About the Company

Tata Consumer Products Limited (formerly TataGlobal Beverages) is an Indian multinational non-alcoholic beverage company headquartered in Kolkata, West Bengal, India and a subsidiary of the Tata Group. It is the world’s second-largest manufacturer and distributor of tea and a major producer of coffee.

The company markets tea under the major brands Tata Tea, Tetley, Good Earth Teas, and JEMČA. Tata Tea is the biggest-selling tea brand in India, Tetley is the biggest-selling tea brand in Canada and the second-biggest-selling in the United Kingdom and the United States, and JEMČA is the biggest-selling tea brand in the Czech Republic.

In 2012, the company ventured into the Indian cafe market in a 50/50 joint venture with Starbucks Coffee Company. The coffee shops branded as “Starbucks Coffee – A Tata Alliance” source coffee beans from Tata Coffee, a subsidiary company of TataConsumer Products.

 

Q4FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 1352 1488 -9.14% 811 66.71% 5808 3612 60.80%
PBT 96 74 29.73% 194 -50.52% 729 576 26.56%
PAT 71 53 33.96% 143 -50.35% 524 411 27.49%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 2427 1811 34.01% 2522 -3.77% 9749 7409 31.58%
PBT -17* 153 -111.11% 264 -106.44% 809* 735 10.07%
PAT -50 94 -153.19% 189 -126.46% 535 474 12.87%

*Contains exceptional item of Rs 264 Cr which mainly consists of impairment of goodwill related to business in Australia and tea business in USA. It also contains some business integration and reorganization costs after the merger with the consumer products division of Tata Chemicals.

Detailed Results

    1. The consolidated performance was modest on a like to like basis with 4% YoY growth in revenue for FY20 and 6% YoY growth for Q4 revenues.
    2. Most of the numbers above may not be exactly comparable as the numbers of Q4Fy19 did not have the performance of the consumer products businesses of Tata Chemicals which were merged later.
    3. Excluding the performance of the newly added foods business, the company saw growth in consolidated EBITDA of 29% YoY for Q4 and 12% YoY for FY20. This was mainly due to an increase in profitability in various international businesses.
    4. The consolidated EBITDA margin improved to 13% in Q4FY20 from 9.9% last year.
    5. The India Beverages business showed a growth of 7% YoY in FY20 while the India Foods business grew 12% YoY in FY20.
    6. International beverages saw flat revenue growth for FY20.
    7. The company declared a final dividend for the year of Rs 2.7 per share.
    8. In the India Beverages business, the company saw volume and value growth of 7% YoY in FY20. The company tied up with Flipkart, Zomato, Swiggy, and Dominoes for delivery of all of its products in this division.
    9. The company also launched Tata Tea Gold and Tata Tea Premium in the UK and Europe.
    10. The India Foods division saw volume and value growth of 3% YoY and 12% YoY respectively for FY20. The company saw a significant increase in demand for salt and pulses during the lockdown period.
    11. The Tata Coffee division saw volume and value growth of 14% YoY and 19% YoY respectively with highest-ever quarterly sales of 1050 tons from the Vietnam facility. This Vietnam plant is now running at greater than 80% utilization.
    12. In the Starbucks JV, the company saw 21% YoY revenue growth in FY20. The company launched 39 new stores in the year and >10% growth in transactions YoY.
    13. The UK tea business saw revenue growth of only 1% YoY but it maintained its market share of 21.3% in the everyday black tea segment.
    14. The USA business saw 5% YoY growth in volumes and the volumes share of Eight O’ Clock Coffee was at 7.4%.
    15. In Canada, the company saw revenue growth of 6% YoY in FY20 and it maintained its market share at 28.9%.

