Tata Consumer Products Ltd will pursue organic and inorganic growth strategies to expand its presence in the food and beverage segment. The company is also investing heavily in new growth engines, including NourishCo, Sampann, Yumside and Soulfull.in with career lineSunil D’Souza, Managing Director and Chief Executive Officer, Tata Consumer Products, spoke on a range of issues including distribution expansion, rural needs and future growth strategies for the businesses. extract:
How do you view the current macroeconomic situation?
In India, inflation, especially oil-driven inflationary pressures combined with other factors, has been weighing on consumption for some time. Rural areas, especially the northern regions, are most affected due to higher agricultural input costs. We have seen a pick-up in rural growth, but it is still not at pre-pandemic levels. Overall, commodity-driven inflationary pressures have now stabilized. I think from now on, we should start to see demand pick up. In the short term, there is inflationary pressure on food prices, but in the long run, I wouldn’t read too much into that. In terms of international markets, we saw headline inflation impact consumer demand, our internal margins were hit by higher commodity prices, particularly coffee, and then currency fluctuations impacted our tea business, particularly in the UK. All of this also seems to have stabilized now. Margins are back on track and commodities and currencies are generally range-bound. The only problem is that inflation is still squeezing consumers. So we need to focus on driving the demand in the international market.
What are the future growth levers for NourishCo’s business?
We are still relatively small in beverages and have huge room for growth. The focus is on significantly increasing the size of the business through product portfolio and geographic expansion. We provide differentiated products at affordable prices. For example, Gluco Plus is a Rs 10 product and we have maintained that price point as we roll out across the country. We are continuing to expand our factories and broaden our product portfolio. Despite the harsh summer weather conditions, our drinkable Gluco plus Jelly has run out of capacity. Likewise, we ran out of Tata Fruski Juice N Jelly. The NourishCo business closed last year with a revenue of Rs 600 crore. Our revenue has grown by 60% to close to Rs 300 crore in the first quarter alone. Our goal is to achieve four-figure revenue by the end of this fiscal year.
Sampann, as one of TCPL’s new growth engines, what is the company’s future strategy? What other white space did you identify for the brand?
Sampann is a strong pantry game. We are focused on strengthening our presence in categories that are large, highly profitable, have room for growth and are challenged by a trust deficit. For example: there is no national dried fruit brand, we launched dried fruit. We launched them online and the annualized run rate has reached Rs 70 crore. Now we are extending them to retail trade as well. The category we entered needed to meet certain parameters in terms of size, volume and profit. It also depends on our research and development capabilities and back-end logistics procurement capabilities. We recently launched seeds and specialize in food mixes such as Gulab Jamun mix. So we’ve got beans, spices, dried fruit, mixes and seeds ready.
There’s been a lot of action in the spice space lately. Are you eyeing inorganic growth opportunities in this space?
Spices are an attractive category. This is a category worth Rs 60,000 crore out of which only about Rs 24,000 crore is the brand segment. Branded companies therefore face a huge opportunity as consumers switch from non-branded products to branded products. We are one of the few large national brands with a strong presence in the space, and Sampann Spices is growing fast. We are not in the South, but we have begun to act in the South. The only problem is that when it comes to spices, products need to be tailored to suit the preferences of consumers in each state. We are open to inorganic growth options and are exploring them across categories. But we will maintain very strict discipline in dealing with inorganic issues. It must provide strategic and financial added value.
How do you strengthen your distribution infrastructure?
We have said that we will increase our distribution outlets to 4 million outlets in three years and we are on track and trending to about 3.9 million outlets. Now we are working on the next target, the total number of outlets is about 8-9 million. So we have a huge opportunity to further expand our distribution. We’ve been fine-tuning our strategy, focusing on efficiency and making sure our dealerships are viable. We not only focus on expanding the breadth of distribution, but also the depth of distribution. For example, we have been focusing on the splitting of routes in more than 1 million cities and towns to strengthen the depth of the layout. At the same time, we will designate dealers in all 50,000+ population areas to expand coverage.