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"MUMBAI: Tata Global Beverages is betting big on coffee pods, or single-serve packs, as it plans to build a larger portfolio of coffee products along with a broader push upmarket to boost profitability. Ajoy Misra, the Tata Group firm’s managing director, said pod — essentially a small plastic cup filled with ground coffee beans that a special 'pod machine' can turn into a hot cup of coffee — is better than existing regular whole bean or roast and ground coffee in pushing profitability.For one, pod coffee is priced four times as much as regular coffee. Also, it’s the latest fad among coffee drinkers in the developed world and the fastest-growing category within hot beverages. Tata Global Beverages marked its entry to the segment on its own a fortnight ago, when it acquired Bronski Eleven that sells pods in Australia under the MAP brand.\"Premiumisation is one of the parts where we want to move faster. We want to go up the value chain and we have an opportunity through MAP,\" Misra told ET.\"That’s the market, we are looking at very seriously,\" he added. While the company was already present in the pods segment in the USA, it was on a royalty basis through an agreement with Green Mountain Coffee Roasters’ Keurig single serve machines for Eight O Clock Coffee. At present, the maker of Tata Tea and Tetley brands earns over 70% of its sales from tea brands while coffee business rakes in another 20% through brands like Eight O'Clock and Grand.\"We should have a much bigger coffee fee play and along with water, it should be a bigger proportion of our portfolio,\" Misra, 56, said. While Tata Global Beverages is already the market leader in tea in India and the UK — both among the top ten tea drinking countries — the company is still a small player in the overall coffee market, which is relatively recession resistant and offers high profit margins.For instance, its coffee business in the US is roughly $200 million, or less than 2% of the country’s retail coffee market of $13 billion. Moreover, Tata Global Beverages has limited or no presence in other top coffee markets such as Brazil, Germany, Japan and France.At the same time, Tata Global Beverages’ tea business is under pressure with the market declining in most developed markets including the US and competitors launching aggressive promotions last year. Even in tea-drinking markets such as the UK, coffee sales have been growing much faster than tea in the last few years.Analysts now expect Tata Global Beverages to go for more acquisitions to brew its coffee ambition. \"Brazil and Russia are expected to lead coffee growth in absolute terms.India and China are expected to deliver the highest growth rates. Tata Global Beverages is virtually absent from three out of the four countries. Building a strong market share in these countries organically would be extremely challenging,\" Manoj Menon and Gaurav Bhatia, analysts at Deutsche Bank, said in a report. Follow and connect with us on Twitter, Facebook, Linkedin, Youtube"
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