Tata Consumer Products Ltd
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Tata Consumer Products Ltd
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Ladies and gentlemen, good day, and welcome to the Tata Consumer Products Limited Results Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities Limited. Thank you, and over to you, sir.
Thanks, Farzan. On behalf of ICICI Securities, we welcome you all to Q4 FY '22 and FY '22 results conference call of Tata Consumer Products Limited. Now I hand over the call to Ms. Nidhi Verma, Head of Investor Relations and Corporate Communications. Thanks, and over to you, Nitin.
Thanks, Aniruddha, and welcome, everyone. I hope you had the time to go through our results that we announced last evening. For today's call, I'm joined by Sunil D'Souza, Managing Director and CEO; L. Krishna Kumar, Executive Director and Group CFO; and Ajit Krishna Kumar, COO. So what we will do is we will spend about 15 minutes or so walking you through some of the key highlights of the quarter and the year, and then we'll spend about 45 minutes to answer your questions.
So without further ado, over to you, Sunil.
Thanks, Nidhi. I'll go straight to Slide #6, which is the indicative summary. During the quarter, our consolidated revenue growth fixed like-for-like full year, therefore, came in at a 9% net of all the exits that we have done. On a 2-year CAGR basis, this translates to a 15% revenue growth like-for-like business. EBITDA for the quarter was up 45%, bringing the full year to 11%. On a 2-year CAGR, it is up by 16%. The India business for the year grew by 13%, with 3% volume and 10% revenue for India Beverages, 8% volume, 19% revenue for India Foods.
International grew by 1%, cycling an elevated base where the last year grown by 12%. Now the critical thing is with the tea inflation is tapering off, India Beverage margins saw significant improvement. Just as a perspective, margins moved by close to 500 basis points for the quarter-on-quarter versus same quarter of last year. Now we invested a significant amount of that into the new businesses and still expanded the consolidated EBITDA, which was up by nearly 400 basis points, despite significant inflation in the food business and despite a 29% increase in A&P for the India business.
With that said, I will just pause you and I'd walk you through the details later, but India Foods business is 2 parts: one is salt, and one is on the growth businesses. On the third, we maintained margins and driven the growth in the new businesses. Overall, our growth businesses are up by 52% for the year. We had firm free cash flow conversion. FCF to EBITDA came in at 100%. Market share was up. India Beverage is up by 100 basis points. India Foods up by 400.
And we continue to make progress against our strategic priorities. We acquired Tata SmartFoodz, strengthened our S&D infrastructure, tripled our innovation from where we started to 3-years back, invested in new drivers of growth and outplayed with the Tata Coffee on international restructuring, a new global simplification plan to drive efficiencies and significant synergies.
Next slide. Next, we go to Slide 8. Yes. If I talk about Q4 2022, India Beverages 3% volume, negative 1% revenue as prices became normalized. India Foods, like I said, there are 2 parts of the story. Salt had steady margin. Little bit of pressure. But overall, for the year, we grew 8%, but for the quarter, it was a bit soft as we took pricing, but Sampann has continued to grow, and revenue up by 19%. U.S. Coffee volume up 3%. International Tea, volume up by overall INR 3,175 crores of revenue.
Next page. For the full year, beverages volume up by 3%, revenue up 10%. India Foods volume up 8%, revenue up 19%. U.S. coffee negative on volume because in the early part of the year, international overall, we were cycling the pantry loading of COVID. Since if you see the International Tea negative 3%, but now the volumes are starting to come back. Tata Coffee including Vietnam full year, 3% volume, 11% revenue and overall INR 12,425 crores of revenue.
In terms of Q4, revenue growth of 6% like-for-like, EBITDA growth is 45%, PBT of 54%, group net profit 222% and before exceptional 89%. And now we're sitting with INR 2,486 crores of cash, which incidentally, despite the investment in Tata SmartFoodz, the recapitalization of APPL, investment into taking control of the TRIL JV and Starbucks investments is still higher than where we were at last year.
Next slide. On a full year basis, revenue up 7% at INR 12,425 crores, EBITDA up 11%, PBT up 12%. So you will see a perfect flow-through from revenue down to PBT. Group net profit up by 9% and before exception is up by 12%. EPS up by 9% year-on-year.
If I talk of the strategic priorities, the 6 pillars that we have strengthen and accelerating core, driving digital and innovation, unlocking costs and synergies, creating a future ready organization, new opportunities and embedding sustainability. And we made progress against all of them.
We have made a commitment of 1.3 million outlets by March. We are out there. Going forward, by next year, we're saying 1.5 million because now the focus is on rest of our current rural and therefore, wholesale and while they're covering a brand expected 2.5-plus multiplier to get us to 4 million outlets, which we have committed by September of 2023. We're continuing to raise numeric reach. If you take the average for the year, beverage is up by 18%, salt by 15. We are completely digitized in our chain. And apart from appointing distributors, now we are focused on rural and semi urban because that is where the numeric opportunity for us lies.
Next slide. Great progress in alternate channels. Modern trade is now up 30% year-on-year, crossing INR 1,000 crores. And e-commerce, we are the market leader. And the good news is, despite COVID waning and consumers going back to the old kinds of shopping, we are still 7.3% e-commerce as a percentage of sale.
Next slide. The up A&P, we spent 22% higher this year on A&P in our India business versus last year, focus on the premium brands of Tata Tea Premium, focus on the south with Chakra as well as coffee, which has paid dividends with coffee growing 44% and tea overall 100 basis point share increase.
Next slide. In foods, salt market share is up by 400 basis points focused on premium salt, which has given us result and you'll see later, we grew by 26% there. Tata Soulfull, once we have focused on the No Maida Choco and the affordable pack is off to a fantastic start. We have launched solar salt, Tata Shudh in the south to gain market share out there. And in our stronghold in north and the east, we are seeing some localized top-up, so we are going on a consumer education to show them that every salt is not Tata Salt.
