Tata Consumer Products Ltd
NSE:TATACONSUM
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Tata Consumer Products Ltd
Earnings Call Analysis
Q2-2024 Analysis
Tata Consumer Products Ltd
In a strong quarter, Tata Consumer Products Limited (TCPL) showcased a significant 11% top line growth, where the compounded annual growth rate (CAGR) impressively stood at 12% for the past four years. The Indian beverage segment, including tea, demonstrated an 8% rise in revenue with a modest 3% increase in volumes. Notably, the NourishCo segment witnessed a robust 25% growth with an impressive 44% surge in the first half of the year. With India Foods jumping by 16% in revenue and 6% in volume and Tata Sampann growing by a staggering 47%, the company firmly believes that its continued momentum in India Growth combined has displayed a remarkable 39% growth, leading to its increased contribution from 15% to 18% to the India business.
Internationally, TCPL enjoyed a 13% revenue growth, 8% of which was in constant currency. This performance helped contribute to a substantial 60% increase in EBIT (Earnings Before Interest and Taxes) within this segment. In tandem with this growth, the company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) surged by 30%, showcasing a margin expansion of 220 basis points. This expansion was primarily fueled by augmented profitability in International and Non-Branded segments, although the company did observe a marginal share loss in salt and tea.
TCPL exceeded its innovation targets, achieving 5.5% against the guided full-year expectation of 5%. The company's Sales and Distribution (S&D) journey reached new milestones, as it has now split routes in all towns with a population of over one million, and has established direct distributors in every town with more than 50,000 residents. The quarter also marked the strategic amalgamation of wholly-owned subsidiaries NourishCo, Tata Consumer Soulfull, and Tata Smartfoodz, with the parent entity, thereby anticipating back-end synergies and tax benefits.
TCPL's outreach has expanded impressively, with direct reach remaining strong at 1.5 million points. The company's Modern Trade continues to grow steadily, exceeding overall growth numbers in India, and e-commerce recorded a robust 33% growth. The business has powered up its branding, stabilizing its market share in tea and regaining momentum in salt share which reached a 12-month high of 38% in September. Simultaneously, the company actively ventured into new product categories like energy drinks, apple cider vinegar, snacking options, vermicelli, and even entered the dessert mixes market with its gulab jamun mix, revealing its commitment to continuous innovation and market penetration.
Financially, the company generated a revenue of INR 3,734 crores, an 11% increase, and an impressive 30% EBITDA growth, reaching INR 569 crores. The company's Profit Before Tax (PBT) saw a 36% uplift, sitting at INR 505 crores. Despite a reported 7% decrease in group net profit, largely due to a one-time gain in the previous year, the adjusted growth was 24%. TCPL has fortified its financial position with a strong cash reserve of INR 2,500 crores, showcasing its capability for sustained investments and growth prospects.
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Ladies and gentlemen, good day and welcome to Q2 FY '24 Earnings Conference Call of Tata Consumer Products Limited, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Manoj Menon from ICICI Securities. Thank you, and over to you.
Wonderful. Good morning, good afternoon, good evening to everyone who is there on the call today. At ICICI Securities, it's our absolute pleasure once again to host the results conference call of Tata Consumer Limited. Over to Nidhi from the management team for further proceedings. Thank you.
Thank you, Manoj, and thanks for hosting us. Welcome, everyone. As usual, I have in the room with me Mr. Sunil D'Souza, Managing Director and CEO; Mr. L. Krishna Kumar, Executive Director and Group CFO; and Mr. Ajit Krishna Kumar, Executive Director and Chief Operating Officer.
In terms of format, we will spend about 15 minutes where Sunil will give you a quick overview of our results and performance during the second quarter, and then we will open the floor for Q&A. I'd just like to draw your attention to the disclaimer statement which is visible on your screen. With that, over to you, Sunil.
Thanks, Nidhi. Before I start off the call, I just wanted to highlight that officially, we've announced LKK's retirement effective today. With that said, as we are in the process of inducting a successor, LKK will stay on with us to make sure the successor lands on his two feet and after that is in a stable position. So as of now, for all practical purposes, you can continue to treat LK as the go-to person for all things finance.
With that, I go to executive summary. We delivered a strong quarter with 11% top line growth, 10% in constant currency. The 4-year revenue CAGR is now 12% in Q2 FY '24. India Beverages grew 8% with tea volumes up 3%. NourishCo grew 25%. NourishCo first half is up 44%. India Foods up 16%, volumes up 6%. Tata Sampann was up 47%. International business came to the party big time this time, 13% revenue growth, 8% in constant currency with EBIT growth of 60%.
The continued momentum in India Growth combined growth was 39%, and they've moved from 15% to 18% contribution to India business during the quarter. EBITDA grew 30%. The margin expanded by 220 bps, primarily driven by improved profitability in International and Non-Branded. On a MAT basis, our salt and tea businesses saw a marginal share loss, and I'll come to the shares when we talk specifically on the slides.
Innovation is now 5.5%. While we have guided for a full year of 5%, this is the second quarter in a row that we've exceeded that. We've achieved a new milestones in our S&D journey. We are committed saying that we will have split routes in all 1 million plus towns, and substantially, in all 1 million plus towns, we do have it. On top of that, we have direct distributors now in all 50,000-plus towns. Just as a perspective, during that time there was a little bit of a blip and you would have seen some movements in the total numeric reach number, but now that the infrastructure is in place, now execution in these places will be the focus. And in addition, we will move beyond the 50,000 population to start expanding more into the rural spaces. We also announced the amalgamation of our wholly-owned subsidiaries, which is NourishCo, Tata Consumer Soulfull, and Tata Smartfoodz with the parent entity. We do expect to see synergies in terms of back-end and more in terms of direct and indirect tax synergies.
