About the Company

Tata Consumer Products Limited (formerly TataGlobal Beverages) is an Indian multinational non-alcoholic beverage company headquartered in Kolkata, West Bengal, India, and a subsidiary of the Tata Group. It is the world’s second-largest manufacturer and distributor of tea and a major producer of coffee.

The company markets tea under the major brands Tata Tea, Tetley, Good Earth Teas, and JEMČA. Tata Tea is the biggest-selling tea brand in India, Tetley is the biggest-selling tea brand in Canada and the second-biggest-selling in the United Kingdom and the United States, and JEMČA is the biggest-selling tea brand in the Czech Republic.

In 2012, the company ventured into the Indian cafe market in a 50/50 joint venture with Starbucks Coffee Company. The coffee shops branded as “Starbucks Coffee – A Tata Alliance” source coffee beans from Tata Coffee, a subsidiary company of TataConsumer Products.

Q3FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 1988 1488 33.60% 1770 12.32% 5409 4456 21.39%
PBT 176 194 -9.28% 231 -23.81% 721 634 13.72%
PAT 136 143 -4.90% 169 -19.53% 538 453 18.76%

 

Consolidated Financials (In Crs)
  Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 3089 2522 22.48% 2808 10.01% 8643 7322 18.04%
PBT 292 264 11% 321 -9.03% 1113 826 34.75%
PAT 237 189 25% 234 1.28% 860 585 47.01%

Detailed Results

  1. The consolidated performance was good at 22.5% YoY growth in revenue and 25% YoY PAT growth for Q3.
  2. The company saw growth in consolidated EBITDA of 12% YoY. EBITDA margins fell 120 bps YoY to 11.9%.
  3. Overall India business grew 36% YoY. The company has a cash position of Rs 1550 Cr.
  4. TCPL acquired 100% equity stake in Kottaram Agro Foods Pvt Limited (Soulfull). Operational integration to be completed by Q2FY22.
  5. Integration expected to be substantially completed by Q4 FY21.
  6. 100% of all channel partners have been digitised and dedicated sales reps have risen 30% in 9M.
  7. The India Packaged Beverages business showed revenue growth of 19% YoY & volume growth of 12% YoY in Q3. India tea business saw 43% YoY revenue growth, 10% YoY volume growth and 94 bps market share gain.
  8. The India Foods business showed a revenue growth of 19% YoY & volume growth of 12% YoY in Q3. Salt revenues grew 19% in Q3 with market share gains. The value-added salt portfolio has grown 2.7 times. Pulses grew 35%. Launched new products Poha and nutria-mixes in Q2.
  9. NourishCo had revenue of Rs 33 Cr and saw 9% QoQ revenue growth. Tata Water Plus sold 1.6 x volumes in Q3.
  10. The Tata Coffee division saw value growth of 1% YoY. Plantations revenue grew 6% YoY and Extractions Volume fell 3% YoY. Vietnam plant now operating at ~93% capacity. Extractions business was impacted by global shortage of shipping containers and further lockdowns in Europe.
  11. In the Starbucks JV, the company saw a 90% YoY revenue recovery in Q3. Around 92% of stores are operational and 13 new stores and 3 new cities are added in Q3.
  12. The UK tea business saw revenue growth of 1% YoY with volume growth of 5% YoY. It maintained a market share of 20.3% in the everyday black tea segment.
  13. The USA coffee business saw a 7% YoY rise in volumes and 6% YoY revenue growth. The tea business saw revenue growth of 18% YoY & volume growth of 22% YoY.
  14. In Canada, the company saw revenue growth of 24% YoY in Q3 and it maintained a market share at 29.5%. The volume growth in the quarter was 19% YoY.

Investor Conference Call Highlights

  1. TCPL exited the Map Coffee business in Australia for the sake of portfolio rebalancing.
  2. The company has trimmed down the number of distributors by about 63% and all distributors are now 100% food and beverage.
  3. Unique outlets built for 3 months are up by 65%.
  4. The SoulFull portfolio straddles multiple consumer occasions, breakfast, snacking, mini-meals, convenience, healthy, clean label, no maida offerings targeted for millennial families. It also has a reach of 15,000 outlets.
  5. The acquisition was done for Rs 156 Cr for 100% equity stake.
  6. The founders and key management will remain with the company at their normal posts.
  7. The estimated market size for TCPL’s health and wellness offerings portfolio is at Rs 20,000 Cr and is expected to grow to Rs 40,000 Cr in next 5-6 years.
  8. In the U.K., after growth in Q2, black tea has started to get into declining territories, but we continue to see strong growth in Fruit & Herbals.
  9. In USA, TCPL saw a decline in regular black tea after strong growth in Q1 and decent growth in Q2. Coffee continues to grow at 7-9% rate.
  10. Canada saw growth both in black tea and in speciality tea.
  11. The company’s super premium brand Teapigs grew 32% YoY in Q3.
  12. Tea inflation in India remains a challenge in the near term according to the management.
  13. The management maintains that there is ample room for growth in the Salt business both on the mass and value added end.
  14. The management has stated that Soulfull already has a good product portfolio and it will be currently looking for distribution expansion for Soulfull and then look to expand the product portfolio.
  15. The biggest permanent impact from COVID-19 was the increased consumption of beverages in home and the rise of tea here.
  16. Pantry loading is indeed expected to continue but it will be declining going forward.
  17. Soulfull had revenues of Rs 39 Cr in FY20.
  18. The tea prices are expected to soften once the new crop comes in by the end of April.
  19. The management sees geographic expansion, capacity expansion and portfolio expansion as the key for NourishCo in the near future.
  20. Although the company has very little presence in the retail coffee space in India, the management believes that this business can expand fast through the company’s brand strength and distribution reach.
  21. The Sampann business has seen 5x growth in the Poha portfolio and is also introducing thin poha to expand the portfolio.

