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Tata Consumer Products — Q2 FY25
Tata Consumer Products reported a mixed Q2 FY25 with consolidated revenue up 13% to INR 4,200 crore, but EBITDA margin contracted 30 bps to 14.9% due to sharp tea cost inflation (~30% YoY).
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Tata Consumer Products reported a mixed Q2 FY25 with consolidated revenue up 13% to INR 4,200 crore, but EBITDA margin contracted 30 bps to 14.9% due to sharp tea cost inflation (~30% YoY). India beverages revenue grew only 3% with tea volumes declining, while India foods grew 29% (organic 9%, volume 1%). International business continued strong with 7% growth and margin expansion. Growth businesses (NourishCo, acquisitions) grew 15%, below the 30% target, impacted by competitive pricing in ready-to-drink. Management expects recovery in NourishCo and continued momentum in Capital Foods and Organic India. Key risk: if competitive intensity prevents full pass-through of tea cost inflation, margins could remain under pressure.
टाटा कंज्यूमर प्रोडक्ट्स का Q2 FY25 का नतीजा मिला-जुला रहा। कंपनी की कुल आय 13% बढ़कर 4,200 करोड़ रुपये हो गई, लेकिन मुनाफा मार्जिन 0.30% घटकर 14.9% रह गया। इसकी वजह चाय की लागत में 30% की भारी बढ़ोतरी है। भारत में पेय पदार्थों की बिक्री सिर्फ 3% बढ़ी और चाय की बिक्री घट गई। वहीं, खाद्य कारोबार 29% बढ़ा। अंतरराष्ट्रीय कारोबार 7% बढ़ा और मुनाफा भी सुधरा। नए कारोबार (जैसे नूरिशको) 15% बढ़े, जो 30% के लक्ष्य से कम है। कंपनी को उम्मीद है कि नूरिशको जल्द सुधरेगा। लेकिन अगर चाय की बढ़ी लागत पूरी तरह ग्राहकों पर नहीं डाली गई, तो मुनाफा दबाव में रहेगा।
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Tea cost inflation not fully passed through
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Read Transcript →Quarter Snapshot
India tea volume growth
-4%
-4% YoY
Tea volumes declined year-on-year for the first time in a long period, impacted by price inflation and demand softness.
Salt market share gain (MAT)
+150 bps
+150 bps YoY
Tata Salt gained 150 basis points market share on a moving annual total basis, reflecting strong brand execution.
Starbucks store count
457
+90 stores YoY
Tata Starbucks added 90 stores in the last 12 months, now present in 70 cities, but same-store sales turned negative.
Capital Foods outlet reach
500,000
+250,000 outlets
Capital Foods distribution expanded from 250,000 to 500,000 outlets post-acquisition, driving quarter-on-quarter growth of 25%.
What Changed vs Last Quarter
NEW
NourishCo to return to 25-30% growth by end of Q3 FY25
After re-indexing pricing on Tata Gluco+, management expects the ready-to-drink business to resume its normative growth trajectory by the end of the current quarter.
NEW
Innovation to sales ratio to exceed 5% for full year FY25
The company is on track to deliver innovation as a percentage of sales above 5% for the full year, with Q2 at 4.1%.
NEW
Further tea price increases expected
Staggered price increases have been actioned and more are planned to mitigate the 30% tea cost inflation, though full pass-through depends on competitive dynamics.
NEW
Structural margin improvement over the long term
Management reiterated commitment to improving EBITDA margins year-on-year, supported by new acquisitions and operating leverage, though near-term tea cost volatility is a watch-out.
DROPPED
Growth businesses to reach 30% of India portfolio
Management reiterated commitment to grow the growth businesses (including acquisitions) from 20% to 30% of the India portfolio, with these businesses growing at 30% CAGR.
DROPPED
Organic India integration to complete in 100 days
Management committed to completing the integration of Organic India within 100 days from the April 16 closure, and is on track.
DROPPED
Capital Foods integration largely complete
Integration of Capital Foods, including channel inventory cleanup, is complete and run rate is trending as expected.
DROPPED
Rights issue to repay bridge debt
The rights issue, expected to close on August 19, will be used to repay short-term bridge financing of INR 3,000 crore raised for acquisitions.
NEW RISK
Tea cost inflation not fully passed through
Tea input costs are up ~30% YoY, but competitive intensity has limited price increases, pressuring India branded margins. Management indicated they will not sacrifice market share for profitability.
NEW RISK
Demand destruction in coffee solubles
Record high coffee prices are causing demand stress in the non-branded solubles business, which could lead to lower profitability as inventory advantages fade.
NEW RISK
Urban consumption slowdown impacting Starbucks and broader portfolio
Analyst raised concern about weak demand at Starbucks and across FMCG. Management acknowledged urban stress due to food inflation and delayed government spending, with same-store sales negative.
NEW RISK
Competitive pricing pressure in ready-to-drink
Tata Gluco+ lost competitiveness due to delayed price re-indexing versus peers and new entrants like Campa Cola, leading to a 30% premium to competitors. Corrective actions taken but recovery uncertain.
RISK GONE
Sustained high tea and coffee prices
North Indian tea prices are up 15-20% and coffee prices (Robusta) up ~50% from two quarters ago, which could pressure margins if not passed through.
RISK GONE
NourishCo underperformance due to heatwave and tactical missteps
NourishCo revenue grew only 7% due to intense summer impacting out-of-home consumption and delayed tactical pricing actions, raising concerns about the business's resilience.
RISK GONE
Integration disruptions at Organic India
Organic India deal closed on April 16, and inventory consolidation took longer than expected, potentially impacting near-term revenue and margins.
RISK GONE
Amortization and interest costs weighing on PAT
Quarterly amortization of INR 55 crore from acquisitions and higher interest costs from bridge financing are depressing reported PAT, with no near-term relief expected.
🤫 Topics management stopped discussing
Mentioned in Q1 FY25, Q3 FY24, Q4 FY24
Management reiterated commitment to grow the growth businesses (including acquisitions) from 20% to 30% of the India portfolio, with these businesses growing at 30% CAGR.
Mentioned in Q1 FY25, Q3 FY24, Q4 FY24
Management committed to completing the integration of Organic India within 100 days from the April 16 closure, and is on track.
Mentioned in Q1 FY24, Q2 FY24, Q4 FY24
Management disputes Nielsen data showing 7% industry growth, claiming they haven't lost share. If competitive data confirms loss, tea volumes could remain soft.
Mentioned in Q1 FY24, Q2 FY24, Q3 FY24
Management remains confident of delivering INR 900-1,000 crore for NourishCo in FY24, despite Q3 being seasonally weak.
Mentioned in Q3 FY24, Q4 FY24
Simultaneous integration of Capital Foods and Organic India within 100 days each could strain resources and execution.
Fast read
Guidance and risk preview
After re-indexing pricing on Tata Gluco+, management expects the ready-to-drink business to resume its normative growth trajectory by the end of th...
Tea input costs are up ~30% YoY, but competitive intensity has limited price increases, pressuring India branded margins.
View Risks →