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Below are Views On Steadily walking the talk By Mr. Sunil D’Souza, MD and CEO, Tata Consumer Products - Motilal Oswal

Bridging the distribution gap with the top player

* TCP started off with direct coverage of 0.5m outlets as of Sep’20, with the target to double it to 1m outlets by the end of Sep’21. As of Jun’21, direct coverage stood at 0.82m. Currently, it has crossed the 1m mark. TCP had over 3,000 rural distributors as of Jun’21, which has increased to more than 4,200 currently. It intends to take it to over 5,000 by the end of FY22. The top FMCG player would have 15-20k rural distributors.

* The management is looking to scale its direct distribution and total numeric reach to that of the market leader. The company was at the bottom in terms of distribution when compared to its peers. It has now scaled up to mid-levels and would eventually aim for the top quartile.

Tata Tea and Salt has still room for growth

* In the Beverages segment (Tea), TCP expects growth to be driven by: i) market share gains from unorganized players (as branded tea constitutes 60-65% of the total market), ii) market share gains from organized players as TCP is the second largest branded tea player in India, and iii) premiumization.

* Growth levers in the Salt segment are similar to that of the Tea segment, given that of the total Salt market in India, 40-45% is branded salt.

* Price inflation impacted margin in the Tea segment of TCP over the last few quarters. However, the management expects the margin in the Tea segment to return to earlier levels by the end of 2QFY22.

Tata Sampann: Growth to return with the RM price volatility issue now behind it

* TCP is expecting Tata Sampann to be the third leg of growth for the company.

* It plans to increase its focus on the Ready to cook (RTC) business as: a) the RTC business can be expanded through the Tata Sampann brand, b) consumer trend is shifting towards RTC meals, and c) RTC is more margin accretive as compared to other segments.

* In the past couple of quarters, growth in the Tata Sampann has been impacted due to RM price volatility, which is unlikely to impact growth going forward.

Soulfull acquisition – fitting well

* The Soulful integration has been completed within 100 days. The entire team of Soulfull has been retained, which was critical for ensuring agility in launching new products and innovation.

* TCP will be using the Soulfull platform to cater to the breakfast, mini-meals, and cereals category to expand its presence.

* Maintaining the agility of Soulfull would be critical, and TCP would provide distribution, A&P spends, manufacturing, and supply chain services.

Digital to remain a focus area

* TCP has moved from ERP to a Cloud-based technology to manage its operations across the globe. With this end-to-end system, demand planning, supply chain, etc. can be managed through this platform. All its distributors are on the distributor management system, which enables TCP to have real-time access to information and data about inventory and sales at the channel level.

* The company has hired Mr. T V Swaminathan as Global Chief Digital Officer. He was earlier associated with Nissan and will be based out of Japan.

Other highlights

* Strategic priorities of TCP include: i) strengthen and accelerate the core business, ii) drive digital and innovation, iii) unlock synergies, iv) create future ready organizations, v) explore new opportunities, and vi) embed sustainability.

* Inorganic acquisition: Return ratios of TCP are currently low due to higher goodwill created in the past owing to acquisitions. Inorganic acquisitions would be incrementally done only when the target meets its strategic and financial requirements. Thus, TCP intends to be selective in acquisitions going forward.

* e-commerce constituted 2-2.5% of sales when the company started with the integration. This has now increased to 7.3% of sales in 1QFY22.

* Out-of-home consumption was severely impacted due to the COVID-19 outbreak. Starbucks and NourishCo were the two businesses, which were directly impacted. The Starbucks business is recuperating strongly and is expected to do well going forward.

* NourishCo: Prior to acquisition, NourishCo clocked INR2b in revenue, and had the potential to increase multi-fold through geographic and portfolio expansion. TCP is growing at a triple-digit growth rate in this segment. Earlier, NourishCo had a presence in Andhra Pradesh, Telangana, Odisha, and Tamil Nadu. TCP has expanded in the eastern region in the states of West Bengal, Bihar, and Jharkhand. It is looking to enter Uttar Pradesh, Delhi, and Rajasthan, and also plans to expand into western states.

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