Tata Consumer Products Earnings Call for Q1FY27

Thanks Nidhi. So in summary overall our consolidated revenue grew 12% with the India business delivering a 13% UV India tea volumes were up by 2% despite the prolonged summer but revenue declined 4% because as tea costs came down we've been passing the benefit to the consumers. Salt delivered 7% revenue growth led by 7% volume growth despite the fact that in the month of June we did take a price increase. Growth businesses grew 47% year-on-year and scaled to 36%. In terms of growth, I think this was the best ever quarter for the growth businesses for TCPL and they account for more than one-third of the India business. Now, Samp grew 58% and it was broad-based volume growth. RTD revenue was up 41% with robust volume growth. Capital Foods and Organic India grew 35% combined. International business grew 3% in constant currency and overall including forex grew by 16%. US business delivered 7% constant currency growth with I think the seventh quarter of consecutive share growth. The non-branded business as coffee prices came down in line with expectations we saw it declining 7%. If I take constant currency it was down by 10%. We delivered a 19% growth in EBITDA and margins expanded 70 bps to 13.6%. Innovation fired on all cylinders and we launched 14 new products during the quarter and we've got a robust pipeline for innovation for the rest of the year. Starbucks had probably a very good quarter. Revenue grew 11% year on year. Albeit I have to say that we were cycling a slightly subdued quarter last year during the same quarter but even without that the same store sales were in a healthy range. So in terms of businesses, India salt up 7% revenue north of 1,000 crores. India tea and coffee was down 4% revenue 1,200 crores. Growth businesses if you look at it now this is a bigger segment than India salt and tea and coffee. Revenue was 1,300 crores growing at 47%. International constant currency 3%, reported 16% growth, 1,245 crores. Non-branded close to 500 crores, down 7% but in constant currency down 10%. So consolidated all in constant currency up by 9%, reported up by 12% at 5,349 crores. Financials: 12% revenue growth translated to 19% EBITDA growth and a 13.6% margin. PBT was up 27% and net profit was up 29% at 427 crores. EPS was 4.31 and last quarter if you remember we started reporting adjusted EPS because we amortize some of the brands from the businesses that we've acquired. If I adjust that, our adjusted EPS is 4.67 rupees per share.

And if I go to the strategic priorities, we continue to put money behind A&P. Our Q1 A&P was 6.1% behind almost all our brands. Growth businesses are now accounting for 36% growing at 47% year-on-year. Our innovation focuses on three big pillars: health and wellness, convenience and premiumization, and we had launches across all these pillars. We continue to focus on sustainability. We are now a member of Dow Jones World Index, which we were incorporated on December 4th, 2025. CRISIL we moved from 61 to 67 and 62 to 68.

Specific businesses: India beverages I talked about volume being up 2%, revenue down 4%. Unusually strong summer along with a minor issue of LPG shortages impacting small restaurants and streetside vendors including hot tea shops in the south did impact the business, but coffee continued to grow 24%. Salt strong show despite the fact that we took calibrated price increases as I mentioned in June. Broadly that salt the orange bag moved from 30 to 32 in terms of MRP but value-added salts continue to deliver strong growth at 13%. Tata Samp had a stellar quarter. We had a 58% revenue growth driven by volume. We had growth across categories, whether it is core or our new launches of dry fruits and chutneys and our whole spices had another great quarter. RTD strong growth, revenue up 41% driven by 38% volume growth, growth across the portfolio across our premium portfolio Tata Gluco Plus as well as Tata Copper water. We also launched two variants of Kombucha Zero focusing on building out our premium RTD tea and coffee portfolio. Capital Foods and Organic India strong growth. Capital Foods revenue at 232 crores, Organic India 118 crores, combined gross margin continues to be very healthy at close to 50%. We had growths of 40% for Capital Foods, 27% for Organic India. We continue to focus on new launches to expand the addressable categories for both the businesses. We do think that apart from various other items including innovation, including the focus on execution, including the restructuring of the go-to-market to drive specific focus behind these brands, have started showing encouraging early results. International another good quarter, constant currency up 3%, reported 16%. US business as I mentioned 7% constant currency growth. Overall the US, UK and Canada were impacted especially in the month of June by the unusually warm summer that they experienced and this did have an impact on the business most specifically in the UK and specifically in the black tea category. But the Teapigs and Good Earth specialty and fruit and herbal brands continue to deliver strong growth. We've also continued to gain share in those segments. Canada revenue was flat. Our value share improved across regular and specialty. The non-branded business as I mentioned in line with the coffee prices declining globally was down 10% in constant currency while solubles which is primarily a pass-through business declined 12%. Plantation declined 8%. But proactive hedging did help us mitigate some of the impact of coffee price corrections. Starbucks had one of their very good quarters. Revenue was up 11%. As I mentioned we are cycling a slightly subdued quarter with the store closures impacted by Operation Sinbad last year in the month of May. But even if I net that off, we had mid-single-digit same store sales growth which bodes very well for the quarters to come. We did close some cafes in the short term. And we relaunched Starbucks Rewards to drive engagement and visit frequency for the business. Over to Ashish for the financials.