Business Snapshot. I talked about India Beverages, 3% volume, 8% revenue; India Foods, 6% volume, 16% revenue; U.S. Coffee was soft. Just as a perspective, the volume softness, when you look at it, we have already mentioned that it was to do with the pack price architecture where we've de-grammed packs to hit price points, and that's why you see volume negative 13%, revenue negative 7%. International Tea, 15% volume and 30% revenue, ex acquisitions minus 5% and plus 16%. Tata Coffee, while volume was soft, primarily driven by plantations, revenue was up 2%. And consolidated all-in 11% revenue growth at INR 3,734 crores.
Next slide. If I move to -- yes, so INR 3,734 crores, which is 11% growth on the top line. INR 569 crores, which is 30% growth on EBITDA. PBT up 36%, at INR 505 crores. Group net profit, negative 7%. I would just like to highlight that we had a onetime gain of INR 147 crores on sale of land in Tata Coffee last year, which was an exceptional item. So that is why this shows a negative. But if excluding exceptional items, the growth is 24% in group net profit, and we're sitting with INR 2,500 crores of cash. In the same quarter last year, it was about INR 2,000 crores.
Against the strategic priorities. I'll straight move into the distribution slide. We had committed 4 million by September '23. We are more or less there at -- it was 3.9 million, it has moved down to 3.8 million, as we actually rejigged below the lower cost strata, replacing sub-distributors in 50,000 towns with distributors. Like I said, we do believe right thing to do and it sets us up well for the future because now we will focus on building a super stockist and rural distributors/sub-distributor in cost strata below. We will come out with a specific target of which cost strata and how many distributors are we looking at very shortly.
Direct reach continues to be strong at 1.5 million. We've implemented the split and 50,000-plus distributors that we commented. Modern Trade continues strong growth, exceeding the overall India growth numbers, and e-commerce continues on a strong wicket with a 33% growth. India business, A&P continued to be high at 6.7%. We have powered up our brands. Now just wanted to make a statement on tea. The shares that you see out here are MAT. On a quarter-to-quarter, it's almost flat.
And just wanted to highlight that you normally see blips in market shares as tea prices come down. They are more or less stable right now. And we do believe, given both distribution expansion that we are doing, along with powering brands, we will get back the tea share quickly. Quarter-on-quarter, the tea share is stable.
Salt, it's a mathematical exercise, we were at the first of the curve last year when we started taking up price. Over the last 12 months, various other competitors have come up in price. So the whole value table has gone up, and therefore, you see the value share lost out here. But just as a perspective, now that we are cycling one full year, we see stability in prices. In September, we hit a 38% share, which is a 12-month high. And we do believe now that prices are stable, we will start getting back to our standard share gain trajectory. Just wanted to highlight that 3 years back, when we took over, this share was 30%, and we're now September -- for the month of September, we exited at 38%.
We continued the momentum on innovation. Pilot launch of energy product, sports drink. We've launched decoction, ready-to-pour decoction. Launches in value-added teas. GoFit is on expansion with apple cider vinegar. Soulfull, which is our play in breakfast, mini-meals and snacking. Having completed the breakfast portfolio, we are now starting to expand into snacking. This is the first of what I would say, many more to come. Simply Better cold pressed oils. We launched it on Amazon Prime Day, and it is off to a fantastic start online.
We've entered a significant category with vermicelli and off to a very good start, both on the top line as well as the margin front relatively in some fund terms. Walnuts and seeds was our expansion in dry fruits. We've rejigged our mixes and we're now playing in the dessert mixes with the gulab jamun mix, which again has started to do well. We had launched Himalayan Saffron last quarter at the very high end with a QR code, et cetera. Now we have entered the midrange play also with Tata Sampann Saffron.
Momentum continues in the engines of growth, growing 39%, now, moving from 15% to 18% contribution to the India business. We've reaffirmed our commitment to sustainability. And just as a perspective, it is not 2030 and 2040. We've put out very, very specific targets for FY '25, '26 on climate, circular economy and people and community.
In terms of business performance, India Packaged Beverages, MAT share, I talked about minus 95 bps, but on a quarter-to-quarter basis, it's stable. Volume growth of 3% and value now ahead of volume as our premiumization efforts continue to play out. Coffee incidentally grew 17% during the quarter.
India Foods. Salt, I talked about the mathematical market share of salt. Overall, value-added salts are 6.6% of our portfolio, continue to climb. Overall Foods growth of 6%, revenue growth of 16%. Sampann had a strong quarter at 47%. That said, I'll guide you back to what we have said. Our long-term aspiration is a 30% growth in Sampann. NourishCo, a strong quarter, 25% revenue growth and INR 172 crores of revenue. We remain on track for the aspirational target of INR 1,000 crores for the full quarter. Just as a perspective, for the first half, we would have grown 44% despite unfavorable weather.
Tata Coffee. Extractions grew 11% and the stellar performance here was Vietnam where we had a fantastic price mix realization, which contributed to the profitability. Revenue growth of plus 1%. Plantations was minus 11% as buyers sold off a bit when they see coffee prices coming off. Starbucks, we opened 22 net new stores, 24 minus 2 is the number. Now we are in 370 stores in 49 cities. And Starbucks grew 14%. The focus remains on accelerating store growth, so that we take full opportunity of the long-term out-of-home coffee consumption story in India.
International operations, U.K. on a very strong wicket with the entire rejigging of cost with the relaunch of Tetley in the most sustainable pack, putting A&P behind it, revenue growth of 13%. Black tea share of 19.5%. But what I'd like to point out is the fact that we have always mentioned that the opportunity is in Fruit & Herbals and Specialty. And we've been focusing on that with Good Earth and Tetley. And now Fruit & Herbal, in the month of September, we've got a 10% market share.
