Tata Consumer Products Ltd
NSE:TATACONSUM
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
911.7
1 261.55
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Tata Consumer Products Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Tata Consumer Products Limited Q2 FY '23 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rajiv Bharati from DAM Capital Advisors Limited. Thank you, and over to you, sir.
Thank you, Faizan. Good afternoon, everyone. Representing DAM Capital, it's our absolute pleasure to host Tata Consumers' Q2 FY '23 Results Conference Call. We are in the midst of a festive season in India, and I thank you all for taking time out for joining this call.
Now, I just hand over the call to Ms. Nidhi Verma from Tata Consumer for the introduction of the management and for further proceedings. Nidhi, over to you.
Thanks, Rajiv. Welcome, everyone, and season greetings to you and your loved ones. I know that there have been a lot of results since yesterday, and it's been a busy day. But I hope that you have had the time to go through our materials.
On the call today, I'm joined by Mr. Sunil D'Souza, Managing Director and CEO; Mr. L. Krishnakumar, Executive Director and Group CFO; Mr. Ajit Krishna Kumar, COO. As we do usually, we'll spend about 15 minutes or so walking you through some key updates during the quarter. And then we will open the floor for Q&A.
So without further ado, over to you, Sunil.
Yes. So if I go to the executive summary for this quarter, so we do -- we grew our top line at 11%, despite a difficult demand environment. And when I say demand environment, I'm talking of macro headwinds, I'm talking of inflation, I'm talking of currency. On a 3-year basis, we have grown at a 13% top line. Consolidated EBITDA grew 4%, with margin down 100 basis points year-on-year, primarily impacted by the international business.
During the quarter, India business grew 9%. India Beverages was down 2%, but on a 3-year CAGR basis, we are up by 14%. India Foods grew strong 29%. However, volumes were soft. You have to remember, we are cycling a very, very aggressive growth of last year on this one. And on a 3-year basis, the business has grown at 22% CAGR. International business was up by 7%, 6% in constant currency. The India business, I talked about having grown at 9%, EBITDA grew at 24%. However, inflationary pressures in, specifically in the U.S., U.K., currency weakness and the fact that while we have action pricing, it takes some time to execute in the international markets take.
We have had a lower EBITDA. However, the business is on a strong footing because we've had volume market share gains both in tea and salt. While volume share is slightly up in tea, value share is slightly low because we have given off some pricing just to make sure the volume momentum doesn't stop. Our growth businesses, which is ready-to-drink, Sampann, Soulfull, all around very, very strong trajectories. They have been growing by 50%. And this 50% number has been consistent over the last few quarters. The ready-to-eat business, we are relaunching and revamping the entire business, including the entire marketing mix. We have launched it in India under the brand name of Tata Sampann Yumside. Internationally, we are using the brand name Tata Raasa.
So if I go to the numbers for the quarter. Yes. So as I talked about India Beverages, negative 2% India Foods, plus 29%, US coffee, constant currency, 16%, but the dollar has strengthened. So revenue growth of 25%. International tea, negative 4%, Tata Coffee, up by 41%, driven by strong coffee prices available. So overall INR 3,363 crores at a 11% growth. So if I look at overall group performance, 11% revenue, 4% EBITDA, 36% group net profit.
Now just as a perspective here, we have a one-time gain on a land sale, a disputed litigated land sale of Tata Coffee, which has been there for a long time. We've sold it and also have some adjustments on account of restructuring, which we are doing internationally. And that's why the group net profit is up by 36%. Overall, margin on net profit, up by 220 basis points and EPS growth of 22%.
We are sitting with INR 2,000 crores, plus of cash. This is despite all the payments that we've made for Tata Smartfoodz, the increased dividend, the extra capitalization we have done for Starbucks, including all that, we're still INR 2,000 crores plus in cash. If I go to the strategic priorities, starting with strengthening and accelerating core business distribution, we had made a commitment saying we will hit 1.5 million outlets direct by March '23. I think we are on track to actually beat that number because we are already at 1.4 million.
The other thing which we have said is we've got to strengthen our reach in semi-urban and rural, which was primarily driving indirect. And therefore, we have upped the number of super stockists to reach into that geography. Modern trade continues to go from strength to strength, up by 18%. E-commerce, just as a perspective, we had exited FY '22 at about 7.5% of sales, and we are powering ahead even further. We are now at 9.2%, e-commerce growth at 40%. But the most important number is 11% NPD contribution, which just shows that if we get our NPD in front of the consumers, we've got winning proposition. So all that we've got to do is make sure they're available and distributed.
We've continued to put money behind our brands. You can see a few of the campaigns on top. Just as a perspective, for the first half, advertising and promotion as a percentage of sales moved from 6.1% to 6.4%. Yes, there's been a slight bit of a slowdown in this quarter, but conceptually, we are committed to continuing to increase spending on building strong brands.
Coffee is a good story and good story in all the places that we play in Tata Coffee, 8 O'clock, as well as India Coffee, which is up by 39%. Premiumization continues to be a focus. Tata Tea Gold Care, which we launched about 24 months back. It is now at about 5% of total sales. As I said, we've gained a bit of volume, but lost a bit of value as we've taken pricing, A, in line with tea prices moving slightly down, but more importantly, make sure we have volume momentum in the semi-urban rural geographies which are on the lower scale of the brand parameters.