Thank you. Operator, could we take the questions from the Q&A line?

We can't hear you. I think there is some issue with the line. Can you hear us? All right.

Yeah. Yeah. Very clear.

Uh so Amnish, number one is in terms of own manufacturing versus outsourced. So let me put it this way. For Organic India most of the infusions, supplements etc. we make it in-house. There are a few categories which we go out. In Capital Foods again most of the production is in-house. We do go to some third parties but then the IP part of it we do it ourselves. RTD is, if I may put it, it's dedicated co-packers who are primarily running it for us. So in those terms it is almost exclusive packaging, exclusive manufacturing except that capex and operations are run by someone else. It is just in Samp that we do a lot of outsourcing but let me put it this way, where we see an opportunity where there is scale already in the category and there is value of bringing it in-house, we will definitely evaluate. Now the good and bad part is for most of these categories the manufacturing capexes are not very heavy so it should not be too difficult, but if it makes financial sense to bring it in-house, and when I say bring it in-house remember it's scale as well as the geographical spread, so also the distribution of the category matters because is it one facility or five facilities? That is what we've got to evaluate. So we do it from time to time. There are a certain number of categories that we are doing evaluation whether consolidation makes sense. So that's number one. Number two, cost inflation. Very clearly, if there is inflation, it will pass on. There might be a bit of a time lag between when it hits us and when we pass it on. But I would say broadly we would pass on the inflation and try to ensure that we maintain margins. Incidentally for Samp for example, our overall growth category we have improved margins during this quarter. That's number two. And number three with CF and OI, yes, we have said our aspirations are at 25 to 30% growth and I would take it one quarter at a time. Like I said, we've got innovation firing, we've got NPD to bear, we've got execution going in. Specifically the split go-to-market by the time we relayed the system was in the month of February. It did take time to fill up all the vacancies on the sales reps etc. But that is starting to bear fruit. The answer to that question is 25 to 30% should be the new normal going forward.

So Amnish, let me answer your second question first. So we have our entire road map drawn out in terms of the categories that we want to play, which includes a very clear thing of what capabilities do we have across the chain including procurement, including marketing, including manufacturing etc. One of the defining factors is the margins in those categories, the growth possibilities in those categories, and most importantly the trust deficit. So when we had looked at the edible oil portfolio, the reason we decided to get into the cold press oils is because we did see a consumer trust deficit in the fact of whether it is refined or cold press, and as soon as we put the Tata brand name it made magic and we figured we could drive growth with margins in those categories. In the base edible oil, right now our hypothesis is we do not have the entire capability and the muscles to play in that segment and we will struggle to find differentiators especially given the fact that trust deficit is not so strong in that segments. But never say no. We continue to look at options on how do we unlock various segments from time to time. And spices, again, apart from the straight spices which is the CTC, which is I would say broadly similar across the country not exactly similar because as I said earlier the coriander green versus the coriander brown in two different parts of the country does make a difference, but the blended spices are broadly regional and they are very very sticky over generations. So we figured whole spices and straight spices are our key focus areas for driving growth with the margins that we're looking for in those categories. So we'll stay focused. I think the runway there itself is long enough for us. So that's number one. To answer your question number one, our guidance remains 30% growth. We will hit it out of the park once in a while, but yeah broadly I would stay focused on the 30%.

So Vivek, the core portfolio of Samp which is pulses, spices, pasta, vermicelli all that has been growing at about the 30% growth rate which I have guided for, and the cold press oil and dry fruits have added to that growth. So let me put it that way. So overall we are happy with the portfolio and we are very very happy with the dry fruits and the cold press oils.

So Vivek, we've always said mid to high single digits is the growth. So I would say 5 to 7 is a good number to target. I would say this, these price hikes will probably take a quarter or so to settle. After that we will keep pushing the envelope. We are now touching close to a 39 share in salt and our ambition is to very very quickly cross the 40 mark.

So I do think our innovation has started to work, our media has started to work, and we've coupled that with execution. So if you ask me yes we think we've started to put the levers together but like I said early days, I would take it one quarter at a time. We do see green shoots. The go-to-market is still not fully fleshed out because for example once we decided and we relayed it in some places we had some trouble finding distributors, some trouble finding DSRs. DSRs take time to join. I would say broadly we are in place on the structure now so hopefully 25-30% growth should be the norm going forward.

