Is the strong momentum we are witnessing a broader consumption recovery or largely led by our own execution or a mix? And how do you see this sustaining over coming quarters?
We have always said we will drive double digit topline and bottomline ahead of the topline, and we have roughly delivered that. I wouldn't comment about broader consumption and recovery. I do think the teams have executed our plans quite well and the plans have changed through the year. For example, we didn't have the Salt targeted actions baked into the numbers or the expansion of certain brands like Sampann baked into the numbers. Tata Consumer is an entrepreneurial company. As we see opportunities, we jump in. It is not that it is not in our budget so we will execute next year - that doesn't happen here. We have seen opportunity this quarter and across the board, I think the teams have driven the numbers quite well.
Growth portfolio has done phenomenally well and reached 30% of India business at least a quarter ahead of timeline. How should we think about this number moving forward? Could this be 40%-50% of portfolio by FY28-29 or are you keeping it open?
Growth businesses have to contribute to a higher percentage of the India business fundamentally, because they are defined as growth businesses - they will grow faster than the core. So the mix will change. That is a conscious strategy. As we seek to diversify away from being a Salt and Tea company into a multi-category food and beverage company, this will happen. We are in the middle of putting numbers together for the next year and beyond. As and when we have clarity, we will definitely give guidance. As of now, I would say 30% is a good number to put a peg on. As and when we look at a different number, we will revert on that.
On Capital Foods - if you could give a sense of what the domestic growth was leaving apart the international impact because of tariffs. You were expecting changes there to reflect in better growth - what is still missing for that part of the business to see a pickup?
Overall, Capital Foods has improved month on month for us. We expect the go-to-market changes to provide impetus to that. The softness in Capital Foods was month-on-month - the early part of the quarter was a bit soft. More importantly, 20% of the business is exports, largely the US. While tea and coffee, base tea, coffee and base spices margins, the tariffs have gone to 0. The rest of the portfolio still remains at 50%. So as you have taken up prices aggressively, that has had quite a bit of an impact.
What is the reverse of that 91-9? Which are the markets where we are seeing the fastest growth for our growth categories?
Fastest growth for our growth categories is across the place. I just gave you an example of Calcutta because that stuck in my mind about what should be done in large metro markets to unlock.
Just to follow up on RTD, what is the current reach - how many outlets do we reach for RTD?
I will have to get back to you on the exact number of outlets, but it is broadly in the million outlet ballpark. Right now, we will focus on growing our share in this territory before widening the footprint.
How do you see the EU FTA for Tata Consumers in the long term? And any update on Tata Starbucks further store opening, resizing stores and further investment in that business?
On EU FTA, I will not comment on it because I am not sure we have all the details on what unfolds. Number two, as we mentioned, our big focus areas in international markets are UK, US, Canada. EU is there but it is not a very significant piece. So I would wait and watch to see how that pans out. On Tata Starbucks, we remain bullish on the coffee opportunity in India, both in home and out of home. On out of home, it is Tata Starbucks. We are now at 504 stores in 81 cities. We are immensely focused on making sure we constantly tweak our business model to make sure it appeals to Indian consumers and continue to drive business. Coming from a significant dip in the entire QSR industry over the last 24 months, last 2 quarters have been encouraging. We are now in positive same store sales growth. We did temper store openings a bit to ride through the softness and make sure we made the right modifications to enable faster growth going forward. We remain in the middle of that entire exercise. But longer term, we do intend to be among the top, if not the top coffee shop in India.
On Tata Soulfull, how is the market share in the past 2 years? It's an exciting market on paper but challenging given one strong multinational company plus a long tail of new entrants. What is the right to win here and how are you differentiating? On Tata Sampann, 45% growth largely volume led - how has the legacy business done and how have the new businesses like Cashew, Nuts done? Where is the growth coming from?
