First cut | Tata Global Beverages Q3: Pricing pressure, lower contribution from associates hurt earnings

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26 Aug, 2025 12:21

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Anubhav Sahu
Moneycontrol Research

Tata Global Beverages third quarter result was lacklustre due to competitive intensity in the domestic business and elevated commodity costs.

Q3: Aided by higher shares from JVs and associates

Source: Company

TGB’s quarterly consolidated sales grew 6 percent in constant currency. On like for like basis, operating sales was 12 percent accounting for an impact of exit from Russian operations (11 percent reported). India business sales grew 5 percent sales although volume growth was 7 percent – implying elevated competitive pressures and lower tea pricing trends.

Gross margins suffered - 166 basis points (bps) YoY hit on higher commodity costs. Additionally, higher advertising cost (brand promotion & category development) and other expenses led to EBITDA margin impact of 333 bps.

The consolidated net profit for the quarter, the company said, was lower mainly on account of a deferred tax credit of Rs 53 crore recognised in Q3 FY18. However, after accounting for this and the exceptional expense in the base quarter, net profit decline is 16 percent YoY in line with operating profit decline.

Improvement in international business
In the US, Eight O’ Clock Coffee saw continued improvement in K Cups performance. Further, Tetley in the UK had value growth of 14 percent (underlying growth of 6 percent) with market share gain in the mainstream black tea segment.

Joint ventures run rate looks fine; lower contribution from associatesBoth Tata Starbucks and NourishCo has clocked a growth of about 30 percent in revenues. Tata Starbucks now has expanded stores to 136, NourishCo continued focus on the national rollout of Tata Gluco Plus.

Having said that, a lower share of profits from associates and joint ventures needs further clarification from the management. It is, however, noteworthy that the plantations segment was weak as per the takeaways from Tata Coffee due to lower pepper sales realisation.

We keep our rating under review and would update post conference call.

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