Next slide. Premiumization starting to show results. Coffee -- sorry, Sampann up by 28%, value added salt up 26%, Tata Coffee up by 45%, and our new launches to expand our premium brands like Tata Tea Gold Care is now 4.5% of Tata Tea Gold.
Next slide. I won't break this slide. The overall 2-year CAGR of 19% in the beverages, 18% in food, international up by 6%. So a significant improvement over the last 2 years.
Next slide. Innovation continues to be on a role. They started off, I think by -- with 0.9% as a percentage of sales. We've exited the year at 2.7%, which is significant improvement.
Lot of work in the last 2 years on creating an agile and efficient supply chain. We have roughly 11,000 drop off points service to 38 centers across India. Integration has yielded great results. We've got more than a 25% reduction in secondary freight because of integrating all our businesses on logistics, completely digitized, back-end as well as supply chain, focus on sustainability with 24% of our energy for the supply chain coming out of renewables. And we have a rinse and repeat model now with integration. And we've integrated 2, Soulfull as well as Tata SmartFoodz, within 3 months of transaction close.
Next slide. We've announced our plan for Tata Coffee merger as well as simplification of the international business. Next slide, which will yield operational efficiencies for management, legal and administrative costs, faster decision-making and execution, taking out the minorities and creating a single listed entity, capturing the full value of the group, creating focused business verticals for extraction and a dedicated plantation vertical and unlocking significant potential synergies going forward.
Next slide. We are en route to becoming a large FMCG company. So our new engines of growth are firing. NourishCo, Sampann, Tata Soulfull and Tata Q has shown a 52% revenue growth for FY '22.
Next slide. Inorganic acquisitions making progress. 100-day integration, rebranding of Soulfull to Tata Soulfull, collaborating with the outside world with IIMR for developing new products. And as I said, that INR 10 No Maida Choco is off to what I would term as a rocket start. NourishCo, we've broken even on Himalayan the first time ever since we acquired the brand. Great progress once we've rebranded Tata Water Plus to Tata Copper, growing more than 3x in FY '22. Distribution is up by 80%, which should yield us results now. When we see the first summer -- full summer for NourishCo under TCPL. Expanded geography, which again bear results starting this year. We've expanded capacity already for growth lines up by 50% and driving innovation, which is up to 10% of sales.
Focused on sustainability, whether it is with the pledge-friendly products in the U.S., Tata Coffee winning awards and health safety and -- health and safety, Tata Tea focusing on social awareness for water and driving sustainability at Starbucks.
Next slide. Just a quick snapshot on the different businesses. If I just go to Slide #31. India business, 3% -- India beverages 3% volume, 6% revenue, 100% -- 100 bps market share gain. The big news here is EBIT margin is up by 400 bps year-on-year in FY '22. For the quarter alone, gross margin was up by 1,500 basis points. Next slide. Sorry. Just a point. India revenue grew by 6%, lapping a 32% growth in FY '21. And just for perspective for Q4, we were lapping a -- almost a 55%, 60% growth, and we still delivered a decent performance.
Next slide. India Foods 8% volume, 19% revenue. More importantly, a 400 bps market share gain. We are now touching the 38% share for total salt. EBIT margin did decline. But here, again, I would emphasize there is 2 parts of this business. One is salt, where we are maintaining margin. And the second piece is our growth businesses where we're investing for growth.
Next slide. NourishCo, 86% revenue, touching INR 350 crores in revenue, significant growth. And more importantly, I think we're well geared for driving growth for this year.
Next slide. Tata Coffee. Plantations revenue growth was soft, negative 3%, revenue growth was 11%. There could be a point where everyone says why was the volume growth low in this quarter. Just in perspective, Tata Coffee, we've been seeing significant shipping issues and therefore, you would have seen a bump in Q3 as we made sure that we did not hold any inventory in any of the plants and shipped out volume as and when it happened. But despite that FY '22 overall 19% revenue growth.
Next slide. Tata Starbucks. This is probably the second most normalized quarter that we've seen despite the pickup of Omicron in the beginning of the quarter. But now we are in 26 cities to 68 stores. 96% of our stores are reopened. The only ones which are not are the ones either in office complexes or in IT parks. Good news is 18% same-store sales growth versus 3 COVID period, and we are seeing great traction and remain very confident about this business going forward. We did open 23 stores for Starbucks in a single quarter, which was a record, bringing the whole year to a 50 stores. That just provides a base of what the team can execute.
International businesses. U.K. We maintained -- more or less maintained our share in everyday black at a 19-plus. Teapigs, which is a focus for growth, up by 7% for FY '22. By overall revenue growth, as I mentioned, was slightly high of COVID was down by negative 2%. The U.S. coffee bags share of 4.3%. Flat coffee growth despite significant -- taking significant pricing. So there was a fine balance between margin, volume and revenue out here. Tea growth negative 8%, again cycling COVID out last year. Canada maintaining market share at a 27%, 28%. Specialty has dipped significantly and, therefore, negative 9%. And they also cycled a high COVID peak and negative 7% revenue growth.
Financial performance. LK, very quickly.
Thanks, Sunil, and Good morning, everyone. So for on the stand-alone basis, we grew revenue for the quarter by 5%, and this was driven both by volume growth in the tea business as well as some pricing in the salt. In terms of EBITDA, we saw 102% growth, largely a function of recovery of key margins to a normalized level, coupled with some investment behind the growth initiatives. Moving on to the consolidated performance. The increase was 5%, 6% on a constant basis, driven by a similar rate of growth in all businesses. In terms of margin, the growth was higher at 45% driven largely by the improvement in margins in the India business. In the international business also, we saw slightly improved margins because of a strong performance in the last quarter by the coffee business and better lower weight of A&P and other expenses. Non-branded business, slightly lower margins impacted by lower realization in the tea plantations.
