Interview with Nalin Miglani, chief HR and communication officer at Tata Global Beverages
How do you make old Rosy Lee sexy? That is the challenge facing Nalin Miglani, HR boss of Tata Global Beverages, whose Tetley brand is the UK’s second-biggest in market share. He is confident he can wean the young off fizzy drinks and get them to find hot tea cool. His business-centric approach to HR is central to this
Here's a confession: when I get home after a heavy day at the office, I don't, like many of today's businesswomen, immediately reach for a glass of wine. No, for me there is nothing quite like a hot cup of tea to help me unwind after the trials and tribulations of life.
Maybe it's the Welsh in me - after all, 25% of Welsh adults drink five or more cups of tea per day compared to just 11% of Scots, according to research by international development charity Traidcraft. Or maybe it's living in the part of London I do, where nothing beats a cuppa Rosy down the local greasy spoon. Either way, I am somewhat addicted to the 'alternative' black stuff - strong, white with no sugar and a McVitie's Rich Tea to dunk in, of course.
Unfortunately for tea producers, I am part of a declining market. While eight in 10 UK adults do drink tea, the beverage has been experiencing a long-term decline in usage. According to research by Mintel in March, 88% of adults aged over 65 drink tea, but only 73% of 15-34-year-olds partake in a cuppa. Mintel adds that younger consumers are less enamoured with traditional English tea - they prefer the exotic herbal offerings - and that the next generation of traditional tea-drinkers may be in jeopardy.
For Nalin Miglani, chief HR and communication officer at Tetley Tea owner and family-controlled business, Tata Global Beverages (TGB), this is not good news - and he is acutely aware of the challenges facing the $1.4 billion business going forward. But, like all successful businesspeople, he sees this as an opportunity, not a threat, for the world's second-biggest tea company.
"It is true that a number of young people are moving away from hot beverages to cold beverages. Youth is not so emotionally connected with hot beverages as the older audience," he agrees. "So at Tata Global Beverages we have set ourselves the task to transform the whole category. We want to make it come alive, both from a brand perspective and category perspective."
Miglani has a job on his hand, however. As well as making tea sexy for the youth of this country, he is taking on the huge brand recognition and marketing budgets of the soft drinks names favoured by that youth.
But he is convinced the company, which is aiming to become the global leader in branded 'good for you' beverages, will succeed. After all, TGB is growing fast, having transformed from domestic Indian tea-grower to a global business in less than a decade, taking on its new name in July last year. Now 90% of sales come from branded consumer products, including new brands such as Tetley Infusions, Good Earth and T4Kidz, while 65% of revenues come from markets outside the UK.
It's not plain sailing, though. Tetley is second in value and volume marketshare to its main UK rival, Unilever's PG Tips, and the iconic Tetley Tea Folk characters are back on screens after a decade's absence, in a bid to change this. Meanwhile, the company has overhauled its senior management team, with the departure of CEO Peter Unsworth last week marking the last of the Tetley top managers in the executive team (the company was acquired by Tata in 2000). On top of this, the FT recently reported that TGB was in talks to sell about 20% of its international operations to a strategic investor after failing to secure a deal with private equity.
In response, the company says: "To achieve the ambitious growth plans of Tata Global Beverages, we are always evaluating options for the best way to invest in innovation, the growth of our brands and acquisitions. No specific proposals have been placed before the board."
If executive team member Miglani is concerned by any of this, he certainly doesn't show it. Instead, he appears genuinely excited by the opportunities afforded by the hot beverage category.
"What excites me is the simple fact that, in the UK, there are more servings of Tetley tea than of carbonated soft drinks. Yet if you look at a cup of tea, it earns 4p-5p per cup and the tea bag is not even 2p. So tea is a good category, but earns 2p per serving, while any other soft drink earns 50p-80p. We have given ourselves the goal within five years to double the revenue per serving. If we do this, it will be a massive change for us."
There is much going for tea in today's health-conscious environment. It is good for you, and certainly better than carbonated drinks and coffee in the anti-oxidant stakes. Private-label penetration is also less significant than in other categories: we Brits still love our Tetley and PG Tips. So why hasn't tea, and Tetley in particular, captured the consumer's imagination? How can TGB revitalise its brands (which also include Tata Tea in India and Eight O'Clock Coffee in the US) and make consumers fall in love with them again?
"Tea is a major part of people's lives and it is possible to make consumers love it more. But you cannot expect consumers to pay more if they don't get more," explains Miglani. "We need to innovate from a functional perspective and become cool from an emotional perspective, so younger people come back to tea and people think of it as a beverage for more occasions. The power of brand is not just in exciting the imagination, but in the value you can generate per serving."
Easier said than done, of course, as hot beverage producers have been trying to alter perceptions for years now. But it is hard not to be convinced by Miglani's enthusiasm and arguments. For one thing, he has form: he has worked for benchmark firms Coca-Cola and British American Tobacco and, while with the soft drinks giant, was involved in transforming business results in South Pacific and Asia and creating a joint venture (Beverage Partners Worldwide) between Coca-Cola and Nestlé.
For another, he has a solid grasp on the business and the markets in which TGB operates. Indeed, he is possibly the most business-focused HR director I have encountered and it's 30 minutes into the interview, and after some prompting by me, before we turn to specific HR matters. For Miglani, HR and business are one.
