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Strengthening position across all categories

Tata Consumer Products’ (TATACONS) FY25 annual report highlights the management’s strategic efforts to reinforce its foundation by broadening distribution reach and market presence, driving growth through portfolio expansion, pursuing new opportunities, and prioritizing innovation. The key takeaways are as follows:

* TATACONS has successfully balanced the Growth and Core businesses, maintaining leadership in Tea and Salt while expanding its Health and Wellness portfolio. Its Growth businesses, including Tata Sampann and Soulfull, now contribute 28% to total sales, driven by innovation and strong execution. Although the Tea segment was muted, the Salt segment remained robust, while newer categories showed strong traction and improvement in profitability.

* The company has shifted beyond its core businesses, building new F&B platforms through a strong innovation engine. With a 5x jump in innovation-led revenues since FY21 and 150 product launches over four years, the company’s focus on consumer-centric innovation is paying off. In our view, this consistent product pipeline positions it well for long-term competitive advantages.

* The international business is gaining momentum, growing 16% in FY25 and contributing 29% to overall revenue. Strong performance in South Africa and the Middle East, along with market share gains in the UK and US, reflects successful innovation and brand expansion. This positions the company well as a competitive global F&B player.

* TATACONS is strategically unlocking value through smart acquisitions and robust distribution expansion. The integration of Organic India and Capital Foods has not only boosted growth and margins but also opened new channels, like Pharma Retail and Food Service. Additionally, its rapidly scaled distribution— reaching ~4.4m outlets—and the deployment of digital tools like MAVIC reflect a modern, data-driven approach to execution, setting a strong distribution network.

* TATACONS generated a CFO of INR20.6b in FY25 vs INR19.4b in FY24. It has been generating a positive CFO for over a decade, with an average run-rate of INR17b in the last five years. Additionally, it generated an FCF of ~INR16b in FY25, similar to FY24 (maintaining an average FCF run-rate of INR8.4b/INR14.1b over the last 10/five years).

Strengthening core business while accelerating the growth business

* TATACONS has remained focused on accelerating its Growth business, while firmly maintaining its position in the Core business. The Tea business now holds a 20% market share, with growth fueled by innovative product launches, impactful marketing, and strategic pricing.

* Tata Tea is also expanding its Health and Wellness portfolio with the launch of Tata Tea Premium Care, Instant Green Tea, and vitamin-infused Tata Tea Gold Vita Care. As the Packaged Tea segment continues to outpace the Loose Tea segment in market share, Tata Tea is expected to retain its position as one of the industry’s leading brands.

* The Core business was further supported by the Salt business. Tata Salt (India’s leading salt brand) posted a strong 15% revenue CAGR over FY20-25, supported by a 31% growth in value-added salt revenue and 57% volume growth in rock salt in FY25. This growth in the Salt segment led to a 30bp increase in Tata Consumer’s market share. The Salt business was a key contributor to the growth of the Indian Foods business.

* Reaffirming its focus on accelerating the Growth business, Tata Consumer’s Growth business (which includes Tata Sampann, Ready-to-Drink (RTD), Tata Soulfull, Tata SmartFoodz, Capital Foods, and Organic India) grew 18% YoY (organically) to over INR32b in revenue, leading to an increase in its contribution to total sales from 8% in FY21 to 28% in FY25.

* The Tata Sampann portfolio posted a 31% CAGR over FY21-25, reaching INR11b in revenue for the full year. This growth was driven by evolving consumer lifestyles and increased innovation in the product mix, as reflected in the innovation to sales ratio (i2s) rising to 8% in FY25 from 2.8% in FY23.

* Tata Sampann was also a key contributor to the Indian Food business, posting double-digit growth for the fifth consecutive year.

* Tata Soulfull continued its strong growth trajectory, with revenue increasing 5x since its acquisition in Feb’21. The improvement in profitability profile was driven by various initiatives taken by the company to reduce manufacturing and freight costs. Soulfull’s reach has increased to over 0.6m outlets from ~15,000 outlets at the time of its acquisition.

* RTD business grew 2% to INR8.4b in FY25, led by trade pricing actions, offset by a 13% increase in volumes during the same year.

* The RTD business continued to strengthen its position in the hydration segment through Tata Copper+, which posted an 18% growth for the full year.

* Strengthening its institutional partnerships, Tata Copper+ became the hydration partner of choice for the Air India Group, further enhancing its visibility.

* Tata Consumer has struck a commendable balance between nurturing its highgrowth new-age portfolio and defending its dominance in core staples— demonstrating that scale, innovation, and agility can successfully coexist within a legacy FMCG business.

Innovation to fuel growth momentum

* TATACONS has expanded beyond its core business and is now focused on building new F&B platforms. With innovation-led product revenue rising 5x since FY21, the company has clearly reaffirmed its commitment to continuous innovation. ? In FY25, the company launched three to four new products each month, increasing total new launches from 14 in FY21 to 41 in FY25 (30% CAGR growth over FY21-25).

