Tata Consumer Products Ltd Q4 FY2025-26 Earnings Conference Call

Thanks, Nidhi. So, in summary, our consolidated revenue for the quarter grew 18%, with the India business delivering 16% UVG. For the full year, we've crossed 20,000 crores. Revenue grew 15%, with India business UVG of 13. India tea volumes grew four. Revenue was minus one, primarily because we've taken price cuts as we've seen tea costs go down. Just as a rider, margin has come back to where it should be, as a result of this. For the full year revenue of our tea was up six. Salt delivered 12% revenue growth with a stellar volume growth as well. Overall for the full year, top line was up 14. Growth businesses crossed the 4,000 crore mark, growing 24% in this year. For the quarter, growth has come back to where it should be with 33%. Sampann grew 69 in Q4 and 46 full year. RTD continued its strong performance. 28% volume, 23% revenue in Q4 and overall was 10% for the year. Capital Foods and Organic India grew eight while the domestic business grew 15, but because of the Middle Eastern issues, shipping got disrupted for the month of March including for the US etc. where we transship via Dubai. And therefore we had a hit on the international business. For the full year, combined revenue was up 12. International maintained a small strong trajectory. It's actually now competing for growth numbers with India. It delivered 11% constant currency growth in Q4 led by the US coffee business. Full year was nine. Non-branded was up by 41 in Q4 and for full year by 23 and with healthy profitability. Profitability in the non-branded which was elevated last year due to pricing is now back to normal. Consolidated EBITDA grew 27, top line 18, EBITDA 27 and therefore margin expanded 100 bps to 14.6. For the full year, because of the softness in the first two quarters, EBITDA margin for the full year was 13.9. Working capital was down now from 221 from 26 days last year and India was minus two versus minus one last year. Innovation to sales ratio came in at a 4.5 with 80 new product launches during the year. The board recommended a dividend of rupees 10 per share, which is a substantial increase on where it was last year. So, for the quarter India beverages 1,600 growing four, India foods up 21, international up 21, non-branded up 43, overall 5,400 crores at a 18% growth. For the full year, India beverages up eight, India foods 18, international up 16, and non-branded up 25, overall a 15% growth constant currency 13. I will not repeat the numbers but to say that while EBITDA grew 27, PBT was up 32%, group net profit was before exceptionals was 48, and group net profit grew 22 and we're now sitting with roughly 3,000 crores of net cash. Sorry, there is one more metric that we are publishing starting this quarter is adjusted EPS and that's the reason is because we also amortize some of the brands that we've acquired and as the amortization winds down, we will have an expansion on EPS so we will continue to show adjusted EPS also as a factor. So, for the full year, 15 top line, 12% EBITDA growth, 23% PBT, 24 group net profit before exceptionals, 20 after, and EPS adjusted EPS of 17.3, reported EPS of 15.6. So, our A&P to sales was slightly soft this quarter because we spent a significant amount in Q2 and Q3. So we normalized it a bit, but as I said, directionally, we will be the 7.5 to 8.5 ratio for as we go forward. Salt market share was up by 100 bips. Tea market share was down 50, but just to reiterate, Nielsen doesn't capture quick commerce e-commerce, which is now 21% of our portfolio. Modern trade half of modern trade doesn't report the numbers and they extrapolate. And if you triangulate between home panel, the Kantar home panel, reported numbers by competition, and the Nielsen numbers, you would figure that these numbers are a bit off. Going forward, we will probably stop reporting this because we use them now only for execution and not for actual benchmarking. I talked about growth businesses contributed 31% of our business India business in FY26. For the quarter, grew 33, contributing 33%. We have finished our entire rollout of our new go-to-market system. So, in geographies where salt is very strong, we've got salt distributor and everyone everything else. There are 64 cities where our salt and tea combined business is overwhelming, so that's we call it core. And the rest