Thank you, Sunil. Just turning to financial key highlights. Our standalone revenue grew at 13% for the quarter and consolidated revenue grew 9%. Just to point out that stand -alone now includes our coffee soluble business, and the base has been restated to that effect. EBITDA growth of 8% on stand -alone and 22% for the consolidated numbers. On a full year basis, stand-alone revenue growth was 11%, consolidated came in at 10%, EBITDA growth of 15% and 25%, respectively. On consolidated financials, while you have seen the numbers and Sunil talked about it, I just want to point out on 2 s pecific items. One is e xceptional items. They are largely attributed to stamp duty on the Tata Coffee merger; and provision on prudence taken on some of the underutilized assets across our entities; and fair value loss on the financial instrument as part of our annual review process. The other is on tax. As you would all know that we'v e been restructuring our structure -- corporate structure in the U.S. And bulk of it is now complete. And therefore, we have taken a onetime gain of close to INR 92 crores in the tax line. And there fore, the ETR for the quarter looks at a lower level. And with that, I think I will hand over back to Nidhi for questions and answers.
TATA CONSUMER PRODUCTS LIMITED analyst Q&A
Thank you, Ashish, and Sunil. Rachel, we can now go to the Q&A queue now, and we will take the questions from the webinar after that.
Thank you very much, ma'am. First question is from the line of Abneesh Roy from Nuvama. Please go ahead.
Congrats on international margins and innovatio n. My first question is on Capital Foods and Organic India. I understand Organic India will be coming in FY '25 numbers. But wanted to understand from inventory in the pipeline how is it, because the initial part of the -- any M&A, we do see that the inventory is there. Higher channel selling is there. So, when I see your numbers in first 2 months, that leads to INR532 crores annual revenue versus INR705 crores revenue in FY '23. In media interaction, you said for Capital Foods, you expect double digits. So, this double digit is for INR705 crores of a numbe r? Or it's from a more FY '24 kind of a run rate? So, if you could give clarity on both Capital Foods and on Organic India, how should we build in the FY '25 numbers? Sunil D’Souza: So let me take that. A , you're absolutely right. When there is transitions, there are adjustments of inventory, e tcetera, because rem ember, they had a multilayer system. They had a set of super stockists, sub -distributors, etcetera. So Abneesh we've -- in the integration, we've flattened the structure integrated. So, we've taken about 200 distributors from their side. The balance we've integrated with our systems. That's number one. Number two, we've reached to almost 95% up -- 95% of our distributors have already built Capital Foods, and we are on our way. We are basing our numbers of growth on the 705 to 750 sort of number. And we wil l work off that base. We are not working on the 500 -odd base because we know it is under-pegged. We remain extremely confident of our ability to drive the top line given what we are seein g on secondary sales, that's number one. Number two, what we are seeing the response to our integration in the international markets as well. For example, in the U.S., we moved from 4 distributors to 13 d istributors because of their strong connections, a; B, I think the innovation pipeline is very strong, and Ajay being there, continued with us, giving us the history and what he's seeing in the future of the business helps actively. In addition, as I said, the most important thing to drive at the front li ne is all our 1 million plus and 0.5 million -- significant number of 0. 5 million plus cities. We've got 3 salesmen at the front end now with 1 salesman focusing exclusively on Capital Foods and Soulfull, primarily because there is a lot of commonalities in the product throughput a, and b, the type of outlets that they will address.
And this will apply even for Organic India, right, in terms of the growth numbers? Sunil D’Souza: Yes. Organic India, we just finished in -- on the 16th of April. W e're still working through all the details. Again, there's only 24,000 o utlets. So -- I mean there is a significant amount of headroom to grow out there. Again, we will -- we are targeting growth on the, how would I say, normalized run rate for these bus inesses, as they continued alone. And it's not on the short-term adjustments that we will have to do.
So, my second and last question is on NourishCo. So, you have done exceedingly well past few years on NourishCo. And you have also given, I think, in the media interaction, the growth expectation of around 30% in FY '25. So, want to understand here what are the products or the brand -- the sub-brands here, which are doing really well. And in terms of distribution synergy, is it now largely done in terms of your total universe. So, is a good penetration already there ? And second related question is, first half, very strong growth in FY '24, Q3 slowed down, and Q4, it slowed down significantly for the entire sector, I understand that. But is the size now becoming an issue? Because FY '23, 60% growth, FY '24 second half significant slowdown. Is size also an issue now given the kind of growth you are seeing earlier? Sunil D’Souza: So let me answer it in 2, 3 ways. Abneesh, I think size, we are far, far, far from where we will say that w e'll become sizable enough that grow th rates will slow down. Both the category growth of Packaged Beverages in India as well as the opportunity for us to address that remains significant enough. The big brands in the portfolio which are growing are Tata Copper Plus and Tata Gluco Plus. Tata Copper Plus is seasonal but not as seasonal as Tata Gluco Plus. And Tata Gluco Plus, which is the higher revenue or higher margin pr oduct, is what -- did not fire as well as we thought it would because of the delayed onset of summer. In terms of the outlet base, we have now about 900,000, 950,000 outlets, which is a significant -- how do I say, we're significantly behind the rest of the competitors -- the large competitors if you look at it. So, we've got still a significant portion to run, and we remain c onfident that we will continue to deliver these growth numbers that we talked about. We -- until January, we were very, very confide nt of hitting the 900 to 1,000. Unfortunately, I would say, second half of February, March was a little bit of a damp ener, but nothing has changed on the basics of the business, so we remain extremely confident.