U.S., a little bit of work to do as coffee prices are coming off and promotional intensity starts heating up. We put in correction and actions late in the quarter, which should start reflecting in this quarter. But overall, more or less maintaining market share, but revenue is a bit soft.
Canada, the star in our portfolio, continues to deliver 8% revenue growth and 28% of overall market share.
In terms of financial performance, over to LK.
Thanks, Sunil. And good morning, everyone. As Sunil mentioned, it was a strong quarter. We grew 11% in top line, 10% in constant currency. India business grew by 11%. And within that, we had India Beverages growing by 8%, Foods by 16%, and overall, the growth portfolio grew by almost 40%. In terms of the International business, the growth was 8% flat to marginally positive if you take out the acquisition. But within that, U.K. saw good growth compared to the same period in the previous year. Non-Branded business grew 3%. In terms of EBITDA, we had a strong increase of 30% and with an improving EBITDA margin.
India business EBITDA grew proportionate to turnover. EBITDA margin at 15.7% was in line with the previous year. International business EBITDA growth was driven by pricing interventions and also savings from restructuring basis in different markets, but the major improvement was in the U.K. business. The increase in EBITDA for the Non-Branded primarily reflects higher prices of coffee, but also some amount of inflation coming down on freight and other logistics costs, which were high in the previous year because of supply constraints and such. For the half year, the Non-Branded is not very different in terms of color. Consolidated revenue grew by 12% and EBITDA grew by 24%.
Moving on to the actual study format. I just want to draw your attention to a few points. We talked about revenue and EBITDA. Talking about exceptional items, we have, in this quarter, a charge of INR 15 crores on restructuring costs. In the previous year, we had the impact of sale of property. So we had a significant exceptional income, which is not there. Hence we are seeing that the growth in PAT is lower at INR 359 crores versus INR 355 crores.
The group net profit after associates is also lower, because if you look at the format, you'll see the share of profit or loss from associates is lower than the same period in the previous year, mainly due to our Northeast India plantation, which had an adverse impact, both on account of crop and prices. The trend for the half year is similar, 12% top line growth. EBIT growth of 25%. PBT before exceptional is 29%, and lower growth of group net profit at 5%.
Moving on to the stand-alone and stand-alone really reflects our Tea business and the Foods business. We have 11% top line growth in the quarter and 17% improvement in PAT. Just to mention that this stand-alone also has some portions of our Non-Branded business, especially the tea extraction. There is also other income from investment and others, which is in the stand-alone. On a year-to-date basis, revenue from operations 11% up, PAT up by 20%.
Moving on to segment performance for the quarter. Revenue up 11%, we have talked about that. In terms of segment results, we are seeing a 7% change compared to a higher EBITDA number we talked about in the past. The reason for this being lower is because we wrote off some assets which were obsolete and were not being used. So there was some amount of onetime charge that we took. So you see the depreciation is slightly higher in this quarter. That's the reason for lower growth in the segment result compared to what you see as well in the presentation.
International business improvement reset is primarily because of U.K. To some extent, other markets also had marginal improvement, but U.K. and inclusion of Joyfull resulted in a 60% improvement in EBIT. Non-Branded improvement primarily reflects the higher prices, but there's also an element of sale of timber of INR 5 crores to INR 7 crores that is included in the results.
Segment revenue, 72% from India, 28% from International business. In terms of profitability, India business slightly higher at 78% versus 22% for International. But as we said, the outlook for International in the medium term is to keep improving the EBITDA margin, so that the difference is catching up.
In terms of the half year performance, no additional call outs. The proportion of revenue is 73% and 27%, and EBIT is 76% and 24%. That's it from our side. Over to Sunil.
Yes. So in terms of -- if I conclude, we've seen a stable demand trend in India and we remain cautiously optimistic and continuing our momentum. We see demand headwinds in our international markets even as we've delivered a competitive performance, and we remain confident that we can continue to deliver. In terms of the business, we again delivered a double-digit top line growth with EBITDA margin expansions.
The interventions that we put in for our India Tea business continue to yield results. This is the third consecutive quarter of volume-led growth. Salt, despite the price increases, we've seen volume growth and continued premiumization. And we do expect that now that we've got stable pricing and we've built out more infrastructure for distribution, we continue to drive volumes.
Growth businesses are on a very, very strong trajectory. JV Starbucks now has 370 stores across 49 cities. International business, we have taken structural interventions and pricing actions, which are now started to deliver margins. As I said, the U.S. is the only place where we've got to tweak in the short-term right now. And we've continued to -- and we've started to put money back into A&P to strengthen brands, so that we move from a push-based model to a pull-based model internationally.
On the NCLT approval, we're waiting for the final approvals to come through. The hearings are all through, and post obtaining those approvals, we expect to complete the merger of Tata Coffee business in this financial year.
With that, back to you Nidhi.
Thanks, Sunil. Moderator, we can go to the Q&A queue.
[Operator Instructions] We have our first question from the line of Abneesh Roy from Nuvama.
Congrats on very good sets of numbers. My first question is on your energy drink and sports drink. So INR 10 price point with a very different brand names, Say Never!. Wanted to understand, does this compete with the INR 20 price point energy drink of cola companies. Cola companies have seen spectacular success, but your pricing is half of that. So will this compete against that product? Is it largely similar, but smaller quantity?
And in terms of distribution, Cola companies have very strong distribution in this kind of a channel. How do you intend to compete? If you want to take it pan-India and big, how do you intend to compete in this?