On a standalone basis, the financials for the quarter. Standalone reflects basically the India Beverages, India Foods and a little bit of exports into the overseas markets. We have seen a growth rate of 5% and improved margin. An improved margin is function of 2 things. We talked about the improving operating margins in tea. But also, if you look at the results, you would see there's a high investment behind brands. So this growth in margins is notwithstanding a significant increase in the A&P spend. PAT higher at 152%, reflecting largely the improved operating performance but also a lower weight of exceptional items. For the full year, we grew 11% with a PAT growth of 43%.
On the consolidated basis, we saw revenues up by 5% for the quarter, a strong margin improvement of 4% driven by the India business as well as improving margins in the international business. Exceptional items were lower. PAT at INR 289 crore versus INR 133 crores and group net profit, INR 239 crore versus INR 74 crores. I just want to make one comment on the share of profit and JV and associates. You will see that the number is flat for the full year, but slightly lower for the quarter. Reflects that there are 2 significant parts to this. One is the Tata Starbucks business, and the second is the plantation businesses that we have. Tata Starbucks had an improved performance relative to the previous year, but the plantation businesses were impacted by lower crop and lower tea prices. So this is an impact of both.
And the other point I want to call out because some analysts have still been asking questions that when we have the plantation interest in North India, we need to remember that North India plantations don't have crop for most of last quarter. So the loss in plantations tends to be higher in the last quarter. That's a phenomenon. Some analysts have not fully considered to it. So I thought I'll make a mention of it.
Moving on to segmental results. And we have changed the segmental presentation to talk of -- so we have presented on a like-to-like basis here. We have changed the presentation to India and the International business. The reason being we adhered to it in the last analyst call that we are managing the India business on an integrated basis, and we often allocate capital between businesses and subgroups of businesses. But equally important is that the organization structure is a single structure with a common sales supply and other functions. So it's only natural that we combine the businesses. We will continue to give revenue and appropriate margin guidance going forward.
So if you look at the profile, 69% of the revenues come from the India business and 31% from International businesses, more or less a similar profile in terms of the segment results. With the International business, improving profitability over the last few quarters and few years. So we are happy with the performance overall on the margin improvement in the International business. India business, the margins are a reflection of improved performance in the tea business, but also higher investment behind some of the growth initiatives, which, over the medium term will also deliver improved margins. So overall, as a company, our guidance still continues to be improving margins in the medium term.
Yes. And just to give you a summary of a conclude and what we're seeing going forward. The good news is the recovery following the third wave has been swift, but the geopolitical situation is evolving and exaggerating inflationary pressures. The good news for us is the 3 big commodities for us, coffee, tea and salt, we've seen the hikes in the past. And hopefully, they are range bound right now. We are not too exposed to the new emerging inflation because of the geopolitical situation in wheat, oil, palm oil and sunflower oil, for example. But that said, overall inflation and its impact on consumer behavior is going to be a key monitorable.
In the international space, again, we have been taking rapid price increases in line with the inflation that we have seen. But in-home consumption is also tapering off as well as the impact of broad-based inflation needs to be monitored and we need to be agile in moving pricing around. In terms of business, we think we've delivered competitive growth in our core businesses. We've gained 100% tea, 400% salt, and we aim to continue that going forward. India Packaged Beverages has seen a return to normalized margins. In terms of growth, we are cautiously optimistic, given the macro environment. Just as a perspective for January and March, Nielsen does report total of 5% volume growth coming back in India, which is good news, and we'll continue to focus on execution to drive growth.
For the year, the food business has seen good volume growth, both salt and Sampann. But this coming quarter, we are lapping a high quarter, and therefore, we need to be mindful about that. The cost pressures, however, will continue for a while, and we've got to be agile moving around. In out of home businesses, both Starbucks and NourishCo has delivered a fantastic performance despite the 2 waves of the pandemic. Given that we are seeing this pandemic slowly receding, hopefully. Therefore, we expect continued momentum on businesses if there are no new surprises.
Our new businesses of Soulfull, TSFL are on track, and we expect to drive growth. TSFL, we could expect to see significant momentum end of Q2, early Q3 as the export Indian ramps up. In the international business, the focus will be on executing against plans, especially 3-brand strategy and gaining share in fruit & herbal and specialty. And like I said, we will be taking pricing actions as appropriate. Given the inflation and investment required for some of the new businesses, we will continue to optimize margins at the consolidated level, balancing margin, market share and volume momentum.
With that, I hand you back to Nidhi.
Thank you. Thank you, Sunil. So moderator, we can go back to the Q&A queue now to take some questions.
[Operator Instructions] First question is from the line of Abneesh Roy from Edelweiss.
My first question is on e-commerce market share and tea. So almost 41.9% market share, which is almost double of your national market share. So my questions here are which e-commerce platform this data is based on and which is the agency, which is doing it? And is it possible to replicate this kind of a success in your other categories? And is BigBasket acquisition by the group also already helping in a significant manner here? And what really brings this kind of a gain in market share? I just checked on the pricing bid. I did see that your pricing is a bit lower than the other large players. So apart from pricing and say, buying the banners and marketing, what has really bring the market share?
So Abneesh, let me respond to you on the pricing question. I think you will see pricing go up and down in the e-commerce space in line with -- I think right now, everyone has got a summer sale going, for example. I mean, so I think we are running a program around that. But you will see pluses and minuses I think on the time, so number one. Number 2, is the high market share in e-commerce only points to the strength of the brand that we have. And assuming that this brand is available at all places, the kind of market share that we could hope to have in the general market. So that just points out to the more important making sure our distribution ramps up. So I would read it that way.