We're powering our brands on foods as well. We're putting money behind Sampann. You see Manoj Bajpayee there advertising for Sampann. We have entered another category of Hing, in line with our trust to enter categories where there is decent revenue, good margin, strong growth and, most importantly, a trust deficit which the Tata name can leverage.
Sampann Spices, we had talked about launching into the South, which is 40% of the Indian market. We have launched AP, Telangana, and now we are ready to launch blends into Karnataka. AP, Telangana, I think is a huge tick mark. And therefore, we are looking at how quickly can we expand into other geographies. On the other hand, market share on salt continues to power ahead.
Remember, we have taken more than a 33% increase in salt prices in 12 months between July '21 and August '22. But despite that, we continue to gain share. We continue the momentum on innovation. Just as a perspective, the number of launches, new launches this year is 2x of what it was last year. And revenue from innovation is up by 16% year-on-year. And some of the few things that we've launched this quarter are Tata Tea Gold Saffron. We've launched the new season Sonnets, Shahi Besan Plus, which is a blend, which makes crispier texture. I talked about Hing, and we've relaunched Muesli with 25% millets.
We've done a full relaunch. I talked about it of Tata Q. In India, we're going under Tata Yumside and internationally, we're going with Tata Raasa. So now you see broadly, we've talked about 5 platforms. This is how we stack up. In our current core, we've got tea, coffee, salt. In pantry, we got pulses, spices, which we had. We've launched besan, poha and other staples. Ready-to-cook, this is, I would say, watch this space because we are doing overall year. Dry fruits has been a great success. And now we are looking at moving it from online into offline as well. Liquids, of course, we've got water and RTDs.
NourishCo business, just as a matter of fact, for last quarter, grew by 64%. Mini-meals is breakfast cereals and Soulfull, ready-to-eat, both partly and Soulfull, as well as we talked about Yumside and Raasa. Snacking is a category which we're looking at. We're still not fully there. And of course, we've just started to wet our feet in protein. And when I talked about wet our feet, we did talk about alternate meats that we launched last quarter. This quarter, we've got into the supplement space with GoFit. Like I said, very early days. We are wanting to learn from this launch, so that we can figure out how to scale it up. Our new engines of growth, and I alluded to it on the executive summary as well, whether it is ready-to-drink, Sampann, Soulfull and Tata Q, which is now Tata Yumside, Raasa, is up by 50%.
This is in terms of where we are seeing commodities trend. I won't talk about the GDP growth, which everyone would be familiar with. Prices have more or less stabilized in Kenya, but the catch is it is US dollars. But when we bring it into the UK, it translates to pounds, the pound is depreciated against the dollar and that creates the currency issue for us. In India, while tea prices were on a secular downward trend in line with the long-term supply greater than demand equation, the problem is there was flooding in the months of June, July, that's number one. And number two, this slight blip created by Sri Lanka going out of the equation, has created a, I would say, very short-term issue, but I do think the prices will continue to trend downwards, which should give us enough elbow room on our India Packaged Beverages.
Coffee, while it has jumped to 210 to about 230, right now playing in that band and very stable. As long as we have taken pricing in line with that in mind, I think we are in a good space. Only thing in the short -- in the immediate quarter gone by, because we had hedges unwinding and we had to buy at the new rates, that is why you would see a bit of pressure on the commodity. But given the fact that now we have the hedges in place, plus we have taken pricing in the market, I think we are in a good place.
So, I won't drain the numbers. We talked about minus 1% volume, minus 7% revenue and 20 basis points of share in tea. India Foods, flat on volume, which is just -- again, I'll repeat, we took a 33% price increase in the last 12 months, flat on volume, share gain of 128 basis points and 29% revenue. NourishCo, very strong. Tata Water Plus is roughly 2x of where it was last year, up 64% on revenue. Vietnam and Tata Coffee, the whole business on a strong wicket, whole extractions and plantations showing strong growth, sum totaling into 39% revenue growth. Starbucks opened the 300 store and opened their first Reserve store now in Mumbai. 99% of stores have reopened. Same-store sales are up by 24% versus the pre-COVID period. Now we are in 36 cities and we opened 25 stores in the last quarter.
International, UK, we've had volume softness and therefore, revenue softness, so to speak. Value continues to hold strong. In the last 4 weeks, we have all taken Twinings to become the #3 company in the market. US, again, we've had share gains, broadly maintained coffee back shares, gained in K-Cups. Tea is up on revenue and coffee, of course, in line with the pricing, up on revenue.
Canada, Canada is on a strong wicket, revenue growth in specialty tea, overall 16% revenue growth and maintaining a strong market share.
Financial performance, L. K.?
Thanks, Sunil. So just walk you through the financial performance, starting with the standalone results. Revenue at INR 2,131 crores, up by 7% or INR 143 crores. This represents the growth mainly in the salt and tea businesses. If you look at EBITDA, it's a 25% growth, led largely by the food business, but also strong margins of the tea business continuing.