Analyst’s View

Tata Consumer Products has a very good product portfolio in diverse F&B segments and strong brands like Tata Tea under its umbrella. The company has seen good growth in both value and volume terms across all segments, especially in the tea and salt businesses. The company has a good opportunity for growth in the health and wellness segment with the recent acquisition of Soulfull. This increases TCPL’s health portfolio to a massive addressable market of Rs 20,000 Cr which is expected to double in 5-6 years. It was also able to pass on the increase in tea and salt prices directly to consumers and also gain market YoY. It remains to be seen how the company’s wholesale businesses which was the worst hit from COVID-19 fare going forward and how the company will fare against other branded players like ITC in the fast-rising branded staples category. Nonetheless, given the company’s leadership position in its top brand segments, its enhanced distribution-reach after the merger, and the incoming synergies and benefits from integration, Tata Consumer Products remains a good FMCG stock to watch out for.

 


 

Q2FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 1770 1462 21.07% 1651 7.21% 3421 2967 15.30%
PBT 231 205 12.68% 314 -26.43% 545 439 24.15%
PAT 169 155 9.03% 232 -27.16% 402 310 29.68%

 

Consolidated Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 2808 2375 18.23% 2747 2.22% 5554 4801 15.68%
PBT 321 262 22.52% 500 -35.80% 821 562 46.09%
PAT 273 208 31.25% 346 -21.10% 619 398 55.53%

Detailed Results

  1. The consolidated performance was good at 18% YoY growth in revenue and 22.5% YoY PBT growth for Q2.
  2. The company saw growth in consolidated EBITDA of 26% YoY for Q2. EBITDA margins expanded 90 bps YoY to 14.4%.
  3. Overall India business grew 25% YoY. The company has a cash position of Rs 1439 Cr.
  4. Realisation of benefits from synergies to start from Q3 onwards. Outlets reach expanded by ~12% till Sep’20.
  5. The India Packaged Beverages business showed revenue growth of 29% YoY & volume growth of 12% YoY in Q2. Margins stable YoY despite unprecedented inflation in raw tea prices.
  6. The India Foods business showed a revenue growth of 13% YoY & volume growth of 6% YoY in Q2. Salt revenues grew 10% in Q2 with market share gains. The value-added salt portfolio has grown by ~100%. Pulses grew 35%. Launched new products Poha and nutria-mixes in Q2.
  7. NourishCo had revenue of Rs 38 Cr and was at 87% of pre-Covid levels in Q2 and 101% in Sep. Highest ever volumes achieved for Tata Water Plus in Sep’20.
  8. The Tata Coffee division saw volume and value growth of 17% YoY. Plantations volumes grew 6% YoY and Extractions Volume grew 11% YoY. Vietnam plant now operating at ~90% capacity.
  9. In the Starbucks JV, the company saw a 70% YoY revenue recovery in Q2. Around 86% of stores are operational and 11 new stores and 1 new city added.
  10. The UK tea business saw revenue growth of 4% YoY with volume growth of 7% YoY. It maintained a market share of 20.5% in the everyday black tea segment.
  11. The USA coffee business saw a 1% YoY decline in volumes and 4% YoY revenue growth. The tea business saw revenue growth of 11% YoY & volume growth of 8% YoY.
  12. In Canada, the company saw revenue growth of 1% YoY in Q2 and it maintained a market share at 29.5%. The volume decline in the quarter was 7% YoY.

Investor Conference Call Highlights

  1. The reworking of the Sales & Distribution system has seen the completion of 2 out of 3 phases.
  2. Operating profit grew by 24% YoY. There were exceptional items of Rs 19 Cr in standalone and Rs 24 Cr in consolidated terms which were primarily representing integration costs and redundancies arising out of the restructuring of the business.
  3. The company is looking to maintain a cautious outlook due to the second wave phenomenon in most major western economies.
  4. Tea inflation in India remains a headwind in the short term for the company.
  5. The company expects a shortfall in tea production for the full year which should put pressure on the inventory.
  6. For the new product segment of Nutri-mixes, the company is focussing largely on e-commerce.
  7. The management expects the branded side of this new business to be growing at a pace of 25-30% per year going forward.
  8. The rise in margins in international tea businesses is mainly due to a slight fall in commodity prices and better product mix as the company moves towards the premiumization of its portfolio.
  9. The projected synergies of 2-3% margin appreciation are expected to come half from the revenue side and a half from the cost side. At present, the company is focussing on cost synergies and as time goes on, the company expects acceleration on these synergies flowing in.
  10. The company takes price increases in Tata Salt based on input cost increases. This was the main reason behind the price increase of 5% in Tata Salt in Oct.
  11. The company is looking to not only dominate the market share and volumes in the salt business, it is also looking to expand its market portfolio and help in premiumization of category.
  12. The objective in Sampann’s business is to increase penetration as it is still at a nascent stage.
  13. The company has multiple products launched lined up for Tea and Coffee including a reformulation and a relaunch of the entire Tata Coffee range in the South.
  14. The company has gone on in a very analytical manner in designating integrated distributors for every city and is considering all distributors regardless of category for investment and expansion.
  15. Roughly half of the tea industry is still unbranded and the shift to branded has slightly accelerated in the year.
  16. Similarly, in pulses, the majority of the industry is unorganized which should provide good growth opportunity for Sampann which is the only branded in the category at present.
  17. The company is indeed on the lookout for inorganic opportunities and is also maintaining a large cash position to stand ready to take any arising opportunities in fast-rising segments like Sampann.
  18. Although there some established players in the ready-to-eat segment, the category is still small and has a big potential for growth and thus competitive pressure is not as high as it seems.

