Tata Consumer sees tea prices to normalise in Q3

Tata Consumer Q2 Results LIVE: Net profit rises 11% to Rs 404 crore, revenue up 18%

Tata Consumer Products, which owns the second- largest tea brand in the country, maintains its earlier stance on tea prices, predicting the prices to normalise in the December quarter, with the FMCG major intending to keep the tea gross margins between 34-36 per cent for the category, with a more volume-led growth.

“We will operate between the 34–36 percent gross margin range for tea, and we have broadly reached that level. Market share is an extremely important factor, and we make sure to keep making corrections in pricing. Our long-term guidance for tea is mid-single-digit volume growth, a couple of basis points of price growth, and mid- to high-single-digit revenue growth. However, that formula can change — we expect to see volume-driven growth coming to the category," said managing director and chief executive officer Sunil D’Souza said in a post earnings call on November 3.

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.

"We have started seeing softening of tea prices and we have at least 3-4 months out before it starts seeing on my supply chain. We are atleast one quarter out before seeing margins normalise for tea, " D’Souza added.  However, the company flagged a double-digit growth in the tea business which owns brands such as Tata Tea and Tetley.

Tea prices in India continue to remain stable. North India tea prices were 18% lower on average in the quarter vs last year, while Kenyan tea prices are 3% lower YoY, according to the company's investor presentation.

Meanwhile, the company is monitoring the coffee prices which were impacted with the latest set of 50 per cent U.S. tariffs imposed on Brazil.   Arabica prices declined at the start of Q2 but stabilized at a higher level towards the end of the quarter, the company said.

In Q2, Tata Consumer's EBITDA margin declined to 13.6% from 14.9% a year earlier.