So thanks, Abneesh. I'll go back to the fundamental premise of acquisition of NourishCo, which was that we had a good team and a good base infrastructure, and we needed geographical and portfolio expansion. We are in the process of geographical expansion with up to 44 plants now. And the portfolio, we're expanding. We've got juice & jelly. We've got jelly drinks. And now we're just starting to dip our toes exactly into what you said, the big emerging energy market.
Now just as a perspective, you're absolutely right. A, the cola companies are priced at, if I'm not mistaken, INR 20, in some cases INR 15 for a different serving size. Our whole logic is that of the cup format. The cup format does 2 things for us. A, it is a lower packaging cos, and b, because we have distributed manufacturing, our freight cost is low, and therefore, we are able -- and of course, it's a smaller serving site, and therefore, we are able to hit our price point. We've launched it in very limited geographies right now to test the concept to see if it works. We are quite confident that it will. And if it works, then we'll come out with a full-fledged plan on how to expand it across all the geographies. We're still not national. I would say we're about 75%, 80% of the country in terms of coverage, and that's where we will play. Where we have cup clients, we will come back with an exact plan on how to play. Early days, I would say, wait and watch.
Sure. My second question is on NourishCo and India Modern Trade. You have done well in most other parts of business. But when I see NourishCo, it seems much lower than the run rate which you are having. So 60% growth in Q1 dropping to 25%, which is a very big drop. Similarly, India Modern Trade first quarter growth was 22%. Q2, you've not given number, but my sense is around mid-single digit. So why is there such a drop? Is there any the impact of, say, the festival shifting in the Modern Trade. Is that the reason? But I don't see that impacting your e-commerce business. In fact, the e-commerce business in India has accelerated significantly in Q2 versus Q1. So if you could explain all these 3 aspects.
So Abneesh, let me answer your second question first. The reason, absolutely, as you pointed out, for Modern Trade is a bit of shift of festivals, because normally Modern Trade loads up about 15, 20 days prior to the festival dates, and there has been a shift of significance -- decent amount of shift this year in the festival dates, so we do expect this quarter, Modern Trade price to pick up quite well. I don't think there is anything else to it because markets are like we're maintaining market share across all the categories that we play in. E-commerce would have performed better for 2 reasons. A is there is not as much loading into the warehouses as Modern Trade does. And the second piece is that there is a significant amount of new launches that we are playing only online, and it is not even in Modern Trade and e-commerce. For example, GoFit, ACV, a lot of the dry fruits, et cetera, is primarily online. That would be the other factor. But the bigger factor would be exactly what you said is the shift of festival dates. So that's the answer to your question number two.
On question number one, it is primarily to do with weather. While we did push on despite inclement weather in the first quarter, we had much in the second quarter when we had unseasonal rains, et cetera, which continued beyond their normal dates. But like I said, we had said we are setting out an aspirational target of INR 1,000 crores for NourishCo for the full year. And right now, we remain committed to that.
Sure. My last quick question is on Tata Sampann. So most of your products in Sampann are in terms of more on health and more on fiber, et cetera. For example, your pulses, et cetera, clearly on that. Also seeds and nuts, all around health platform. When I see your latest launch of gulab jamun mix, it seems a bit different. So will it work? I understand the overall mother brand strategy, but having a dessert brand against a healthy pulses and healthy nuts and fruits, will it work?
So let me step back. So Abneesh, Tata Sampann is a pantry brand, right? Yes. And most of the categories that we have chosen to play in are on the healthy side. But if I look at the specific category of mixes, when you distill the entire opportunity out there in the mixes segment per se, you will see that there is a significant amount of opportunity out there in dessert mixes, which we were leaving it out on the table. So this is our first, again, if I say, launch-and-learn experiment of launching a gulab jamun mix into the trade. Also, this is a very, very seasonal product. So that's why we've launched it about 1.5 months before Diwali to test it out. If this works, then we will have to step back and look at our whole portfolio play and see what tweaks do we need to make.
[Operator Instructions] We'll take our next question from the line of Manoj Menon from ICICI Securities.
Sunil, just wanted a bit of a macro marketing perspective from you. So when I broadly look at the revenue performance, particularly volume performance of consumer staples, there is a very clear divergence between food companies and home and personal care. Well, there are certain, let's say, hypotheses, which I do have. Just wanted to pick your brain on, let's say, what are those drivers which you are witnessing? And how do you see this trajectory? Can it even accelerate food versus HPC?
So Manoj, I would not comment on broader macroeconomics and other companies. All I can say is we see a huge runway, whether it is in teas, whether it is in salt, whether it is in Sampann, Soulfull, everything. We remain focused on our categories. We remain on focus on what we can control. And what we can't, we make sure we've got adequate actions to make course corrections. In tea, we've always said that we see a long-term growth of 5%. We are slightly short of that. We're better than where we were a year ago where it was in a decline. We do see a little bit of stress on rural. And this is -- I mean you see every FMCG company commenting upon it. There we have seen an effect of inflation. We've seen an effect of erratic monsoons. We've seen an uptick on MGNREGA. But that said, again, we've seen a jump in two-wheeler sales as of late. So we remain cautiously optimistic out there.
On salt, again, we've guided for a mid-single-digit volume growth. And we are more or less inching towards that. That being faster coming towards that than the beverages space. Sampann, we've always said we'll grow 30%. Soulfull is a wide, wide space for us to play. We've moved from breakfast to snacking. And now, I think you'll see us expanding our term and growing far, far faster. So I do hear various chatter from various different people, but I would not comment on it without knowing the details yet.
