Companies

Will explore opportunities for organic, inorganic growth: Tata Consumer MD

Meenakshi Verma Ambwani New Delhi | Updated on March 23, 2021

Sunil D’Souza, MD & CEO, Tata Consumer Products

Vision is to become a significant FMCG player

Tata Consumer Products Ltd, which was formed with the merger of the consumer business of Tata Chemicals and Tata Global Beverages last year, is set to make its début in the Nifty 50 Index. In an interview with BusinessLine, Sunil D’Souza, MD & CEO, Tata Consumer Products, spoke on the company’s vision to become a larger packaged food and beverage company and eventually a significant FMCG player leveraging on both organic and inorganic growth strategies. Excerpts:

How has the journey been so far?

In the last 13 months, we have taken key strategic steps with a focus on integrating these two business successfully, expanding distribution and creating a new organisation structure. We have also set very clear strategic priorities for the future and have also been executing in terms of our inorganic growth strategy.

There is a huge opportunity in front of us and we aim to continue with this aggressive focus on growth, both in terms of volume as well as portfolio expansion while leveraging on the strategic pillars. We will also make sure that we continue on our inorganic and organic growth agenda to become a larger food and beverage player and then a larger FMCG player.

The integration of the two businesses was to be completed by the end of fourth quarter this fiscal. Is it on track?

We started with harmonising the organisation structure from May and that has already been implemented. The second piece was to integrate both the front-end, which is sales and distribution, and the back-end which is manufacturing and logistics. For the sales and distribution piece, we have been focusing on doubling our direct distribution over 12 months and we are on track to achieve this. In 36 months, we also want to double our total reach across retail outlets.

We are already seeing results of the integration process in the sales and distribution piece, as the number of the total outlets, which we service on a three monthly basis, are up by about 65 per cent. The urban distribution infrastructure piece was executed by December and right now we are focused on moving the rural piece up. We have added three times the number of people to expand our rural distribution. For instance, we used to cover about 2 million outlets in the beverage business and now we are up to 2.4 million outlets. By the end of fourth quarter, the entire integrated structure will be in place.

Will there be a much higher focus on inorganic growth strategy in the coming days?

We acquired PepsiCo’s stake in the NourishCo JV last year and we have also acquired Soulfull recently. We will continue to explore new opportunities both through the organic and the inorganic routes. Being part of the Tata Group, we have visibility of almost everything that is available out in the M&A space. At any point of time, we are juggling multiple opportunities. But we are very mindful that any deal that we do, will have to pass the muster, both on the strategic front as well as the financial front.

What are the strategies being put in place to become a more significant player in the food and beverage space? When will you be expanding into the FMCG space?

First, our focus is on building a strong food and beverage company and then we will slowly enter into the FMCG space. There are a large number of categories that we can have a play in the food and beverage space. We, infact, looked at 30 categories which have a market size of about ₹5,000 crore. And then we further distilled them looking at various factors such as financial potential, growth trajectory, margins, our capabilities and competition intensity and what advantage will the Tata brand name have in those categories, among others. So based on this distillation process, we’ve now identified, four platforms which will be the key focus areas for us. One of those platforms was the whole space of snack, breakfast and mini meals, and therefore we made the acquisition of Soulfull.

We have defined six strategic priorities. The first one is strengthening and accelerating our core businesses of tea, salt, coffee and the Sampann business. The second is the digital and innovation pillar, which will drive the business for us in the future. Other priorities include tight focus on costs and unlocking synergies, creating a future ready organisation, exploring new opportunities, both through organic as well as the inorganic route besides embedding sustainability.

To give some perspective on where we are on all these pieces. Since we have expanded our reach, we’ve gained share both in tea as well as in salt, which is our core categories. Our Sampann business is growing in strong double-digits and the coffee business is also doing well. In terms of digital innovation, our distribution and supply chain is now digitized. We have also significantly ramped up our innovation pipeline and you will see new products rolling out very quickly.

How do you see the online channel accelerating and will there be focus on online exclusive brands?

We are seeing digital acceleration both on consumption of media as well as in terms of commerce. Share of the e-commerce channel for the portfolio has grown from 2.5 per cent to about 6 per cent. We have set up a separate vertical for the e-commerce piece and strengthening our presence across all e-commerce platforms. We will also leverage on the online channel to launch online-only brands. For instance, we recently re-launched Tata Coffee Sonnets targeted at connoisseurs of coffee. We are also launching Tata Tea 1868 which is again a gourmet range of teas from very select estates.

Published on March 23, 2021

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