Tata Consumer Products has been doubling down on innovations and growing its distribution in recent times. In an interaction with  businessline, Sunil D’Souza, MD and CEO of Tata Consumer Products talked about expectations of rural distress easing on the back of festival season, ramping up direct reach to 1.5 million outlets and strong focus on R&D. Edited excerpts:

Q

Volume growth of the company’s beverage and food businesses in India was sluggish in Q2. What is your overall outlook?

If one looks at the Indian beverage business, tea prices have been coming down and we have been passing the benefits to consumers as well. If you look at our results, volumes are at -1 and the value at -7 in tea. This means we have given off more value than we have lost on volume, which is in line with tea prices coming down. The catch is that the stress was visible in the rural and semi-urban regions, especially in the northern parts of the country in Q2. Monsoons have been good but not overtly. MSPs are good and with the first festival season in two years without any restrictions, we  expect to see somenormalcy. The second half of September was slightly better, and October started off not too badly. While we can start seeing some green shoots, I think we will need to wait for a few months to see if demand is recovering.

In the India foods business, all other segments barring salt have been on a strong growth wicket. Soulfull is growing at 100 plus per cent and Tata Sampann grew by 37 per cent. We‘ve had significant inflation in salt. And between last July and this August, to offset that inflation, we’ve roughly taken a 33 per cent price increase. A 1 kg packet of salt has moved from ₹21 to ₹28. We have maintained our salt margins versus last year even with these price increases. This is why volumes are looking sluggish.

Q

Has urban consumption been better than rural consumption ?

We are seeing stress in urban but more stress has been visible in rural regions. But we are growing faster in rural than in urban. This is because we have good market shares in the metros and urban areas. Our opportunity areas, in terms of market share, are in semi-urban and rural regions. We are focusing on ramping up distribution in rural regions by appointing wholesalers, super-stockists and sub-distributors. We are also focusing on the right price packs to make sure we are getting traction.

Q

How has the contribution of new product launches to sales been? Will you continue to be aggressive on new product launches in the second half of the year too ?

We have been immensely focused on building our capabilities around innovation for the past 2-3 years. In FY 2020, the contribution of innovation to sales was at 0.9 per cent, and now we are targeting to grow this to about 3.5 per cent of sales by the end of the year. In terms of e-commerce sales, new launches’ contribution is at 11 per cent. We have invested strongly in R&D and we have clearly identified the platforms (categories) that we want to play in. The focus on new launches will continue. Our innovation pipeline for the next six months is also firm.

Q

What are your plans for increasing distribution?

We had made a commitment to hit 1.5 million outlets in terms of direct reach by March 2023. I think we are on track to actually beat that number because we are already at 1.4 million outlets (direct). By December, we should achieve the target.

We are also focusing on getting our indirect distribution streamlined. We have appointed 20 per cent more super-stockists than what we had at the beginning of the same quarter last year. And in terms of wholesalers, we’ve doubled the number. 

Q

Are you seeing the e-commerce channel growth levels tapering down with the resurgence of the out-of-home channel ?

E-commerce continues to be a strong pillar of growth. It was 7.5 per cent of our sales by the end of March and is now at about 9.2 per cent. It is growing at 40 per cent. Having invested in the team, technology and products and all the capabilities, we believe this strategy will pay dividends for us.

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