Fair enough. Fair enough, sir. Secondly, on the distribution bit. Good work by the team up until now. Would you be able to give us some quantification of, let's say, the growth from the sales vector, which you would have got, let's say, in the last 3 to 5 years? And how do you see -- some quantification on how do you see this into the medium term also, in volume terms?
So in terms of where are we getting the growth from, Manoj, so actually speaking, while everyone is talking about rural stress, and we do think there is a little bit of that still left out there, for us, rural is an opportunity where we are expanding the distribution, and therefore, for us internally, rural growth and urban growth is working out to almost the same in percentage terms. That's number one.
Number two, where we had done split routes in urban areas with the hypothesis being that we will expand the bandwidth at the front end and therefore, be able to drive depth in the outlets rather than width, we are seeing that with significant -- with decent increase in lines and therefore, growth rates on split routes versus non-split. 50,000-plus towns, which was our depth -- which was our width expansion in rural -- semi-urban and rural. Early days, encouraging signs, but the reason why we are confident is because now we're going to step out beyond the 50,000-plus.
On tea volumes itself, Manoj, I think for the last, what, about 3 quarters, we've been seeing about 3% plus volume growth. We had seen a little bit of an upsurge on local regional brands. But now like I said, once tea prices are more or less stable, it boils down the branding and execution, and we remain confident that we should be able to equal if not exceed this number towards our midterm aspiration as we go forward.
Understood, sir. If I may, on the salt business, given the limited operating history which we have, just a question. Where will you put the category strength or, let's say, your brand strength, let's say, in terms of linkages to commodities? What I'm trying to understand is, let's say, if I look at businesses like soaps, for example, or Marico's Parachute, while these are brands, let's say, Lux is a brand, but there is a commodity linkage where there is a necessity to drop prices or, let's say, manage the profit pool appropriately as you lose market share. But let's say, in the salt business, in a scenario which may happen at some point in time of, let's say, the lower input cost, where will you put the price retention power or the profit pool actually can expand or not?
So Manoj, let me put it this way. Normally, price elasticity comes when there are substitutes. The good news is there is no substitute for salt. And therefore, it's got a moat of its own. It's not that people can eat less or use less of salt, unlike most of other categories which you mentioned, which includes various factors, number one. Number two, if you look at -- the cost of salt is primarily determined by 2 things. Number one is the cost of brine -- there are 3 things: cost of brine, cost of fuel, and logistics, right?
Now if you presume that cost of brine and logistics is equal for everyone, the only place where I am slightly up is cost of energy for conversion, because we use coal and more or less imported coal. So it's dollar-denominated and price of international coal, but that is not a very, very significant portion of my mix. And therefore, we will continue to be not insulated per se, but relatively lesser impacted with moment in commodities. That's number two.
Number three, with a 38% share, we have the strength to move the market. Like last year, when we look at the prices, historically, this company has never taken beyond INR 1, and in one shot, I think in 2 quick months, we moved out INR 5. The reason is because we were confident, a, of the brand; b, of the fact that what is hitting us is hitting everyone else; and c, the fact that we can execute as well, if not better than everyone else in the market. And that is why you will see, despite taking that steep price increase, we've more or less maintained market share. Yes, there have been small movements, but like I said, September is back to 38%, which is again a 12-month high and we expect to keep this trajectory going.
Super, super. I do remember last year noting that very few brands can actually have a 25%, 30% price growth and still have volume growth. Good luck, sir.
We have our next question from the line of Percy Panthaki from IIFL.
Congrats on a good set of numbers. My question is on the growth businesses, which are high teens percentage of your India business. So can you give a little more color on that as to what is the profitability of this business? Point one. Or rather, I should say, point one is, what is the breakup of that? If you can -- we don't want exact numbers, but some color on the breakup of this business between pulses, spices, NourishCo numbers you gave, but whatever else remains in this.
And also, we did a calculation last quarter where we said that since this business is probably not making profit right now, the rest of the portfolio actually has seen like a 200 basis point margin expansion versus 4 years ago, which is not very visible in the reported numbers. I think probably it might help if you also sort of highlight this to investors that the EBITDA margin expansion is actually much higher than what it seems if you adjust for the growth business.
So sorry for the long question, but to sum it up, do you think that as this business grows bigger, it will have a negative mix impact the overall sort of India business? Or do you think that the recovery in margin of these businesses itself should nullify the negative mix impact going ahead?
So Percy, Tata Consumer Products was built for growth. And when I say growth, we've always said double-digit top line growth, including EBITDA. We're absolutely conscious of the fact that we are behind many of our listed FMCG peers in terms of EBITDA margins. And therefore, you would see us continuing to deliver EBITDA gains. Now the mathematical formula, the way it works is, more or less we've built out the fixed cost. There is not going to be a significant increase. And therefore, whatever comes in, in terms of gross margin and, I would say, margin after promotions, at the top [indiscernible] to the bottom. So we manage the India business as a whole to make sure that we're delivering this. And therefore, you find different percentages across different businesses from time to time.
Now that said, the growth businesses are very high growth rates. And if I look at the 3 businesses that we classify today as growth, NourishCo, Smartfoodz -- sorry, Food businesses, NourishCo, Smartfoodz, Sampann, and Soulfull, I would say, broadly, NourishCo, Soulfull, and even Smartfoodz, broadly percentage margins are in the range of our India base business. Sampann would be a little bit behind probably because of the categories that we are playing. And this is a mix to manage for us to deliver the total India business P&L.
Yes, even within Sampann, if you slice and dice it, spices are probably -- spices should be higher than our base business. Today, we're still building it out. Mixes should be higher than our base business. Pulses would be slightly short of that. Now that's number one. Number two, sequentially over the last 3 years or so, we've improved the margins in all the Sampann categories by growing the top line significantly. Number two, as we're growing these businesses, we are very, very clear, we are playing for the future. It's not number for every quarter. And therefore, we are putting A&P far ahead of the curve in all these businesses. So NourishCo, for example, today, if I turn off the tap, I am profitable, but did I turn it off, no, because I think there is a substantial headroom for growth.