Moving on to consolidated. It's a growth of 11%, and the turnover increased by INR 330 crores. India business grew by 9%. The difference between standalone and the growth rate in India business is largely due to the water business, which grew at over 50%. International business grew by 6% and non-branded by 30%. In terms of consolidated EBITDA, while the India business grew by 24%, international business EBITDA had a decline. That was due to higher commodity costs in coffee, overall inflation, which impacted trade, which impacted currency in the case of U.K. We have taken price increases in these markets, but they are coming into effect with a lag because we need to discuss with organized retail. And we see the impact of pricing coming through in the next quarter and beyond.
Non-branded EBITDA led by prices. Again, talking through the -- let's go back to the next slide. So on consolidated financials, we've talked about the revenue growth of 11%. EBITDA consolidated went up by 4%. The muted growth is largely because of international being lower, as I explained.
Moving down to exceptional items. We had INR 111 crores of exceptional income, which largely represents a sale of an asset that we've been holding for sale in Tata Coffee, which we concluded during the quarter. Profit after tax is higher by 36%. But what's not shown here is the share of profit from JVs and associates was higher this quarter at about INR 34 crores compared to INR 24 crores, I think, in the same period last year, reflecting improved performance both by Starbucks and also by the North India plantation.
Year-to-date, revenue is up by 11% and profits up by 37%. Standalone, we'll just talk through the performance of the quarter, a 7% top line growth and 25% EBITDA growth, flowing through to the PAT growth of 22%. In terms of segment-wise performance, India revenues accounted for 72% and international 28%. In terms of segment results, India business had a higher share of 84% because international performance was lower than the same period last year.
So that's it from our side. We are happy to answer any questions that you have.
Yes. Just in terms of outlook, I don't think I need to talk about the macros. Inflation internationally, while India has been relatively more resilient, you've seen the rupee moved so quickly in the past few days. Rural continues to be a stress. We have heard that or we were hoping that monsoons and the festive season would pick things up. We've seen some good news end of September. October has started off decently, but how much of it is festival, how much of it is structural, I think too early to tell, keeping fingers crossed. U.S. Fed's monetary tightening will continue to cause, as Jerome Powell said, a little bit of pain for us more in terms of currency, more translation than transaction.
The impact of inflation and monetary tightening will be the key factor to watch out. As I said, we have taken cost pricing actions already in international markets. Unfortunately, from the day you announced to the day it is executed, takes a bit of time. So, I guess it will drag on for this quarter before landing in. That's number one. Number two, there are certain structural cost actions, which we have already actioned in the international markets, which again would take about 3 to 4 months to land.
Overall, I think the commitment that we have kept on making, we will continue to drive profitable growth. We have delivered double-digit growth, which is exactly the intent that was stated while balancing margins. The Tea business in India remains soft. We are aware of that. However, for me, as long as we're maintaining market share, we are in a strong position.
As industry comes back, we will bounce back. We took pricing in salt to mitigate cost inflation. And you would observe broadly our gross margins are flat versus last year because of that. Yes, there's been an impact on volumes. But the fact that we continue to gain market share is a testament of the strength of the brand and our execution capabilities now.
Our growth businesses, whether it is NourishCo, Starbucks, Soulfull, all have delivered strong results and will continue to deliver strong results.
RTE, as I mentioned, we have done a full marketing mix and, therefore, a new relaunch. We do expect to see significant acceleration from here on. Given the inflationary environment and investments required, we will continue to balance margins while remaining focused on maintaining the growth momentum.
Yes. With that, we'll open up the line for Q&A.
[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.
My first question is on the RTE, RTC brand relaunch. So, want to understand why Tata Q relaunch happen? And why a separate brand for the domestic and international? Is it a copyright issue? A related question is RTE, RTC and spices. These categories look very good on paper, and there are already a lot of local and listed players also present in most of these. You are not exactly an early mover in most of this. So what is the plan here in terms of market share capture from a longer-term perspective because there is not too much a differentiation and some of these are tough also? So, want to understand from a market share longer term, what is the plan?
So Abneesh, if I take that question, the reason for the relaunch is we went back to the drawing board after we acquired Tata Smartfoodz and looked at the consumer outputs, right? Basically, we found there were issues on -- or there was consumer feedback on product. There was consumer feedback on branding. There was consumer feedback on packaging, right? So if you look at it, we have worked on all the 3 pieces. So, I would strongly suggest you to try some of the new products, which are there. And especially, if you tried Tata Q in the past, you would see the noticeable difference. In fact, at a recent strategy meet for the world, we only served them products from this range and they couldn't make out the difference between fresh versus from this set. Yes. So that's the product quality, A.
B, you're absolutely right, there is an issue. Ideally, I would have wanted to use Tata Raasa as one brand across, but there is an issue of copyright in India, and therefore, we had to go 2 ways. But apart from that, in India, we wanted to give the cover of Tata Sampann to make sure consumers know where it is coming from, because we do think Sampann has built a decent equity in India, which allows us entry into the consumer mind and hopefully kitchen. That's number 2.
