Tata Consumer Products’ revenue soars 16%, but what’s behind the profit slump?

Tata Consumer Products Ltd. has announced robust financial results for the quarter ended June 30, 2024, showing a significant 16% increase in revenue from operations, reaching ₹4,352 crores. Despite this impressive top-line growth, the company faced challenges that impacted its profit margins and net earnings.

Key Financial Highlights

For the first quarter of FY25, Tata Consumer Products achieved a consolidated EBITDA of ₹671 crores, reflecting a 23% increase. However, profit before exceptional items declined by 6% to ₹465 crores. This drop in profit was attributed to higher finance costs and increased amortisation charges, which overshadowed the improvements in operational performance. The group’s consolidated net profit stood at ₹289 crores, impacted by higher exceptional items and reduced profits from associates and joint ventures.

Business Performance in India

In India, the company’s beverages segment reported a 6% revenue increase, with a 1% organic growth rate, primarily affected by an intense summer. The coffee segment, however, performed exceptionally well, with a 28% rise in revenue. Tata Consumer Products launched Tata Tea Chakra Gold Vita Care in Tamil Nadu to bolster its Health & Wellness platform in southern markets. Tata Tea’s Jaago Re campaign on climate change garnered over 100,000 pledges, while Tata Tea Gold’s Mother’s Day campaign achieved over 30 million views.

The company’s Ready-to-Drink (RTD) business, Nourishco, saw a 7% revenue growth, though this was tempered by a high comparison base and the summer’s impact on out-of-home consumption. New product introductions like Tata Spring Alive water and Himalayan Saffron performed well during the quarter. The India Foods segment experienced a remarkable 30% revenue increase, with 14% organic growth. Salt revenue grew by 9%, driven by strong volume growth and a 35% increase in the value-added salt portfolio. Tata Salt’s ‘Namak ho Tata ka, Tata namak’ campaign was highly effective, becoming the most memorable IPL 2024 campaign in terms of ad recall. The Tata Sampann portfolio also saw a strong 37% growth.

International Operations and Tata Starbucks

On the international front, Tata Consumer Products recorded a 10% revenue growth, excluding acquisitions, and an 8% increase in constant currency terms. The international business saw significant profitability improvements due to structural interventions and strategic pricing actions.

In its joint venture, Tata Starbucks, the company added 17 new stores across four new cities, bringing the total to 438 stores in 65 cities. Key product launches during the quarter included Cold Brew and Refreshers with green coffee extract, complemented by an engaging summer campaign.

CEO’s Statement on Performance

Sunil D’Souza, Managing Director and CEO of Tata Consumer Products, commented on the results, highlighting the company’s 16% top-line growth and 23% EBITDA increase. He noted the strong performance in the India salt business and acknowledged the impact of an intense summer on the tea segment. D’Souza emphasised the remarkable 66% growth in the company’s growth businesses, including Tata Sampann, RTD, Tata Soulfull, Tata SmartFoodz, Capital Foods, and Organic India. He also praised Tata Starbucks for its continued expansion and the significant margin improvements in international markets.

D’Souza highlighted ongoing efforts to strengthen the sales and distribution infrastructure with the implementation of split routes, which is expected to add 35% additional feet on the street. He also mentioned the success of modern trade and e-commerce channels, as well as the pilot initiatives in the pharma and food service channels. The successful integration of Capital Foods and the progress on Organic India were noted as key achievements. Looking ahead, Tata Consumer Products aims to continue executing its strategic priorities and delivering consistent, profitable growth.