Investor Conference Call Highlights

  1. The management has stated that there is a market opportunity of Rs 30 Lakh Crore for Tata Consumer Products in the consumption story in India.
  2. The company has seen a decline in commodity costs especially in tea due to large oversupply from small tea growers. Even Kenyan tea and Robusta coffee prices have declined in the year.
  3. In international businesses, the company has seen a 20-25% jump in the consumption of retail brands while it has seen a sharp decline in B2B businesses in Australia and the USA since the start of COVID-19. The management expects demand to normalize and contract slowly going forward.
  4. In Tata Starbucks, the company had shut down all stores since the start of the lockdown and has opened only 30 stores for delivery only operations.
  5. The company saw 30% of revenues in the Tata Starbucks JV being generated from the loyalty program called My Starbucks Rewards which highlights the growing strength of the brand.
  6. In the UK, the company saw significant demand growth in teabag sales since the start of COVID-19 and were running their factories even during the weekends to meet the demand.
  7. The company has a net cash position of Rs 1321 Cr and at a gross basis, it has cash of more than Rs 2500 Cr.
  8. The new CEO has highlighted that the immediate priority for the company will be to ensure full operational effectiveness as the lockdown ends. Other than this, the management will work on 4 pillars: organizational structure, sales & development, synergies and growth categories.
  9. The management believes that the main strength that the company has while developing the New brand of Tata Sampann is the conversion of customers from unbranded products to branded products in the F&B industry. Tata Sampann is in pulses and spices which is still dominated by unbranded products in terms of consumption figures in the country. The management hopes to be able to replicate the same success it is having in converting unbranded tea consumers to branded tea consumers into this new consumption category for the company.
  10. Major advantages for the company are the conversion of unbranded consumers to branded consumers, the shift in overall consumer behaviour and the adoption of non-traditional channels like online grocery shopping. This shift is expected to be further accelerated due to the current lockdown.
  11. The management has admitted that the company has struggled with logistical issues in distributing Tata Salt at the start of the lockdown and it has ramped up production while managing to bring its operations close to normal.
  12. The management is expecting synergies of Rs 150 Cr in the next 18 to 24-month period. Most of these synergies are cost synergies.
  13. The management admits the return ratios for the company will remain subdued for a while as long as the integration takes place but overall it should go up once the company starts to see growth coming in and costs reducing as a consequence of the completed integration.
  14. The management has refrained from providing any specific guidance on EBITDA margin or ROE targets but it remains confident that these ratios should rise from current levels going forward and should reach the industry benchmark in the medium term.
  15. The management has admitted that the company is indeed renegotiating many existing rental agreements for its existing Starbucks outlets and is aiming to make it a revenue linked model rather a fixed model. The management has stated that most of the owners are amenable to this suggestion.
  16. Other than the major brands of Tata Tea and Tata Sampann, the company is also looking into other packaged beverage formats like health drinks and will be seeing it play out once the lockdown is over.
  17. The management has stated that the company will maintain low Capex intensity and will keep the current model for spices and pulses asset-light by working with 2 co-packers.
  18. The company has reached a coverage of 2-2.5 million outlets (an increment of 400,000-500,000) after the merger.
  19. The management will explore how to proceed forward with Tata Coffee and whether to enter the retail space with it or maintain operating primarily in the B2B space which is working very well for the company till now.

Analyst’s View

Tata Consumer Products has a very good product portfolio in diverse F&B segments and strong brands like Tata Tea under its umbrella. The company has also appointed a new CEO who has had a lot of experience in the F&B industry in India with major brands like Whirlpool, PepsiCo, Coca Cola, etc. The newly merged entity of Tata Consumer Products aims to leverage the synergies and brand building experiences of the company and new CEO to forge a new FMCG major in India. The company’s retail businesses have been doing well despite the disruption across the world from COVID-19. The company did face severe supply chain issues at the start of the lockdown period and has managed to resolve them now. It remains to be seen how the company’s wholesale businesses which have the worst hit from COVID-19 fare going forward. Nonetheless, given the company’s leadership position in its top brand segments, its enhanced distribution after the merger, and the incoming synergies and benefits from integration, Tata Consumer Products remains a good FMCG stock to watch out for.