Similarly, with Soulfull. If we turn off the A&P tap, we are profitable. So we are not playing this game for the next 1 quarter or 1 year, we see a substantial runway for growth. Sampann in the entire pantry space is open. And today, actually speaking, we're heading towards close to INR 900 crores to INR 1,000 crores in Sampann for the full year. And we did this in roughly about, what, 3.5 years. Similarly, in NourishCo.
So I would not want to slice and dice it saying, should I put on the brakes on this business, so that my margins -- the game is to continue to deliver double-digit top line and improved EBITDA margins. So therefore, you will see EBITDA margins improving. This quarter, for example, compared to last quarter, we've improved 200 bps plus on last year same quarter, 200 bps plus of EBITDA margins while delivering growth. So that would remain the objective.
Very helpful. Sunil. Just a quick follow-up on this. On the tea business in India, when you look at your EBITDA margin, and I'm not asking for the figure, but just when you internally look at it, and compare it with, let's say, best-in-class tea margins across competitors in India, do you think you are more or less there? Or do you think you still have some catch-up to do according to you?
So Percy, I would say not probably the right way to look at it. And there's a specific reason why, right? I would look at margin after promotion expenses and not EBITDA, because in the EBITDA pieces, you load various measures of the P&L. And depending on your scale and leverage on your fixed costs, you will have a different output there. But the margin after promotion expenses, I would say they're in the ballpark. We're still not there, but they're in the ballpark of most of our big competitors. EBITDA percentage margins will be lower because of center of the P&L. Some of the larger players have got significant leverage on cost, which we don't. LK, do you want to add anything?
No, I just wanted to say that -- that's 1 point which I guess all of you are aware, that relative comparison of our portfolio versus our key competitor, I think there is scope for us to premiumize, and we are doing that pretty rapidly, and we have been making good progress in South. So I think for us, there is some scope for improvement from where we are. This is the only measure that I want to leave because there is greater opportunity for us to premiumize within certain markets where relative share is probably lower. So that's an upside for us.
Yes, so just to add to what LK said, our spend is mass to mass premium, whereas if you look at our key competitors, the strength is from mass premium to premium. So a slightly higher revenue, and therefore, even while percentage margin remains the same in absolute rupees, it is slightly higher, par, I would say, about 10% to 12% higher numeric distribution and therefore, ability to spread costs faster. And because of the larger portfolio, the central fixed costs, et cetera, the leverage that you'll get, which will translate into EBITDA percentage, we would be slightly behind.
That said, that is why the whole objective is to continue to grow rapidly while maintaining fixed cost, so that we also come into the same ballpark.
We have our next question from the line of Tejash Shah from Spark Capital.
So my first question is the extension of 1 of the previous participants' questions only that we have some very good execution on our numeric distribution expansion, both on direct and indirect, but when we see as an outsider, how should we see this lever? Is it a growth lever? Or is it just a necessary condition, but not a sufficient condition to kind of connect with the growth itself?
So Tejash, I would say it's a necessary, but not sufficient condition for 3 reasons, right? A, total universe, 8 million, 9 million outlets, you take your pick from those numbers you choose. If you look at tea as defined, it's available in about 6 million outlets plus for sales, and I'm talking about my total reach being about 4 million. So there is still a significant amount of -- and there will be about 2.8 million to 2.9 million only for tea. So there is still -- I mean, half the way is still to go. That's number two. Number three is, even if you reach that, the question is, how well are you executed in terms of your lines, in terms of your displays in the outlets, in terms of the right packs being available. That's a long way to go. So it is work in process. I like the word that you used, necessary, but not sufficient. We've got to 4 million. Now that we're in the 4 million, we've got to improve, but we've also got to go beyond the 4 million.
So that is why you'll see us doing these various different items of -- whether it is split routes, whether it is direct distributors up to 50,000; below 50,000 now starting to expand rural and sub-distributors. We're in the middle of rejigging our entire SFA and DMS. We will probably be, what I would say, best-in-class by exit for this year on the front-end DMS, SFA, which would then enable pinpointed execution by outlet.
Got it. Got it. And second question is on the acceptability curve of the NPD group when it moves across. So for example, you said that none of our launches are now focused on online. So let's say, when we do something on online and it works there, and when you transcend the channel, you move it to MT and then MT to GT, does the acceptability curve remain the same or it drops materially? And how it happens vice versa. Let's say, you started something with GT and the acceptability is very high on MT and online? How does that work?
So Tejash, let me say, I see more of launches online than going to MT and GT rather than vice versa. I don't think we would see that other way around. Why? Because it's very easy to launch online addressing a target consumer of one, right? I mean, I can talk to every single target consumer one-on-one, that's a; and b, I like to use this term to beat up my sales guys saying, when it is only the consumer and me which is online, that is when the power of the brand comes in. After that, it is your execution ability. So for example, in tea, we're the market leaders on e-comm. So therefore, the strong hypothesis that if we get our distribution in place, there's no reason we should not be closing the gap on market share, right?
But to your point, after the launch online, we do have to make tweaks. And let me give you the example of dry fruits. Dry fruits was up for a very, very strong launch online, where we started hitting about INR 50 crores to INR 70 crores annual run rate, if I may. That's the terminology which the online guys use, right, ARR. And then we said, okay, it's got legs to go offline. As we went offline, we figured out we've got to make 2 tweaks to our packaging.
