Tata Consumer Products Earnings Call for Q3FY26

Yeah, thanks Niti. So if I have to summarize, we've had a decent quarter where we had a 15% revenue growth. India branded business posted underlying volume growth of 15%. India tea up 3% as tea prices have come down, we've started passing on pricing back to consumers. Overall YTD we are growing at 9%. Just to put it in perspective, we've always guided for a mid to high single-digit growth for the tea business. Salt had a strong quarter: 14% revenue and 15% volume as we did targeted actions on consumer price and trade promotions coupled with distribution in specific geographies. We saw strong results there. Growth businesses, which we always guided for being 30% of our business growing at 30%, we were quite in the ballpark growing 29% and contributing 30% to our revenue, surpassing 1,000 crores in quarterly revenue. Tata Sampann had a strong quarter with 45% growth, all volume-driven. RTD delivered strong performance with 26%, again all volume-driven. Capital Foods and Organic India together grew 15%. Organic India was in the 30s and Capital Foods India grew sequentially month. We were impacted a bit by the US tariffs because 20% of Capital Foods is international business. International business maintained a strong trajectory with 11% constant currency revenue growth, primarily led by US coffee which had strong volume growth as well. Non-branded business up 20% with profitability remaining healthy, but margins coming back to normative levels as coffee prices have stabilized, albeit at a higher level. Consolidated EBITDA up 26%, so EBITDA has grown roughly 2x of revenue. Margins expanded 60 bps quarter-on-quarter, 120 bps year-on-year to 14.2%. Our innovation pipeline remains strong with 15 new product launches through the year. Innovation to sales is roughly 4.8%, almost close to our target of 5%. So, 1,600 crores of India beverages with a growth of 7%, foods similar number growing at 19%, international 1,300 growing at 18%, and non-branded growing 23%. Total 5,000 crores, this was a landmark quarter for us having crossed the 5,000 crore mark in a quarter. Year to date close to 15,000 crores growing at 14% with all businesses delivering double-digit revenue growth. 5,112 crores topline growing 15%, 728 crores of EBITDA at 14.2% margin, PBT up by 11% to 563 crores, before exceptional net profit of 399 crores which is up by 130 bps versus last year, and we're now sitting with 1,272 crores of cash. 9 months almost 15,000 crores growing at 14%. Group net profit before exception was growing at 17% to 1,137 crores, and 1,272 crores of cash. Starting with the India business, we maintained our margins close to 7%, 6.8% to be precise. Salt market share: we had volume growth on top of that we had market share growth as well of 40 bps. Market share of tea, as I've mentioned, this only tracks about 57% to 60% of our business, down 70 bps. I had talked about last quarter about our pilots on go-to-market. Just to repeat, a lot of the salt strong geographies were also the geographies where our new growth businesses were supposed to be strong, and therefore to provide the requisite focus. We have three types of pilots running: a separate salt distributor in salt geographies where salt contribution was very high, and a non-salt distributor in geographies where salt plus tea was very high. Salt alone was not, salt plus tea was very high. We separated into core and growth. And there are cities where smaller outlets we've now got a common salesman going in, whereas for larger outlets we've got separate split routes selling by category going in. All the three pilots more or less were bang on the KPIs that we had budgeted for, and therefore now we are rolling it out nationally. We are about 82% done on the national rollout. By first week of February, we'll be 100% done. 270 odd distributors have been transitioned to the new go-to-market model, and we've added 160 more distributors. We've used AI to align routes and servicing norms, also dispatch plans, auto replenishment systems have been aligned, and the sales hierarchy has also been realigned as needed. For example, if it's a salt plus all non-salt, the territory executives and area managers will handle only salt, and we consolidate at the region level to give dedicated focus both from a supervisory level as well as from an execution level on the ground. This I already talked about, 29% contribution growing at 29% growth, and growth businesses now account for 30% of our India business. New launches across health and wellness, convenience, and premiumization. We have launched matcha, we've launched RTD green tea and fruit tea, green tea which includes L-carnitine as well. Tata Copper now in glass. We've launched various formats of coffee and jelly and flavors in coffee. Soulful, we've launched Slimare. In convenience, we've got ready mixes for paneer, chili, Szechuan, and Manchurian. We always had ginger garlic paste, but there is an opportunity for a separate ginger and garlic. And we've launched high-end chili soy, light soy, which is primarily used in Southeast Asian and Japanese restaurants. And Drop Salt, we've taken it to the next level by launching a Himalayan version. Our ratings underscore our commitment to responsible business. We've upped the game on MSCI ratings, upped our score on S&P Global, and done decently on all the other ratings. In macro terms, tea prices are coming down broadly to the 2024 levels. Albeit at the end of Q3 we did see a little bit of an uptick on tea prices, keeping a close watch on that. Coffee had started to come down except after the Venezuela action there was a bit of uptick on coffee. The forecast is that from the current about 370 to 390 it should start coming down, but your guess is as good as mine on coffee pricing. We remain agile and ready to take pricing as and when needed. In packaged beverages, 3% volume translated to 3% net revenue for tea. Marginal movement in market share, albeit gross margins expanded handsomely out here as tea prices came back to normal. India Foods 19% net revenue growth, 16% volume. Salt up by 14% on revenue, Sampann 45%, salt market share up by 40 bps. Ready to drink close to a 200 crore net revenue. Remember Q3 is probably one of our lower quarters, and therefore we are well poised to recover strongly in the coming season. Revenue up 26%, primarily driven by volume up at 27%, and we've expanded the ready-to-drink tea and coffee aggressively in the meantime. Capital Foods and Organic India: Capital Foods close to 240 crore revenue, Organic India 120 crores, combined gross margins of close to 50%. Non-branded business revenue up 20%, solubles revenue up 34%. Tata Starbucks second successive quarter of same-store sales growth of 3%. Average daily traffic which was the issue is now more or less stabilized, and ticket is holding. We opened 12 new stores during the quarter. We are now at 504. We opened our second reserve store in Gurgaon, and now we're present in 81 cities with Jabalpur being the latest city to be opened. UK flat on revenue, market share on black close to 19%, and we continue to maintain 10% value market share but very strong delivery on profitability in the UK. The US business very strong revenue growth driven both by volume and by pricing at 31%. Market share slowly inching up both for K-Cups as well as coffee bags. In the US, coffee bags are growing roughly four times the growth rate of K-Cups, and given our strong share in bags, we remain quite confident to continue this growth at least in the near term. Canada, as we took some aggressive pricing on tea, revenue has been sluggish. Growth in specialty has been hovering at 2%, and overall more or less maintained our market share at 25%. Ashish over to you for financials.

