On gross margins compressed sequentially - largely non-branded coffee and international. With elevated cost levels from crude and fuel, can near-term margin be under pressure? What level for FY27 especially when A&P goes back to 7.5%?
Some increases in packaging costs. Increases because of places where we use LPG. Got fairly balanced portfolio of slightly stronger commodities and highly processed food. So far not seen big impact on margins. If fuel goes up broad-based inflation it's different story. With current variables don't see high pressure. Got enough equity in categories to take increases to mitigate margin. Wouldn't lose sleep on margins in next 2-3 months. Longer term, your guess as good as mine. Remain confident of delivering top line numbers and EBITDA ahead of top line. Top line will grow at double digits.
On Sampann - margin you're referring to MAPE. Possible that on EBITDA bit Sampann gets profitable and gives sizable contribution?
In a structure where front end is common and back-end operations common, would not try to do mathematical exercise to allocate overheads. We do P&L by category up to margin after promotion and advertising expenses. Below that all costs are fixed. Targets for teams handling those lines are fixed costs. For every category, whether tea 33-35%, salt 35% range, or Sampann mid-teens, it is all margin after promotion expenses.
On profitability across channels - like-for-like same products, profitability lower on new channels but premiumization - category-level margins could be better. Right way to look?
All-in cost - different costs on different channels. Cost of field force on GT, cost of logistics and visibility on E-com/Quick-com - might land up in same ballpark. Wouldn't want to do that calculation. Would rather play where consumer is even if slightly lower margin. ROAS game - as you build scale, initially have to spend higher visibility, then advertising dollar gives higher return.
On product portfolio - launched several products and categories - portfolio more or less complete?
With ambition of growing double digit and EBITDA ahead of top line, we will not only grow organic portfolio but continue to drive distribution, marketing, brand building and innovation. As we see consumer trends come up, you will continue to see innovation. Long way away from saying we've got the perfect portfolio. Will continue to aggressively expand distribution, build strong brands, expand on innovation.
Gaps in your portfolio over next 1-2 years? Risk of spreading too thin?
Last 3 quarters - strong double-digit top line growth 18, 15, 18. Driven by base UVG, not pricing. Proves ability of system to execute innovations at scale. Not all innovations immediately lining up in distributor's warehouses. E-com, Quick-com allows you to test in a city, do quick test, then roll out. As long as playbook is clear - lowest risk, lowest cost, highest impact - no problem launching innovation. Food and beverage space - enough white spaces especially in nutrition, health and wellness, premium categories.
What is your strategy on tactical aggression in high-margin protein segment? Organic or all options on table given cash on balance sheet?
Protein is trending and we are looking at it closely. Acquisition strategy doesn't pertain to protein alone. Very clear where we want to play. If attractive acquisition comes across any segment, will look at it - protein included. Protein per se - launches like Makhana, Edamame - it's a teaser. Will see much more ramping up in this space but with a plan.
On consumption patterns - GLP-1 trend semaglutide adoption - developing products for that category?
GLP support is what food and beverage companies are looking at. We are also looking. Right now, nothing on the anvil. We will wait and watch but be trigger ready to see if this category takes off.
On 50-70 bps EBITDA margin expansion over FY26 - hold to that?
50 to 75, 80 bps is a given. It's not an option. We will deliver it. Seasonality in businesses - quarter-to-quarter. Not automatically jumping up to 50 to 100 for full year number straight away. Cycle quarter-by-quarter because seasonality, you will see that in play. 50 to 75 for the full year will happen.
On Sampann growth of close to 70% - material step up. Largely NPDs or tailwind from new GTM? Sampann margins now at similar level to food and beverages?
Reason for Sampann growth is broad-based but higher impetus in NPDs. Growth across pulses, poha, vermicelli - whole portfolio. Quick-com, e-com shift by consumers helping us - distribution and availability not a constraint. From margin perspective, we've always said there's no reason Sampann can't hit mid-teens plus number. Starting to get close to that. Salt on very strong wicket. Beverages back to strong wicket. Sampann headed towards mid-teens margin. Overall in a good place.
On market share data you may stop giving - it is more execution rather than benchmark. How do you benchmark? E-commerce data you must have - how reliable? If data not covering many channels how relevant even from execution?
For Quick-com, E-com, Nielsen does have a panel - we get that data. We are market leaders on tea on Quick-com and E-com. Urge you to go through different annual reports, analyst calls to do comparisons. My team has specific targets in terms of channels, numeric reach. More than market share, numeric reach is what I look at. Overall market share - I don't find directional numbers right. Salt by sheer weight of 40% share is highly distributed. Beverages - 20% Quick-com/E-com, 15% modern trade (half doesn't report) - so GT is just 55%. Number is off.
On beverage - Campa is now number 3 in water Pan-India, aggressive advertising INR15 Campa Sure, Amitabh Bachchan brand ambassador. Margin perspective for NourishCo? Long-term growth given Campa will keep getting aggressive? On US business margins improving but pricing in developed markets cools off when commodity cools - how to think?
Commodities have softened but inventory in channel of raw material - entire margin expansion hasn't happened. After 2-3 months when inventory levels go down and newer inventory flows in, margins would come back to where they were before this entire up-cycle on coffee prices. Could see action on pricing specifically driven by promos. We remain alert. Till industry comes back to margins of 2 years back, I don't see too much of fight breaking out. Margins broadly will improve from current. NourishCo - confident of growing 30% consistently. 3 verticals - water, affordable cups, tea and coffee. More launches across water, RTD tea/coffee.
On growth categories - Capital Foods and Organic India doing well in domestic - thinking about more acquisitions? Salience in next 3-4 years?