Number 3, it is the overall market share. I think it covers Amazon and a few other platforms. And it is not only limited to BigBasket. So this is not a one practicing. And if I'm not mistaken, again, I will qualify that, if I'm not mistaken, and Nidhi will confirm this to you. It is -- this is syndicated data coming out from the e-commerce [ industry ]. But again, just to highlight, this just shows the strength of our brand and the ability to gain market share if we are evenly distributed. And that is the big focus. So even if I take a offline number, Abneesh, I am about 10% behind on numeric versus my biggest competitor and 10% behind on market share. So just by equating distribution, I could get too close to leadership, and that is -- that will continue to remain the focus.
Yes. One follow-up on tea business. This is more in terms of raw material for FY '23. What is your take, given Russia, a large importer, that seems to be a bit difficult. And -- but on the other hand, Sri Lanka, which is a large exporter, it is also not able to export. So are these 2 canceling each other, so you don't see a big inflation for India tea raw material FY '23?
So I'll just give you a slight bit of color on that one. So in FY '21, the tea price had spiked up because of the lockdowns and therefore, the inability to harvest, especially the first and second flushes. FY '22, we thought it would normalize, but then there were droughts in Assam in the months of May and November. And therefore, the shortage on crops and that kept the prices high. But that said, the pricing came down significantly from where it was in the same period a year ago.
Right now, it is operating broadly range bound. So that is number one. It all depends -- I mean, it broadly depends on the rainfall and the crop output going forward. Right now, if you believe IMD being -- I mean, a good forecaster of 98%, 99% of long-term rainfall, we should see a decent monsoon and therefore a decent crop. And therefore, pricing should be range bound, if not with a slight downward bias. That's number one.
Number 2, to answer your question on Russia and Sri Lanka. Both the places, remember, it is an orthodox market and a slightly higher quality orthodox. India is more of a CTC market and less on orthodox. So while this imbalance on demand and supply could cause some of the customers to ship to orthodox from CTC, but capacity is limited. And the fact that we expect a slightly better crop this year than last year should broadly hold, if not to the slight downward bias on the pricing.
Yes. My last question is on Himalayan and Tata Q. So Himalayan breakeven for the first time. Is it sustainable? And what led to it? I mean Tata Q, you are the #2 brand in this category. So wanted to understand who is #1? And how big is the total additional market for Tata Q?
So Himalayan, I think just similar to all the brands that we have, I think we've got fantastic brands, but this is simply not been available to consumers. As we are expanding distribution, just FYI, I think September of 2020 is when we detached the Himalayan distribution from Varun Beverages and went on our own, and that is when we started to see the traction, and this is led by distribution. It is not led by pricing. It is not led by any other extraordinary effort. Yes, extraordinary efforts in terms of distribution. More accessibility and more offtake. So therefore, there is no reason to believe it is not sustainable. More importantly, there is no reason to believe it cannot continue to grow exponentially going forward. So that's number one.
Number 2, on Tata Q, I think MTR is the market leader right now. We are the #2. But that said, I think we've got a long way to go. The addressable market in India is not as big as the export market. So while we drive in digging our portfolio both from a product as well as a marketing communication perspective for India, I think the bigger focus, Abneesh, is to make sure that we are ready for the export market with all approvals, et cetera. As I said, I think you will start seeing greater traction at the end of Q2, early Q3 as we get our export Indian [ climb up ].
Next question is from the line of Jaykumar Doshi from Kotak.
When I compare your India business tea segmental margins with the second half of FY '20, it appears to be higher both in percentage terms as well as per unit basis. And even though the prices and I look at commodity prices of the last couple of quarters versus second half of FY '20, it's about 20% higher. So with 20% higher pricing, you managed to -- commodity prices, you've managed to fully recover and perhaps exceed your previous highs. Is this sustainable? Or you think the competitive landscape would force you to reduce the prices further and maybe margins pace at -- to get a slightly lower level?
So, Jay, just to give you a perspective, one of the fundamental assumptions in putting this company together was that they've got a fantastic 4 letter brand called Tata and subbrands under it, which are not getting leverage. So if we create a dedicated consumer entity focused on execution against the brands, we will get a return, and that's exactly what you're seeing. So just as a perspective, our direct distribution earlier for beverages was about 500,000, and numeric reach was about 2 million when we started off end of FY '20, which you are talking about. This is when Tata Consumer was formed. Right now, we are about 1.3 million, and our numeric reach is about 2.7. So we are seeing that expansion. As we are reaching more outlets directly, there is an upside.
Number two, if you observe, we've been ramping up our investment behind brands, so moving from a completely or overwhelmingly push strategy to a more pull strategy, therefore, creating better brand power and therefore, better pricing power. We have narrowed the indices between us and competition significantly and therefore, taken up relative pricing. That's the second piece of margin. And the third piece of margin is when you follow a good strategy, you put lot of money into trade. As you start taking some of that out, we've redeployed it into brand, and that is why you're seeing the margins go up. And I think we are at a fairly comfortable position right now from a gross margin perspective on beverages. And there's no reason to see -- to say, we cannot continue this, if not improve on this slightly going forward.
That's helpful. On the Foods portfolio, do you need further price increases in salt to offset the inflationary headwinds? Can you talk a little bit about what's the inflationary -- incremental inflationary pressure, if at all any, between December quarter and now? And what would be the price increase that you may need to offset that?