 


 

Q3 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 954.72 911.58 4.73% 946.67 0.85% 2908.61 2801.51 3.82%
PBT 126.38 124.36 1.62% 133.81 -5.55% 418.25 502.22 -16.72%
PAT 94.22 89.66 5.09% 99.7 -5.50% 300 357.62 -16.11%

 

Consolidated Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 1987.85 1935.17 2.72% 1859.35 6.91% 5774.86 5597.94 3.16%
PBT 196.36 176.24 11.42% 191.55 2.51% 610.94 582.06 4.96%
PAT 140.47 121.32 15.78% 143.23 -1.93% 432.81 380 13.90%

Detailed Results

    1. The consolidated performance was modest with 3% YoY growth in revenue from operations and 16% growth in PAT in consolidated terms.
    2. Consolidated EBITDA grew 23% YoY mainly due to favorable commodity prices.
    3. The India Tea business showed a volume growth of 7% YoY and value growth of 6% YoY.
    4. The brands of Agni & Spice Mix saw <10% growth.
    5. The merger with the consumer division of TCL is on track as expected.
    6. In US coffee, the company saw a revenue decline of 3% YoY while volumes fell 2%.
    7. In the UK, the company saw market share by value at 17% and 23% market share in total volumes.
    8. In Canada, the company saw market share by value at 29% and 40% market share in total volumes. Revenue growth in this region was 5% YoY.
    9. Tata Coffee saw revenue growth of 25% and volume growth of 14% YoY.
    10. In the Starbucks JV, revenue growth was 27% YoY.
    11. In the NourishCo JV, Himalayan revenues grew 5% YoY.
    12. Associate companies AAPL and KDHP saw revenue growth of 7% and 25% respectively.
    13. The company is selling its TGB Czech business to Dr. Muller Pharma for 4 million euros.
    14. The company has appointed Mr. Sunil Alaric D’Souza as MD & CEO from April 2020.
    15. The company has also appointed Mr. Ajit Krishnakumar as the COO for the company.

Investor Conference Call Highlights

  1. The company had a favourable exchange rate in the quarter along with soft commodity prices which helped improve margins for the company.
  2. Canada’s performance was very good for the company with Tetley establishing itself as the number 1 brand in its category.
  3. In the NourishCo JV, Tata Gluco Plus sales were hit due to excessive and late monsoons in primary markets of Orissa and coastal Andhra Pradesh.
  4. The Vietnam plant has done well for Tata Coffee with the company bagging good marquee orders for this facility.
  5. The company has piloted Himalayan Water in the USA market.
  6. Most of the company’s ad spend in international tea is spent in the UK.
  7. The company has also launched a campaign in Australia for its Cold Infusions product line which was launched in the country recently.
  8. In the next 2 to 3 years, the company will be looking to focus on margin and profitability and let new products like Cold Infusions provide the push to growth for the company.
  9. The management has mentioned that the revenue potential of the Vietnam plant at full capacity should be around a few crores per year. The management expects capacity utilization at this unit for the year to be at 60-70% and this figure should rise next year to 80-90%.
  10. The management has mentioned that the ad spends in the Tata Tea business is mainly to maintain a robust brand image and to increase market share in an already competitive market.
  11. The management expects the Tata Starbucks JV to be EBITDA positive this year.
  12. The management has mentioned that the regional brands of Tata Tea have done well in the year so far.
  13. The management expects the commodity prices of tea to trend upwards in the near future.
  14. In Eight O’Clock business, the management expects the bags business to recover from the slight fall earlier this year. The management also believes that the Keurig pods business should have bottomed out and can start seeing a consolidation of market share in this business.
  15. The company is looking to try out its other brands like Barista Blends and Flavors of America in the pods business.

Analyst’s View

Tata Global Beverages have put together a formidable brand portfolio operating in both India and abroad. The upcoming merger with the consumer business of TCL is expected to give a good boost to the company’s reach and product portfolio. The company has benefitted from favourable exchange rates and commodity prices which has helped bring the margin profile up. The Vietnam plant has also been showing good performance and it is expected to bring good growth for the Tata Coffee business. The Starbucks JV has also been doing well in the year so far and is widely expected to turn EBITDA positive by the end of the year. The company is banking heavily on its new innovations like Cold Infusions and the nascent liquid segment to drive growth for the company. It remains to be seen whether the company’s efforts to boost growth will bear fruit and how will commodity prices affect the company’s performance in the future. Nonetheless, given its market positioning, wide product profile and the anticipated synergies from the upcoming merger with the consumer business of Tata Chemicals, Tata Global Beverages remains a good consumer goods stock to watch out for.


