Companies

On track to achieve revenue and cost synergies, says Executive Director & Group CFO, Tata Consumer

Meenakshi Verma Ambwani New Delhi | Updated on September 28, 2021

L Krishnakumar, Executive Director and Group CFO, Tata Consumer Products Ltd

Plans to ramp up total distribution to about 4 million outlets in the next few years

Tata Consumer Products Ltd has said that it is on track to achieve revenue and cost synergy targets following the integration process of its food and beverage businesses. The company has also submitted its investment proposal for the Production Linked Incentive (PLI) scheme for food processing industry.

It now plans to ramp up total distribution to about 4 million outlets in the next few years and accelerate its pace of innovation. In an interaction with BusinessLine, L Krishnakumar, Executive Director and Group CFO, Tata Consumer Products Ltd said the company is seeing moderation in tea prices and also taking other measures to mitigate the impact of inflationary pressures. Excerpts:

What’s your view on the commodity inflationary pressures being faced by the FMCG sector? Are you looking at hiking prices in any categories?

The past year saw unprecedented inflation in a key raw material for one of our businesses i.e. India tea, where prices moved up by 70-80 per cent at peak. We are now seeing a moderation in tea prices sequentially. From July-August onwards, we are seeing a clear shift downwards.

We are continuing to track these movements and will make sure that we balance between consumer price sensitivity and margins to ensure a strong momentum in the business.

During the inflationary period in India tea business, we had consciously not passed on the entire cost to consumers. There is a fine balance to keep between impact on the consumer, price elasticity and competitive dynamics. By doing that, we ensured that volume momentum in the business was maintained.

In the last few months, we have seen some inflation in packaging materials and freight, however we have been able to mitigate part of the impact through synergies from the integration of our F&B business. For example, synergies from optimising our network and scale led efficiencies in supply chain, among others. Going forward, we will continue to monitor the inflationary pressures situation.

How is the integration journey (merger of Tata Global Beverages and Tata Chemicals) been for the company?Have you achieved the targets that you set out in terms of cost savings and efficiencies?

At the front-end, we have integrated the sales and distribution system of foods and beverages. In the process, we have changed the terms of trade and we have got many new channel partners. There has been a cost benefit because we have de-layered the system, resulting in better working capital and cash flows.

At the same time, we are expanding our direct and indirect distribution. We have doubled direct distribution reach to about 1.1 million outlets now. Overall, we are looking at expanding the total distribution (both direct and indirect), which is about 2.5 million outlets to 4 million outlets in the next few years.

We are also realising cost synergies and we are getting higher sales because of increased distribution. We are very much on track of achieving revenue and cost synergies of about ₹150 crore and potentially even exceed it.

Is the company looking to invest through the PLI scheme for the food processing sector?

There are different facets of the PLI scheme involving different categories. It’s a good initiative of the government and we have applied for it.

Will you accelerate product launches in the coming months?

We certainly want to accelerate the pace of innovation and we have increased our capability to deliver on innovation with this integration. Some of the new launches have already been launched and many more will hit the market in the second half of the year.

For instance, we have stepped up distribution of Tata Tea Quick Chai and also strengthening Tata Tea Gold Care. We have launched 1868 by Tata Tea on the DTC platform and we are adding new variants to it. We are also doing a pilot of Eight O’Clock Coffee in India.

We believe there is also an opportunity to bring some of the tea and coffee products we have in overseas markets to the Indian market. In terms of liquid beverages, Tata Copper Plus Water has been launched in the Southern region.

We are also launching Tata Gluco Plus in the jelly variant and it will have both juice and jelly variants. In the food segment too, new products under the Sampann brand, will be launched during the festival season. We are also expanding the distribution of Tata Soulfull and have also introduced the ₹10 pack of the brand.

Are you looking at dialling up the FMCG play beyond F&B? Are you actively looking at inorganic growth opportunities?

We will broaden our offerings beyond food and beverages and we are looking at relevant opportunities. We will look at growth through both organic and inorganic means. But we will look at acquisitions which have the potential to scale. It will need to be a new age brand with a differentiated proposition and consumer profile.

Published on September 28, 2021

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