Brand value, overseas growth led to Q3 profit: Tata Global

Tata Global Beverage's consolidated net profit grew 25 percent year-on-year to Rs 80 crore in the third quarter of FY13 and the company's consolidated total income rose by 6 percent YoY to Rs 1,915 crore.

Harish Bhat, CEO & MD of Tata Global Beverages told CNBC-TV18 the third quarter has been very successful and despite the rising prices of tea they have shown a considerable improvement in their net profit. He further added that the company continues to be a volume as well as value market share leader. Besides, performances in Canada and Australia have been commendable in the last quarter, he said.
Going forward, Bhat sees their strong brands combating the effects of commodity cost inflation. Here is the edited transcript of the interview on CNBC-TV18. Q: Can you talk about your margin performance this time. How much of the jump has come courtesy a hike in tea prices and what could a sustainable margin be going ahead?
A: We have had a very successful quarter Q3. Tata Global Beverages has declared good results with 25 percent improvement in our consolidated net profit and we have done this, not withstanding the pressure of commodity, tea cost, which has been going up over the last year.
Our sustainability is driven by our performance in the market place. I am happy to report that our volumes in India have shown good growth. You have seen the results of Tata Coffee, which were declared a few days back, which have also been exceedingly good and we have seen good innovations in many parts of the developed world including Canada, UK and Australia driving both margins and performance. I would say that margin performance in Q3 has been very encouraging and I am very hopeful that these margins will sustain into the future.
 
Q: Talk a bit about the tea business which went up 9 percent, both on the topline contribution as well as profitability. Is it largely on the back of improved realisations and are you still facing volume challenges?
A: The tea business has behaved differently in different countries. Let me begin with India. In India, it has been a sterling performance in quarter three. We have gained double digit value, we have gained strong volumes and we have also ensured that commodity cost inflation is managed very effectively.
In addition, I am very happy to tell you that in India we have gained in market share and we continue to remain both volume market share leader and value market share leader in the Indian tea market. It has also been a strong performance on the tea business from Canada and Australia, which are two other large geographies in Tata Global Beverages.
During the quarter, both of them have witnessed good bottomline and topline growth. The one area of the world where we are facing some pressure on volumes is Europe, which is going through some degree of recessionary trends but if you look at our overall portfolio, the performance of the tea business has been very encouraging in quarter three. We are hopeful that the quarter ahead will see a repeat of that performance. Q: In order to offset the rising prices of tea, will you need to take any more price hikes in the quarters to come?
A: Forecasting commodity cost is somewhat like crystal ball gazing. I am not going to try to do that. Tea prices are firm but, what you are seeing from results in the last few quarters is that we have strong brands. For example, Tata Tea is a strong brand in India, Tetley is a strong brand globally. Similarly, Chakra Gold, Gemini, Kannan Devan are all strong brands in many regions of India.
We have successfully demonstrated that we can manage commodity cost inflation through smart pricing in the market place ensuring that we offer consumers very good value while protecting margins at the same time. So, that will be the same philosophy going forward. We have strong brands and we are confident that those brands can take the impact of commodity inflation now and in future quarters.