is clubbed under the growth distributor. And in about 17 cities, we were common distributors, but we've changed the frequency and or the number of salesmen who go to the outlet. As a result of this, we've already started to see execution metrics, especially lines per outlet, go up significantly, and we do expect that to start to roll into actual revenue numbers. We have continued to focus on channels of the future. Modern trade was up 20, contributing to 15% of India business. E-commerce quick commerce was up 62 contributing to 19%. We incubated three channels during this year. Food services exited at an ARR of 170 crores, present in roughly 60 cities. Vending exited at an ARR of 100 crores, and we have now about 8,000 plus machines. Pharmacy exited at an ARR of 30 crores, and we cover about 42,000 outlets nationally now. Innovation to sales we continue to ramp up. It's now 4.5% of our sales, and we've grown innovation revenue 7x from where we started. We launched 80 new products this year, roughly doubling the number from last year. And our innovation was all focused on the three pillars that we've defined, health and wellness, convenience, and premiumization. We also made strides on sustainability. We featured in the S&P Global Sustainability Yearbook for the second consecutive year. We have ranked among top three companies among India's 60 most sustainable companies by BW Business World for second year in a row. And since formation, we've grown top line at a 16% CAGR for India, 7% for international, consolidated at 13%. EBITDA has grown ahead at 14%. Group net profit has grown still ahead at a 22%. And we've driven shareholder returns. Net working capital in India is minus two. Total working capital... The point to note is our working capital in India is less than... While we've more than doubled the business, it is less than when we started off six years back. Adjusted EPS more than three and a half times. Free cash flow to EBITDA was 107% and we've consistently improved our dividends. In terms of the macros, tea prices largely benign right now trending about 5% ahead of where they were this same period last year. But barring any unforeseen climate change, we should have largely benign tea costs. Coffee prices coming down right now as we speak, it is $2.99 is what Arabica is trading at. Which means in the next probably two months or so, you'll start to see coffee margins climb up in the US. I talked about 4% volume one minus 1% of revenue for India packaged beverages. Coffee also grew 20% in Q4 and overall for the full year 43%. India foods, volume was up 15 primarily driven by salt, but net revenue was also up 21. And salt on already high market share, we continued to improve share from there. Sampann grew 69% with broad-based contribution across categories. Dry fruits and cold pressed oils, which we launched about 2 years back, as of now are close to hitting a 500 crore each ARR. RTD, we've grown 28% on volume, 23% on revenue, and 260 crores total. Tata Coffee Plus continues to go from strength to strength, up by 33% in Q4 and 26% for the full year. Capital Foods and Organic India, Organic India 135 crores, Capital Foods 213 combined gross margin, as we said, roughly around 45 to 50% above our base, which is at 47%. Domestic business in Q4 grew 15, 13% overall in FY26. Exports declined, primarily because of the hit in Q4, very specifically the month of March. Non-branded business revenue was up 41, soluble revenue was up 43. Starbucks, good part is now this is the third successive quarter of positive same-store sales growth, same-store sales growth of five and total Starbucks growth of 7%. We opened 23 net stores, 502 total stores, and now we are present in 80 cities. UK, revenue growth of three, there's volume growth of four. Market share continues to retain at a 19, and value market share in fruit and herbal continues to inch up. US, very strong revenue growth driven by price, volume was a bit soft. Market share continues to improve, bags is 4.3, and we continue to gain share on K-Cups as well. Canada, we had volume growth in Q4 and revenue growth of plus seven. Big part was focus is to grow... we've already got close to a 45-50 share in black. Focus is to gain specialty. So, if you observe specialty grew faster than base. Overall value market share of 25. I hand it over to Ashish to talk to you about the financial.