The Sampann growth is broad based. The base businesses of Poha, Pulses, Makhana are all firing off on great cylinders percentage growth wise. It has come from new businesses as well as from the legacy businesses. The dry fruits business is now close to a Rs. 250-300 crore annual run rate. Cold press oils is again in the similar ballpark. All of these were launched in the last 18-24 months - differentiated products, specifically entering trust deficit categories. Very clear winners. The ultimate idea in dry fruits is to play the whole spectrum - now that we know the sourcing, the time of year, channels, packs and dry fruits that work, when we enter the flavored, roasted, salted segments, that is where we move up the value ladder. In cold press oils, we got pull from modern trade pulling us into the outlet even before we went to GT or SAMT. We remain bullish on Sampann, but our guidance is for roughly 30% growth. On Soulfull, we are close to a double-digit market share in most categories we operate in. The big numbers are in Choco-fills as well as the Muesli segment, which is growing very fast. In Soulfull we are not playing in one particular category - we have expanded TAM by playing in rusks, Choco-sticks, Muesli, Breakfast Cereals. We are decently satisfied, but we think we can take Soulfull to the next level. I wouldn't worry about one incumbent versus all startups - everyone can carve out their own space.
You said 30% is the more normal number for Sampann, but growth was 45%. Is there no one-off? Second, on the margins for Dry Fruits and Soulfull - any color from an outlook perspective, when do you see that normalizing versus the overall non-core portfolio (X of Salt and Tea)?
There is no one-off in Sampann this quarter. I am just trying to temper expectations that we might not always hit a 6 - sometimes it will also be a 4. 30% is a realistic number for us to keep targeting. While we know we can drive 45% and we will continue to drive for that. On margin, I always said in Sampann we were close to double-digit margins. The good news is we have hit double-digit. We remain confident of edging up the total business to close to a 15% sort of number in the medium term, near to medium term. While we are growing topline, the good news is we are constantly improving the margin profile as well. Going forward, the margin profile will only get better - as I said in dry fruits, the margins are in the roasted, salted, flavored ones. But for you to get there, you need to know how to play the base game because then you add the value additions on top of that.
On Salt, which is generally highly penetrated - last 2 quarters I have seen super volume growth. You mentioned grammage addition, trade incentive and promotion. On a full year basis, does it normalize because customers will buy more but won't consume more Salt given health concerns? Would you say next 2 quarters this could start normalizing to a much more modest number or will market share gains continue?
We have always guided for Salt being in the mid to high single digit growth on revenue, volume being about 4-5% and rest being value price mix movements. The top 6 brands are probably 56%-57% market share in this category, and the balance 44% is a long tail of no-name brands. So the scope for growth is enormous. It is not necessarily driven by per capita consumption - it is driven more by market share and improved penetration of Tata Salt, not necessarily Salt. We are replacing other brands in the household. The market size could be 2x of what it is if you just extrapolate from that perspective. But mid to longer term, we have maintained that it will be mid to high single digits.
On Tea pricing - have all the price cuts in Tea been captured in the quarter? If not, what percentage is reflected in 3Q? With Tea prices going up again, given you bought most of the Tea in 2Q, you have a lower cost advantage - can that have a tailwind to margins?
Broadly on commodities, we have given up on forecasting with accuracy. Given climate change etc., you don't know how things pan out. We remain flexible, agile, able to move in either direction. That is what I maintained even in coffee. There was a small uptick on Tea prices at end of the quarter. But January to about mid-March, early April is a very lean season in the north. How the north crop comes out mid-March to early April will determine the opening prices then. I would not make a statement as to whether we will be better off or worse off. We have done a calculation - we have got inventory for a decent part of Q1, but we will be flexible on moving up or down depending on how the commodity fares when the season opens. To the other point, we have already passed on most of the increases in this quarter. That is why you saw volume equal to value growth for the quarter. As of now, if nothing changes, broadly we will go back to the mid-single-digit volume plus a couple of basis points of price mix.
Can you talk more about the GTM changes? 80% pilot is in place - is that only for some number of states, 8 states or so, or pan-India? And the impact on growth - does the 30% growth call-out for growth businesses already capture these GTM changes or can one expect elevated growth because of this?
