way of the growth that’s basically been baked into their situation.
Meanwhile, in the United Kingdom, manufacturing has nearly disappeared and growth has slowed substantially. This is paired with an explosion of public and private debt. Since 1993, the national debt has increased from 3 300 billion pounds to 2.5 trillion, while private debt has increased from 1.2 trillion to 2.7 trillion. Meanwhile, British labor has remained relatively highly paid compared to the rest of the world.
Between strong labor unions and a relatively high minimum wage, British brands that rely on domestic Talent find themselves increasingly less competitive. Which is a shame, because the United Kingdom has some of the most iconic brands on the planet. Brands take time to develop and embed themselves into the culture, but once they’re stuck in a population psyche, it can be incredibly hard to get them out. Cadbury was founded in 1824 in Birmingham, England. Johnny Walker was founded in 1820 in Kilmarnock, Scotland.
And Rolls-Royce was founded in 1906 in Derby, England. And they all benefited from the peak of the British Empire where trade moved in both directions. So the Brits would import diamonds in gold from South Africa, textiles from Hong Kong, and corn and wheat from America. But in return, they’d export Cadbury chocolates, Johnny Walker whiskey, and Rolls-Royce cars around the globe.
Today, you can go almost anywhere and those Brands will be recognized and understood. That’s Prestige, something that India and Tata was lacking. The issue of having the need to grow and the need to take a view that you’d grown in India in some cases we had a fairly substantial market share and that as a group we ought to look beyond the shores of India as India’s wealth had grown. Tata looked to move up the food chain and Target brands that mattered internationally and commanded strong margins.
Their first move came in 2000. That’s when tata’s Global beverages division acquired the British Tea Company Tetley. Tetley, founded in 1837 in Yorkshire, they were the first company to sell tea in tea bags to the United Kingdom in 1953. By 1990, with a yearly production of more than 20 billion tea bags, they were one of the world’s largest tea companies. This move was one of the earliest instances of an Indian company making a high-profile acquisition of a British brand.
Tata acquired Tetley for 432 million dollars. In the acquisition, metadata, the second largest Tea Company in the world after Unilever which owns Lipton. International expansion though was not without some controversy. And aside from the economic rationale, there was also emotional consequences. And I’m thinking here of the acquisition of Tetley tea, the idea of a beloved British tea brand being bought by an Indian company must have stood some hearts in England. If they did, it was quite quiet and dignified. And despite new ownership, Tetley could still trade on its English Heritage.
That meant that Tata just bought a ton of market share in the UK, Canada, and the US. Tata could also lower expenses at Tetley. After the acquisition, the company Consolidated their operations, reduced the number of employees, closed some factories, and streamlined the supply chain. As a result of these measures, Tetley’s expenses were cut by as much as 10 percent. In 1999, Tetley’s Revenue was 736 million dollars. Their profit margin was about 10 percent, meaning that their expenses were about 662 million dollars. Means that Tata was able to find approximately 66 million dollars of additional profit in the company that they acquired.
When you consider the 432 million dollar acquisition price, they got back 15 of that cost in the first year just through those savings. It was a smashing success and it wet Tata’s appetite for more International expansion. In the mid-2000s, Chorus Steel Europe’s second-largest steel producer was struggling and losing money. Since it was primarily based in the UK and the Netherlands, it faced particularly High operational costs from its labor and Regulatory Compliance. These high costs were exacerbated as the market for steel became increasingly Global and producers based in countries with lower labor costs and less regulation could price chorus out of the market.
A lack of vertical integration compounded course issues. Unlike their competitors chorus did not control access to the raw materials required for making steel meaning that fluctuations in the commodity prices associated with key materials like iron ore and coal could sink the company. Tata Steel solved both problems, a purchased course group in 2007 for 12 billion dollars, a landmark deal for the steel industry and the largest acquisition by an Indian company at the time.
Upon taking over, they ran the same Playbook. They shut down plants and laid off workers, but they also invested in raw materials assets from Canada and Mozambique to secure their European operations. Back home in India, statistical was already vertically integrated. The company owned iron ore and coal mines in the Indian states of Jharkhand and Odisha which provided them security from commodity price fluctuations. Now, thanks to the course acquisition, tata’s cost competitive steel had distribution networks set up in Europe. In short order, Tata became the fifth largest steel producer in the world. But they had one more move to make.
The signs were everywhere but now it’s official. We are in a recession. 2008 was a tumultuous year for the economy. The housing market collapse created One financial crisis after another. The federal agency that takes over unsound Banks is the Federal Deposit Insurance Corporation. The same people who guarantee that depositors won’t lose their money. Ford was one of the companies most affected by the Great Recession.
In 2008, the company lost 14.6 billion dollars in sales in the United States, declined by 20 percent, and the company’s cash reserves dwindled by 21 billion dollars. The only way for Ford to avoid bankruptcy was to take on loads of long-term debt, layoff 30,000 employees, and sell some of its assets. Tata saw the opportunity and pounced. They acquired Jaguar and Land Rover from Ford in a 2.3 billion dollar all-cash no stock transaction marked Tata Motor’s entry into the premium luxury car market.
But Automotive insiders thought that they were taking a risky gamble. Here’s what people were missing. Tata was already a manufacturing partner to Jaguar Land Rover before acquiring the IP in 2008. Back in 2004, Tata Motors had begun to produce Jaguar and Land Rover vehicles under license from Ford and before that, they’d learned to scale manufacturing through producing their own vehicle the Tata Indica. The faith you put in your people to do this in case in point was on the Indica.
Conventional wisdom said that you couldn’t enter the car business without having a collaboration and certainly to think of the designing a car domestically and producing it was an unheard of thing. The Indica was introduced on December 30th of 1998. It was the first passenger hatchback from Tata Motors which had previously produced station wagons and SUVs but importantly the Indica was one of India’s first indigenously developed Passenger cars.
It was Tata’s Engineers that had developed the design for the vehicle and how to manufacture it. By 2008, they’d produced more than 1.2 million vehicles and hit annual sales numbers as high as 140,000 per year. The car was even exported to other countries including the United Kingdom, South Africa, and Sri Lanka. This feat of manufacturing and Engineering gave Tata the confidence to jump into larger car markets. Now with Jaguar and Land Rover, they had the iconic car brands to make it happen. For the past few years, Ford had been under-investing in these companies as it struggled with cash flow. Immediately Tata infused substantial funds into Jaguar Land Rover to modernize and expand their production facilities.
They also marketed the luxury Brands to the growing Indian upper class. In short order, Jaguar Land Rover became profitable and today it’s one of the world’s fastest-growing luxury car brands. Tata is not alone in turning the tables on its former Colonial rulers. Numerous Indian conglomerates have leveraged their relatively low costs of Labor and raw materials to improve the margins of British brands that have stalled out over the last three decades. Mahindra group acquired BSA motorcycles. Royal Enfield was taken over by the India-based Eicher Motors in 1994. India’s United Breweries group purchased Hobsons, a British Brewery.
But perhaps nothing epitomizes this Changing of the Guard more than the current prime minister of the United Kingdom Rishi Sunap. It’s obvious to most that he’s of Indian descent, but what fewer people know is that he is the son-in-law of the founder of another Indian conglomerate Infosys. His time in office will surely deepen the economic ties between these two countries and open the door for more mergers and Acquisitions. We’ll be watching how this plays out in the years ahead as it supports our thesis that India is poised to win the 21st century.