No, no, no. Yeah. So one of the things that we are laser focused on is making sure our ARS system works and therefore inventory days are defined. It is inventory defined minus, sorry, the thing is very very clearly a calculated piece and therefore there is nothing to do with the, if you're mentioning the difference between primary and secondary, broadly in line. In India there was a little bit of export phasing which moved to this quarter but that's not significant enough for us to call it out. Our export business also now it's almost, one of cycling tariffs and the initial hit that we took from downtocking in the US etc. that happened last year, but broadly I would say on track.

Yeah. Thanks.

So Mir, I think this is, I maintain my stance that I've stopped trying to forecast tea completely. We will move in line with the market. Last quarter little bit of impact of the extended summer and lack of rains in specific parts of the south as well as north. Overall we're seeing about 7 to 10% I would say inflation that is for now but the peak cropping season is just started to come in. Right now the crop seems to be quite good in Assam. We saw inflation more at the bottom end of the portfolio rather than the higher end of the portfolio. But that was the trend till now. And we've not, I mean we're not into a significant portion of our buying. We've got a long long long way to go because like I said the peak cropping season has just started and it's about 30 days between the cropping and by the time it hits our inventories. So I would say right now we're seeing 7 to 10. We're planning for a 7 to, if that happens then we will look at judicious pricing to make sure margins are maintained. We've already taken some minor price increases in the month of June. But if the trend persists we will look at maintaining margins and take pricing up. But for now like I said we are not calling a trend for now. We will wait and watch at least for the next 15 to 30 days because we've got a lot of buying to go.

So I keep maintaining that we will drive double digit growth, right? There will be those odd quarters where we will have mid-teens and there will be those quarters where it will be low double digits. And here's the thing, I don't think lapping any of the bases matters. Tea and salt, we've got very decent shares and it's category-driven growth but our growth businesses runways are as long as you can imagine. Whether it is Samp or it is RTD, I think we've got long runways and therefore delivering double digit growth should not be an issue.

See overall for the growth portfolio we are targeting 30% plus. Various permutations combinations, we've got a portfolio, some things will fire, some things will be a little bit lagging, and therefore I think 30 is a good number to take.

So we've guided for 50 to 70 bps margin expansion for the year. And we've got seasonality in our business. For example tea will peak in Q3 Q4 because winter. Some of the businesses foods etc. Q2 Q3 peaks because of the festive seasons around that time. Salt is largely non-seasonal excepting there is a bit of downtocking during the monsoons by trade, that's historical. So I would not look at the quarter sequentially. My comparison always is versus the same quarter last year. And versus the same quarter last year we've delivered 70 bps increase, which is in line with our guidance for the full year. So we do maintain that this year we expect to deliver 50 to 70 bps of margin expansion.

So first of all, we delivered despite the hot summer, despite the LPG hiccup that I talked about, we still delivered 2% volume growth in tea. So there's no reason for us not to exceed it. Our guidance remains mid-single-digit volume growth and we do expect to deliver it in the short to medium term. So that's number one. And Starbucks like I said, same store sales growth was mid-single-digit. That coupled with new store openings, I think you should expect close to a high single-digit topline growth going forward.

So Percy, I think we have multiple drivers coming through. One of course is the full impact of the pricing that we have taken and if need be we will also make further pricing interventions because the cost has been fairly dynamic and we also are coming to terms with the exact inflationary impact on the margins because at the same time as you would be aware, the cost situation has been fairly dynamic and therefore has also been a bit dynamic. So we also don't want to get ahead of ourselves and take up price increases which are not underlined. Yeah. So we have been a bit calibrated from that perspective. So that's one clear driver. The second driver as I said would be US coffee because coffee prices again have been coming off, while recently they have gone up again but I mean directionally they are significantly lower than what we saw last year. So US coffee should lead to further improvement in international margin. And third, of course, we have mounted multiple cost-saving and efficiency drives across the organization. We should continue to bring in goodness in the P&L.

So Percy, it is still net positive because in our unbranded business it is largely a pass-through because it's made to order. So we don't have any adverse impact of cost prices coming off. So therefore in the branded business is where we gain. So it's a net positive. And mathematically per se, the US consumer business is larger than the solubles and plantations put together.

So Percy, broadly last quarter we had said that we are stopping disclosure of Nielsen because today general trade accounts for only 56% of my business. Modern trade is 16%. But there is one significant player who doesn't share numbers and therefore there is a guesswork on what their numbers are because unlike in many countries where there is a surrogate for such outlets for such retailers, in India there is no surrogate for that particular retailer, and quick commerce and e-commerce is anyway not added and it is separate. My only submission would be that there are publicly disclosed numbers which include quarterly filings and annual reports. If you put together enough data, I think you'll be able to figure out we've broadly done better or gained in market share in relative terms over the last couple of years, and this quarter also we do feel from the numbers that we have from the big retailers as well as from the quick commerce players, we do think we've gained market share overall. Even in our portfolio, our mass premium and premium range has done better than the bottom end of the portfolio, which has again increased market value realization.