Analyst’s View

Tata Consumer Products has a very good product portfolio in diverse F&B segments and strong brands like Tata Tea under its umbrella. The company has seen good growth in both value and volume terms across all segments, especially in the tea and salt businesses. The company has a good opportunity for growth in the staples segment with Tata Sampann which saw good traction in the quarter. It was also able to pass on the increase in tea and salt prices directly to consumers without losing any market share thus highlighting the brand’s strength. It remains to be seen how the company’s wholesale businesses which was the worst hit from COVID-19 fare going forward and how the company will fare against other branded players like ITC in the fast-rising branded staples category. Nonetheless, given the company’s leadership position in its top brand segments, its enhanced distribution-reach after the merger, and the incoming synergies and benefits from integration, Tata Consumer Products remains a good FMCG stock to watch out for.


 

Q1FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 1651 1505 9.70% 1352 22.12%
PBT 314 235 33.62% 96 227.08%
PAT 232 155 49.68% 71 226.76%

 

Consolidated Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 2747 2425 13.28% 2427 13.19%
PBT 499* 300 66.33% -17** 3035.29%
PAT 389 198 96.46% -50 878.00%

*Includes a one-time gain of Rs 84 Cr from the conversion of NourishCo JV into 100% subsidiary and integration costs of Rs 21 Cr for the foods business.

*Contains exceptional item of Rs 264 Cr which mainly consists of impairment of goodwill related to business in Australia and tea business in USA. It also contains some business integration and reorganization costs after the merger with the consumer products division of Tata Chemicals.

Detailed Results

    1. The consolidated performance was good 13% YoY growth in revenue and 42% YoY PBT (before exceptional items) growth for Q1.
    2. The company saw growth in consolidated EBITDA of 37% YoY for Q1. EBITDA margins expanded 310 bps YoY to 17.9%.
    3. The India Beverages business showed a growth of 11% YoY in Q1 while the India Foods business grew 19% YoY in value terms and 8% YoY in volume terms.
    4. International beverages saw 23% YoY value growth for Q1 with volume growth of 27% YoY in Coffee and 4% YoY in Tea.
    5. Completed acquisition of the entire stake of PepsiCo in NourishCo in May 2020.
    6. There was a sharp increase in North India Tea prices during Q1FY21 owing to production impacted by lockdown and excessive rains in Assam.
    7. Tata Tea Gold showed >10% growth.
    8. The India Foods division saw Salt revenues grew 11% and record volumes sold in May & June for Tata Salt. Pulse & spices grew >50% YoY.
    9. The Tata Coffee division saw volume and value growth of 18% YoY and 12% YoY respectively with highest-ever quarterly sales in volumes. This Vietnam plant is now running at greater than 87% utilization and has turned EBIT positive.
    10. In the Starbucks JV, the company saw an 87% YoY revenue decline in Q1. Around 60% of stores are operational and 82% of orders are for delivery.
    11. The UK tea business saw revenue growth of 12% YoY with a volume growth of 7% YoY. It maintained a market share of 20.5% in the everyday black tea segment.
    12. The USA coffee business saw a 27% YoY growth in volumes and 26% YoY revenue growth. Tea business saw revenue growth of 25% YoY & volume growth of 26% YoY.
    13. In Canada, the company saw revenue growth of 32% YoY in Q1 and it maintained a market share at 29.2%. Volume growth in the quarter was at 28% YoY.

