Tata Consumer Products, which owns the largest tea brand in the country, expects its branded tea margins to bounce back by the December quarter, aided by falling auction prices and improved pass-through of cost inflation, managing director and chief executive officer Sunil D’Souza said in a post earnings call on July 23.
Tea prices makes up a significant portion of Tata Consumer's revenue and had been surging since 2024 amid adverse weather conditions and supply snarls. The owner of Tata Tea, expects the prices to move downward, with Q2 being the transition period. Tea prices are currently down 13 per cent YOY according to the latest auction data.
In the June quarter, branded tea business revenue grew 12 per cent but margins were down by 10 percentage points due to incomplete cost pass-through.
"We’ve had about a 10 percentage point impact of tea prices. We’ve passed on about 70 per cent to the consumer, so 30 per cent is still out there,” D’Souza said, adding that “by Q3 see tea margins operating in the 34–37 per cent range. and Q2 will be a bridge to that.”
The comments come as higher tea costs and coffee price corrections weighed on the Tata Group company's consolidated EBITDA, which fell 8 per cent on-year to Rs 615 crore. Tata Consumer is still guiding for a 200–300 basis point improvement in consolidated margins as commodity prices (tea, coffee) soften and start reflecting in the P&L.
On the coffee front, margins in the non-branded business dropped sharply to 12% from 22% in the previous quarter, largely due to inventory losses from falling prices. The management attributed the dip mainly to trailing inventory losses due to falling coffee prices globally.
"You’re sitting with inventory and selling it at a lower price… We are probably close to the bottom on the margins front. We’ll probably see one more quarter of pain… but if prices stay where they are, we should get back to historical margins," D'Souza said.
The company continues to guide that its growth business will grow upwards of 30 per cent in the coming quarters, despite pressure in the Ready To Drink (RTD) category and transitory issues witnessed in the newly acquired Capital Foods.
No immediate risk from U.S. tariffs
The Fast Moving Consumer Goods (FMCG) company has its presence in US through sale of its tea and coffee products. In Q1, revenue from international sales grew 9 per cent to Rs 1,074 crore. The US coffee business registered 20 per cent growth, according to its investor presentation.
When asked about potential impact from tariffs, D'Souza said, "There are basically three businesses which we operate in the US which are dependent on the India piece."
“Number one is the coffee business in the US. Now coffee, whatever happens on tariffs with Brazil, Indonesia, Vietnam, it will happen for everyone. Therefore, it’s a category issue, it’s not a competitive issue,” he said adding that even if the proposed tariff hikes were to be implemented, it wouldn’t disproportionately affect Tata Consumer.
Q1 results
Tata Consumer reported a net profit of Rs 334 crore for the first quarter of the financial year 2026. This marks a 15 percent on-year jump from the Rs 290 crore net profit reported in the corresponding quarter of the previous financial year.
The company’s revenue from operations meanwhile rose 10 percent on-year to Rs 4,778.91 crore during the quarter under review, driven by underlying growth of 11 per cent in India Business, 6 percent in International Business and 6 percent in Non-Branded Business, the company said in a regulatory filing on July 23. The Tata Group company had earlier reported revenue from operations at Rs 4,352 crore in the same period last year.
However, revenue is below the poll estimate of Rs 4,849 crore. The firm's net profit is slightly lower than the Rs 340 crore average estimate by brokerages polled by Moneycontrol, amid higher tea costs.
On a standalone basis, net profit to Rs 714 crore in the quarter ended June 30, significantly higher from Rs 185 crore last year, boosted by dividend income Rs 464 crore from its subsidiaries. Standalone revenue rose 10 percent YOY to Rs Rs 3,529 crore.
India business profit dipped 10 percent YOY to Rs 291 crore but recorded double digit growth, on the back of strong growth in both core categories of tea and salt, supported by underlying volume gains, the firm said in its press release.
Tata Consumer's popular brand, Tata Sampann, continued its strong momentum, but the RTD (Ready to Drink) business volume growth was impacted by unseasonal rains, the firm added. It further said that its international business saw a revenue growth of 5 percent in CC terms.
Its RTD business was impacted by unseasonal rains and recorded a moderate volume growth of 3 percent, the firm added.
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