So just as a perspective, Jay, we have taken roughly INR 4 price increase on a INR 21. So we moved from INR 21 to INR 25 from July to April 1. The last price increase that we have taken is just now on April 1. The reason for that is the inflationary headwinds are coming in the form of 2 pieces. Number one is the fact that there was extended monsoons in Gujarat and therefore, lesser brine available to make salt. And therefore, brine prices went up and therefore, cost of goods went up. That's one piece. The second piece is to convert brine in to salt, you do need energy and large amount of that energy is coal. And large percentage of the coal that we use is imported goal. And with the coal prices and shipping prices going up, we've seen a jump of that.
Now overall, we have seen a significant jump in overall cost in Q2 and Q3. Q4, right now, there might be a small increase, but it will not be as steep as what we saw in Q2 and Q3. And we have taken a price increase, like I said, in April 1, in a little bit of anticipation. But we will remain nimble to make sure that if needed, we will take -- we will make sure that we put pricing in play to make sure we are maintaining margins. But the more important thing, Jay, I would say is despite taking that pricing, we are continuing to ramp up market share. It just shows the power of the brand and the execution that the team is putting behind it.
Overall market share, despite all that pricing that we've taken, which is roughly 19% in a space of 9 months, our market share for the year is still up by 400 basis points, yes. But like I said, we need to stay close. The only thing is there might be a 30-, 45-day lag between costs going up and us being able to take pricing.
The next question is from the line of Vishal Gutka from PhillipCapital.
Just one question. I just wanted to understand on salt distribution. Is it possible to accelerate the distribution further? Because this year, we have increased the distribution of 15% because direct reach is a very critical component for driving the salt business. Was it due to some COVID led challenges that we were able to increase numerical distribution on 15% during the year?
Sorry, sorry. Could you just repeat that question a little bit slowly, so that we can get it?
Yes. Just on the salt distribution front. Is it possible to accelerate the distribution network because direct reach is a very critical component for driving sales of salt? So I wanted to know because this year the increase [indiscernible] 15%. So was it due to COVID led challenges that it was -- we were able to increase only by 15%? Overall numerical distribution for salt business.
No. So let me say, I would say total numeric reach is the most important piece. Probably direct being slightly higher for salt than for tea. But that said, I think right now, what we are seeing is on the metros and Tier 1, Tier 2 towns, we are fairly good on overall numeric reach. I think our gaps or opportunity areas are more in rest of urban and rural. And to get to rest of urban and rural, yes, can we go direct? Why not? I can move from 1.3 to 2 or whatever. But I think it is more efficient for us to move to a decent number. And I would say 1.5 broadly for FMCG is a good -- it's not best in class yet. It's a good number to target.
But this year, the focus will be to get the multiplier of the wholesale. That is where the focus is because one of the commitments that we did make when we formed this company is that we will double our total numeric reach by September of 2023, which is 4 million. So mathematically, if I go to a 1.5 million and get a 2.5 multiplier, I will be close to that number to deliver the total numeric reach, which in turn will deliver us volume and market share.
The next question is from the line of Nikunj Gala from Sundaram AMC.
My question is with respect to India Food business. So India Foods business except for salt in, say, next 3 to 5 years, if you -- if the company can ramp up to the kind of a preferred gold company as desired, what kind of a margin or ROC level we are looking at?
So let me do it this way. I'll say Tata Consumer was formed to become a large FMCG company. As step 1, we are becoming a large F&B company. And if you look at the opportunities for growth, just from a field of play perspective, there is more opportunity in food and beverages. Therefore, we do expect a significant ramp-up in the food business. Now important thing as we grow the businesses, you have to remember, there is a target long-term stable margin, and there is a margin in the interim while building of those businesses.
So we are very, very mindful about the businesses that we are getting into, whether it is organic or inorganic to make sure that the long-term margin profile of the business is accretive to our current portfolio. But that said, going forward, you could see investments in businesses to make sure that we are coming up to par to scale. So I wouldn't hazard a specific number to you, but do expect a double-digit growth in the India Foods business with margins continuing to improve as we move forward.
Sure. And the question was like, for example, in the spices, can we go up to what peers are doing, the margins? Or even at the aggregate level, you believe the margins would be in line with what companies delivering right now?
Every category that we play in, we aim to be in the top 2 or 3 players. And the top 2 or 3 players, not only in terms of volume and market share, but also in terms of margin. There is no reason we cannot get to industry margins in any of the categories. But that said, over a period of time, it will not be instantaneous because a, you have to build scale, second, you have to build the brands.
Sure, sir. Sure. And the second question, with respect to the media article stating that the company is planning to get into the home and personal care through acquisition led strategy. So just wanted your thoughts on that.
So I'll repeat what I said is Tata Consumer was formed to fulfill the FMCG ambitions of the Tata Group. At that, one, we have done a F&B company and more from being beyond -- just beyond a tea and salt company. So that's number one. Number 2 is, if you go by the group norms of simplify, synergies and scale, for the last 2 years, while we have been doing a bit of scale up, the focus has also been to simplify and synergize the businesses. The last simplify and synergy is being the Tata Coffee and the international restructuring. Now that we have broadly done with the heavy lifting and there will be a continued focus on synergies, for example, on costs, et cetera.
Now you could see a traction on the scaling up perspective. I wouldn't comment on speculative articles on which category we are getting into or which we are not. All that I would say is any category that we get into, we are very, very mindful about, a, the potential or the scale for that category, the margins in that category, the number of brands that play in that category, whether it is too fragmented, consolidated, what does the Tata brand name do, what are the capabilities that we have? That's number one. Number 2, every category that we will consider, we will also look at is the best bang for the buck going organic or inorganic. So we will become a large FMCG company. We will have scale. We will deliver superior financial returns, but over a period of time.
Sure. Just on that, is there any threshold ROCE you look at when you consider any category or any product in that way? Or that's just a ballpark number you work with that? That's a good ROCE to work with to get into the category? Yes. That was my last question.