Investor Conference Call Highlights

  1. Tea prices continue to rise and it may affect margins in the short term.
  2. The company is in the process of implementing end-to-end digitization across both the sales & distribution side and the supply chain side, providing end-to-end visibility.
  3. The management states that the company is broadly on track to realize the estimated synergies announced at the time of the merger.
  4. The company is looking to double its direct reach in the next 12 months and double the total reach in the next 3 years.
  5. The company has a concentrated supply agreement for 5 years and R&D support for 3 years from PepsiCo for NourishCo.
  6. The management expects some problems to come up with coffee as TCPL’s primary customers facing issues on on-premise and out-of-home consumption because most of the coffee is consumed out-of-home.
  7. Starbucks launched India’s first Starbucks Drive Through at Zirakpur near Chandigarh.
  8. The company launched the Good Earth brand (which operates in the USA) in the UK in Q1.
  9. The main reasons for the revenue growth in foods business being greater than volume growth are:
    1. Increase in selling prices.
    2. Improvement in product mix.
    3. Reduced promotions.
  10. The company was able to gain market share in India Tea business despite passing on the increase in RM costs.
  11. The company’s immediate focus is to complete the merger integration by December and then it will look to explore new businesses or categories.
  12. The management has reassured that it will not be blindly chasing volume growth for tea. The management will also ensure that as inventory costs go up, this translates to an increase in pricing.
  13. The company will focus on setting up its distribution structure in urban areas before going to rural areas.
  14. The management states that Tata Sampann has good potential going forward and the company is looking to increase distribution reach for this division.
  15. The company is looking to flatten the distribution structure by implementing the salesforce applications with the front end connected with DMS and the distributors.
  16. Tea margins are expected to decline slightly going forward.
  17. The management stresses that digitization is the way forward for improving efficiencies and cost control for the company as it will help optimize procurement, inventory management and sales for the company while providing detailed analysis of all activities like procurement auctions, etc.
  18. The net cash position for the company is at Rs 2000 Cr.
  19. Most of the debt taken by the company is related to long-term credit for the Vietnam project and some debt for Eight O’Clock which is a very low international rates.
  20. The management has highlighted the company’s future ambitions as:
    1. Expanding Sampann into new channels and wider reach.
    2. Going into new categories like snacks, etc.
    3. Maintaining and possibly improving return ratios while capturing market share.
    4. Transforming into a full-fledged FMCG company.
  21. The management has indicated that the reason for the rise in market share in tea in India was mainly due to better procurement and distribution reach for the company as compared to other players, especially smaller players.

Analyst’s View

Tata Consumer Products has a very good product portfolio in diverse F&B segments and strong brands like Tata Tea under its umbrella.  The newly merged entity of Tata Consumer Products aims to leverage the synergies and brand building experiences of the company and new CEO to forge a new FMCG major in India. The company has seen good growth in both value and volume terms across all segments except NourishCo & Starbucks. The company has a good opportunity for growth in the staples segment with Tata Sampann which saw good traction in the quarter. It was also able to pass on the increase in tea prices directly to consumers without losing any market share thus highlighting the brand’s strength. It remains to be seen how the company’s wholesale businesses which have the worst hit from COVID-19 fare going forward and how the company will fare against other branded players like ITC in the fast-rising branded staples category. Nonetheless, given the company’s leadership position in its top brand segments, its enhanced distribution reach after the merger, and the incoming synergies and benefits from integration, Tata Consumer Products remains a good FMCG stock to watch out for.

 


 

 

Q4FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 1352 1488 -9.14% 811 66.71% 5808 3612 60.80%
PBT 96 74 29.73% 194 -50.52% 729 576 26.56%
PAT 71 53 33.96% 143 -50.35% 524 411 27.49%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 2427 1811 34.01% 2522 -3.77% 9749 7409 31.58%
PBT -17* 153 -111.11% 264 -106.44% 809* 735 10.07%
PAT -50 94 -153.19% 189 -126.46% 535 474 12.87%

*Contains exceptional item of Rs 264 Cr which mainly consists of impairment of goodwill related to business in Australia and tea business in USA. It also contains some business integration and reorganization costs after the merger with the consumer products division of Tata Chemicals.

Detailed Results

    1. The consolidated performance was modest on a like to like basis with 4% YoY growth in revenue for FY20 and 6% YoY growth for Q4 revenues.
    2. Most of the numbers above may not be exactly comparable as the numbers of Q4Fy19 did not have the performance of the consumer products businesses of Tata Chemicals which were merged later.
    3. Excluding the performance of the newly added foods business, the company saw growth in consolidated EBITDA of 29% YoY for Q4 and 12% YoY for FY20. This was mainly due to an increase in profitability in various international businesses.
    4. The consolidated EBITDA margin improved to 13% in Q4FY20 from 9.9% last year.
    5. The India Beverages business showed a growth of 7% YoY in FY20 while the India Foods business grew 12% YoY in FY20.
    6. International beverages saw flat revenue growth for FY20.
    7. The company declared a final dividend for the year of Rs 2.7 per share.
    8. In the India Beverages business, the company saw volume and value growth of 7% YoY in FY20. The company tied up with Flipkart, Zomato, Swiggy, and Dominoes for delivery of all of its products in this division.
    9. The company also launched Tata Tea Gold and Tata Tea Premium in the UK and Europe.
    10. The India Foods division saw volume and value growth of 3% YoY and 12% YoY respectively for FY20. The company saw a significant increase in demand for salt and pulses during the lockdown period.
    11. The Tata Coffee division saw volume and value growth of 14% YoY and 19% YoY respectively with highest-ever quarterly sales of 1050 tons from the Vietnam facility. This Vietnam plant is now running at greater than 80% utilization.
    12. In the Starbucks JV, the company saw 21% YoY revenue growth in FY20. The company launched 39 new stores in the year and >10% growth in transactions YoY.
    13. The UK tea business saw revenue growth of only 1% YoY but it maintained its market share of 21.3% in the everyday black tea segment.
    14. The USA business saw 5% YoY growth in volumes and the volumes share of Eight O’ Clock Coffee was at 7.4%.
    15. In Canada, the company saw revenue growth of 6% YoY in FY20 and it maintained its market share at 28.9%.

