Tata Consumer to expand its FMCG portfolio

New Delhi: Tata Consumer Products will expand its fast-moving consumer goods portfolio with “clearly differentiated products” that command good margins, company managing director Sunil D’Souza said. “The premise of creating the consumer business was to create a much bigger space in FMCG; but we will go ahead with clearly differentiated products, our approach will be measured, and we will enter categories where we can drive margins,” D’Souza told ET. However, forays into non-food businesses are “some time away” as the company’s immediate focus is on scaling up the foods and beverages businesses, he said.The maker of Tetley tea, Tata salt, Sampann pulses and Himalayan water will look at both inorganic and organic routes to drive growth. “While we are actively looking at acquisitions nationally, we are also keen on strategic bolt-on acquisitions which can give us strong hyperlocal leverage,” D’Souza said. He said the acquisition of mid-sized breakfast cereal and millet-based snacks brand Soulfull from Kottaram Agro Foods for Rs 155 crore was a clear signal that TCPL is actively looking at tuck-in acquisitions across categories. Soulfull, with a distribution footprint of 15,000 outlets, can potentially drive strong value in the medium term, analysts said. “These small but strong brands can leverage the distribution network of TCPL and benefit from the Tata brand equity,” ICICI Securities analysts Manoj Menon and Aniruddha Joshi wrote in a report on Wednesday.On the company evaluating a strategic stake or partnership in Cafe Coffee Day’s retail outlets which offer synergy with its branded tea and coffee businesses including Tata Starbucks, D’Souza neither denied nor confirmed the plans. A potential partnership with CCD would give Tata Starbucks access to both premium and mass coffee and tea retailing platforms.D’Souza said Tata Starbucks, its 50:50 with Starbucks Corp that operates about 209 stores in India, has recovered faster than expected from Covid-induced shutdowns, with 92% of Starbucks stores now entirely operational and negotiations on lowering rentals with landlords and mall owners having been sorted out. Starbucks, which competes with Cafe Coffee Day, Barista and Costa Coffee in India, may add 35-40 stores this year, many of which would be in tier 2 and 3 markets. “There is huge runway in terms of growth and across formats such as takeaways and drive throughs,” D’Souza said.TCPL, which was formed after the merger of Tata Global Beverages and the foods businesses of Tata Chemicals, sells tea, coffee, salt, pulses, spices and water. It competes with the likes of ITC, HUL and Nestle. The company has marked ecommerce and the direct-to-consumer space as a growth pillar with the rapid adoption of consumers to shopping online for daily grocery products. One such move is Tata Coffee’s own ecommerce platform coffeesonnets.com for its super premium coffee brand Sonnets.“We were a bit under indexed on ecommerce earlier, but Covid has accelerated the shift towards online and we have built a strong team and recruited from ecommerce companies,” D’Souza said.He said the ecommerce channel, which contributed 2.5% to the company’s overall sales in February and March, has increased to 5-6%, and escalation to double digit contribution “is not far off”.The company's revenue from operations increased 23% year on year to Rs 3,070 crore in the December quarter, having completely recovered from Covid-induced supply and production constraints, though tea price inflation hurt gross margins.D’Souza said the quarter was driven by improvement in top-line and profit and that integration of its food and beverage businesses is progressing ahead of plan.He said the rural business is growing significantly faster than cities, boosted by a good monsoon, the government’s focus on rural markets, and the migrant population moving back to villages.

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