It's very nice to sell a product simply with pictures and then deliver it at home. But when consumers actually shop offline, they want to look at the product and therefore, there has to be a see through window on the packaging. And the second thing is the package cannot lie flat, which is the way we designed the package, it has to be a standup pouch. So right now, we're in the middle of modifying the package. Because we did a trial in very limited markets in GT/MT and we could get in dry fruits. Because by now everyone knows Sampann dry fruits are available online. But unless we make this modification to our packaging, we can't get going. So you're right, we will launch products online. We will see the acceptability, and if we find enough legs, we will go offline, but as we go offline, I think we will have to make tweaks to our product packaging, pricing strategies.
We have our next question from the line of Mihir Shah from Nomura.
Congrats on a very good set of numbers. Sir, if you can talk about the timing and the synergy benefits from the amalgamation of NourishCo, Soulfull, and Smartfoodz, and kind of any quantification or ballpark quantification impact that we can see on margins on the back of that, sir?
So these companies are already consolidated, right? So basically, the larger objective is simplification. There will be some amount of rationalizing the support cost because of combining entities. But in business, not very significant benefits. There will be, however, some benefit on account of GST, more cash, little bit P&L, because for us we have an inverted duty structure. That means our input costs are higher than the output GST, whereas for the other companies, it's reverse. So we'll have some cash flow and a little bit of P&L benefit, not significant.
In addition, because our carryforward loss will be able to absorb some of the losses of these companies, which will give us a benefit on the tax line. Again, it will be -- in the overall numbers of all things put together, would be in the range between INR 50 crores to INR 100 crores, somewhere in between, all things considered, some of it cash flow, some of it P&L.
Got it. So my second question is on margins. When we see the international margins on a sequential basis, they appear to be down, while on a Y-o-Y basis, there's expansion. So how should we think about international margins from here on? Was it seasonality?
Second subpart is on the India margins again. They appear to be lower largely. Is it a function of higher ad spends? Or anything else would be pulling down India margins a tad bit. And lastly, on the Non-Branded margins, it appears to be higher than the Branded ones. If you can share how should we think about that as well?
So I'll start with the Non-Branded margins first. Non-Branded margins is primarily a factor of coffee prices and great performance by our Vietnam business on the price mix. I mean, there's no capacity changes. It is just that we played the right game on the price -- customer/price mix out of Vietnam, and that's why the margins look better. I think they will continue to be in a decent range going forward because the focus on making sure that we derive value out of all our investments has come in. That's number one.
Number two, on the international piece, or the India piece, per se, you have to remember 2 things. We have seasonality in our businesses, especially for tea and coffee, more tea than coffee. For international, I would urge you to look at year-on-year and not quarter-on-quarter, because there will be changes that we will do especially on A&P, et cetera. This quarter, we have spent higher, and why have we spent higher? Because we rejigged that entire packaging with our investments into the existing factory. We came out with a more sustainable Tetley pack. We took some time to get it into the trade. We took pricing to make sure it has stabilized. And after it has stabilized, now we have put A&P behind it.
Apart from that, we're expanding distribution, which as you realize, in international market, does require listing fees, et cetera. Our Good Earth, for example, which we were only piloting in Sainsbury's, now we have decided to take it across and we are now entering multiple geographies. We've launched Joyfull in Tesco. There's initial activation fees, et cetera. So therefore, I would urge you to look at year-on-year and not quarter-to-quarter. That's number one.
In the India business, we do not look at it, again, similarly on quarter-to-quarter, because the tea business in India, you do realize, is highly seasonal. The North kicks in, in Q3, more in Q4, and tea prices are dramatically different on what you buy in Q1 versus Q4. So this will go up and down. The balance businesses will more or less remain steady. There will be a little bit of cost movement here and there. As, for example, we've invested ahead of the curve on sales and distribution, in splitting them out and putting the distributors in all 50,000-plus towns, which, in my mind, is right thing to do, because if not watching quarter-to-quarter, but as you build out the distribution system for the long run, this is the right thing to do.
We have our next question from the line of Arnab Mitra from Goldman Sachs.
My first question was on the Sampann. 47% growth seems to have stepped up and also higher than your normal 30% range. So is there a significant pricing step-up due to underlying commodity here? And also, if you could help us understand how much of the volume growth is being driven by incremental distribution and addition of new segments outside the pulses. If you could just give us some flavor on both of those other than pricing.
So let me answer your second question first. The whole premise of doing split routes in the 1 million-plus towns was the fact that we thought there was a bandwidth release which was needed at the front end. And if we did that, we would get growth. So whether it is in beverages or it is in foods, we are seeing incremental growth in the split routes rather than the non-split routes. So that's number one.
And number two, Sampann growth, that is why we have constantly guided for a 30% growth in the medium term. This quarter, I think we've delivered beyond that on the base business, as well as there is some inflation effect, especially in the areas of pulses, et cetera. But while we will continue to push the needle to the maximum, longer term, we do stay committed to the 30% growth for Sampann.
And is there a significant or a significantly increasing contribution from the newer segments like dry fruits and others? Or they are still very small in the mix in Sampann?
So right now they are small, because the big pieces in Sampann, if I look at it, it is pulses, besan, spices, and then we've got all the other new categories. But do realize that the new categories have just got launched probably in the last 12, 18, 24 months per se, and it takes time to build up. Yes. But whichever category we are entering, we're confident that, a, the categories are large because -- let me put it this way, the expansion is not a mindless expansion. It is a road map drawn out about 2 years back of which categories we should enter and what size we will get to, a; and the reason why we got into those categories is specifically because we've got a specific target, we've got ability to create a difference. There is a trust deficit in that category, and therefore, we'll be able to get a decent market share.