Investor Conference Call Highlights

  1. The management has stated that there is a market opportunity of Rs 30 Lakh Crore for Tata Consumer Products in the consumption story in India.
  2. The company has seen a decline in commodity costs especially in tea due to large oversupply from small tea growers. Even Kenyan tea and Robusta coffee prices have declined in the year.
  3. In international businesses, the company has seen a 20-25% jump in the consumption of retail brands while it has seen a sharp decline in B2B businesses in Australia and the USA since the start of COVID-19. The management expects demand to normalize and contract slowly going forward.
  4. In Tata Starbucks, the company had shut down all stores since the start of the lockdown and has opened only 30 stores for delivery only operations.
  5. The company saw 30% of revenues in the Tata Starbucks JV being generated from the loyalty program called My Starbucks Rewards which highlights the growing strength of the brand.
  6. In the UK, the company saw significant demand growth in teabag sales since the start of COVID-19 and were running their factories even during the weekends to meet the demand.
  7. The company has a net cash position of Rs 1321 Cr and at a gross basis, it has cash of more than Rs 2500 Cr.
  8. The new CEO has highlighted that the immediate priority for the company will be to ensure full operational effectiveness as the lockdown ends. Other than this, the management will work on 4 pillars: organizational structure, sales & development, synergies and growth categories.
  9. The management believes that the main strength that the company has while developing the New brand of Tata Sampann is the conversion of customers from unbranded products to branded products in the F&B industry. Tata Sampann is in pulses and spices which is still dominated by unbranded products in terms of consumption figures in the country. The management hopes to be able to replicate the same success it is having in converting unbranded tea consumers to branded tea consumers into this new consumption category for the company.
  10. Major advantages for the company are the conversion of unbranded consumers to branded consumers, the shift in overall consumer behaviour and the adoption of non-traditional channels like online grocery shopping. This shift is expected to be further accelerated due to the current lockdown.
  11. The management has admitted that the company has struggled with logistical issues in distributing Tata Salt at the start of the lockdown and it has ramped up production while managing to bring its operations close to normal.
  12. The management is expecting synergies of Rs 150 Cr in the next 18 to 24-month period. Most of these synergies are cost synergies.
  13. The management admits the return ratios for the company will remain subdued for a while as long as the integration takes place but overall it should go up once the company starts to see growth coming in and costs reducing as a consequence of the completed integration.
  14. The management has refrained from providing any specific guidance on EBITDA margin or ROE targets but it remains confident that these ratios should rise from current levels going forward and should reach the industry benchmark in the medium term.
  15. The management has admitted that the company is indeed renegotiating many existing rental agreements for its existing Starbucks outlets and is aiming to make it a revenue linked model rather a fixed model. The management has stated that most of the owners are amenable to this suggestion.
  16. Other than the major brands of Tata Tea and Tata Sampann, the company is also looking into other packaged beverage formats like health drinks and will be seeing it play out once the lockdown is over.
  17. The management has stated that the company will maintain low Capex intensity and will keep the current model for spices and pulses asset-light by working with 2 co-packers.
  18. The company has reached a coverage of 2-2.5 million outlets (an increment of 400,000-500,000) after the merger.
  19. The management will explore how to proceed forward with Tata Coffee and whether to enter the retail space with it or maintain operating primarily in the B2B space which is working very well for the company till now.

Analyst’s View

Tata Consumer Products has a very good product portfolio in diverse F&B segments and strong brands like Tata Tea under its umbrella. The company has also appointed a new CEO who has had a lot of experience in the F&B industry in India with major brands like Whirlpool, PepsiCo, Coca Cola, etc. The newly merged entity of Tata Consumer Products aims to leverage the synergies and brand building experiences of the company and new CEO to forge a new FMCG major in India. The company’s retail businesses have been doing well despite the disruption across the world from COVID-19. The company did face severe supply chain issues at the start of the lockdown period and has managed to resolve them now. It remains to be seen how the company’s wholesale businesses which have the worst hit from COVID-19 fare going forward. Nonetheless, given the company’s leadership position in its top brand segments, its enhanced distribution after the merger, and the incoming synergies and benefits from integration, Tata Consumer Products remains a good FMCG stock to watch out for.

 


 

Q3 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 954.72 911.58 4.73% 946.67 0.85% 2908.61 2801.51 3.82%
PBT 126.38 124.36 1.62% 133.81 -5.55% 418.25 502.22 -16.72%
PAT 94.22 89.66 5.09% 99.7 -5.50% 300 357.62 -16.11%

 

Consolidated Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 1987.85 1935.17 2.72% 1859.35 6.91% 5774.86 5597.94 3.16%
PBT 196.36 176.24 11.42% 191.55 2.51% 610.94 582.06 4.96%
PAT 140.47 121.32 15.78% 143.23 -1.93% 432.81 380 13.90%