So let me answer this. We've seen some increases in packaging costs etc. Number one. Number two, we've seen some increases because of places where we use LPG. Now, the good and bad part of our portfolio, I think we've got a fairly balanced portfolio of slightly stronger commodities and highly processed food. So far, we've not seen a big impact on the margins per se. Now, if fuel price goes up, then it's broad-based inflation and then it's a different story, but with the current set of variables, we don't see a high pressure per se and I think we've got enough in our equity for all the categories for us to take increases to make sure we will mitigate margins. So, let me put it this way. I wouldn't lose sleep on trying to figure out margins at least in the next 2-3 months. Longer term, your guess is as good as mine, but right now, we remain confident of delivering top line numbers and EBITDA ahead of top line, right? And top line, we will grow at double digits. So, yeah.

No, no, no. So, 50 to 75 80 bps is a given. I mean, it's not an option. We will deliver it, number one. Number two, just a rider saying that we've got seasonality in our businesses, so it'll be quarter to quarter. So, it's not that it's automatically jumping up to the 50 to 100 for the full year number straight away. So, you have to cycle quarter by quarter because we've got seasonality. You will see that in play. 50 to 75 for the full year will happen.

So, the reason for Sampann growth from a portfolio perspective is broad-based but a little bit of higher impetus in the NPDs. But we've seen growth across pulses, poha, vermicelli, everything. I mean, whole portfolio. I think we're getting stronger as a brand and portfolio per se. That's number one. Number two, the quick e-com shifts by consumers is helping us as well because then distribution and availability is not a constraint and we're able to reach every single consumer, right? That's number two. Number three, from a margin perspective, we've always said there's no reason Sampann can't hit a mid-teens plus number and we're starting to get close to that. But we don't look at food... we look at tea separately, we look at salt separately, and Sampann separately. Salt is on a very strong wicket, beverages has come back to a strong wicket. Tea... Sampann per se is headed towards a mid-teens sort of margin. So, from a margin perspective overall, we're in a good place.

So, you know, for quick commerce e-commerce, the good part is Nielsen does have a panel and does give us data, right? So, we get that data and by the way, we're market leaders on tea on quick commerce e-commerce, right? And I would just urge you to go through different annual reports, different analyst calls to pick up numbers and do comparisons on tea, number one. And the reason I say benchmarks is my team has got very specific targets in terms of channels, in terms of numeric reach, etc. So, more than market share, I mean, the numeric reach, etc. is what I would look at share among handlers and numeric reach. But the overall market share, I would say broadly I don't find the directional numbers right and that's why we are starting to stop publishing because I don't want to get this discussion every time saying the numbers are not right, etc., right? Salt by sheer weight of the fact that you've got a 40% share and therefore it's very highly distributed and we are the number one, right? I think broadly the number works. Now, I don't have any benchmark anywhere in the industry to do any other comparison on salt. So, that's why salt we'll still look at the number. But beverages, like I said, 25 I will just give the number, right? 20% is quick on e-com. Out of 15 modern trade if you give it a half, it's about another seven. Institutions is about four five for me. So, overall GT is just about 55 and the number is off, right? So, doesn't make sense.

So, let me go with the second answer first. Number one is today while commodities costs have softened, there is inventory in the channel of raw material and therefore the entire margin expansion hasn't happened. And even after two three months when the inventory levels start to go down and the newer inventory starts to flow in, the margins would just come back to where they were for the industry before this entire up cycle on coffee prices. That said, you could see action on pricing specifically driven by promos on the shop floor. We remain alert to that, but I would say till broadly the industry comes back to the margins which used to be there just about 2 years back, I don't see too much of a fight breaking out on the shop floor, and therefore margins I would say will they come back to exactly where they were? I'm not sure, but they will definitely improve from where we are currently. So, that's the reason why we remain extremely confident. That's number one. And by the way, the good part is even in this scenario of compressed margins, we've continued to drive significant top line and therefore gain market share in the US. So, that's one. And the second part, I wouldn't compete about competitors with numbers and data which I am not too clued in about. All that I can say is we remain confident of growing 30% consistently and improving our whole margin portfolio profile as well. In NourishCo, we have three different verticals that we are very clearly focused on. Number one is water in its whole stack, and you'll see a bunch of launches happening. Right now, we have Himalayan, we have Spring Alive, we have Alkaline, and we have Tata Copper. You'll see more launches across the spectrum as well as functional waters. That's number one. Number two, you have affordable cups, and I would term it as affordable and profitable cups. Right? So, I wouldn't worry about people trying pricing actions in that category. And number three is where I have every right to win, which is tea and coffee. We have right now launched kombucha green tea, fruity. We've got coffee in cans and coffee in PET, and you will see more launches in the coffee space, sorry, tea space as well as we go forward. We've grown Tata Copper by 33% last quarter. There's no reason why this trajectory can't continue at this level for a long, long time because A, we do have a strong brand proposition. B, we've still not covered the entire country in the manufacturing distribution terms. And per capita consumption of water itself is at abysmal levels in India when you compare to the rest of the world. So, geographic expansion, per capita consumption, and portfolio expansion, all three will drive NourishCo.