The primary reason we have done the GTM changes is to continue to drive growth. As the percentage of growth businesses grows and the absolute grows, even maintaining the 30% is a decent enough target. So in the short to medium term, we are not changing the 30%. The GTM changes are fundamentally supposed to be driving growth. They are pan-India, not restricted to specific states. We had shown the maps on the strong points - where Capital Foods was strong, where Salt is strong, where Organic India was strong. So the 8-state deduction is not right. We have done pan-India, more than 10 lakh plus cities. Any city which is either overwhelming share of Salt, then it is Salt plus non-salt; where Salt plus Tea is overwhelming - for example Calcutta was 91% Salt plus Tea and only 9% contribution from growth - there we have gone core plus growth. Across every other city where we have common distributors and we had split routes earlier, we have gone back because retailers told us that for small drops, they don't want multiple salesmen coming in. The smaller outlets - more than Rs. 3,000 drop per month in urban and metros and Rs. 2,000 in lower than metros - we have common salesmen. Beyond that, we have multi-category salesmen going in split routes. The salesman has dedicated focus. Above the salesman, the TSE and the ASM is also structured by category. For Salt, the guys only handle Salt. If it is core and growth, there is a team only handling core, a team only handling growth. So that gives dedicated focus both at supervisory level and execution level.
On margins - you highlighted double-digit revenue growth and higher than revenue growth for profit. What will be the tailwinds for margins? Dry Fruits portfolio will contribute to Sampann but is relatively smaller. What other drivers can lead to better margin growth?
The single biggest lever will be scale - growing 14%-15%, we get huge leverage of scale. Number two is the mix of the portfolio. We have got a balance between the higher margin acquisitions, Tea, Salt being growing enough to offset the lower margin growth of Sampann, and we have managed that so far. Overall, when we exit Q4, we should be in the ballpark of 14.5%-15% EBITDA margin. 15% is a normative number which we need to get to. Longer term, as we continue to drive premiumization in our portfolio and drive premium categories and improve margins for the base categories - for example pulses was a negative 5% when we started 5 years back, today it is close to a double digit. As we improve that as well, we would expect to continue to improve the gross margin profile. Longer term, I have always maintained a good foods business in India should be a 17% plus. We are targeted towards that in the longer term.
What was the growth in the export part of Capital Foods?
Exports was roughly flat for the whole quarter.
On acquisitions - historically you have mentioned that whenever you incrementally evaluate, it has to be aligned to distribution, something that can go in the same truck. If you ever have to consider categories beyond this, what are the aspects you would look into?
It is the same, nothing changes. A, it has to pass strategic filters. Right now we are in Food and Beverage. In Food and Beverage, we have defined specific categories where we will play. More or less, we have ticked all the boxes on the categories we wanted to play in. We have got the brands now to play across the food and beverage spectrum. B, apart from that, it has to make sense from a financial value creation perspective. Unless that happens, I don't think we will be doing acquisition - but that is not to say that we won't. We are keeping our eyes and ears open. Almost every deal that happens in India does pass through either Tata Sons or Tata Consumers. So we either will do or will not do depending on the fact that it has to tick off both the strategic and financial filters.
On Sampann - as a brand overall, all the categories Sampann deals in, is the brand breakeven at EBITDA level?
We have always maintained we do not do EBITDA for brands. For every single business, we do something called margin after advertising and promotion expenses because below that the sales force and operations are all common cost. I can always do a hypothetical allocation Excel sheet, accounting number, but that is not a true way to judge the business. The MAPE for Sampann is positive and it is improving quarter-on-quarter in line with our expectations.
Given Sampann is a lower margin business growing at very high pace, do you think that will put a drag on the overall consolidated margin?
For the last 5 years, we have been growing Sampann at 30% and we maintained the gross margin. The whole trick is to make sure that your portfolio works to your advantage. We have crafted our portfolio in a manner where A, we have got a set of businesses paying the bills with a steady state gross margin, bar up and down of a US coffee or tea happening from time to time, but broadly longer term Tea, Salt, international are very steady businesses, mid to high single digits and certain gross margin. There are high topline businesses of RTD and Sampann, where the margin is lower but improving consistently. And then there are the growth businesses growing aggressively, smaller businesses, but significantly higher margin profiles of Capital Foods, Soulfull, Organic India. It is all to make sure that you are balancing topline and bottom-line at the same time. It is a delicate balance. If none of my other businesses were growing and it was only Sampann, it would be dilutive. But over the last 5 years, we have proved that we have the ability to juggle multiple balls at the same time.