Detailed Results

    1. The consolidated performance was modest with 3% YoY growth in revenue from operations and 16% growth in PAT in consolidated terms.
    2. Consolidated EBITDA grew 23% YoY mainly due to favorable commodity prices.
    3. The India Tea business showed a volume growth of 7% YoY and value growth of 6% YoY.
    4. The brands of Agni & Spice Mix saw <10% growth.
    5. The merger with the consumer division of TCL is on track as expected.
    6. In US coffee, the company saw a revenue decline of 3% YoY while volumes fell 2%.
    7. In the UK, the company saw market share by value at 17% and 23% market share in total volumes.
    8. In Canada, the company saw market share by value at 29% and 40% market share in total volumes. Revenue growth in this region was 5% YoY.
    9. Tata Coffee saw revenue growth of 25% and volume growth of 14% YoY.
    10. In the Starbucks JV, revenue growth was 27% YoY.
    11. In the NourishCo JV, Himalayan revenues grew 5% YoY.
    12. Associate companies AAPL and KDHP saw revenue growth of 7% and 25% respectively.
    13. The company is selling its TGB Czech business to Dr. Muller Pharma for 4 million euros.
    14. The company has appointed Mr. Sunil Alaric D’Souza as MD & CEO from April 2020.
    15. The company has also appointed Mr. Ajit Krishnakumar as the COO for the company.

Investor Conference Call Highlights

  1. The company had a favourable exchange rate in the quarter along with soft commodity prices which helped improve margins for the company.
  2. Canada’s performance was very good for the company with Tetley establishing itself as the number 1 brand in its category.
  3. In the NourishCo JV, Tata Gluco Plus sales were hit due to excessive and late monsoons in primary markets of Orissa and coastal Andhra Pradesh.
  4. The Vietnam plant has done well for Tata Coffee with the company bagging good marquee orders for this facility.
  5. The company has piloted Himalayan Water in the USA market.
  6. Most of the company’s ad spend in international tea is spent in the UK.
  7. The company has also launched a campaign in Australia for its Cold Infusions product line which was launched in the country recently.
  8. In the next 2 to 3 years, the company will be looking to focus on margin and profitability and let new products like Cold Infusions provide the push to growth for the company.
  9. The management has mentioned that the revenue potential of the Vietnam plant at full capacity should be around a few crores per year. The management expects capacity utilization at this unit for the year to be at 60-70% and this figure should rise next year to 80-90%.
  10. The management has mentioned that the ad spends in the Tata Tea business is mainly to maintain a robust brand image and to increase market share in an already competitive market.
  11. The management expects the Tata Starbucks JV to be EBITDA positive this year.
  12. The management has mentioned that the regional brands of Tata Tea have done well in the year so far.
  13. The management expects the commodity prices of tea to trend upwards in the near future.
  14. In Eight O’Clock business, the management expects the bags business to recover from the slight fall earlier this year. The management also believes that the Keurig pods business should have bottomed out and can start seeing a consolidation of market share in this business.
  15. The company is looking to try out its other brands like Barista Blends and Flavors of America in the pods business.

Analyst’s View

Tata Global Beverages have put together a formidable brand portfolio operating in both India and abroad. The upcoming merger with the consumer business of TCL is expected to give a good boost to the company’s reach and product portfolio. The company has benefitted from favourable exchange rates and commodity prices which has helped bring the margin profile up. The Vietnam plant has also been showing good performance and it is expected to bring good growth for the Tata Coffee business. The Starbucks JV has also been doing well in the year so far and is widely expected to turn EBITDA positive by the end of the year. The company is banking heavily on its new innovations like Cold Infusions and the nascent liquid segment to drive growth for the company. It remains to be seen whether the company’s efforts to boost growth will bear fruit and how will commodity prices affect the company’s performance in the future. Nonetheless, given its market positioning, wide product profile and the anticipated synergies from the upcoming merger with the consumer business of Tata Chemicals, Tata Global Beverages remains a good consumer goods stock to watch out for.


 

Q2 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY20 Q2FY19 YoY % Q1FY20 QoQ % H1FY20 H1FY19 YoY%
Sales 946.67 921.43 2.74% 1007.22 -6.01% 1952.89 1889.93 3.33%
PBT 133.81 162.02 -17.41% 158.06 -15.34% 291.87 377.86 -22.76%
PAT 99.7 120.3 -17.12% 106.1 -6.03% 205.8 268 -23.21%

 

Consolidated Financials (In Crs)
Q2FY20 Q2FY19 YoY % Q1FY20 QoQ % H1FY20 H1FY19 YoY%
Sales 1859.35 1831.66 1.51% 1927.66 -3.54% 3787 3662.77 3.39%
PBT 191.55 188.77 1.47% 223 -14.10% 414.58 405.82 2.16%
PAT 143.23 125.09 14.50% 149.11 -3.94% 294.15 312.1 -5.75%

 

 