So Vivek, let me say while we've improved our performance in Capital Foods and Organic India, I think we've got a runway to improve it still more significantly. With the split GTM that we have rolled out, we've already started seeing... my single biggest indicator is lines sold. And for that we have started to see significant improvement in Capital Foods and Organic India. When I look at by category and when I look by type of distributors, the growth guys are growing the fastest on lines per outlet, which means we are doing the retailing and distribution of the products backed by media spends on the brand as well. Whether it is Sachin Tendulkar or it is Ranveer Singh on the Capital Foods side. I think that's doing very well for us. And you'll see a lot of innovation also rolling out in the pipeline.

So therefore we should be accelerating on Capital Foods and Organic India. You will see a lot of launches organically across different platforms as we go forward including some new platforms that we're going to launch. So therefore the growth portfolio will continue to chug along at the 30% number at least in the near term. On the acquisitions front we remain open but right now let me say what we like is not for sale. What is for sale we don't like, right? So from that perspective if and when something comes along which we think will be attractive we will look at it. So we've never said no. In terms of percentage right now for the short term short to medium term I would say 30% growth is a given for the growth businesses and we will keep recalibrating as we go forward.

So overall if you look at it Vivek how does the entire Middle East situation impact us? Number one is in terms of availability of raw material and therefore business continuity, right? So for the India business itself, we used to have some plastic closures and PET etc. which we used to import. We've already shifted about I would say about 15-20 days back and we are fully I mean there is no issue on continuity. That's number one. Number two is the issue is LPG. LPG for specific categories where we used to use LPG. Most of the places we found alternate suppliers who are supplying without a problem and or we switch to dual use burners. So that is not an issue at all. The third piece is where if there is a fuel price increase and there is broad-based inflation, that is what should worry us. As of now, I mean I'm not sure where this is headed. I don't see a reason why it should only impact us. It'll be an industry-wide phenomenon if it happens and therefore you would see price increases with people making sure margins are protected. My hypothesis is if there is a broad-based fuel price uptick, it will translate to price increases as everyone in the industry moves to protect margins. But per se, as of now with the moves that have happened, I don't see too much of an impact and if there is an impact, like I said, we do have the equity strength to take pricing and make sure we mitigate that.

Absolutely because international, remember in UK, Canada, etc. it's primarily tea and therefore the big big impact is tea prices more than anything else and that hasn't changed. Similarly, in the US it is coffee which is probably 90% of my business and again, coffee prices are coming down rather than going up and therefore doesn't change. There will be minor uptick here there, but nothing significant.

Thank you.

No, sir. This quarter Organic India did touch close to 30%. I think it was 26 or 27 if I'm not mistaken. Capital Foods was a bit subdued. I would have loved for it to grow, but it still grew double digit. The primary reason was as we relayed the entire go-to-market. Remember between November and February, we relayed our entire go-to-market in the top cities. That had a bit of a hiccup. That said, we remain quite confident of coming to the 30% mark very quickly.

So like I said, I've stopped trying to forecast commodities too far ahead because things go up and down, but as of now, for this year, tea prices have trended well. They are roughly in the same ballpark as the price same period last year, and so therefore it's largely benign. And that's why we had given off pricing to make sure that we are competitive. As of now, we don't see any reason to change the guidance for that.

See, in a structure like mine, where my front end is common and my entire back end operations are common, I would not try to do a mathematical exercise to allocate overheads by different categories, and therefore calculate EBITDA, right? So I mean, we've always maintained saying we will do a P&L by category up to margin after promotion and advertising expenses. Below that, all the costs are all fixed, and then the target when the targets for the teams who are handling those lines are fixed costs. And that's how we play it. So for every single category, whether it is I mentioned the 33 to 35 for tea or the 35 range for salt or the mid-teens for Sampann, it is all margin after promotion expenses.

Thank you.