 

Q2 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY20 Q2FY19 YoY % Q1FY20 QoQ % H1FY20 H1FY19 YoY%
Sales 946.67 921.43 2.74% 1007.22 -6.01% 1952.89 1889.93 3.33%
PBT 133.81 162.02 -17.41% 158.06 -15.34% 291.87 377.86 -22.76%
PAT 99.7 120.3 -17.12% 106.1 -6.03% 205.8 268 -23.21%

 

Consolidated Financials (In Crs)
Q2FY20 Q2FY19 YoY % Q1FY20 QoQ % H1FY20 H1FY19 YoY%
Sales 1859.35 1831.66 1.51% 1927.66 -3.54% 3787 3662.77 3.39%
PBT 191.55 188.77 1.47% 223 -14.10% 414.58 405.82 2.16%
PAT 143.23 125.09 14.50% 149.11 -3.94% 294.15 312.1 -5.75%

 

 

Detailed Results

    1. The consolidated performance was decent with 5% YoY growth in revenue from operations and 14% growth in PAT in consolidated terms. The growth in PAT is mostly on account of the reduced tax rate.
    2. The India Tea business showed a volume growth of 8% YoY and a value growth of 8% YoY.
    3. The flagship brands of Tata Tea Premium, Agni, Spice Mix saw >7% growth.
    4. Lal Ghoda and Kala Ghoda brands incorporated from August 2019 onwards.
    5. The US coffee business grew 4% while the international business grew 2% by volume.
    6. The merger with the consumer division of TCL is on track as expected.
    7. In US coffee, the company saw a revenue decline of 3% YoY while volumes grew 4%.
    8. In the UK, the company saw market share by value at 17% and 22% market share in total volumes.
    9. In Canada, the company saw market share by value at 29% and 40% market share in total volumes.
    10. Tata Coffee saw revenue growth of 18% and volume growth of 20% YoY.
    11. In the Starbucks JV, revenue growth was 26% YoY with 12 new stores opened in the last quarter and 5 new stores opened in Gujarat in one day.
    12. In the NourishCo JV, revenues grew 8% YoY and Tata Gluco Plus revenues grew 22% YoY.
    13. Associate companies AAPL and KDHP saw revenue growth of 7% and 25% respectively.
    14. The acquisition of Dhunseri Tea & Industries Ltd was completed on 21st August 2019.
    15. The updated tax rate had a net one-time adverse impact of Rs 9 crores on consolidated profits.
    16. The beneficial impact of rate reduction should be seen in subsequent quarters.

Investor Conference Call Highlights

  1. The management attributes margin expansion to softening in commodity prices and reducing inefficiencies in the overall system.
  2. Contrary to most industry players, the company is reporting rising sales volumes which it sees as increasing demand or penetration for the company. The demand has strengthened in urban areas while rural area demand has weakened slightly.
  3. The management has stated that according to various data collecting agencies like Nielsen, the tea category is witnessing growth across all segments.
  4. The management has stated that the margin expansion in the international tea business has been due to a variety of factor which includes lower ad spending, fixed costs’ rationalization and improvement in gross margins.
  5. On a consolidated basis, advertising fees for the quarter was Rs 137 Cr as compared to Rs 142 Cr last year.
  6. After the merger with the consumer products division of Tata Chemicals, the new entity will be named Tata Consumer Products Limited. The main focus for the future for the company would be to grow the whole consolidated consumer product portfolio.
  7. The NourishCo JV and Starbucks JV are now breakeven at the net level. Starbucks is also expected to be breakeven at the store level.

Analyst’s View

Tata Global Beverages has put together a formidable brand portfolio operating in both India and abroad. The upcoming merger with the consumer business of TCL may give a good boost to the company’s reach and product portfolio. The company has been buoyed up by rising volumes from the tea business and the Starbucks JV is performing very well so far. The biggest risk for the company remains its over-dependence on tea and other commodity cost prices. Nonetheless, TGB is still a good stock to look out for especially considering the potential value creation from the merger with the consumer products division of Tata Chemicals.