When you said a foods business in the longer run should be 17%, is that at EBITDA level or at the other calculation - variable costs and advertising but not accounting for fixed costs?
No. I wish I was allowed to deliver businesses with MAPE of only 17% because below that there is at least 12%-13% of costs coming in. I can in no way deliver EBITDA as required. This is EBITDA percentage of 17%. +17% is the number.
On Tea, the volume growth of 3% is a little lower than your targets. So what is playing here - is it competition or just a one-off quarter? What should we read into this?
I wouldn't measure too much into the quarter-on-quarter for every single category. Overall, year-to-date, we have delivered a 9% topline for Tea. Also remember, last year same quarter, we had delivered a 7% volume growth. So we are cycling that. If you do 7% and 3%, we are back to the 4%-5% volume growth, which we have been guiding for. So A is the base quarter. Second, I would urge not to look at quarter-to-quarter. There will be ups and downs because at times you will have volume upsides, price downsides and vice versa. Sometimes a few quarters does take to settle. But overall, India Tea, about 4%-5% volume and a couple of basis points of price mix. That is what we guide for.
On Capital Foods - in 2026, do we have any major plans with respect to scaling that part of our portfolio? And overall on the distribution side, for the next 2 years what is the kind of roadmap we have with respect to our GTM strategy?
On the GTM strategy, overall we cover about 1.7-1.8 million outlets directly and numeric reach is about 4.5 million. In the medium term, our target is to get to about 5 million numeric reach. Direct reach will probably an aspirational number is about 1.9-2 million - I wouldn't drive beyond that, because now we have to get the wholesale multiplier and get into semi-urban rural territory, which are our lower share territories. On Capital Foods, our ambition remains 25%-30%. We have started to expand the portfolio through innovation, and the new segmented go-to-market and supervisory system should drive us there. You would have seen our new ads - this is in the mold of how Capital Foods was built, making blockbuster ads memorable. That is the third pillar.
Is there something which is missing for us to accelerate the growth path for Capital Foods? Some missing link we need to work on right now?
I wouldn't say there is a missing link. There are basically two jobs in Capital Foods - market share growth in existing categories, and category creation. The south and east of the country, Capital Foods is a slightly alien thing - they have not seen Schezwan chutney, etc. Both advertising and sampling at scale are the critical pieces, and we have started accelerating that. We have upped our taste ambassadors by roughly 50% over the last 6 months. We have pumped up our A&P, including bringing in known faces from the south into the ads, so as to relate better to the consumers. Like I mentioned in Calcutta, where 91% of business is Tea and Salt, 9% is total growth categories - you can imagine how much focus it gets. The segmented go-to-market will be a huge unlock, because now there is dedicated focus on these categories.
Two parts on RTD portfolio. One is we launched the Zip Zap Energy drink last quarter - how has been the initial reception? Second, expectation is that summer will be good this year, and beverage companies are already building channel, increasing visi-coolers. Where are we in distribution and how are we planning to increase reach before summer ends?
Let me use a Hindi term, Aapke Muh Mein Ghee Shakkar, because I have stopped trying to forecast the weather. When there are rains in Bombay in November and December, and it doesn't rain till around June, July, it is a very difficult forecast. But seasonality does pick up. Probably February onwards is when you would start seeing the uptick. Right now, over the last 2 years, we have started to be ahead of the curve. We have ramped up our distribution and we should be in a good position by around end January, early February, whether it is sales force, distributors or salesmen, because after that the entire focus is on execution. If it is a good summer, we will ride it out. It is not a pricing-driven growth, it is a volume-driven growth which I feel good about. We very clearly started to build out the 3 pillars - the entire water stack right from Rs. 10 bottles of copper water up to Rs. 90 to Rs. 100 bottles of Himalayan, and the entire range in between. You will see some more aggressive launches in this space coming in the next 60 days or so. We have started to build the whole stack of Ready-To-Drink tea and coffee - green tea, fruit tea, kombucha, Ready-To-Drink coffee in a can at Rs. 70, PET at Rs. 50, and high-end as well. Then we have got the entire cups portfolio. Zip Zap was launched middle of last quarter - fingers crossed, we are still in a few markets. We want to test it out before we go broad-based. Right now, more or less to expectations.
