'The DNA of Tata Consumer Products is all food and beverage.'
Tata Consumer expects to close the year with margins at 15 per cent.
In an interview, Sunil D'Souza, the managing director and chief executive officer of Tata Consumer Products, talks about what led the company to deliver a strong topline in the second quarter despite GST disruptions with Sharleen D'Souza/Business Standard.
Despite GST disruptions in the quarter, you've managed to see a strong rise in revenue?
We've got good volume growth. We continue to expand distribution and innovation and we continue to power up.
We are on track for a full year of five per cent innovation to sales this year as well.
GST disruption came at the end of the quarter, and we did see disruption in our growth portfolio, because salt is GST exempt, and tea was at five per cent GST always. But Capital Foods, Organic India, Soulfull, ready-to-drink moved to the five per cent bracket.
We did see some hiccups in modern trade as well as in general trade. Our internal target was to hit ₹10,000 crore for the first half of FY26, but we were in touching distance from the number.
Will the extended monsoons have an impact on consumption?
This year, the monsoon came early and is retreating late. This is something that we have to get used to.
I would say we've got to learn to execute beyond this. Climate change is for real. It's here to stay.
I can't be blaming weather and my point is you continue to execute.
Are you taking price hikes in coffee?
In coffee, after prices went up, we have now started to see some softening. For now, we have taken a price increase in July.
We have done a degramming exercise in November and we have announced another price increase effective January in the US. This is a constant exercise.
Going forward, what will be the drivers of growth for the India business?
It's just distribution, branding and execution has come to the fore.
Going for volume growth, and then driving a bit of price mix on top of that, I think that's the critical piece.
Value added salts have come to the party very strongly. Base salt is growing, but the big growth is coming from the addition of value added salt.
In tea, it's distribution and a little bit of market share gains which are helping out.
In our growth categories, we've got long runways, whether it is the acquired businesses of Capital Foods and Organic India or the in grown businesses of Sampann.
It's just a question of expanding the product category portfolio and continuing to execute against those pieces.
When will Tata Consumer Products look to expand beyond foods?
The day we see growth from the food category starting to slow down, that is the day we'll start looking at, where else do we go. But today we need to drive a double-digit top line and drive margins in excess of the top line.
As long as we are doing that we are in a good place. Because remember when we move into the FMCG space, whether it is marketing, R&D, manufacturing, I have to learn new tricks.
The DNA of this organisation is all food and beverage, but getting into a deodorant or a detergent or a perfume is slightly different to the current categories we are present in. I would say it's some time off.
What is your margin guidance for the second half of the year?
We'll close the year with a close to 15 per cent Ebitda (earnings before interest, tax, depreciation and amortisation) margin.
This quarter also, while we did a 13.6 per cent Ebitda margin, the impact from the US coffee pricing itself was 110 bps.
If I put that back, it is 14.7 per cent so that's why we're quite confident of hitting close to the 15 per cent plus number by Q4 (FY26).
Feature Presentation: Rajesh Alva/Rediff