Detailed Results

    1. The consolidated performance was decent with 5% YoY growth in revenue from operations and 14% growth in PAT in consolidated terms. The growth in PAT is mostly on account of the reduced tax rate.
    2. The India Tea business showed a volume growth of 8% YoY and a value growth of 8% YoY.
    3. The flagship brands of Tata Tea Premium, Agni, Spice Mix saw >7% growth.
    4. Lal Ghoda and Kala Ghoda brands incorporated from August 2019 onwards.
    5. The US coffee business grew 4% while the international business grew 2% by volume.
    6. The merger with the consumer division of TCL is on track as expected.
    7. In US coffee, the company saw a revenue decline of 3% YoY while volumes grew 4%.
    8. In the UK, the company saw market share by value at 17% and 22% market share in total volumes.
    9. In Canada, the company saw market share by value at 29% and 40% market share in total volumes.
    10. Tata Coffee saw revenue growth of 18% and volume growth of 20% YoY.
    11. In the Starbucks JV, revenue growth was 26% YoY with 12 new stores opened in the last quarter and 5 new stores opened in Gujarat in one day.
    12. In the NourishCo JV, revenues grew 8% YoY and Tata Gluco Plus revenues grew 22% YoY.
    13. Associate companies AAPL and KDHP saw revenue growth of 7% and 25% respectively.
    14. The acquisition of Dhunseri Tea & Industries Ltd was completed on 21st August 2019.
    15. The updated tax rate had a net one-time adverse impact of Rs 9 crores on consolidated profits.
    16. The beneficial impact of rate reduction should be seen in subsequent quarters.

Investor Conference Call Highlights

  1. The management attributes margin expansion to softening in commodity prices and reducing inefficiencies in the overall system.
  2. Contrary to most industry players, the company is reporting rising sales volumes which it sees as increasing demand or penetration for the company. The demand has strengthened in urban areas while rural area demand has weakened slightly.
  3. The management has stated that according to various data collecting agencies like Nielsen, the tea category is witnessing growth across all segments.
  4. The management has stated that the margin expansion in the international tea business has been due to a variety of factor which includes lower ad spending, fixed costs’ rationalization and improvement in gross margins.
  5. On a consolidated basis, advertising fees for the quarter was Rs 137 Cr as compared to Rs 142 Cr last year.
  6. After the merger with the consumer products division of Tata Chemicals, the new entity will be named Tata Consumer Products Limited. The main focus for the future for the company would be to grow the whole consolidated consumer product portfolio.
  7. The NourishCo JV and Starbucks JV are now breakeven at the net level. Starbucks is also expected to be breakeven at the store level.

Analyst’s View

Tata Global Beverages has put together a formidable brand portfolio operating in both India and abroad. The upcoming merger with the consumer business of TCL may give a good boost to the company’s reach and product portfolio. The company has been buoyed up by rising volumes from the tea business and the Starbucks JV is performing very well so far. The biggest risk for the company remains its over-dependence on tea and other commodity cost prices. Nonetheless, TGB is still a good stock to look out for especially considering the potential value creation from the merger with the consumer products division of Tata Chemicals.


 

Q1 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 1007 968.5 3.98% 810.66 24.22%
PBT 158 215.84 -26.80% 73.7 114.38%
PAT 106.1 147.71 -28.17% 53.26 99.21%

 

Consolidated Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 1927.66 1831 5.28% 1810.69 6.46%
PBT 223 217 2.76% 152.65 46.09%
PAT 149.11 133.6 11.61% 93.82 58.93%

Detailed Results

    1. The operational performance was decent with 5% revenue growth YoY and 12% growth in PAT in consolidated terms.
    2. The India Tea business showed a volume growth of 8% YoY and value growth of 7% YoY.
    3. The flagship brands of Tata Tea Premium, Agni, Spice Mix saw double-digit value growth.
    4. The construction of a new TGB tea packing unit with 36 million kgs capacity has commenced and is expected to be operational by end of 2020.
    5. The US coffee business grew 4% while the international business grew 3% by volume.
    6. The merger with the consumer division of TCL is on track as expected.
    7. In US coffee, the company saw revenue decline of 1% YoY.
    8. In the UK, the Tetley Cold Infusions now has a market share of >20% in its category while green tea market share fell due to category decline and intense competition.
    9. In Canada, the company grew 8% in both volume and value terms mainly on the bak of their Specialty Teas segment.
    10. Tata Coffee saw revenue growth of 30% and volume growth of 18% YoY.
    11. In the Starbucks JV, revenue growth was 23% YoY with 5 new stores opened in the last quarter.
    12. In the NourishCo JV, Revenues grew 8% YoY while volumes grew 1% YoY.
    13. The company is also migrating the Himalayan brand from the PepsiCo network to VBL franchise.
    14. The due diligence for the acquisition of Dhunseri Tea & Industries Ltd is complete and the transaction is expected to be completed soon.

Investor Conference Call Highlights

  1. The Board has approved the acquisition of Lal Ghoda and Kala Ghoda brands in Rajasthan and the company will move forward with this transaction.
  2. The management has stated that high-cost inventory and investment into new sales and distribution transformation have caused margins to come down in the current quarter. This high-cost inventory will be exhausted by September.
  3. The management is satisfied with the performance in the current quarter. They state that the reason why the value growth has been slightly lower than volume growth is due to the rapid expansion of the mass-market brands.
  4. The company sees commodity costs to go lower in the broad term and they will be passing on the cost benefits to the end customer slowly.
  5. The management believes that there is a trend of improving profitability.
  6. The company’s larger ambition is to be a broad FMCG company post the merger with the consumer business of TCL.
  7. Overall, the management expects the margin profile to improve slightly after the merger is completed.
  8. The company is set to get a lot of synergies from the upcoming merger. Most of these are based on sales and distribution synergies giving both these entities better access to geographies that they are weak in.
  9. The company expects to grow the Starbucks JV faster in the future as the rollout of more and more stores takes place.
  10. In addition to the strong brands, the company will also get synergistic benefits in distribution systems from the acquisition of Dhunseri.
  11. The management has stated that their medium-term objective is to improve margins.

