As Tata Consumer begins its journey to become a leading and differentiated consumer products company, Sunil sets out how we plan to deliver on our strategy and create better value.
You have assumed charge at a very interesting juncture in the Company’s growth story. What have been your immediate takeaways?
I joined Tata Consumer with the knowledge that I was joining a highly respected, values-driven Group and a business that is known for innovation, customer centricity and agility.
This has been a big year of change for the Company, both internally and externally, and I have spent the last few months learning as much as I can about the business. In talking to colleagues at all levels and other key industry stakeholders – albeit virtually – I have been struck by several things.
Firstly, that in Tata Consumer’s arsenal, we house some of the most loved and iconic, global and regional brands. We have deep penetration in our international markets of the US, UK and Canada. In India, we have a combined reach of almost 200 million households and wide distribution network of 2.5 million retail outlets. We offer consumers a distinctive range of food and beverage options through well-established channels. Our consistent pace of innovation and the depth of our consumer insights keep us ahead in a fast-moving, competitive environment. I have also been impressed by the enthusiasm and commitment of our colleagues and their relentless focus on servicing consumers and communities, especially in the current environment.
How is the Company unlocking synergies and strengthening its value proposition?
Tata Consumer is the flag-bearer for the Tata group's aspirations in the FMCG space. The combination of the Consumer Products business of Tata Chemicals and the Beverages business of Tata Global Beverages allows us to participate in opportunities spread across all three segments of the food and beverage consumer basket – in-the-kitchen, on-the-table and on-the-go.
We are integrating the businesses effectively and unlocking synergies in terms of growth and efficiency. Growth drivers include multiplying distribution, focused and faster innovation and stronger cashflows to invest in growth. Efficiency drivers include superior terms of trade with channel partners, supply chain opportunities and scale efficiencies in areas such as marketing and packaging. Apart from this, we also have access to Tata Chemicals' state-of-the-art innovation centre in Pune, which will fast track new product development for us.
Driving conversion from unbranded to branded products is built into the DNA of this organisation, across food and beverage. We have a proven track record of creating category-defining brands, the likes of Tata Tea and Tata Salt. While there is still a large headroom for growth in our core categories, we see similar opportunities in the staples and packaged foods space too, where Tata Sampann is a mega brand in the making. I think carving a strong brand through sharp consumer insights, products that offer value and brand communication is key to achieving this.
How has the performance of Tata Consumer been in the last year and what has been the progress of the business?
The Company has recorded healthy growth during the year, with most of our businesses performing well. Consolidated revenue for the year grew by 33% and consolidated EBITDA by 56%. On a like-to-like basis (excluding the India Foods business) our topline growth was 4% and our EBIDTA grew by 12%. We are a cash positive company and have net cash of ~Rs. 1,300 Crores on our balance sheet.
Each of our businesses is well aligned to the overarching strategic objectives of the Company. We are improving our regional play, encouraged by countryspecific revenue growth strategies, organic and inorganic opportunities, impactful marketing campaigns and promising innovation. Over the last few months, we have moved quickly across geographies, to adapt to changes in consumer trends and buying behaviour through our delivery channels and brand communication.
All our international businesses have shown great resolve during this period. We have witnessed volume growth in all markets and significant increase in our profitability due to the various initiatives that we have taken in the last two to three years.
We see digital transformation as a key driver for growth and we are strengthening our capability in this area, including a digital platform for commodity buying, enabling the entire supply chain from demand planning to procurement and embedding digital technology and decision-making at the frontline of the sales organisation.
As I said earlier, a key milestone for the year was the merger of Tata Chemicals’ Consumer Products business, with the Beverages business and the integration of the businesses is well underway. Also, in India, we acquired the branded business of Dhunseri Tea Industries to strengthen our market presence in Rajasthan.
In addition, we are focusing on strengthening our ready-to-drink beverages portfolio. We are in the process of acquiring PepsiCo's stake in NourishCo Beverages Limited, a 50:50 JV between the two companies. We will look to scale up NourishCo's capabilities and footprint further and build a differentiated portfolio in this segment.
Tata Starbucks, a 50:50 JV between Tata Consumer and Starbucks has been performing well, with 39 new stores opened during the year. There is now a total of 185 stores across 11 cities in India. Our growth in Tata Starbucks was however impacted a bit in Q4, due to the onset of COVID-19, which led to the closure of all our stores for more than two weeks in the month of March. Some of our stores have now opened for delivery and takeaways and will progressively normalise over the next few months.
Your reflections on the Company's commitment to sustainability.
We have a strong track record of managing our business responsibly and sustainably. We are proud of our continued leadership position in the most recognised sustainability benchmarks, such as CDP that is concerned with disclosure of a company’s environmental impact. Beyond what we are trying to achieve with emissions, water use, plastics use and waste management, we aim to support one million community members across our value chain. Our initiatives span sustainable agricultural practices, women and children empowerment, affordable healthcare and rural development. We recognise that, ultimately, our success is linked to our ability to create sustainable value for our stakeholders, from customers and investors to the communities in which we operate.
We are committed to sustainably sourcing all our teas and we encourage our supply chain partners to follow sustainable agricultural practices in the certification of Rainforest Alliance (international markets) and trustea (India). We have also framed Extended Producer Responsibility (EPR) for collection and reprocessing of plastic packaging waste on a brand neutral basis across key markets. In FY 2019-20, the India Beverages business achieved 70% and the India Foods business achieved 98% collection of plastic packaging waste. The target is to secure 100% collection and disposal of plastic packaging by 31st December 2020 in India.
How is the Company adapting to the pandemic and preparing for its long-term ramifications?
Our planning for scenarios beyond the current situation is well underway and we should be well prepared as the future unfolds. Now more than ever, we are collaborating, sharing learnings and supporting each other, right from the senior leadership at the Corporate Office, to the teams at the frontline and every facility.
On the ground, we are innovating with new marketplace models. We have tied up with delivery providers and e-commerce partners to enable direct delivery to consumers.
We are also accelerating our digital agenda to take advantage of the new world realities. There have been significant changes in consumer beliefs, habits and buying patterns during the pandemic and the recent lockdowns.
As the consumer emerges from this and adapts to a new normal, some of the changes will stick. The key is to keep close to the consumer and quickly adapt to the changes to make sure we stay in the relevant basket. During the recent events, we are also proud to have played our part in helping the communities around us. We are supporting many programmes to aid frontline workers and the elderly in the US, Canada, the UK and India.
We supported GroceryAid in the UK with a special donation during these challenging times. It is a wonderful charity doing invaluable work to provide practical, emotional and financial help to people who work, or have worked, within the grocery industry either for a retailer, wholesaler or manufacturer. We are also proud to support the Government of India’s Suraksha Store initiative to tackle the crisis, by ensuring safe hygiene practices at over 13,700 stores across six districts in Delhi and over 12,800 stores across 10 districts in Haryana.
How do you see the road ahead for Tata Consumer?
The economic environment in the near term will be rough with multiple headwinds around the world. However, we believe that given our heritage, our brands, our portfolio, our strong balance sheet, our people and our connect with communities, we are better placed than most to withstand this crisis, and if anything, I am confident that we will emerge stronger at the end of this.
With the Foods and Beverages businesses coming together to form Tata Consumer, we now have a platform to build on for the future. We will continue strengthening our brands, expanding our portfolio, sharpening our capabilities, building our talent, improving the way we service our customers and working collaboratively with our partners and communities to create shared value over the longer term.
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