So let me take your second question first. The Sampann growth is broad-based. The base businesses of poha, pulses, makhana, all of them are firing on all cylinders growth-wise. So let me say it has come from the new businesses as well as from the legacy businesses. The best part is my dry fruits business is now close to a 250-300 crore annual run rate. Cold-pressed oils is again in a similar ballpark. All of these have been launched in the last 18 to 24 months. Differentiated product very specifically entering trust-deficit categories, very clear winners. In fact, the good part is this is just the base foundation because the ultimate idea in dry fruits is we will play the whole spectrum. Now that we know the sourcing, we know the time of the year, when to source, which channels, what are the packs which work, what are the dry fruits which work, now when we enter the flavored, roasted, salted, that is where we will move up the value ladder. Similarly in cold-pressed oils, I think we're off to a great start because normally we would list on e-commerce, then go to semi-modern trade, then general trade, and then modern trade. This time we've had pull from modern trade pulling us into the outlet even before we went to general trade or semi-modern trade. So that's how powerful the proposition is. So we remain bullish on Sampann, but I'll go back to our guidance for roughly a 30% growth and we will remain guided by that. On Soulful, we are close to a double-digit market share in most categories which we operate. Mostly close to a double-digit number. The big numbers for us are in the choco fields as well as the muesli segment which is growing very fast. But here's the thing: in Soulful, it is not one particular category that we're playing at. We've expanded to different categories and therefore expanded total addressable market. We're not playing in a small pond given the fact that we're playing in rusks, we're playing in chocolate sticks, we're playing in muesli, we're playing in breakfast cereals as well. So it's a wide-ranging thing. Broadly we are decently satisfied, but we do think we can take Soulful to the next level. And I wouldn't worry about one incumbent versus all startups etc. Everyone can carve out their own space. I think with the plans that we have, we remain quite confident.