Analyst’s View

Tata Global Beverages have put together a formidable brand portfolio operating in both India and abroad. The upcoming merger with the consumer business of TCL should provide a good boost to the company’s reach and product portfolio. The company has been buoyed up by a good performance from the tea business and the Starbucks JV is performing very well so far. The biggest risk for the company remains its over-dependence on tea and other commodity cost prices. Nonetheless, TGB is still a good stock to look out for especially given its resilience in the current stock market slowdown.

 


 

Q3 2019 Updates

Financial Results & Highlights

Standalone Financials (In Crs)

Q3FY19

Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18

9M% Change

Sales

911.58 874.72 4.21% 921.43 -1.07% 2801.51 2626.15 6.68%
PBT

124.36

266.35 -53.31% 162.02 -23.24% 502.22 645.51

-22.20%

PAT

89.66

208.43 -56.98% 120.3 -25.47% 357.67 481.16

-25.67%

Consolidated Financials (In Cr)

Q3FY19

Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18

9M% Change

Sales

1935.17 1750.94 10.52% 1831.66 5.65% 5597.94 5195.38

7.75%

PBT

176.24 205.67 -14.31% 188.77 -6.64% 582.06 625.41

-6.93%

PAT

121.32

186.11 -34.81% 125.09 -3.01% 420.99 484.94

-13.19%

Detailed Results

    1. Indian growth of business was at 5% YoY with volume growth of 7%.
    2. Green tea segment in India grew 14% driven by volume growth of 7%.
    3. Top line improvement in US coffee segment was 28%.
    4. UK segment grew by 6% which resulted in gain in market share.
    5. Higher cost of tea is hurting margins in the Indian tea business.
    6. Lower realisation and lower crop yields in coffee plantations have hampered the Indian coffee business.
    7. Overall revenues from branded business segment and group businesses in consolidated basis have grown 12% YoY.
    8. But Q3 PBT in consolidated basis has fallen 14% YoY in consolidated basis showing significant cost pressures. 9M PBT has had a smaller fall of 7% YoY.
    9. Profits have also fallen in standalone terms, though not as steep as shown above since the last year had a significantly higher base which contained an exceptional item of more than Rs 100 Cr.
    10. TGB is also launching home experience stores called Tata Cha where they have already launched 6 store in Bangalore.
    11. In US, Tea sales have been 3% up as compared to last year. The margins in the US business has been adversely impacted mainly due to higher ad spending.
    12. In Canada, TGB has launched Tetley Super Teas which is the first product of its kind in the country. It has also captured 1.6% market share of non-black teas in the country in only 4 months of launch.
    13. In the Tata Starbucks JV, top line growth has been a phenomenal 30% with 20 new stores added during the year so far. All of their outlets have reported profitable.
    14. In the Nourishco JV, top line growth has exceeded 30% which was mainly driven by the Tata Gluco Plus brand.
    15. In overall, the group’s net profit has been down due to rising commodity costs and higher investment into brand marketing as mentioned above.

Investor Conference Call Highlights

  1. TGB has not passed on the rise in tea prices mainly to stay competitive as other market participants have also not done so.
  2. The price increases have been implemented only in the South with Chakra brand and will be brought gradually into Tata Tea Gold and Tata Tea Premium brands in the coming quarters.
  3. For the saturated tea market where market volume is expected to stay stable, TGB is focussing on conversion of loose unbranded tea consumers to branded tea consumers and on premiumization of their products. The former represents a significant opportunity as loose unbranded tea accounts for more than 40% of overall tea volumes in the country.
  4. Main focus of management is to stay on top of this conversion and to keep their lower priced brands like Tata Agni competitive to enhance this conversion for the masses.
  5. The premiumization efforts are being taken with the restaging of Tata Tea Gold and Tata Tea Chakra. TGB is also pushing Tetley Green Tea and introducing Tata Tea Veda to expand their premium brand portfolio while addressing the upcoming niche areas of green tea and fortified tea.
  6. TGB is also concentrating on pushing their tea retail outlets called Tata Cha to lift profile of tea and bring about café culture in the world of tea in India.

Analyst’s View

Tata Global Beverages have put together a formidable brand portfolio operating in both India and abroad. Despite the big variety of product segments that they operate in, their tea business segment is one that affects revenues the most. Tea business has been dropping in margins and profits due to rising costs and competitive pricing pressure from other players. This has resulted in slowing revenues and drop in profits for the company. Thus the drive towards conversion of unbranded consumers to branded consumers and premiumization will remain key for the company’s future in this segment. The company has been very proactive in terms of introducing new niche products and in its efforts to create a mainstream tea café chain, which shows that they remain positive on this market and are looking for newer ways to create value from a market that is already saturated in terms of volume. Hence, volume growth and increasing margin are the two areas where the company is trying to focus on. The next few quarters will dictate whether their efforts in that direction are showing some promise or not.

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