Tata Consumer Products (TCPL) is staying firm on its goal of 30 per cent topline growth, buoyed by signs of recovery in its core tea business and strategic plays across digital channels and premiumisation.
The company reported a 1 per cent decline in consolidated EBITDA of the March quarter on account of high tea cost inflation in India and higher coffee costs in the US. In Q4, it absorbed nearly 54 per cent of tea cost increases to protect volumes .
"If tea prices stabilise—as expected by end of Q1 or mid-Q2—margins are likely to normalise, supported by softer input costs," managing director, Sunil D’Souza told analysts in a post earnings call on April 23. He added that the tea prices are starting to come down due to seasonality but they’re still about 15 per cent higher than what they were in the same quarter last year.
Adverse and erratic weather conditons in 2024 spiked the tea costs, prompting top packet tea companies like Tata Consumer and Hindustan Unilever to gradually raise prices to protect margins. TCPL has recovered about 30 per cent of tea costs in FY25 through the price hikes, however the maker of Tata Tea and Tetly had been wary of passing too much of the costs to the consumers in a bid to stay competitive and protect market share. In Q4 alone, it absorbed 54 per cent of the tea costs.
Higher tea costs also weighed on the company’s EBITDA margin for the year, which stood at 14.2%, down 110 basis points year-on-year. Adjusted for tea inflation, EBITDA margin would have expanded c.80 bps YoY, the company said.
However, Tata Consumer is seeing tea volumes bounce back in the second half, with volumes growing 2 per cent YOY in the March quarter but its value market share in tea declined by 40 basis points, or 0.4 percentage points, compared to the same period a year, according TCPL's investor presentation.
Meanwhile, elevated coffee prices bumped up the instant coffee segment , which saw a 12% increase in revenue compared to the same quarter last year.
“It's difficult to predict a clear trajectory for coffee prices at this point. We did see a brief dip when tariffs were announced, but prices have since started climbing again. There are a few indicators to watch — crop forecasts from Brazil and Vietnam are slightly below expectations, which could influence pricing. We're also seeing large players shorten their hedging cycles, which suggests heightened uncertainty. As for us, we're not putting out a forecast — we’ll continue to respond to market movements.,” D'Souza added.
Q4 results
Tata Consumer Products's Q4 FY25 net profit jumped 59 percent year-on-year to Rs 345 crore, beating Street expectations, aided by double-digit growth in India food and beverages business, which contributes nearly 70 percent of its topline. According to a Moneycontrol poll of 9 brokerages, the Tata group consumer staples firm's fourth quarter net profit was estimated to shrink 28 percent to Rs 311 crore.
The increase in profit was aided by an exceptional gain of Rs 45 crore, while the base quarter had an exceptional loss of Rs 215.8 crore.
Consolidated revenue for the March quarter rose 17 per cent to Rs 4608 crore. The company's board recommended a dividend of Rs 8.25 per share of face value Re 1 each for FY 2024-25. The dividend will be paid on or after 21 June 2025, Tata Consumer said in stock exchange filing.
On a standalone basis, profit rose 85 per cent to Rs 277 crore, while revenue jumped 20 per cent to Rs 3354.2 crore. Meanwhile, underlying Volume Growth (UVG) for India Branded Business (excluding acquisitions) was 5.9% for the quarter and 4.5% for the year, the company said in a press statement.
Consolidated EBITDA for the quarter at Rs.625 crore, down 1 per cent YOY.
"Overall, despite a tough operating environment, we delivered strong growth across businesses, and we will continue to drive consistent profitable growth as we move
forward," said D’Souza.
Segment performance
The company’s beverages unit, which includes iconic brands such as Tata Tea, Tetley, and Tata Coffee, posted a steady performance with consolidated revenue rising 9 per cent (excluding acquistions). During the quarter, the RTD (ready to drink) business recorded a volume growth of 17 per cent , with revenue growth of 10 per cent ; up from -2% in Q3. Meanwhile, premium business in RTD grew 29% in the quarter.
Capital Foods and Organic India grew 19% in FY25 on a combined basis (including international operations). For the year, the combined revenue of Capital Foods and Organic
India came in at Rs. 1,173 crore. Combined gross margin at 50% for Q4 and 49% for the year is significantly accretive to the base India businesses, the company said.
Revenue from the foods business grew 17 per cent (excluding acquistions), with salt volumes growing 5 per cent YOY. Salt revenue grew 13% in Q4 driven by a mid-single digit volume growth as well as pricing. The maker of Tata Salt gained 30 bps market share in the category in the March quarter.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