So let me put it this way: there is no one-off in Sampann this quarter. I'm just trying to temper expectations on the number that we might not always hit a six; sometimes it will also be a four. From that perspective, I think 30 is a realistic number for us to keep targeting, while we know we can drive 45 and we'll continue to drive for that. On the margin perspective, I always said in Sampann we were close to double-digit margins. The good news is we have hit double digit. We remain confident of edging up the total business to close to a 15% sort of number in the medium to near term. And that's what. So while we are growing top line, the good news is we are constantly improving the margin profile as well. Going forward, the margin profile will only get better because as I said in dry fruits, the margins are in the roasted, salted, flavored ones. But for you to get there, you need to know how to play the base game, because then you add the value additions on top of that.

So, we've always guided for salt being again in the mid to high single-digit growth on revenue, volume being about 4% to 5% and rest being value price mix. Just to give you a perspective, I think the top six brands are probably 56% to 57% market share in this category and the balance 44% is a long tail of what I call no-name brands. So the scope of growth is enormous. It is not necessarily driven by per capita consumption. It is driven more by market share and improved penetration of Tata Salt, not necessarily salt. They're replacing other brands in the household. So the total market size could be 2x of what it is if you just extrapolate from that perspective. But mid to longer term, we have maintained that it will be mid to high single digits.

So let me say we have always said we will drive double-digit top line and bottom line ahead of the top line, and I think we've roughly delivered that. I wouldn't comment about the broader consumption and recoveries etc. I do think the teams have executed our plans quite well, and the plans have changed through the year. For example, we didn't have the salt targeted actions baked into the numbers, or the expansion of certain brands like Sampann baked into the numbers. But Tata Consumer is an entrepreneurial company. As we see opportunities, we jump in. It's not that it's not in our budget so we'll execute next year; that doesn't happen here. So if we see opportunity, we will drive it. We've seen opportunity this quarter and across the board, I think the teams have driven the numbers quite well.

So, let me say growth businesses have to contribute to a higher percentage of the India business fundamentally because they're defined as growth businesses. They'll grow faster than the core. The mix will change, and that's a conscious strategy as we seek to diversify away from being the salt and tea company into a multi-category food and beverage company. This will happen. We're in the middle of putting numbers together for the next year and beyond, and as and when we have clarity we will definitely give guidance. But as of now, I would say 30 is a good number to put a peg on. As and when we look at a different number, we will update on that.

So, let me say broadly on commodities we have given up on forecasting with accuracy given climate change. You don't know how things pan out. So number one, we remain flexible, agile, able to move in either direction. That's number one. Number two, there was a small uptick on tea prices at end of the quarter. But remember, January to about mid-March, early April is a very lean season in the north. How the north crop comes out mid-March to early April will determine the opening prices then. Therefore I would not make a statement as to whether we'll be better off or worse off. We've done a calculation. We've got inventory for a decent part of Q1, but we will be flexible on moving up or down depending on how the commodity fares when the season opens. To the other point, we've already passed on most of the increases in this quarter, and that's why you saw volume equal to value growth for the quarter. And as of now, if nothing changes, broadly we'll go back to mid single-digit volume plus a couple of basis points of price mix.

So number one, the primary reason we've done the GTM changes is to continue to drive growth. Now as the percentage of growth businesses grows and the absolute growth, I think even maintaining the 30% is a decent enough target to have. So in the short to medium term we're not changing the 30%. The GTM changes fundamentally are supposed to drive growth. They are pan India, not restricted to specific states. But we had shown maps on certain things like where Capital Foods were strong, where salt is strong, and where Organic India was strong. If that is the deduction for eight states, that's not the right number. We have done it pan India: more than 5 lakh plus cities, more than 10 lakh plus cities, any city which is either overwhelming.