So I don't think we only look at ROCE when we enter into category. Just for example, in pulses, ROCE is almost infinite, right? Because there is no capital. I mean we are using third party. There's just working capital and inventory that we are holding and we are selling it off. So ROCE is not the only determinant. The determinant is the scale of the category, the margins in the category, how accretive is it to our business, do we have the capabilities to synergize and scale. For example, getting into a cold chain doesn't make sense for me right now, maybe it's later. But today, no cold chain products will be on the table since -- irrespective of the ROC or the margins because I do not have synergies. So there are multiple things that we consider when we get into a category to make sure that ultimately at Tata Consumer, we are creating financial value.
The next question is from the line of Percy Panthaki from IIFL.
My first question is on costs. So when we had acquired the consumer business of Tata Chemicals, we had said that there are a lot of synergies, not only on the top line, which I understand, but also in terms of costs. And we have realized a lot of those synergies. I remember you mentioned that there was one redundant layer of distribution which you removed, et cetera.
So what I want to understand is where we are in that journey of realizing cost synergies from the merger. Are we sort of 50% through that journey? Are we 80% through? Some kind of flavor you can give on that. And a sub question to that is, apart from cost synergies from the merger, are there any other low-hanging items in terms of sort of cost rationalization, which you can implement? See, there will always be some cost rationalization possibilities for any FMCG companies even after a century of existence and sort of good management. I'm not talking about those. I'm talking about something more obvious and something more sort of low-hanging which you can extract over the next 1 or 2 years. So these 2 sub questions to my first question.
Yes. So Percy, we had made an announcement of taking out between INR 100 crores to INR 150 crores of synergies. Now you are right. I mean, top line is a derived calculation, but costs are real, right? And we were presenting the amount of cost still I think about September quarter, if I'm not mistaken, where we had almost delivered that entire INR 100 crores and INR 150 crores. And it came in various pieces. It was a layer of management system. It was layers in the supply chain with the super distributors and C&FAs. It was with beverages and tea operating as 2 separate units. It was as a integrated structure. It was in procurement, multiple pieces.
So we have delivered that. And the proof of the fact, apart from the gist that you would have believe the management, when they say that they've delivered, it's the P&L itself, right? There is -- we have fueled significant amount of new categories and investors behind those categories, number one. Even in the core business, we have ramped up our A&P significantly while continuing to deliver improved financial returns. All that is possible simply because we have been taking cost out from the P&L, large part of that from the synergies. Just, for example, even in this presentation, I showed you the secondary freight per kilometer is down by more than 25% just because we combine the salt and tea. And that's a mathematical proven number that is on the table.
So synergy is almost completely delivered as commented. But as you rightly said, it is not a one-stop per se. We will continue to look for synergies. Just for example, right now, we've announced the Tata Coffee merger and the international restructuring. There is significant money on the table. Apart from the simplification, legal management, teams, et cetera, there is tangible value on the table, which we will take out. But that we will quantify once we finish the entire exercise. You could expect a significant number to come out. That's number one.
Number 2, the example that this is a constant exercise and we will keep looking for it, looking for opportunities. As we expand the Sampann portfolio, for example, we are leveraging 3P manufacturers across the country. And as we grow this business aggressively, we have to look at the footprint that we operate in because between freight and sourcing is where there is a significant amount of money. So we've just finished an exercise which re-lays our entire or significantly changes parts of our footprint on sourcing and logistics. Again, with a significant build in terms of synergies to be realized at the end of it. So it is an ongoing exercise. I would say 3% to 5% productivity on the cost angle will be a constant endeavor for this company going forward.
Right, sir. Second question on Starbucks, and you have done very well in terms of store expansion and city expansion footprint, et cetera. I just wanted to also spend a little time on the margins. So what my understanding of this business, having studied other QSR formats, is that typically beverages versus food, beverages has a edge in terms of better gross margins. And secondly, also, given where Starbucks price points are, which are definitely at a premium to other sort of change in the industry, I would have thought that margins would be better, especially now since you are 250 stores plus. So the scale is not a big issue anymore. My expectation is that for a format like this, pre-India is 116 and pre-royalty EBITDA margin should be close to 20%. And I don't think we are there yet. So do you think that's a fair target, first of all? And if yes, what is required for us to go to that level?
So Percy, I would not dispute your target of that 20% margin. And I will say we are quite close to that. We are not way off, right? And you have to remember, the margins is a function of also the total cost that we are bearing and the throughput that we're getting through. During COVID and the closures, we've had significant issues in terms of the traffic in the stores. And therefore, the drop in revenue -- and the costs have not changed significantly. We have managed to bring down cost of it, but they have not changed significantly. The revenues dropped and therefore, the net margins have come down on the EBITDA level. That said, right now, we are seeing them come, I would say, between 15% to 20%. And therefore, we do not see an issue in ramping up going forward.
Yes. Percy, this is LK. Just one another point you need to bear in mind is what you're saying without commenting specifically, but overall profit numbers will be different in a steady state than when you're expanding. We have opened, as Sunil said, over 25 stores in the last quarter, right? So we are not in steady state yet. So please remember that.
Sure. Just a clarification on this. This 15%, 20% number which you spoke about, is that a number which is pre-IndAS 116 or it is under the 116 reporting standard?
Let's have this conversation offline, Percy.
Sure. Sure.
Percy, just to give you some more color on that. Revenue grew by 76% and EBITDA grew by 160%, yes. So just the throughput or the traffic in the store itself moves up the EBITDA in a big way. And as I said, on the out of home piece, I think for NourishCo and the Starbucks, the last quarter was almost normal apart from the Omicron pickups that happened. So we could expect to see these pieces ramping up as we go forward.
Yes. Thanks, Percy. [Operator Instructions]
The next question is from the line of Sumant Kumar from Motilal Oswal.
