Release Date: October 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Consumer Products Ltd (BOM:500800, Financial) reported a 13% increase in revenue, with India Foods revenue growing by 28% organically.
- The international business showed strong performance with a 7% revenue growth and improved profitability, particularly in the UK.
- The company has successfully integrated newly acquired businesses, with Capital Foods and Organic India showing quarter-on-quarter growth of 25% and 45% respectively.
- Tata Starbucks has become the largest cafe operator in India with 457 stores across 70 cities.
- The company has become net cash positive after completing a rights issue and paying off debt, which is expected to positively impact future financials.
Negative Points
- India beverages segment experienced a decline in volumes, marking a rare occurrence of volume decline year-on-year.
- The company faced a contraction in EBITA margins by 30 basis points to 14.9%, primarily due to higher input costs in the India tea business.
- The ready-to-drink business was negatively impacted by unfavorable weather and competitive pricing, leading to an 11% decline in revenue.
- The non-branded business is experiencing stress in demand for soluble coffee due to high pricing, which may affect future profitability.
- Starbucks reported a challenging quarter with only 2% revenue growth, attributed to reduced consumer traffic in the QSR segment.
Q & A Highlights
Q: How should we think about the profitability of the India branded business given the recent price increases in salt and other products?
A: Sunil D’Souza, Managing Director & CEO, explained that for salt, the cost increase has been mitigated, so margins should maintain or slightly improve. However, for tea, while they aim to pass on cost increases to consumers, the competitive environment will dictate the extent of margin improvement.
Q: What is the outlook for the non-branded business, particularly in terms of coffee realizations?
A: Sunil D’Souza noted that the non-branded business, especially the soluble coffee segment, is experiencing demand softness due to high prices. While they have benefited from inventory carry forwards, future profitability will depend on market conditions and may return to normative levels.
Q: Can you provide insights into the competitive intensity in the tea market and the delay in price increases?
A: Sunil D’Souza mentioned that while they are committed to maintaining market share, the competitive environment has delayed price increases. They are prepared to adjust pricing as competitors do, ensuring they remain competitive without sacrificing long-term market share.
Q: How are the recent acquisitions, Organic India and Capital Foods, performing, and what are the growth expectations?
A: Sunil D’Souza expressed confidence in achieving business case numbers quickly despite starting from a lower base. They have learned from integration challenges and remain bullish on growth, with no plans to recalibrate expectations lower.
Q: What is the impact of rising prices on unorganized players, and how does it affect Tata Consumer Products?
A: Sunil D’Souza indicated that unorganized players face stress due to working capital constraints and rising prices. This could benefit organized players like Tata Consumer Products, although the impact has not yet been fully observed in market share data.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