But what is going to happen is over a period of time, you have to remember, there are 2 distinct channels in the international market. One is the ethnic stores. But more than that, now slowly, slowly, there is the world food aisle, which is growing significantly in mainstream grocery across the globe. Our intent is to be there. And therefore, 2 brand names might help us play that game in a significantly differentiated segmented manner.
Lastly, Abneesh -- so we are aware that this is a market which -- there are multiple players. There are not only players from India who are manufacturing and exporting. There are local players in those markets who are manufacturing, who built pretty strong basis. But given where we are number one, given the fact that we have teams on the ground, given the fact that we have retailer relationships and I'm talking of mainstream grocery, which is where the better margin game is, given the fact that we have logistics and sales partners, which are very, very strong. And of course, I don't think we need to market the Tata brand name to too many people. We will dominate that category where we get phenomenal shares. But given the fact that it is a INR 1,500 crore market and growing significant double digit, we do think it is a nice profitable business, which can become scale.
Sure. That was useful. My second question is on India branded Tea. Last few quarters, volume growth here has been elusive for you. So when I see the construct of the industry, almost half of the market is local, regional players. And whenever commodity deflation happens, which has, in fact, happened in tea last 1 year, it has come back in terms of advertising and promotion, which means that they would have come back.
So the Nielsen market share -- Sunil, the issue is almost every listed company says that we have gained market share, but when I correlate that with your lack of volume growth past few quarters and the regional players coming back, then it doesn't tie up. And second is you mentioned, when the industry comes back, what will lead to the industry coming back? I understand the current slowdown, but it's a very well-penetrated category also. And you've also relaunched Agni in the past 2 quarters. So why the volume growth is not coming back, taking everything into account that half of the market is still local players?
So Abneesh, you're absolutely right. Let me just flip it around. Instead of saying deflation, in times of inflation is when organized players gain in this market. And the good news is you're reading the headlines right now, whether it is rupee, whether it is oil, et cetera. So we do think -- apart from tea prices, everything else is prime for inflation and therefore, probably should even out, number one.
Number two, the softness, if you look at it, it's primarily rural and semi-urban. And even if you look at my portfolio, it is by March, premium and premium portfolio is doing well. The stress is at the bottom and the stress is in very specific geographies, Abneesh. So it's not broad-based. I would say it is more rural, it is more semi-urban and it is more Hindi belt sort of softness, which is why -- I mean, I've been keeping an eye on the monsoon and therefore, what happens. And right now, as I see, I can start seeing green shoots, but I wouldn't declare victory.
I think we've got to watch for some time. But we do think -- so to your point about Nielsen, Abneesh, I mean, in the lack of any other data to point you in which direction you are headed, I think Nielsen is the only option on the table. The good news is we are very, very clear. You might not get volume and share numbers accurately, industry numbers accurately, but you do get distribution numbers accurately. And I do believe, given the fact that we have very, very strong share of handlers, if I'm distributed, I will get shares. So therefore, we are going surgically behind geographies where we have distribution gaps. And you will be amazed that despite the progress that we've made in the last 2 years, we've still got enough wide space to play, let me put it this way across the country, which is what we are focused on, which should start giving us volume momentum gains.
Sure. That's helpful. One last quick question. Starbucks, 25 new stores on a total base of 300, that's a very sharp expansion. Is it because of the bunching of our stores? Because of the COVID, so approvals, et cetera, those were delayed. What is the run rate we should build in from an annual run rate for the next 3, 4 years?
So Abneesh, last quarter, we had not opened as many stores. So, you are right, there is a bit of bunching up. But I will also leave you with the fact that I have maintained that Starbucks, we've got a strong operating model. We know that same-store sales continue to grow aggressively. Like I said, we are up by 24% versus the pre-COVID period. We know that store profitability is good. We know that when we open outlets, we do get very, very strong ADTs as well, even in terms of going to Tier 2, Tier 3, and there is significant excitement when Starbucks enters a new town. We are still in limited, if I'm not mistaken, 31 cities now and 36 cities. And we've still got significant runway to play, given the fact that we have a strong operating model. We know there is competition coming in. We know we've got a window of opportunity. We are committed to accelerating stores.
The next question is from the line of Sumant Kumar from Motilal Oswal.
Yes. So, my question is regarding Tata Sampann. So assuming all the product portfolio strengthened as on date and the kind of growth we have shown, 37%, so what kind of volume growth -- I'm not talking about value growth, what kind of volume growth we can expect from Tata Sampann in couple of years?
So, I don't think we should look at volume growth in Tata Sampann because my volume growth in -- for example, if I take dry fruits and index the pricing to my pulses, it is by a factor of multiples, right? So therefore, I don't think for Tata Sampann, it is right to look at volume because of the various different categories that we play in. Spices per kilo versus dry fruits per kilo versus pulses per kilo, it's significantly higher.
Now what we have said is we will grow Tata Sampann CAGR at 30%. Last quarter, we were soft and we had said that we are not worried because we did renegotiate trading terms. And normally, when you do that, you do see a temporary step back. We have grown 37%. We are expanding Sampann into new categories. We've gone into Hing, for example. We are going into new geographies. We were not in the South in spices in a significant manner. We've gone there. So 30% CAGR, I think, you can take it as given.