So my question is regarding tea margin. In month of April, we have seen a CTC leaf prices gone up by 12% to 16%. And you have -- you talked about the tea price likely to correct. So if it is not going to correct, and can you talk about how things are going to be for the price increase side and margin side for the tea business in the next couple of quarters?
So Sumant, let me comment in 2 different ways, yes. Number one is as the prices go up or down, we will modify our pricing in the market to make sure we are more or less maintaining margins while maintaining competitive stances and volume momentum. So that's number one. Number 2, just as a perspective in the month of April, if I'm not mistaken, while there was some small upticks in the North Indian teas, South Indian tea saw a downward pressure. So that's number 2. And number 3, April is probably the wrong month for making a conclusion on tea pricing because the first flush happens about May. And from May onwards is when you could see the price movement is going up or down.
But broadly, like I said, tea prices were range bound in the last quarter per se. We will see some ups and downs, but not as significant as what we have seen in FY '21. And quite a large part of the beginning of FY '22, if we have a normal crop this year, you could see a downward pressure on prices overall. But anything that moves up or down, we will make sure that we are moving our algorithm in line to make sure maintaining margins and maintaining momentum.
Okay. Last question. The other expense is higher in Q4. What are the key reasons for that?
Sorry?
Other expense is higher in Q4. So it's -- yes.
We will -- it's not only in Q4, but overall, other expenses, there are number of reasons. They are just -- first is the fact that we are investing in infrastructure that has been digital as we expand. Second is compared to the previous year, there are new businesses which have come in like Soulfull, like Tata Q. Third reason is we are ramping up at some point and other things, and there is an element of inflation, which all of us have. So all these are contributors.
The next question is from the line of Trilok from Dymon Asia. As there is no response from the current participant, we'll move on to the next question.
So moderator, perhaps please go to the webcast now and take some questions from there, yes.
There is a question from Alok Shah at Ambit.
He's asking that distribution in tea and salt has increased by 15% and 13% CAGR over FY '20 to '22. I wanted to check how much more distribution is yet to be covered. And against this distribution expansion, tea and salt volume growth CAGR has been 7% and 9% over the same period, which is lower than the distribution expansion. So is this understanding, then how do we reconcile it?
So I'll answer this in 2 or 3 parts. As I mentioned, our target in terms of numeric reach is 4 million outlets. We are at a 2.7. So we have got at least 50% more ground to cover. And at 4 million outlets, I think we will be in the top quarter in our FMCG company. That is the target. That's number one. Number two, I don't think you can do a direct linkage with the distribution expansion for the same time period because this takes time to build up. And number two, as we are expanding distribution, as I mentioned, rest of urban and rural is the opportunity where we would expect to see slightly lower volume/value throughputs.
And number three, it is also a function of industry ups and downs, while long term, the beverage industry in India, for example, the tea industry has been growing between 5% and 7% volume. We have seen significant softness in the beginning part of this year. As I said, January and March, 2 months have come in at a 5% volume growth. And the industry looks to be coming back. I would not draw a straight line correlation. I would urge to go on the hypothesis saying that, a, if you are present in 4 million outlets, if you got strong brands and therefore share of handlers, therefore, we will be getting volume market share and, therefore, a good bottom line at the end of it.
Thanks, Sunil. And he has another question, perhaps LK can take this. ICD has gone up from INR 730 million to INR 4.99 billion. Can you share some more details on the same?
Okay. So this is a deployment of surplus funds. We have preferred deposits with strong companies, for example, HDFC is one company where we paid deposits. So they are not within the group. They are -- when we get a better return than employing them in short-term mutual funds. So these are examples of where we place it.
And the last question is what is the gross margin profile of NourishCo versus tea business?
So broadly, the gross margin profile of NourishCo is in the ballpark of the tea business. In fact, once we get our innovation engine fired up, it should be slightly accretive to where the tea business would be on a steady state. As I said, the big opportunity in NourishCo is that even after the expansion that we have done, I think we have still got about 45% to 50% geography of the country to cover.
NourishCo has not delivered towards full potential on the bottom line simply because it has been hindered by the 2 waves of -- the second wave and the Omicron which you have seen. I'm keeping my fingers crossed that this is the first full year in which they would see a full summer and would have executed in all the expanded geographies that they have operated in. And therefore, you should start seeing significant traction on that business.
So I think we can go back to the Q&A queue and perhaps we can extend the call by 10 minutes so that we can address that to the question.
The next question is from the line of Devika Jain from Ratnabali Investments.
So I just wanted to understand what is the growth strategy for Sampann. So I think Sampann is one of the biggest growth drivers of the Indian business. So I just wanted to understand and the biggest thing, what would your strategy be going forward on a long-term basis?
I can go on for about half a day on the Sampann growth strategy. But to just give you in a nutshell, Sampann is going to be the pantry brand for us. And therefore, all the categories that we will enter with Sampann is time free. So right now, we have got spices. We have got pulses. We have got raisin, all of which are doing very well. Poha is grown more than 100%. Overall, Sampann has grown by more than 30%. Sampann, the other categories have been identified it needs to enter. We have just entered the dry fruit category, which, again, is a high margin, but Trust deficit category because there is no big brand operating there.
Sampann, I think the critical phase is to make sure: a, we get into the right categories; b, we build the brand on which I think we've got a lot of work to do; c, expand distribution; and d, most importantly, once we get to a certain level of scale, start leveraging procurement at the back. And lastly is start putting in value-added innovation as we go through to make sure we move up the margin profile.
Okay. And a little bit of guidance as to -- can you expect growth of more than 30% going forward?
I would say you can expect very healthy growth across TCPL, but Sampann should be outpacing the TCPL growth number significantly.
Next question is from the line of Shirish Pardeshi from Centrum Capital.