So a couple of things, Manoj. On the water business, we've done very well I would say. We've grown volumes overall for the RTD business by upwards of 30%. Right. And the rest of it is translated to about a 41% revenue. Sorry, so the exact numbers are 35% volume and 41% revenue, and water is also in line with these numbers. So very good growths on water. In fact water, I think the critical piece for us is we underestimated our growth rates in some parts of the country and one of the things is we are doubling down now to make sure that we add as much capacity, definitely for next season but even if possible for this coming second season as well, because we think the entire mix including execution is starting to fire up. In terms of the medium-term aspirations, just to recap, we had said a good food business in India should operate between a 17 to 20, at the higher range. So we should be showing a glide path towards that. You're absolutely right in terms of the gross margins for tea and salt, 33 to 35, 36 is the range, and therefore there won't be a substantial move on that. The moves will be a mix of the higher margin Capital Foods, Organic India growing number one. Number two, the water business continuing to improve margins as we improve utilization and throughputs, and the premium RTD coffee tea portfolio starting to fire up within that and the value-added waters that we've launched one and you'll be seeing a barrage of launches now in the next I would say 3 months or so which are incremental on the margin front. And then I come to Samp, which actually when we started off it was a negative 5% in 2020. We are closing in on a 12% with a constant increase. I think this quarter was close to 150 to 200 bps of margin expansion over the same quarter last year. So it's growth plus incremental margin. So that's one piece. The second piece is the most critical piece is operating leverage. Right? So this you're not seeing it this quarter in the P&L for a very simple fact that there is lot of noise with the inflation on packaging, inflation on freight, fuel, forex movements etc. But last year we had about a 220 bps swing because of leverage. So we expect that a significant portion of the increase will also come with scale leverage because this year for example in terms of headcount, apart from very specific injection for the vending and a little bit of injection on the RTD business, there's no substantial headcount increase for example. And over the past few years we had been adding headcount as we expanded our footprints, expanded geographies. Last year as the go-to-market split routes came into being, but now it is broadly stable and we don't expect significant increase in the middle of the P&L. So scale leverage should start kicking in pretty quickly.

By far, by far, Manoj. Let me put it this way. We probably do sell water I would say in 70, or let me put it this way: we have availability in probably 75% of the country but in real distribution marketing, having got our act together, we're probably still at a 42-50% level. So we've still got a long way to go. The north, the east, sorry, north, the west are I would say broadly white space geographies. The water business primarily is Andhra, Telangana, Odisha, a little bit of Tamil Nadu, West Bengal, and a little bit of Bihar and East UP. So balance is I would say still a wide geography where we've got a lot of work to do.

Yeah. So Tata Soulful we grew at 45% for the quarter. It was a decent run. Tata Soulful you will see a significant number of launches in the premium category so to speak and a little bit of expansion of the categories in which they play. We've just launched protein muesli and it has gone off to a very good response. Muesli is the top performing category for us but you should expect to see expansion in number of categories in which Tata Soulful plays. I would say probably in the next 3 to 6 months.

So Tata Soulful is primarily the strong channels are online and modern trade. It is available in all modern trade outlets and most of the high-end SMT outlets. We are listed on all the quick commerce and e-commerce and that is a significant growth channel for us.

So a couple of things, right? If sowing is low which means output is low, prices will go up. If prices go up we will take up our prices, as simple as that. So I don't see an issue around that. We are still a relatively very small portion of the overall pulses market. Just to put it in perspective, Samp pulses would be about 6-7 crores. The pulses market is a 2,000 crores with 6% branded penetration. Right? So I wouldn't worry about the overall broad-based piece because I think the ball is in our court as to how fast we will grow. That's number one. Number two, in terms of El Niño, I think we did see the effect in terms of a delayed monsoon and then very erratic monsoon so to speak. But like I said, I don't know what I don't know. If the single biggest impact of El Niño would be on tea, if it happens and if it happens prices go up, we will take up pricing to maintain margins.

Thank you.

I think again already said that. Right now we are very very early in our total buying. We are seeing a 8 to 10%, 7 to 10% inflation in tea so far. If the costs continue to be high, right now the crops look to be good for this month which is now starting to get into the peak cropping. If the pricing as I mentioned, we've already started some calibrated pricing in June, we will look at continued make sure we maintain margins as we go forward.

So yeah, we've got our portfolio expansion drawn up for Capital Foods. The big expansion was noodles where we've finally got capacity together. We've launched cup noodles. We've expanded chili oil and they're looking at a slightly disruptive play in the Korean noodle space coming soon. Organic India is an expansion into the supplement categories. And we're looking at aggressive expansion of the organic pulses. Incidentally, pulses per se and organic pulses is a quite a large runway. We've still not got our full act together in that space. We've just begun to put the threads together and you should start seeing some good action in that space.