Share of salt then it is a salt plus non-salt where salt plus tea is overwhelming. For example, Kolkata was 91% salt plus tea and only 9% contribution from growth. So there we have gone plus core plus growth. And across every other city where we have common distributors and we had split routes earlier, we've gone back and because the retailers told us that for small drops they don't want multiple salesmen coming in, and therefore the smaller outlets, if I remember right, it's more than 3,000 rupees drop per month in urban and in metros and 2,000 in lower than metros. We have common salesman. Beyond that we have multi-category salesman going in split routes. So the idea is the salesman has dedicated focus. Above the salesman, the TSC and the ASM is also structured by category. So for salt it is the guys only handle salt. And for if it is core and growth, there is a team which is only handling core, there's a team which only handling growth. So that gives dedicated focus behind execution. So not only supervisory level, execution level, everything is segmented to drive growth.

So I think the single biggest lever will be scale, simply right. Growing 14-15% in that ballpark, we get huge leverage of scale, number one. Number two is the mix of the portfolio. We've got a balance between the higher margin acquisitions, tea, salt to be growing enough to offset the lower margin growth of samp for example, and we managed that so far. Overall, like I said, when we exit Q4 we should be in the ballpark of a 14.5 to a 15% EBITDA margin. 15 is a normative number which we need to get to longer term. As we continue to drive premiumization in our portfolio and drive premium categories in the portfolio and improve margins for the base categories. For example, pulses, it was a negative five when we started 5 years back. Today it's close to a double digit, right? So as we improve that as well, we would expect to continue to improve the gross margin profile. Longer term, I've always maintained a good foods business in India should be a 17 plus. We are targeted towards that in the longer term.

So overall, Capital Foods has improved month on month for us and like I said, we expect the go to market changes that they're doing to provide impetus to that. Overall, the softness in Capital Foods was like I said, the early part of the quarter was a bit soft. And more importantly, 20% of the business is exports, largely the US. And while tea and coffee base tea, coffee and base spices, the tariffs have gone to zero, rest of the portfolio still remains at 50%. So as you've taken up prices aggressively, that has had quite a bit of an impact.

Exports was roughly flat for the whole quarter.

It's the same, nothing changes right. It has to pass our strategic filters we've already defined. Right now we're in food and beverage. In food and beverage you've defined specific categories where we play. More or less we've ticked all the boxes on the categories that we wanted to play in and we've got the brands now to play across the food and beverage spectrum. Apart from that, it has to make sense from a value creation perspective right. So unless that happens, I don't think we'll be doing acquisition. But that's not to say that we won't. We are keeping our eyes and ears open. Like I said, almost every deal that happens in India does pass through either Tata Sons or Tata Consumers, so we either will do or will not do depending on the fact that it has to tick off both the strategic and the financial filters.

So Percy, we've always maintained we do not do EBITDA for brands. For every single business we do something called margin after advertising and promotion expenses because below that the salesforce, the operations are all common cost. I can always do a hypothetical allocation excel sheet accounting number but that's not a true way to judge the business. The MAP for sen is positive and it is improving quarter on quarter in line with our expectations.

So Percy, for the last 5 years you've been growing sen at 30% and we maintained the gross margin. The whole trick is to make sure that your portfolio works to your advantage. As I said, we've created our portfolio or crafted our portfolio in a manner where we've got a set of businesses which are paying the bills and with a steady state gross margin, bar up and down of a US coffee or a tea happening from time to time, but broadly longer term tea, salt, international very steady businesses, mid to high single digits and certain gross margin. There are high topline businesses of RTD and sen where the margin is lower but improving consistently. And then there are the growth businesses growing aggressively, smaller businesses but significantly higher margin profiles of Capital Foods, Soulful, Organic India. So it is all to make sure that you're balancing top line and bottom line at the same time. So it's a delicate balance to play. If none one of my other businesses were growing it was only something, it'll be diluted. But I think over the last 5 years we have proved that we have the ability to juggle multiple balls at the same time.

No, no. So, I wish I was allowed to deliver businesses of MAP of only 17 because below that there is at least 12 to 13% of cost coming in right. So I can no way deliver EBITDA is required. This is EBITDA percentage of 17%. 17 plus is the number.