So let me answer the second question first. We've always mentioned for T, we will target mid single digit growth and a couple of basis points of price mix. Therefore, mid to high single digit total top line growth. From that perspective, we are almost there but not there in this quarter. So I would aspire for a slightly higher number. That's number one. Number two on the quick commerce e-commerce, our philosophy is very clear. We will be where the consumer is. And if the consumer is shifting from GT modern trade to e-com quick com, we will be there first and then we'll figure out all the other pieces later. So that's been our motto. Number one. Number two is remember we came from significantly behind on distribution. While you might say relationships on GT, when we started six years back, we were half a million outlets with a numeric reach of 2 million. Today, we are about a 2 million outlets with a numeric reach of 4 and a half, right? So from that perspective, we've expanded significantly, but we are still behind where we want to be on distribution. And the ability to reach consumers through quick on e-com and gain momentum is primarily because A, we've got the most trusted brand name in the country. B, we are very very sure of the quality of the products that we offer. And therefore, when we connect straight with the consumer, we hit it out of the park, right? And in fact, that is one of the things which I used to beat up my sales guy saying, 'As long as I am talking straight to the consumer, which is what happens on quick on e-com, I am a winner and I'm number one, right?' So therefore, if they get my execution right and close distribution gap, there's no reason I should be number one. I shouldn't be number one even in GT channels.

No, you have to remember when you put all in costs, right? If you look at only up to gross margin level, there are different costs on different channels. If you take the cost of the field force and put it on to GT channels and the cost of logistics and you put the visibility on the e-com quick on channels, you might broadly be surprised that it lands up in the same ballpark. So I wouldn't want to do that calculation. And the other piece, like I mentioned, right? I would rather go play where the consumer is, even if it's a slightly lower margin, than not go just because it is lower margin and land up with no margin, right? So that's number two. Number three, remember there is a game of ROAS as well. As you build scale on these channels, you initially have to spend higher visibility to get momentum going. Once you get momentum going, that same advertising dollar gives you significantly higher return by building scale. So there is an advantage to be had by first mover, and I do think that in quite a bit of the categories we're getting there.

Thank you.

So a couple of things, right? As long as I don't increase the middle of my P&L, my top line continues to grow double digit. It has to drop to the bottom line. That's number one. Number two, I did mention that if there are some tweaks and some small niggles on cost aspects, we have the ability to take pricing up and therefore make sure that margins are well protected. So I wouldn't worry about it. I would say a food business in India should be between, I would say, 7.5 to about a 8.5 sort of A2S ratio. We're broadly operating in that ballpark, and even if you look at the full year, we're almost in that ballpark, right? So for the full year, there will be ups and downs in quarters because, for example, there is a peak in North India in quarter three, quarter four. So you will find a slightly ahead of that advertising ramping up. Or, for example, there are specific big days and big events around, we will ramp it up then. But broadly in the ballpark, we should be in the seven sort of range coming in and I don't expect that to impact my overall EBITDA margins.

So absolutely. If you saw the slide on innovation, innovation is focused on the three big macro trends in the Indian consumer, health and wellness, convenience, and premiumization, right? The other piece is communication moving to digital and online shopping as well. So you see us going aggressively between e-com, quick com, and therefore advertising dollars also being rupees also being spent on that. So that is a secular trend, number one. Number two, you will see Sampan and you'll see Tata Simply Better. That's because the base categories we are present in Sampan and then we are adding something, subtracting something, making sure it is better than what you consume on a regular basis, that is branded under Tata Simply Better. So cold pressed oil is not a regular oil, it is better for you oil and therefore it is Tata Simply Better.

Yes, please go ahead.

So Percy, I said as of now we are seeing it roughly flat. We will and I've mentioned on a couple of calls I've stopped trying to forecast commodity costs too far ahead because with all the bumps that we have on climate, weather, etc., I don't know what I don't know. And we will react, we'll be agile to move pricing, etc., in line with the commodity trend. For now, the season has already started. Plucking and auctions are up fully in April. And we are seeing costs roughly benign.

So Percy, the tea margins for Q4 are roughly where we want to be. We were not there in the beginning of the year. They started expanding as we went through the year and we had taken pricing and cost went down. Roughly right now where we should be and we'll aim to be in this ballpark.

So Percy, with our ambition of growing double digit and continuing to deliver a beta margins ahead of or a beta ahead of top line, we will not only grow our organic portfolio which exists today, but we will continue to drive as I've clearly mentioned saying it's distribution, marketing, brand building and innovation, right? So as we see consumer trends come up, you will continue to see innovation coming out. So I think we're a long long long way away from saying we've got the perfect portfolio. I do think we will continue to aggressively expand distribution, continue to spend behind building strong brands and continuing to expand on innovation.