The next question is from the line of Percy Panthaki from IIFL.
Sir, the NPD percentage of 11% that you mentioned, how do you define it? Is it all launches in the last 24 months, 36 months? What is the definition exactly here?
Yes. So it's launches over the last 3 years, right? You take contribution from revenue over the last 3 years. But just as a perspective, Percy, the significance of launches in the last 1 year is significantly higher than the last 3 years and definitely much more than the last 2 years. So it is more recent launches, which are coming up rather than I'm cycling numbers of the past. And like I said, that's because we are accelerating the pace of innovation. We are -- this quarter compared to last quarter, we have doubled the number of new products launched.
So, this 11% is a revenue contribution number, right?
Yes, on e-commerce.
11% pertains only to e-commerce and not the overall portfolio.
That's correct. No, no, no, no, no. 11%. Percy, I would give a hand and a leg and everything to get 11% on my total number. But unfortunately, no, it's not, right? So there, I mean, our target is to exit this year at a 3.5% to a 3.8% of sales total.
At the total portfolio level?
That's correct. The benchmark for us is we should be getting to a 5%. If you remember, when we started FY '20, we closed at 0.9%. From there, we've made significant progress, almost doubling every year. So this year, the target is to exit at 3.5% plus.
Understood. Next question is on margins. This quarter, you recorded a margin of about 13% on a consolidated level. So just wanted to understand what are the pluses and minuses, which are likely to occur over the next couple of quarters? And do we see like a sharp jump from this level in the next quarter itself? Or it's going to be a very gradual kind of a recovery from this 13%?
So, Percy, if we were able to predict it, I think we would be in a fantastic position. You've seen what's happening to people who cannot predict, right? So anyway -- so for the India market, I would say the variables are volume growth coming back into tea. That's number one. I wouldn't worry about salt traction. I wouldn't worry about Sampann, which are the big drivers. I wouldn't worry about RTD. I wouldn't worry about Starbucks. Internationally, as I said, there are multiple factors in play.
The biggest thing is currency movements because, remember, tea is bought in US dollars in Kenya, out of Kenya. But then there is an actual transaction impact when we sell in the U.K. So that is one piece. Canada also rolls up to the U.K. So that's one piece. And the pound to the rupee, when I translate it into Indian revenue, that is becoming an issue. US dollar helps me in terms of revenue for the US. Some total inflation in the international markets and therefore, impact on the categories and demand, number one.
Number two, currency movements and our ability to make sure that the impact on the P&L is negligible. And number three is making sure that we're taking pricing in line with all these moments to make sure we're maintaining margins is the most critical piece. Now just as a perspective, the one thing I'm not worried about, at least when I look at the business right now is market share. It's more industry factors, which I'm worried about because like I said, in the UK, now we've become the #3 brand. And in the US, we've continued to hold and gain shares in K-cups.
Right. So if my calculations are right, the international margins being under pressure this quarter, the larger part of that problem is not the Europe business but the 8 O'clock coffee business, right? So if you can give some idea as to what really happened there, why margins there were under pressure?
No. So actually, Percy, it's a matter of both, right? It was currency, inflation, softer demand. UK was primarily softer volume and therefore, the relevant pressure on the P&L and a bit of inflation. The U.S. was more about coffee prices. As I said, coffee prices have gone up steeply. We do hedge. As those hedges come up for renewal, we have to hedge at newer rates and some of those costs have hit us.
And therefore, we need to take pricing. Both in the US and UK, we're taking pricing. US, it is already underway. UK, it got announced. But to your point, are we out of the woods? Probably not. This quarter is still a choppy quarter in terms of all these moving parts in international. And in India, we do need to see demand coming back consistently before we can declare that now it's smooth sailing. So, I would give it at least a quarter before making a call.
[Operator Instructions] Next question is from the line of Palak from Infina Finance.
Just firstly, I wanted to pick up on the point that you mentioned before. Overall cost of cup for tea consumption has actually inched up in Q1 and has further inched up in Q2 and Q3, in fact. So do you see the volume growth despite of a softer base will come back strongly in Q3 and Q4?
Sorry, sorry. I'm not sure I got the questions.
Volume growth in tea growth.
So in the last quarter, one of your peers mentioned that the cost of tea consumption, this per cup has actually inched up because the tea prices were high. Even the milk and the sugar prices have inched up. That inflation has continued in the ensuing quarters as well and in fact, build up on that. So do you foresee the volumes coming back in Q3 and Q4?
So, I would not try to go as much as a cost of a whole price of tea cup because, remember, the alternate beverages are coffee, which is, again, it's milk and sugar. So, I would be more focused on fundamental tea prices and the value that we are giving to the consumer in terms of the tea that we are selling. Yes, it does translate into an end cup. We are seeing stress out there. As I said, the stress is very specifically rural, semi-urban.