So I wouldn't measure too much into the quarter on quarter for every single category. Overall year to date we have delivered a 9% top line for tea. Also remember last year same quarter we had delivered a 7% volume growth. So we're cycling that. So if you do seven and three we are back to the 5% four to 5% volume growth which we have been guiding for. So A is the base quarter. Second, I would urge you not to look at quarter to quarter. There will be ups and downs because at times you'll have volume upsides, price downsides and vice versa. Sometimes a few quarters it does take to settle but overall India tea about four to 5% volume and a couple of basis points of price mix, that's what we guide for.

So on the GTM strategy overall, we cover about 1.7-1.8 million outlets directly and numeric reach is about 4.5 million. In the medium term our target is to get to about a 5 million numeric reach. And the reason I'm emphasizing this because direct reach will probably, I would say an aspirational number is about 1.9 to 2 million. I wouldn't drive beyond that because now we have to get the wholesale multiplier and get into the semi-urban rural territories which are our lower share territories. So that's number one. On Capital Foods, our ambition remains 25 to 30%. I do think we've started to expand the portfolio through innovation, number one, and number two the new segmented go to market and supervisory system should drive us there. Apart from that, you would have seen our new ads that we've created. This is in the mold of how Capital Foods was built, making blockbuster ads memorable which lasts for a long time. So that is the third pillar.

Sorry, I we missed you in the middle.

I wouldn't say there is a missing link. There are basically two jobs in Capital Foods. There is market share growth in existing categories and there is category creation. For us, the south and east of the country, Capital Foods is a slightly alien thing right. I mean they've not seen suan chutney etc. So both advertising and sampling at scale are the critical pieces and we've started accelerating that. We've upped our what we call taste ambassadors by roughly 50% over the last six months or so. And like you seen, pumped up our A&P including bringing in known faces from the south into the ads so as to relate better to the consumers.

And lastly, like I mentioned, I'll give you the example of Kolkata where 91% of the business is tea and salt, 9% is total growth categories. You can imagine how much focus it gets and therefore the segmented go to market will be a huge unlock because now there is dedicated focus on these categories.

In Kolkata, 91% of the business came from tea and salt and 9% from all the growth categories including Organic India, Capital Foods, Soulful, and samp. Whether it is a distributor, whether it is a salesman, whether it is the supervisor, ultimately bread and butter is paid for by tea and salt and therefore the focus is always tea and salt. Now that we've separated it out, there is dedicated focus on these growth categories and that's where we expect the unlocks.

So, fastest growth for our growth categories across the place. I just gave you an example of Kolkata because that stuck in my mind about what should be done in large metro markets to unlock.

It's also, let me use a Hindi term because I have stopped trying to forecast the weather right. When there are rains in Bombay in November and December and it starts doesn't rain till around June July, it's a very difficult forecast right. But that said, you're absolutely right, seasonality does pick up. I would say probably February onwards is when you would start seeing the uptick. So right now, over the last 2 years we have started to be ahead of the curve. We have ramped up our distribution and we should be in a good position by around end January, early February whether it is salesforce, whether it is distributors, whether it is salesmen because after that the entire focus is on execution. So if it is a good summer we will ride it out. Like you've seen, it's not a pricing driven growth, it's a volume driven growth which I feel good about. And they very clearly started to build out the three pillars, the entire water stack right from the 10 rupees bottle of copper water up to the 90-100 rupees bottle of Himalayan and the entire range in between. And you will see some more aggressive launches in this space coming in in the next 60 days or so. We've started to build the whole stack of ready to drink tea and coffee whether it is green tea, fruit tea, kombucha, ready to drink coffee in a can at 70. We've now a pet at 50 and high-end as well. And then of course we've got the entire cups portfolio. Zip Zap was launched middle of last quarter. Fingers crossed, we're still in a few markets. We want to test it out before we go broad-based. But right now more or less to expectations.

I'll have to get back to you on the exact number of outlet but it's broadly in the million outlet ballpark. Right now we will focus on growing our share in this territory before widening the footprint.