"We are not a service function and not partners. The challenge I have, however, is getting HR people who cannot visualise outside either of these two things: you get business partners brought up on [HR guru Dave] Ulrich, or service partners brought up on outsourcing. Therefore we need to say who we are - and I say, 'a player in the business'. It is much stronger than saying 'partner'."
The contradiction in this, as Miglani acknowledges, is that normal businesspeople do not have to think about who they are in business. "It should be so obvious," he says, "but every time I make a change in the HR function, it is impossible to get people who do not need this type of communication. I hire people who have HR training - but what is there in making a performance appraisal mechanism? Once you know what this business is trying to achieve, you seamlessly respond - and not just respond, but lead.
"Calling ourselves 'players' is the best communication right now, towards the ultimate goal of not even having to think like this. All development in the HR team is about getting to grips with the real issues from a consumer, customer, business-modelling and route-to-market standpoint. If you understand all of that, the rest will come to you."
Miglani is warming to a subject in which he passionately believes. "We emphasise the ability to play in business, not just understand business, such as the P&L. In TGB, the HR function is in strategy creation. We seamlessly integrate all HR initiatives into what the business wants to be."
Pondering on this last comment, he adds: "Even as I say that, it sounds like the business decides. But it is not like that - it all flows. This appears to be a difficult subject for HR. It seems like an achievement when you say HR professionals are integral to business. There is a view that business is different to HR.
"The more people think they need to have a seat at the top table and a boss who understands HR, the less likely it is going to happen. You have got to stop thinking you are out and have to find a way in. You are already in - by thinking this way, you are putting yourself out.
"Think, 'now that I am in, let someone get me out', rather than 'please invite me in'."
Within TGB, there are 55 in HR - lean given the size of the organisation, which has 3,000 employees across the world and deals with many thousands more through joint ventures and partnerships. In the UK's global headquarters sits an HR team with strengths in communications, culture, reward and capability, while outside are three regional HR heads (UK, India and US) with teams.
HR has been pivotal in a major transformation programme within the business. The starting-point was designing the organisation to enable it to revitalise the hot beverage market. "It is about how you create an organisation that for 80 years has been selling a 'very-good-for-you' beverage as if it were a commodity. There are many lost decades in this category. How do you transform the organisation so that it becomes the organisation that reinvents tea? How do you create one that starts looking at the future this way?" Miglani asks.
The answer lies not just in culture and getting people fired up, but in capabilities and structure. Or, as Miglani puts it, the science and art of transformation.
The starting point - the science bit - is organisational design (OD). This is also the critical part and, for TGB, this one instrument achieved two objectives: transforming the business and integrating the Indian, British and US firms.
Originally, the company ran full-value chain businesses. In other words, Tetley or Eight O'Clock Coffee bought the raw ingredient, roasted it, manufactured it, sold it and marketed it. Each business had its own CEO. Now TGB has five regional organisations (US; UK and Africa; Europe, Middle East and Russia; Canada and Australia; and South Asia) that are consumer-focused: no supply chain, marketing or buying, just focused on the customer, such as Tesco or WalMart, and the end consumer.
By removing the rest of the supply chain, the onus changes from controlling costs and cash to creating value. "When you are frustrated about market share or price increases, you tend to get into a conference room, call in the supplier and start talking about price. It is important to create an organisational design in which the person who fronts the business has no reason to look at anything other than the consumer and has no reason to fall into the temptation of looking at costs," Miglani explains.
"Manufacturing efficiency is not where the value lies. On the back of that, Tesco won't listen to you; the consumer won't listen to you. Getting their attention takes imagination," he adds.
So, manufacturing within TGB is now a global operation rather than reporting to regional heads. Global functions in HR, communications, finance and IT have also been created - again to release the regions to focus on the consumer.
It took TGB a year to restructure and was not without its headaches, with the obvious need to change legal and reporting structures as well as business review processes. But creating the design is one thing, whether it works in practice another. This is where Miglani's 'arts' side comes in. "Culture and strategy are two sides of the same coin," he says. "OD has to have the right culture to it and we have created directional themes to our culture."
These themes (see left) are focused entirely around the business and are represented by icons, enabling staff to grasp the concepts easily. "If you translate our themes into business - if you are consumer-focused, do good and do it disruptively - then there is a lot of money to be made."
One example of this type of thinking is Tetley Infusions, a liquid tea mix launched in Canada. These are sachets with real liquid tea concentrate, rather than bottles of a tea-flavoured soft drink. As Miglani explains: "When you want to drink tea, you open the sachet and there is real, genuine tea. That serving is three to four times more expensive than a tea bag, so better for us, but a significantly lower cost than a ready-to-drink bottle."
Another example of this philosophy in action is the 'Think Big' programme. Described by Miglani as "Dragons' Den multiplied by American Idol", the scheme involves employees generating ideas that are examined by judges, while an external audicence votes for the best online. Staff were tasked with coming up with ideas that double revenue per serving, disrupted business, did good and so on. It was a way of communicating innovation and strategy and generated 1,350 ideas.
As with so many businesses, talent is the top challenge for Miglani. But TGB's response is unusual.
"We are dealing with this in a contrarian way, saying we are going to make our talent very marketable. We are saying 'the more you work with TGB, the better you become, and the better you become, the more opportunities you have'. It's a tough one and we have lost people recently, so it hurts a bit, but we think once we are past one or two cycles, we will become the place talent wants to come.
"At the moment, we are able to pick from two rising stars in a company. There will come a time when six will compete. Eventually, talent is drawn to success."