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Informist, Wednesday, Apr. 23, 2025

By Avishek Rakshit

KOLKATA – Tata Consumer Products Ltd. is aiming at 30% revenue growth in its organic foods business in India in the current financial year, which will be driven by expansion in categories and further strengthening of the distribution channels, Managing Director & Chief Executive Officer Sunil D'Souza said Wednesday.

"While overall for the full quarter (Jan-Mar) it was 17%, we are improving from month to month and we remain fairly confident that we'll come back to the stated 30% top line growth (for organic foods business in India) very quickly," D'Souza said in a call with analysts after declaring the company's results for the quarter and year ended March.

The Tata Sampann brand of food products, together with the salt portfolio, primarily comprises the organic foods business, and brands like Organic India, Capital Foods, and others comprise the inorganic business in India. During the financial year ended March, the company's organic foods business in the country grew by 13% on year, and the overall domestic foods business grew by 29% on year.

D'Souza said that although the company remains confident of achieving this top line growth, the company is behind the scheduled growth by a quarter. The top official said that this was on account of the company taking time to understand the various distribution channels, outlets, buying frequencies, merchandising skills, and competition.

The targeted revenue growth will primarily come from product expansion in the existing categories, he said.

"I think more or less we've ticked off all the boxes on the categories that we had shortlisted as I mentioned about four years back or maybe four and a half years back. So I don't think we are going to see any more category launches. You're probably going to see an expansion in the same categories that we play in," D'Souza said. "For example, we might launch a GI-tagged (geographical indication tagged) dal or we might get into a new range of dry fruits or we might launch a different version of poha or a flavoured version of vermicelli, I'm just making it up as I go. Remember each of these categories, the runway for growth is huge."

D'Souza said that pulses remain the main growth driver for the company in the foods category, the reason being right procurement strategy and supply chains, backed by right price indices and price reaction times tuned to market conditions. The dry fruits category which the company launched a few quarters back is close to INR 1 billion run rate, and cold pressed oils, which Tata Consumer launched recently, has a run rate of over INR 700 million.

In the fast moving consumer goods industry, run rate refers to a financial metric used to estimate a company's future annual revenue based on current performance, typically monthly or quarterly. It projects current revenue over a longer period, assuming that the current rate of sales or revenue generation will continue.

For the NourishCo brand of beverage business, D'Souza said that the company will continue to focus on existing markets and increase penetration in those areas instead of focussing on entering new geographies. However, D'Souza cautioned that there might be a bit of pressure on consumer products as inflation builds up in some categories and the company has announced increase in price of coffee in the US June onwards which could aid its margins from international business. The company has not planned any significant capital expenditure in the ongoing financial year.

D'Souza said that tea procurement costs for Tata Consumer might come down going forward as the tea crop in east and north-east India was better in March on a year-on-year basis, and April was sluggish. "But the expectation is, April plus May will come in better than last year so overall till now, it looks like (the) crop (will be) better than last year; and therefore, if crop (is) better than last year, then we do expect some flex in price and softening out there," D'Souza said. 

The new tea crop, which could be procured at a lower cost on year, would start coming in for packaging during the middle of Jul-Sept, and thus Tata Consumer expects its operating margins from tea, as well as overall operating margins to improve by end of September. "If the tea crop is normal and if prices (procurement costs for Tata Consumer) start to ease off, we would see margins starting to normalise," D'Souza said.

During FY25, tea procurement costs rose sharply for Tata Consumer and the country's second-largest tea retailer absorbed over 50% of the rise in tea costs and raised prices marginally to maintain its market share and stay competitive in the market. 

During the March quarter, high tea and coffee procurement costs primarily led to the company's consolidated earnings before interest, tax, depreciation, and amortisation to decline by 1% on year. The EBITDA margin declined by 110 basis points to 14.2% owing to the high tea procurement cost. D'Souza said that adjusted against the inflation in tea, EBITDA margins would have expanded.

For Jan-Mar, Tata Consumer reported a consolidated net profit of INR 3.45 billion, up 59.2% on year. Its revenue for the quarter was up 17.3% on year at INR 46.08 billion.

On Wednesday, shares of Tata Consumer ended 1.2% higher at INR 1,150.10 on the National Stock Exchange. The company announced its earnings after market hours.  End

Edited by Ashish Shirke

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