India Beverage market share in Tea has seen some softness despite revenue growth. To what extent is this a conscious value over share trade-off and how do you internally track success in such situations?
I have publicly maintained and the good news is now multiple people are saying the same thing. If you read the Economic Times, yesterday or day before - just to give you a perspective, last quarter about 18.5% of my business came from e-commerce, quick commerce. Previous quarter was 21%. This quarter, it was 18.5%. Modern trade roughly is in the 14-15% ballpark, so that is 33%. About 5% comes from institutions, which is 38%. Therefore all of GT is only 62% of the business. In modern trade, remember, which Nielsen reports, one significant player doesn't share data. At best they are reporting about two-thirds of the market in a sampling format. If you observe market shares ups and downs, I would urge you to listen to commentary from multiple players and then make up your mind about who has gained share, who has lost share. Because there is no other database available, we continue to report Nielsen because otherwise if I don't report, I will be accused of trying to hide numbers. When my volume growth is still a strong number compared to industry, when total value growth is close to double digits, we feel in a good place. I don't think we are losing market share. It might move marginally up and down. Nielsen does measure e-commerce - they don't report it and don't total it into this. But we are market leaders on e-commerce. Quick commerce has grown 100%. On e-commerce, we have about 38-39% share and we are leaders. If I total all that, it will be a completely different picture. There are channel shifts which Nielsen doesn't measure. Where it measures, it is by sampling. In modern trade, it doesn't pick up one player. So your guess is as good as mine.
On Tata Sampann - is the growth being primarily driven by distribution expansion or are we beginning to see repeat consumption and brand-led pull, especially in staples like Pulses and Spices?
My strongest channel for Sampann is e-commerce, simply because most of the categories that we play in, with all due respect, we are also competing with a retailer. When I am selling Pulses, he is scooping up Pulses from a 50 kilo bag, making a 50% margin on that. Whereas in my Sampann, he would at best make a 15% odd sort of margin. Therefore, e-commerce, quick commerce is the stronger channel for Sampann. The fact that we are getting this volume traction just proves that we built brand loyalty and pull. Even when I do market visits, most of the times even GT retailers around attest to the fact that once a consumer has picked up Sampann, they hardly go back, just because of our stringent adherence to quality norms.
On innovation - with 15 launches this quarter, what percentage of revenue now comes from products launched in the last 3 years? How has this metric evolved?
We have launched 15 products this quarter. Year-to-date is 55. We have publicly said we want to be around the 5% plus mark on innovation to sales, defined as revenue from products launched in the last 3 years. We are at a 4.8% at the end of last quarter. There is no reason we will not cross 5% this year.
How much is quick commerce within this quick e-commerce salience of 18%-20%?
Quick commerce is about 15%. The balance about 4-5% would be e-commerce.
Can you clarify the outlook for Tea price mix going forward, given we have given some pricing back to consumers? Should we expect some negative price mix for the next 2 quarters?
Yes, as I said, we have given off most of the pricing during this quarter, but I don't think the entire picture on the pricing has flown through. There would be a little bit of impact of price mix, but I wouldn't say it will be significant enough - it will be sort of flattish to slightly lower going forward. But as we have given off price, we expect volume to pick up. We have said mid to high single-digit revenue growth. At points in time, volume will be overpowering versus price growth and vice versa. Going forward, at least for the short term, we expect volume to come back stronger and therefore us continuing to deliver the mid to high single-digit revenue topline.
On international margins - are they largely back at normative levels, or are we likely to get expansion in the fourth quarter?
No, international margins are not at the normative level, simply because the entire impact of the coffee cost increases have not passed through. We have had one more round of price increase in the US in the month of January, post which we would have broadly passed on the current cost increases. But that takes some time to translate into the P&L. So I would say we are about a quarter away from seeing normalized pricing for international. Yes, so we are at least a quarter off.