So Percy, last three quarters I think we've been in a strong double digit top line growth 18 15 18. So that's number one. Number two, these are all driven by base UVG and not by pricing actions. I think that proves the ability of the system to execute all these innovations at scale. That's number one. Number two, remember not all the innovations that you see are immediately lining up in the distributors warehouses and therefore complicating the system. Today there is this beautiful channel called e-com quick com which allows you to launch so your test market is you can do it in a city on quick com do a quick test and then roll out total quick com then modern trade then SMTs then GT. So as long as your playbook is very clear on how you're going to expand at lowest risk lowest cost and highest impact, I don't think there is a problem in launching innovation, right? The critical piece is to have your framework on where you want to play and launch innovation in that space. I think that is the more critical space. So I wouldn't see an issue out there. As far as portfolio goes, let me just leave you with we are right now in the food and beverage space which is still got I would say enough white spaces for us to go after. Especially in very very specific nutrition health and wellness and premium category. So we will you will continue to see launches across our portfolio in that space.

So Sumpan overall for the full year ended at close to 1400 crores, but remember starting from a 35 37 growth if I'm not mistaken in Q1, they're now at a 60% I don't... Yeah, this is some 1600. Oh, 1600 crores is the actual number for Sumpan for the full year per se.

Thank you.

So let me answer it in this way. Yeah, protein is a segment which is trending and we are looking at it closely. But the acquisition strategy doesn't pertain to protein alone. As I said, we're very clear where we want to play, where we don't want to play. And if there is an attractive acquisition which comes across any of the segments that we play in, we will look at it. Protein included. But protein per se, you would have seen some of our launches come out. Makhana, for example, or we've launched edamame, etc. That is let me just say it's a teaser. You would see much more ramping up in this space, but ramping up with a plan.

So GLP support is what food and beverage companies are looking at. We're also looking at that the thing right now there is nothing on the anvil. We will wait and watch, but we trigger ready to see if this category takes off.

So the primary reason is because for Organic India the single biggest market is the US. And we carry inventory onshore out there in the US. During the tariff up and down which impacted Organic India quite a bit, we had pumped up inventory and therefore there was enough inventory sitting onshore in the US. Whereas for Capital Foods it is FOB India to many of the retailers, and most of them do US transshipments happen at the Middle East, etc. And that shipping got disrupted in the month of March. Come April it is back to normal and we do expect to start delivering decent growth even in that category.

There are multiple drivers. Starting with the first thing which I said, when Tata Consumer was formed, we decided to play not only in vacuum evaporated iodized salt, we said we will play in salt. So actually if you look at my salt portfolio today, it's almost like a Udupi restaurant menu, right? You got salt with zinc, you've got salt with iron, you've got salt light, you've got salt super light, you've got rock salt, you've got sendha salt, you've got solar salt, you've got vacuum evaporated. So we have created a portfolio on salt which caters right from the premium down to a value play. That's number one. Number two, over a period of time we've continued to build the brand with media and strengthen it. In fact, top of mind I think right now I would dare say Tata Salt is probably right up there among the top Indian brands. Our top of mind is now about 88. So 88 out of 100 Indians if you ask them salt, they'll say Tata Salt, right? As simple as that. Number three is distribution and we continue to expand and we continue to re-engineer our distribution systems to make sure we're delivering. There were very many cities, I think 24 if I'm not mistaken, where salt was overwhelming and therefore if it's a very very strong market, it's good to separate it out to give it single-minded focus. That has started to play off as well. So yeah, multiple things in play. I would say not one.

So the growth is primarily when you compare with last year, so the coffee prices are elevated even when you compare to last year and that is what is driving the unbranded soluble growth. Incidentally on the unbranded soluble growth, just FYI, I think Vietnam is now running at a 99% utilization and we had already started a project to expand capacity out in Vietnam which should be online by I think very early in 2027. That will give it the real next leg of growth going forward. Today our board has also officially approved capacity expansion on tea extracts which again we've run out of running out of capacity and we will start on that project as well. So the whole soluble unbranded business will continue to go from strength to strength.