I think I have publicly maintained and the good news is now multiple people are saying the same thing. If you read the Economic Times I think yesterday or day before, just to give you a perspective, last quarter I think about 18.5% of my business came from e-commerce, quick commerce. The previous quarter was 21, this quarter it was 18.5. Modern trade roughly is in the 14.5 ballpark. So that 33, about 5% comes from institutions which is 38. Therefore all of GT is only 60-62% of the business. And in modern trade, remember which Nielsen reports, one significant player doesn't share data, so at best they are reporting about two-thirds of the market in a sampling format. And if you observe market shares ups and downs, I would urge you to listen to commentary from multiple players and then make up your mind about who's gained share, who's lost share. We look at because there is no other database available, we report continue to report Nielsen because otherwise if I don't report I'll be accused of trying to hide numbers. So we do report it for what it is worth. And yeah, when my volume growth is still a strong number compared to industry, when total value growth is close to double digits, we feel in a good place. I don't think we are losing market share. It might move marginally up and down. Just to give you a perspective, Nielsen does measure e-commerce, they don't report it and don't total it into this, but we are market leaders on e-commerce incidentally. E-commerce, quick commerce as I mentioned, quick commerce has grown 100%. So we have about on e-commerce we have about 38-39 share and we're leaders. If I total all that it'll be a completely different picture. There are channel shifts which Nielsen doesn't measure. Where it measures it's by sampling and like I said in modern trade doesn't pick up one player. So your guess is as good as mine.

So let me say my strongest channel for samp is e-commerce simply because most of the categories that we play in, with all due respect we are also competing with a retailer. Remember when I'm selling up pulses, he is scooping up pulses from a 50 kilo bag making a 50% margin on that whereas in my company he'll at best make a 15% odd sort of margin. So therefore e-commerce, quick commerce is the stronger channel for samp. Traction and this thing just proves that we built brand loyalty and pull. Just to put it in perspective, even when I do market regions etc., most of the times even the GT retailers who are around, they attest to the fact that once a consumer has picked up samp, they go back just because of our stringent adherence to quality norms.

So we've launched 15 products this quarter, year to date is 55. And we've publicly said that we want to be around the 5% plus mark on innovation to sales defined as revenue from products launched in the last 3 years. We are at a 4.8 at end of last quarter and there's no reason we will not cross five this year.

So EU FDI I will not comment on it because I'm not sure we have all the details on what unfolds. Number one. Number two, as we mentioned, our big focus areas in the international markets are UK, US, Canada. EU is there but it is not a very significant piece. So I would wait and watch to see how that pans out. On Tata Starbucks, we remain bullish on the coffee opportunity in India both in home and out of home. On out of home it is Tata Starbucks. We've opened, we are now at 504 stores in 81 cities. We are immensely focused on making sure we constantly tweak our business model to make sure it appeals to Indian consumers and continue to drive business. As we said, coming from a significant dip in the entire QSR industry over the last 24 months, last two quarters have been encouraging. We now in positive same store sales growth. We did temper store openings a bit to ride through the softness and make sure we made the right modifications to enable faster growth going forward. We remain in the middle of that entire exercise. But longer term we do intend to be among the top, if not the top, coffee shop in India.

So quick commerce is about 15. The balance about four to five would be e-commerce.

Yeah, as I said we've given off most of the pricing during this quarter but I don't think the entire picture on the pricing has flown through. There would be a little bit of impact of price mix but I wouldn't say it will be significant enough. It will be sort of flattish to slightly lower going forward. But as I said, as we've given off price, we expect volume to pick up and as I said we've said mid to high single digit revenue growth. At points in time volume will be overpowering versus price growth and vice versa. Going forward, at least for the short term, we expect volume to come back stronger and therefore us continuing to deliver the mid to high single digit revenue growth.

No, international margins are not at the normative level simply because the entire impact of the coffee cost increases have not passed through. We've had one more round of price increase in the US in the month of January. Post which we would have broadly passed on the current cost increases. But that takes some time to translate into the P&L. So I would say we are about a quarter away from seeing normalized pricing for international. So we are at least a quarter off.

Thank you.