* Over the last four years, the company has launched 150 products to improve its market share and profitability.

* The growth portfolio has multiplied 10x over the past five years, demonstrating strong momentum. This performance is underpinned by a focus on innovation, with an innovation to sales ratio of 5.2% during the year.

* Innovation remains central to the company’s RTD strategy, with a diverse product range meeting evolving consumer needs. Key innovations include exploring alkaline water in hydration, relaunching Tata Gluco Plus Sports Drink,  introducing Tetley Kombucha in the wellness segment, launching new flavors of Tata Gluco Plus Jelly in the kids’ segment, and expanding its cold coffee offerings with Tata Coffee Grand Cold Coffee and cold brew variants.

Driving profitable growth in international markets

* The international business grew 16% to INR4.6b during the year, with EBITDA margins of 16.5%, led by notable growth in South Africa and the Middle East. It contributed 29%/40% of the total revenue/EBIT mix in the branded business during FY25.

* South Africa delivered strong performance, driven by distribution gains and product innovation. Laager Plus CBD capitalized on the growing demand for functional beverages, while Tetley Chai Latte expanded consumer choices in the premium segment.

* The Middle East recorded consistent growth for the third consecutive year, supported by Tetley’s market expansion into Saudi Arabia. Strategic activations, including in-store promotions and large-scale sampling, have increased consumer engagement. The introduction of Tata Soulfull and Tata Tea Kannan Devan has broadened the product portfolio.

* The UK business grew 3% during FY25, with EBIT growing 31%. This was driven by strong growth in Teapigs and Good Earth, supported by the company’s extended distribution network.

* In the US, teapigs recorded exceptional growth with sales increasing 38.5% from its largest customer, the Wholesale Foods market. Meanwhile, Eight O’Clock Coffee’s ‘Have It Black’ campaign helped maintain its stable market share in the US.

* The Canada business grew 5% in FY25, led by the introduction of India-based world foods products aimed at diversifying the portfolio beyond beverages.

Unlocking value through acquisitions

* On a combined basis, Capital Foods and Organic India posted healthy growth of 19% in FY25, reaching INR11.7b with a gross margin of 49%.

* The acquisition of Organic India has enabled Tata Consumer Products to develop a pharma channel that will not only strengthen Organic India’s herbal supplements and infusions portfolio but also serve as a gateway for other relevant brands from Tata Consumer Products’ portfolio. A structured rollout of this channel is currently underway across 40 markets.

* The company has accelerated Organic India’s growth in international markets through stronger e-commerce execution in the US. It has also established a presence in key pharmacy chains such as Medplus, Wellness Forever, and Noble Plus.

* The company has expanded its Capital Foods portfolio by foraying into adjacencies such as Schezwan ketchup, Siracha sauce, and Momo chutney, catering to the growing demand for bold, spicy flavors.

* The Food Service channel, catering to HoReCa (Hotels, Restaurants, and Cafés), corporate canteens, and B2B partners, is a key focus area for expanding the Capital Foods portfolio. The company is actively engaging with key institutional buyers to scale partnerships and drive sustained growth.

Strengthening distribution reach and presence to accelerate core growth

* TATACONS has rapidly expanded its direct reach to ~2m outlets as of FY25, nearly quadrupling its network from ~0.7m outlets in FY21. Further, its total reach has expanded to ~4.4m outlets from ~2m outlets in FY21.

* Modern Trade and E-commerce have been instrumental in driving the company’s growth. Modern Trade/E-commerce grew ~18%/57% in FY25, leading alternate channels to contribute ~34% of revenue in the India business—a notable increase from ~19% revenue contribution in FY21.

* Additionally, e-commerce has emerged as a key launchpad for new products, contributing ~15% to i2s within the channel. This has enabled faster concept validation and refinement.

* The company has strengthened its distributor management system through the rollout of MAVIC—its next-generation Go-To-Market platform—which provides real-time market intelligence and key insights into distributor sales and retail shelf activity. 100% of the MAVIC rollout has been completed within four months across 3,500+ distributors and 10,000+ sub distributors.

* To enhance execution in large cities, the company introduced split salesman routes across metros and towns with populations exceeding 0.5m.

Valuation and view

* TATACONS is pursuing a two-pronged growth strategy: 1) advancing new growth drivers like Tata Sampann, Tata Soulfull, and the ready-to-eat/ready-to-consume segments, while simultaneously reinforcing its core business; and 2) aggressively expanding its distribution network and leveraging digital capabilities across the supply chain to propel the next phase of growth.

* We expect a revenue/EBITDA/PAT CAGR of 8%/13%/20% over FY25-27 and arrive at our SoTP-based TP of INR1360. We reiterate our BUY rating.

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