It is very specifically in the lower end of my portfolio, and we do need to see in those geographies and that part of the portfolio come back. As I said, right now, the hypothesis is given that it's been a good monsoon, yes, it's probably been an overtly good monsoon, probably at the wrong time overtly good. That's what I hear. But that it's been a good monsoon, A, MSPs are good. And the festive -- this is the first festive season where there are no restrictions. We do expect to see some sort of normalcy come back. But as I said, I would still wait for 1 quarter to declare that, I mean, everything is back to normal and growth has come back.
Got it. Just one more. On the salt side, the input inflation, has it moderated on a sequential basis because we're hearing that the brine prices are actually inched up because of unseasonal and heavy rainfalls?
Actually speaking, I think if you look at the distribution of rainfall, it is deficit in the areas where it should be deficit, which is primarily in the salt basins in Gujarat. So hopefully, brine prices will hold. We will know that in a couple of months. But the problem is the cost of energy, which is required to convert brine into salt is the critical piece. So 2 components at work here. One is the cost of coal and other is, because it's imported, is the foreign exchange. And while overall crude prices have moderated and therefore, what I'm hearing is, overall, the pressure on demand for coal is starting to moderate. I think the rupee depreciation doesn't help. So, we are watching that closely. But I'll go back to the fact that we've taken aggressive price increases, made sure that our execution matches up and therefore, we've held up share on salt.
Got it. Those were the 2 questions from my end.
Sorry. Just a point that I would want to make is, for me, 2 important factors in judging the health of any business long term. One is market share and second one is margin. The reason why it is market share is -- I mean, I don't control industry. Industry can go up and down, for example, in tea, whether it is India or the UK, US, wherever. And when the industry does come back, we will come back strongly. We are in the staples business. We are not discretionary. So it will come back.
So, we will come back very strongly and volume growth will come back. Margin important because when we come back, we are making sure that we're making the same amount of money that we were making when there was pressure mounting. So these are the 2 factors that I would look at. And every single business, which I look at, market share and margin seems to be on a good wicket in India. Internationally, market share is on a good wicket, margin is not. And that's why we're taking pricing actions to make sure we put them back.
The next question is from the line of Amit Purohit from Elara Capital.
Sir, if you could just share some data points on the rural versus urban growth trends that you indicated in your outlook as well. What has been -- what you have witnessed in the Q2 and Q1 quarters till now?
So, we would be probably the wrong benchmark to look at rural versus urban, because we have consistently maintained that over the last 24 months or so, while we've rebuild, build or rebuild our distribution system, we are good on the urban side, metros and urban. Our gaps are in the semi-urban and rural. We are building out semi-urban and rural. And therefore, our growth in semi-urban and rural are far healthier than urban, but that's not the story for the industry. The catch is we did expect the industry to be on a faster wicket in semi-urban and rural, and that is what is slowing us down.
Okay. And what would be our mix like in terms of semi-urban and rural here?
Mix right now will be roughly -- I'm just giving you a ballpark number. It will be 2/3 urban, 1/3 rural.
Okay. Okay. And sir, I also wanted to understand your initiatives in the South. We launched actually a salt brand, Shuddh, just to compete -- I mean, to ensure that it is solar based. How has been the response from the consumer side? And just if you could throw some light on that because we were looking to build back to, I mean, tag along other categories as well. So just if you could throw some insights on that.
So, you're absolutely right. Shuddh was a brand, which we had launched in the South. Very specifically, if you take the southern market other than Tamil Nadu or AP, Karnataka, Telangana, the consumer is -- and to a significant extent, Kerala as well, the consumer is used to solar salt. And therefore, when we put in vacuum operated salt, the answer that we get is, this is not my salt from the homemaker or the person who's using the actual salt. And therefore, we have launched Shuddh by Tata Salt. We had launched it about, I think, just about a quarter ago.
We've launched it in the state of Andhra, Telangana, and we've had significant learnings out there. While the product itself scores a win against all competitors, bar none, the catch is we've had learnings on the packaging and the cues on the packaging. We are right now working to do a sort of -- as we roll it out from this pilot per se, as we roll it out, we will be modifying the packaging, both the way it looks and the size, scale of the packaging so that it denotes a much more premium image. In the next probably 30 days, 60 days or so, we will be rolling it out because we're confident now that we've learned what the consumer reacts to, I think we've got the entire formula in place to make a success out of it.
And sir, lastly, if you could share, I know, I mean, these are uncertain times, especially on the international market on the currency. But would this pricing actions that you have taken up would help you to at least reach the double-digit EBIT margins, say, maybe Q4 or so? Is that a possibility? Or you would just wait and watch kind of a...
So just as a perspective, in the U.S. market, if I'm not mistaken, from about September of '21 onwards, we've taken about a 22% price increase already. And we thought that was good enough for us to negate any commodity/currency action. Now that's obviously not the case. So, we are doing one more round of pack price, packaging-led pricing, if I may put it that way. In the U.K. as well, we have taken a 7% price increase, which at that point of time, looked like it was good enough to get us through, but obviously not. So, we've announced a very, very significant double-digit price increase already in the market.
The only issue is that it takes -- there is roughly a 90-day notice period to trade there. And then, of course, there are games which the retailers play among themselves before the pricing lands. So, I would say you will see that pricing land firmly only in Q4 and intent is to make sure that both the businesses get back into double digits. But here is the thing between now and then, your guess is as good as mine as to how inflation plays out, how cost plays out and where the pound goes and where the dollar goes.