We have our next question from the line of Sheela Rathi from Morgan Stanley.
So my first question was again with respect to the growth businesses. So if I see from F '22 to F '24, we have almost doubled the share of growth businesses from 10% to 18% now. So Sunil, should we see a similar trajectory to play out, say, in the next 2 years that the share of these businesses could be circa 40% or, say, 50% in the next 3 years?
So fundamentally, we've said, Tata Consumer will deliver double-digit growth and EBITDA ahead of that double-digit growth, right? So if I peel back -- if I take my base categories of tea and salt, we've always said mid-single-digit volume and a few basis points on that of price, which will not get me to the double-digit growth. And therefore, the growth businesses have to be delivering substantially more than the base businesses.
All I can say is, I think we've made our aspirations, for this year at least, very clear with Sampann INR 900 crores to INR 1,000 crores; for NourishCo, we've already said the aspirational target for this year is INR 1,000 crores and we do seem to be on track to deliver that. Soulfull is on a very strong trajectory. We are moving from now breakfast into the largest snacking occasions, which should deliver us more. So yes, the short answer to your question is, I think you will see substantially faster growth in the growth businesses compared to our base business.
Sure. And the second part to the same question is, how should we think about the growth businesses in terms of, say, you talked about tea, we're more under mass and mass premium side -- mid-premium side. How would you categorize your growth businesses? Will it be mid-premium or premium? Or will there be a share of mass in this growth business also, because we are also doing pulses?
So Sheela, I would split the businesses and talk about it. So if I talk about Soulfull, I would say it is mass premium to premium. If I talk about NourishCo, it is I would say 90% mass and 10% premium, because we do have Himalayan out there. We've launched Himalayan Saffron. We have launched ready-to-drink coffee, which is again a premium this thing, but as a percentage of the mix, it would be relatively smaller.
Sampann largely would be a mass. But again, I would put a fine rider out there. In whichever category we play, we do command a premium on the base portfolio. For example, our pulses would be roughly a 10% to 15% premium over every regional competitor, if I may. Similarly, our spices would be benchmarked to the national players and more or less in that ballpark on the pricing. So it depends -- strategy is where we have defined. And even within that category, it depends on who is the benchmark and what are we going for? The big player would be Sampann, the big player would be the NourishCo mass. These would be probably, like I said, Sampann would be a 10% to 15%, if you take pulses; NourishCo would be in the mass pricing range.
We have our next question from the line of Sumant -- sorry, ma'am. Go ahead, please.
Yes. We will just go to the webcast for a question, and then we can come back, if that's okay? Yes. So Sunil, there is a question from Saurabh [indiscernible]. He is asking, for Sampann, which started with pulses, besan, et cetera, incrementally, you seem to be moving towards ready-to-cook products like vermicelli, tea mixes, et cetera, and high value trust deficit categories like dry fruits, saffron. What is the strategy moving towards higher-margin products given the distribution and brand awareness is being established over the last few years. Also on saffron, we launched one in Sampann as well Himalayan. Is there a change in strategy or both the products can coexist at premium and super premium?
So let me put it this way. Like I mentioned earlier, it is not that we're thinking on our feet. This is a road map drawn out on which categories we are going to enter. We drew it up about 24 months back. Every category was defined in size of category, margins, right to succeed. Do we have the differentiation in -- ability to differentiate the product itself. Is it trust deficit? Because the Tata brand name does magic in trust deficit categories.
So all the launches that you see are the result of that road map, which is drawn. There would be products which would be high margin. Each of these categories has a role to play in our portfolio. There would be some which we'll drive for volume. There's some which we'll drive for margin. And of course, there will be some which we'll drive for image. So there is a road map and we are following my road map.
The answer to the saffron question is, yes, we did launch Saffron under Himalayan. This is saffron from Kashmir. It is accompanied -- every single pack is accompanied by a QR code, which gives you the authenticity of the saffron which was sourced, but that is at the very, very high end. Sampann is more or less, as I just mentioned, is a mass premium sort of brand. And therefore, we do think saffron, given that it is a high trust deficit category, high-margin, high-value category, we can make a play in that, and that's why we've launched Sampann out there. We do think both the brands can play in the same space over a period of time.
Thank you. Moderator, we can go back to the Q&A queue please. And just take one last question perhaps given the time.
Sure ma'am. We have our last question from the line of Sumant Kumar from Motilal Oswal.
Sir, can you talk about NourishCo's channel expansion and key state expansion we have recently done?
NourishCo, as I said, geographical and portfolio expansion. In geographical expansion, we've had about 44 plants, if I'm not mistaken. Right now, we cover about 650,000 outlets. Just as a perspective, the large players, I would say, between 4 to 5 million easily. Therefore, while we have put up the geographical footprint in terms of manufacturing, we've still got a long way to go in terms of distribution and that remains the opportunity. As we build out our distribution, adding to the portfolio and strengthening our depth in the outlets is the other opportunity and that's why you would see us testing out energy drinks or sports drinks.
In the food category, we have seen our product launches strategy is majorly focused towards premium products. So do we have a strategy to launch or planning to launch to mid to mass segment also going forward?
So Sumant, I would launch last products where I can make money. As simple as that, right? I would be very happy to launch high volume and high margin products, but I would struggle to find them. So like I said, we've looked at the entire food and beverage space, looked at where are the spaces where we can create meaningful scale and make money there. And that is the play that you are seeing play out.
I would now like to hand the conference over to Ms. Nidhi Verma for closing comments. Over to you.
Thank you, everyone, for joining us, and thank you, ICICI Securities for hosting us. In case there are further pending questions, you can reach out to us. Our contact details are mentioned in the investor deck. Thank you.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.