 

Q1 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 1007 968.5 3.98% 810.66 24.22%
PBT 158 215.84 -26.80% 73.7 114.38%
PAT 106.1 147.71 -28.17% 53.26 99.21%

 

Consolidated Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 1927.66 1831 5.28% 1810.69 6.46%
PBT 223 217 2.76% 152.65 46.09%
PAT 149.11 133.6 11.61% 93.82 58.93%

Detailed Results

    1. The operational performance was decent with 5% revenue growth YoY and 12% growth in PAT in consolidated terms.
    2. The India Tea business showed a volume growth of 8% YoY and value growth of 7% YoY.
    3. The flagship brands of Tata Tea Premium, Agni, Spice Mix saw double-digit value growth.
    4. The construction of a new TGB tea packing unit with 36 million kgs capacity has commenced and is expected to be operational by end of 2020.
    5. The US coffee business grew 4% while the international business grew 3% by volume.
    6. The merger with the consumer division of TCL is on track as expected.
    7. In US coffee, the company saw revenue decline of 1% YoY.
    8. In the UK, the Tetley Cold Infusions now has a market share of >20% in its category while green tea market share fell due to category decline and intense competition.
    9. In Canada, the company grew 8% in both volume and value terms mainly on the bak of their Specialty Teas segment.
    10. Tata Coffee saw revenue growth of 30% and volume growth of 18% YoY.
    11. In the Starbucks JV, revenue growth was 23% YoY with 5 new stores opened in the last quarter.
    12. In the NourishCo JV, Revenues grew 8% YoY while volumes grew 1% YoY.
    13. The company is also migrating the Himalayan brand from the PepsiCo network to VBL franchise.
    14. The due diligence for the acquisition of Dhunseri Tea & Industries Ltd is complete and the transaction is expected to be completed soon.

Investor Conference Call Highlights

  1. The Board has approved the acquisition of Lal Ghoda and Kala Ghoda brands in Rajasthan and the company will move forward with this transaction.
  2. The management has stated that high-cost inventory and investment into new sales and distribution transformation have caused margins to come down in the current quarter. This high-cost inventory will be exhausted by September.
  3. The management is satisfied with the performance in the current quarter. They state that the reason why the value growth has been slightly lower than volume growth is due to the rapid expansion of the mass-market brands.
  4. The company sees commodity costs to go lower in the broad term and they will be passing on the cost benefits to the end customer slowly.
  5. The management believes that there is a trend of improving profitability.
  6. The company’s larger ambition is to be a broad FMCG company post the merger with the consumer business of TCL.
  7. Overall, the management expects the margin profile to improve slightly after the merger is completed.
  8. The company is set to get a lot of synergies from the upcoming merger. Most of these are based on sales and distribution synergies giving both these entities better access to geographies that they are weak in.
  9. The company expects to grow the Starbucks JV faster in the future as the rollout of more and more stores takes place.
  10. In addition to the strong brands, the company will also get synergistic benefits in distribution systems from the acquisition of Dhunseri.
  11. The management has stated that their medium-term objective is to improve margins.

Analyst’s View

Tata Global Beverages have put together a formidable brand portfolio operating in both India and abroad. The upcoming merger with the consumer business of TCL should provide a good boost to the company’s reach and product portfolio. The company has been buoyed up by a good performance from the tea business and the Starbucks JV is performing very well so far. The biggest risk for the company remains its over-dependence on tea and other commodity cost prices. Nonetheless, TGB is still a good stock to look out for especially given its resilience in the current stock market slowdown.