I have one question. In reference of Slide #13, where you have seen strategic priorities, 6 pillars. I would like to see on the context, you said you have holding about INR 2,500 crores cash. So the point what I wanted to understand is explore new opportunities. So what is it that you are looking? Are we looking for brand, channels, B2C or format? That would be helpful. And the sub question on that, these acquired brand Soulfull and Tata Foods. In the medium to long-term, say, 2 years, what is your expectation in terms of scale, distribution, profitability and maybe a revenue point of view?
So let me answer the first part of your question. The INR 2,400 crores cash is kept ready and powder dry to deploy in case we see opportunities. I think the critical piece is creating value for Tata Consumer. We are extremely mindful of the return ratios of the business, but also we've got to make sure that we fulfill the ambitions in terms of scale. So every opportunity is looked at from every multiple angle to make sure it is creating value.
So Soulfull, for example, and that's a classic example that I can give you. Great brand in the geographies, which it was operating, and we thought we can scale it across the country. They had a unique proposition of millets, which was a differentiated proposition from a consumer perspective. But also different -- how do I say, entry barrier simply because they possess the technology to process millets very efficiently which not many companies can.
Number 4, they brought in a great team. We have leveraged that by keeping the team separate and only integrating where TCPL gives create value. So is there a specific one piece that I can give you saying, we would go deploy against brands or we'll deploy again in B2C, no. We look at every possible opportunity that is there. There is a set of targets that we have, which we go after, but in that to create total value. As I said, every single acquisition has to finance strategic filters, as I mentioned, but also more importantly, the financial filters for us to make sure that it is value accretive.
Okay. And on the 2 acquired brands, medium to long-term targets, say, 3 to 5 years, where do you think that this business can go?
So I think it is to multiply the top line and the bottom line multifold for all the businesses. Soulfull is already on its way. Like I said, it had a slow start just because of 2 things. One is we had to integrate that business. And number 2 is I think it's a bit hard. I think it takes a little bit of more time to understand the category because we have never operated in that place earlier. But now that we've got it, now it's into triple-digit growth for the last couple of months, and we expect to continue a very, very strong momentum going forward apart from the fact that we will expand portfolio.
On Tata SmartFoodz, I did mention earlier that we are working process going on to -- we've already integrated the business. But from a portfolio angle and more importantly, the big bang for the buck will be the export market, making sure we have the brand, the product portfolio and the regulatory approval to start ramping up that business.
Let's just take a little more, Sunil. I have tested both the brands and I have seen -- I'm a big fan of processed food. While if I give anecdotal evidence, McCain came in India with potato wedges for a long time, but they have not been able to scale up. Of course, I am not saying the time is different. Today time is very different. So in a medium to long-term sales where to reach or say, a INR 10 billion brand, do you think you will require 4 years, 5 years, 6 years?
I wouldn't give you a specific, number one. And I wouldn't try to draw parallels because I can give you the name of one of the big competitors in India. Would they try to get into salt as well as Atta, right? But there are other players like we have succeeded in salt and someone else has succeeded in Atta. So just because, a, player write a category and did not succeed, doesn't mean others can succeed or fail. Every company has to evaluate what its strengths are, where are they playing to make sure we are differentiating, make sure we have the ability to execute and then go for it. As I said, Tata Consumer, we have got lofty ambitions. But as I just said just now, I think we are just about I think 10 minutes of a 2-hour movie. So we've got a long movie to go. Stay tuned.
Moderator, we can just take one last question now. Sorry.
The next question is from the line of Bharat Sheth from Quest Investment Advisors.
Sunil, congratulations on good set of number. You have answered, I mean, on the product portfolio expansion of Soulfull as well as, I mean -- but on NourishCo, how do we really look? And second, this ready-to-eat. So it will be among the whole, I mean, full kind of a day right now, we have a Soulfull, which is for morning breakfast. So how do we expand that portfolio on the -- one is hygienic or nutri side and NourishCo. And the export engine that you said, so how do we see the distribution model will be there for export?
So if I understood the question right, I think NourishCo, we have brought a huge opportunity for growth. Just for example, NourishCo grew by close to 90% for the year, right? So and this is without having a normal year. I think the product portfolio that they have is Tata Gluco Plus, Tata Water Plus, Himalayan. We just introduced Fruski. We have just launched a Tata ORS. We just launched a jelly variant. I think just expanding in the beverage status where we can create a differentiation and value for the consumer and executing against it, I think we're in a good place on NourishCo.
On Soulfull, I think the core differentiator is millets. Soulfull was brought in to specifically cater to the demand spaces of breakfast, mini meals, -- breakfast, snacking and mini meals. And therefore, the portfolio that you will see coming out of Soulfull, and I think the first product could come out by -- new products should start coming out by end of this month, early next month is in the same space. The big differentiator being millets and superior products per se. On Tata SmartFoodz, like I said, there is work in process to make sure that we've got a portfolio which appeals to the Indian consumer as well as for the international market appeals to the international consumer. In international, we will play both the ethnic as well as the world food isles in the mainline supermarkets.
Okay. And any, I mean, thought process on the revenue from this 3-year business contribution on the top line and EBITDA in over a 3 to 5 years' timeframe?
So both on top line as well as EBITDA, we would expect it to be incremental and significantly. I wouldn't hazard a guess to give you a number in the future, but we have to preview past performance. And I think the boiler plate here is past performance can be a guarantee of future performance. And we've grown this year. The growth businesses have grown 52%, endeavor we'll be able to continue to maintain that momentum going forward.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Nidhi Verma for closing comments.
Yes. Thank you. Thanks, ICICI for hosting us on behalf of the management. Thanks, everyone, for joining us. If you do have any remaining questions, please get in touch with me. Thank you.
Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.