Okay. And last...
Sorry. Just another piece is -- the other piece is, we have also, given the fact that it is uncertain times, we have looked at our entire cost structure in the international piece. And we've got a full-fledged roadmap on cost, structural cost restructuring. We've already actioned part of it. There has been already -- you call it, insuring, offshoring, outsourcing, whatever. So, we've got an in-house offshore back office at Bangalore, where we've already started pulling work from the international markets. But there will be a Phase 2 at which we will look at all different other costs in the systems to figure out how we can make it into a much more leaner machine and to your point, delivering significant double-digit EBIT growth.
Okay. Sir, just one follow-up. Does this pricing action puts us any in -- on a disadvantageous position versus competition? Or this is generally the trend?
Everyone buys tea from Kenya. All tea in Kenya is priced in dollars. All the guys in UK sell it in pounds. So, I guess, all of us are in the same hole.
[Operator Instructions] The next question is from the line of Mihir Shah from Nomura.
Can you talk a bit more about the timelines and any indicative synergy benefits from the simplification exercise that we had called out last year on the international business in Tata Coffee? So that's my only question.
Yes. So there were 2 parts of the simplification. One was the India leg and one was the international leg. And they are also in a sense interdependent. On the India leg, we had applied for NCLT to demerge the extractions business and merge it into Tata Consumer and roll in the plantations business into a wholly-owned subsidiary of Tata Coffee. So both the companies had applied for NCLT. For Tata Consumer, which is NCLT at Calcutta, we've got the date of November 12, which is NCLT hearing. We're still awaiting the date from NCLT Bangalore for Tata Coffee, post which I think the whole thing -- I mean, your guess is as good as mine as to when that comes through. But presuming it comes through in the next 30 days or so, I would say, give it, I mean, 90, 120 days to be fully actionable. So it is in motion. It's just -- we're waiting for the requisite approvals.
On the international leg, there were 2 pieces, 2 significant pieces. Number one was we were swapping shares held by TEO, which is a Tata company from our UK parent holding company into India shares for which we had requested for approvals. We've got them, and we will be actioning that. So, we will be removing all minority holdings from our UK holding company through which we will start the simplification process. The only catch in the international simplification process, the big piece is the 8 O'clock coffee, for which we need the Tata Coffee NCLT to go through before actioning it. But as of now, everything is on track. It's just a matter of getting the proper approval so that we can press the triggers.
Got it. Ballpark understanding of it being EPS accretive of about 3% to 4% would be a fair understanding, sir?
Absolutely. I mean the whole objective is that there is a significant amount of cost and dividend and a tax optimization that is possible because of which it will be EPS accretive.
Moderator, we'll just go to the webcast now and take a couple of questions from there before returning to this. Okay?
Sure.
So Sunil, there is a question from [ Chanchal ]. He is asking, given the cash position in book and speed to market by acquiring good quality assets, any thought on the same? And second question is also on pulses sourcing. How far are we in that process?
So let me answer the second question on pulses sourcing. I think Chanchal, like I said, we have rejigged our entire system, including injecting new talent and we've seen very, very good movements, basis the actions that we've taken, but very early days. On top of that, we are right now building an entire digital engine in our tea procurement business, which we will be leveraging for other commodities, including pulses. So we feel good about where we are. It's just that we need to see a few quarters of consistency before we say we are good, right? So that's number one.
Cash position in books and good quality asset, Chanchal, if you have anything in mind, do let me know. I'm also on the lookout. The catch is, as I have consistently maintained, we will not be in a hurry for anything. We will be very, very focused on making sure the financial metrics and the strategic screens, both pass before we get it through. There are multiple discussions always ongoing at the consumer. In fact, in the early part of the integration, we had beefed up our digital teams, our R&D teams and our sales teams. We have of late boosted up our M&A and strategy teams as well. We look at multiple things at the same time, and there are ongoing discussions. But yes, I wouldn't put a timeline. I wouldn't put a target because we want to make sure we are creating value.
Okay. And the next question is from [ Saurav ]. He's asking among the growth categories, how do we create synergies and distribution marketing strategies, et cetera, given that the products are at 2 different ends of the spectrum? On one hand, we have deeply penetrated categories like pulses, spices, et cetera, but no brands. And on the other hand, we have RTE plant-based meat, NourishCo, Gluco Plus, et cetera, where market is at a nascent stage but very fragmented.
So let me put it this way. It's not that we'll get synergies in everything across all the categories that we play in. So ready-to-drink is a separate vertical in terms of whether it is manufacturing or it is distribution. It is distinctly different from the other categories that we play in, and therefore, we're building it separately. It's a completely asset-light model because it is co-manufacturers manufacturing at the back end and distributors manufacturing at the front end. The value we add is in terms of R&D and products, marketing and strategies. And so far doing very well. Like I said, we're right now growing at about 64%.