 


 

Q3 2019 Updates

Financial Results & Highlights

Standalone Financials (In Crs)

Q3FY19

Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18

9M% Change

Sales

911.58 874.72 4.21% 921.43 -1.07% 2801.51 2626.15 6.68%
PBT

124.36

266.35 -53.31% 162.02 -23.24% 502.22 645.51

-22.20%

PAT

89.66

208.43 -56.98% 120.3 -25.47% 357.67 481.16

-25.67%

Consolidated Financials (In Cr)

Q3FY19

Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18

9M% Change

Sales

1935.17 1750.94 10.52% 1831.66 5.65% 5597.94 5195.38

7.75%

PBT

176.24 205.67 -14.31% 188.77 -6.64% 582.06 625.41

-6.93%

PAT

121.32

186.11 -34.81% 125.09 -3.01% 420.99 484.94

-13.19%

Detailed Results

    1. Indian growth of business was at 5% YoY with volume growth of 7%.
    2. Green tea segment in India grew 14% driven by volume growth of 7%.
    3. Top line improvement in US coffee segment was 28%.
    4. UK segment grew by 6% which resulted in gain in market share.
    5. Higher cost of tea is hurting margins in the Indian tea business.
    6. Lower realisation and lower crop yields in coffee plantations have hampered the Indian coffee business.
    7. Overall revenues from branded business segment and group businesses in consolidated basis have grown 12% YoY.
    8. But Q3 PBT in consolidated basis has fallen 14% YoY in consolidated basis showing significant cost pressures. 9M PBT has had a smaller fall of 7% YoY.
    9. Profits have also fallen in standalone terms, though not as steep as shown above since the last year had a significantly higher base which contained an exceptional item of more than Rs 100 Cr.
    10. TGB is also launching home experience stores called Tata Cha where they have already launched 6 store in Bangalore.
    11. In US, Tea sales have been 3% up as compared to last year. The margins in the US business has been adversely impacted mainly due to higher ad spending.
    12. In Canada, TGB has launched Tetley Super Teas which is the first product of its kind in the country. It has also captured 1.6% market share of non-black teas in the country in only 4 months of launch.
    13. In the Tata Starbucks JV, top line growth has been a phenomenal 30% with 20 new stores added during the year so far. All of their outlets have reported profitable.
    14. In the Nourishco JV, top line growth has exceeded 30% which was mainly driven by the Tata Gluco Plus brand.
    15. In overall, the group’s net profit has been down due to rising commodity costs and higher investment into brand marketing as mentioned above.

Investor Conference Call Highlights

  1. TGB has not passed on the rise in tea prices mainly to stay competitive as other market participants have also not done so.
  2. The price increases have been implemented only in the South with Chakra brand and will be brought gradually into Tata Tea Gold and Tata Tea Premium brands in the coming quarters.
  3. For the saturated tea market where market volume is expected to stay stable, TGB is focussing on conversion of loose unbranded tea consumers to branded tea consumers and on premiumization of their products. The former represents a significant opportunity as loose unbranded tea accounts for more than 40% of overall tea volumes in the country.
  4. Main focus of management is to stay on top of this conversion and to keep their lower priced brands like Tata Agni competitive to enhance this conversion for the masses.
  5. The premiumization efforts are being taken with the restaging of Tata Tea Gold and Tata Tea Chakra. TGB is also pushing Tetley Green Tea and introducing Tata Tea Veda to expand their premium brand portfolio while addressing the upcoming niche areas of green tea and fortified tea.
  6. TGB is also concentrating on pushing their tea retail outlets called Tata Cha to lift profile of tea and bring about café culture in the world of tea in India.

Analyst’s View

Tata Global Beverages have put together a formidable brand portfolio operating in both India and abroad. Despite the big variety of product segments that they operate in, their tea business segment is one that affects revenues the most. Tea business has been dropping in margins and profits due to rising costs and competitive pricing pressure from other players. This has resulted in slowing revenues and drop in profits for the company. Thus the drive towards conversion of unbranded consumers to branded consumers and premiumization will remain key for the company’s future in this segment. The company has been very proactive in terms of introducing new niche products and in its efforts to create a mainstream tea café chain, which shows that they remain positive on this market and are looking for newer ways to create value from a market that is already saturated in terms of volume. Hence, volume growth and increasing margin are the two areas where the company is trying to focus on. The next few quarters will dictate whether their efforts in that direction are showing some promise or not.

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