While we've improved performance in Capital Foods and Organic India, got runway to improve more significantly with split GTM. Single biggest indicator is lines sold. Growth guys growing fastest on lines per outlet. Innovation pipeline. Accelerating on Capital Foods and Organic India. Acquisitions front - we remain open. What we like is not for sale, what is for sale we don't like. 30% growth is a given for short to medium term for growth businesses. Will recalibrate.
On unique raw material basket vs competitors and geopolitical volatility - from margin or growth perspective, anything to bear in mind from US, Canada, UK?
How does Middle East situation impact us. Availability of raw material for business continuity - for India had plastic closures and PET imported, we've shifted 15-20 days back, no continuity issue. Issue is LPG - found alternate suppliers without problem and/or switched to dual use burners. Third piece - if fuel price increase and broad-based inflation, that should worry us. As of now not sure where this is headed. Should be industry-wide phenomenon - everyone protects margins through pricing. With moves that happened, don't see too much impact.
Same commentary applies to international business too?
Absolutely. International - UK, Canada is primarily tea so big impact is tea prices. Hasn't changed. US is coffee which is 90% of business - coffee prices coming down not going up so doesn't change. Minor uptick here or there but nothing significant.
On Capital Foods and Organic India - impact in international but thought domestic could start touching 30% growth this quarter. What are the issues?
Organic India did touch close to 30% - 26% or 27%. Capital Foods was a bit subdued. Would have loved it to grow but still grew double digit. Primary reason - we relayed entire go-to-market between November and February in top cities. Had a hiccup. Remain confident of coming to 30% mark very quickly.
On tea - last quarter highlighted worry of slight spike. Tea prices comfortable for year ahead?
Stopped trying to forecast commodities too far ahead. As of now, for this year, tea prices have trended well. Roughly in same ballpark as price same period last year. Largely benign and that's why we had given down pricing to make sure we are competitive. As of now, no reason to change guidance.
Tata Consumer is amongst best performing on Quick-commerce/E-commerce platforms. What has worked well and allowed you to outperform vs GT? On tea, 4% volume growth - satisfactory or aspire higher next 3 quarters?
On tea - always mentioned we will target mid-single-digit growth and couple of bps price mix, mid to high single-digit top line. From that perspective, we are almost there but not there this quarter. Aspire for slightly higher number. On Quick-commerce/E-commerce - we will be where consumer is. We came from significantly behind on distribution - started at 0.5 million outlets, now 2 million outlets, numeric reach 4.5 million. Still behind where we want to be. Most trusted brand name in country. When we connect straight with consumer we hit it out of the park.
On A&P going up with gross margins under pressure - 60-70 bps EBITDA expansion possible?
As long as I don't increase middle of P&L, top line grows double digit, drops to bottom line. If small niggles on cost aspects, we have ability to take pricing up. Wouldn't worry about it. Food business in India should be 7.5% to 8.5% A-to-S ratio. We are broadly in that ballpark. For full year there will be ups and downs - tea peak in North India Q3-Q4, big events. Broadly 7% range, don't expect to impact overall EBITDA margins.
On strategic - Sampann launched Protein Makhana, you have Simply Better. Are you seeing people move towards more healthier food? Strategic shift happening fast?
Innovation is focused on 3 big macro trends in Indian consumer - Health & Wellness, Convenience, Premiumization. Communication moving to digital and online shopping. Sampann is base, Tata Simply Better is when adding/subtracting something - making it better than what you consume regularly - branded under Tata Simply Better. Cold-pressed oils is not regular oil - better for you oil, so it is Tata Simply Better.
On tea cost - FY27 likely to be flat YoY?
As of now we are seeing it roughly flat. Stopped trying to forecast commodity costs too far ahead because climate, weather etc. We will react, be agile to move pricing. Season has already started, plucking and auctions up fully in April. Costs roughly benign.
Tea margins in FY26 - happy with that? Plan to see expansion in FY27 through your own initiatives? Small cost impact will pass on - so still see expansion in India tea margins?
Tea margins for Q4 are roughly where we want to be. We were not there in beginning of year. They started expanding as we went through the year, and we had taken pricing and costs went down. Roughly right now we are where we should be, and we'll aim to be in this ballpark.
ARR of Sampann overall, including all categories?
Sampann overall for full year ended at close to INR1,400 crores. Starting from 35%, 37% growth in Q1. Now at 60%. INR1,600 crores is the actual number for Sampann for full year.
Organic India has approximately 40% revenue from exports yet grew 24% during the quarter. Capital Foods has 20% export mix yet delivered below expectations. Reason?
For Organic India, single biggest market is US and we carry inventory onshore in US. During tariff up and down, which impacted Organic India quite a bit, we had pumped up inventory so there was enough sitting onshore in US. For Capital Foods, it is FOB India to retailers and US transshipments happen at Middle East. Shipping got disrupted in March. Come April it is back to normal, expect to deliver decent growth in that category.
What is driving the strong volume growth in salt? Coming from loose, unorganized or other drivers?
Multiple drivers. When Tata Consumer was formed we decided to play not only in vacuum evaporated iodized salt - we said we will play in salt. Salt portfolio like a Udupi restaurant menu - salt with zinc, iron, light, super-light, rocksalt, sendha, solar, vacuum evaporated. Premium to value play. Built brand with media - top of mind 88 out of 100. Distribution expanding and reengineering. 24 cities where salt was overwhelming - separated out for single-minded focus. Multiple things in play.
What is explaining unbranded soluble growth given coffee prices in deflation? Outlook for FY27?
Growth is primarily when you compare with last year. Coffee prices elevated even compared to last year - that's driving unbranded soluble growth. Vietnam is now running at 99% utilization. We had already started project to expand capacity in Vietnam - online by early 2027 - real next leg of growth. Board has also officially approved capacity expansion on tea extracts - running out of capacity. Whole solubles unbranded business will continue to go from strength to strength.