I think even calculating for the COVID lockdowns and the time lost for us to scale it up, we are still, I think, north of 50% CAGR. So it's in a very, very good place. All the other products, there is significant amount of synergies because the only thing is you have to dissect it, for example, whether it is plant-based meat or protein. I will not be selling it in every Kirana store and every outlet. So, there is immense amount of synergy in modern trade and e-commerce, also in D2C. So, that is where we are focusing. It's the same team which is handling it. And given the fact that it is modern trade and/or e-commerce, bandwidth is not an issue for the team to deal with.
At the front end, when it comes down to product distributed in Kirana stores, there is immense amount of synergy, for example, whether it is Sampann. RTE, also to an extent in what we call SAMT, stand-alone modern trade and higher-end grocery/Kirana stores. Given the fact that we are completely digitized on our distribution system, we have the ability to make sure we restrict distribution where we want it and open distribution where we want it. So that's the way we play it.
The only thing we've got to be mindful and we are right now running a few pilots in a few places. As our portfolio expands, we've got to make sure that the salesman doesn't become a bottleneck with too many products to sell. So, we are looking at how do we create extra bandwidth there, either through geographical segmentation or through portfolio segmentation and looking at split routes, split geographies, all those kind of things. But there are pilots running, this is which we'll take a call because we will grow our portfolio and we will try to leverage synergies. But we've got to make sure that we continue to keep the bandwidth going.
Okay. And the second question from him is why Sampann has a strong proposition of purity and is associated with not processed pulses? Does launch of RTE products, which are essentially processed food can impact the essence of Sampann as a brand?
You're absolutely right. So the whole -- this thing is it's Sarvagun Sampann and we will preserve the goodness. Now just as a perspective, it's a misnomer that RTE doesn't contain nutrition and is full of preservatives. Most of our SKUs do not have -- in RTE, do not have added preservatives, colors or flavors. They are good sources of protein and fiber. And Sampann is the endorser brand. It's not the main brand. Like I said, in India, it is Yumside, which is the brand. The reason it is -- like it is almost from the house of Sampann, so to speak, which gives us an easier entry into the consumer minds and therefore, the kitchens.
Okay. With that, we'll just quickly go back to the Q&A queue to see if there are any pending questions.
We'll take the next question from the line of [ Darshil Pandya ] from [ FinTrust Capital ].
First of all, congratulations on the number. You have been doing good. Sir, I have -- one of the questions was already answered regarding this Tata Sampann Yumside. So even I was a bit skeptical about how things will be because we have seen reviews, but I'll definitely try this new product, which the Tata has launched.
Second question was on the basis of this GoFit, which the company has introduced. So where do you see -- you see this penetrating high in the market in the next few quarters or years?
GoFit.
GoFit. So GoFit here is the thing. I mean, we have defined protein as a platform, which we'll focus on. We did launch Tata Simply Better, which is alternate meat and we will be expanding the portfolio on Tata Simply Better to more products, which are probably beyond protein as well, Simply Better products per se. And then we have launched the supplement range. We've made our first foray with GoFit. The idea of GoFit is to, I would say, I would use a phrase called launch and learn. We pulled out there in the market. It's positioned at women, which is a wide space. There is no other product which is positioned at women. It's got probiotics, which helps in easy digestion.
So very, very early days. I would reserve any judgment on where we want to take it, how far it can go, what is the expansion that is possible for some time before we see -- because remember, this is a completely new category for us. We are also learning. Once we have a firm handle, then we will see how to play this category. The reason we have got into it is because protein is a big trend globally and will become a big trend in India. While we missed the boat on many other categories, we want to make sure that we do have a -- not exactly, but a first-mover advantage in this category.
And sir, second question is on the exceptional item, which we have seen around INR 147 crores from the sale of land. Do you -- can you please give me some more light on that transaction or something because it's quite a -- one of the items where we don't see it more openly. So what is it, if you can please tell me?
So this is emanating from Tata Coffee. This was a disputed land around Hyderabad, which has been, A, in dispute. It emanates from a transaction which Tata Coffee did years back because -- and that has been under litigation for a long, long time. The more practical and value generation was from selling the land, which they've sold and they've recognized it. That's about it.
All right. And sir, the very last question. Do you have any other product pipeline, which maybe it could be chips, premium chips or biscuits or something you're looking at?
So, we have defined snacks as one of the platforms that we will have in mini-meals, breakfast and snacking. But I do not think, at least -- and I'm shooting off the cuff here. I do not think we're going to get into chips. We are not going to get into bhujia. We're not going to get into the Kurkure equivalent. We have to figure out our whole strategy on snacking to make sure that we are creating a space, which is not competitive or where we have a right to win, which has got decent margins. We have the ability to scale it. It's a category which is growing fast. It's work in process. We do not have an answer. But yes, snacking as occasions will continue to grow, and therefore, we wanted to play in it. I don't think we will be playing in it with the chips or bhujia.
Thank you very much. As there are no further questions from the participants, I would now like to hand the conference over to Ms. Nidhi for closing comments.
Yes. I would just like to thank, everyone, for taking the time on behalf of the management. And wish you all a great festive season ahead and see you all during the next call. Thank you.
Thank you. Ladies and gentlemen, on behalf of DAM Capital Advisors Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.