The next question is from the line of Jay Doshi from Kotak.
Yes. First que stion is a bookkeeping question on Capital Foods and Organic India. What w ill be the aggregate amortization charge for both the entities and depreciation as well? And what is the ballpark EBITDA that you are sort of building for FY '26 for the EPS neutral MAT?
So, Jay, in terms of Capital Foods, it's going to be a round INR160 crores per year. Organic India, we've just closed, as Sunil said, on 16th of April, and we're still working th rough the financials and PPA. I think we'll be able to convey that number later. On forward -looking EBITDA, I think, I will refrain from giving a guidance at this stage. Sunil D’Souza: But essentially, what we have said is both these businesses will be cas h accretive right from this year, and EPS overall accounting accretive starting next year -- FY '26.
Will it be EPS accretive or EPS neutral? And is this after factoring in amortization charges?
So, after factoring in amortization charges, Jay, the way we ’ve built the business case , and if we deliver on that, then, of course, by year 3, we’re likely to become overall accretive.
All right. FY '27?
Yes. FY '27.
Got it. And a couple of more qu estions around profitability. First of all, thanks for the disclosures on profitability movement for different businesses. Now from next year perspective, what is the outlook on profitability for the international business? And I'm t alking about the brande d -- international branded business. We understand t he volatility in non- branded. And second is, what about the synergies for Tata Coffee? At th e time of consolidation merger announcement, you had indicated some cost savings and other synergies. So, are you still on track or expecting those to materialize? And if you could quantify that for us again. Sunil D’Souza: So let me take that question. A, we had always maintained that the international EBIT margins should be accretive to the total India portfolio. And starting this quarter, given the U.K. strong turnaround, I would say, a; and b, the continued delivery of Canada and the improvement in the U.S. U.S., we still got work to do. We expect international to continue to be accretive on EBIT margins going forward, a. B, overall, as a company, I think we've said EBITDA margins, we have delivered 15.3%, for whole of last year -- last quarter was 16.1%, but we will be improving of the 15.3% number as we go forward. And sorry, on the Tata Coffee merger, yes, we have started realizing the synergies. The integrated organization ha s already got announced. And therefore, from a cost perspective, we have seen the synergies coming in. In terms of revenue synergies, early signs, there were top line synergies as well, as we put both the teams together. Complementary geographies, complementary products coming together. We have started seeing early signs of those synergies coming in, and we do expect to deliver on those commitments.
The next question is from the line of Mihir from Nomura.
So, my first question on the tea business, on the tea volumes. How should one think about the tea volumes for the coming year? In fourth quarter, volumes became flat. No sooner, the base volumes came back to positive tra jectory. And that trend will continue. So, can volumes in tea business languish in FY '25? Or steps are being taken to curtail market share losses? Sunil D’Souza: So, a, I'll react first to the market share question. As I mentioned, we don't expect the ind ustry grew by 7% last quarter, as reported by Nielsen, and therefore, we would wait for competitive data to come out before making a judgment on that. That's number one. Number two, long term, we do expect the India Tea business volumes to be about a 5% growth. And a couple of points on that -- on our price mix and revenue growth management numbers. Yes, this quarter was a bit soft compared to wha t we were seeing as a trend because we had seen volumes coming to a 2% to 3% volume growth. We do expect t o see at least a 2% to 4% growth -- volume growth numbers, at least i n the short term. But in the medium to long term, we do expect tea to come back to a mid-single-digit volume growth.
Understood, sir. Sir, my second question is on the coffee solub le business. What is the steady - state margin f or this business? And given this 22 -odd percent margin is driven by price increases, can these margins sustain for some more quarters till it gets anniversarized? Or how should one look at the margins for this business at least for the coming few quarters for the year? Sunil D’Souza: So again, I would separate out the non -branded margin into 2 different pie ces. There is a coffee solubles and there is a plantation business. Coffee solubles is a pass -through -- largely a pass-through number. There might be di fferences in margins between timing of buying of inventory and selling of inventory because, remember, we are buying coffee from various parts of the world, converting it to extracts or solubles, and selling it onwards. So, there is an input price also differential. Whereas in the plantations, we get the upside of the entire coffee pricing going up. It wil l remain volatile for some time. We had seen a sort of plateauing of that over the past 3 quarters. But in Q4, again, we've seen Robusta starting to jump up and in tandem, then Arabica jumping up. We would say we would expect volatility, at least in the s hort term on this piece, but we will have to manage the numbers. Now just as a perspective, overall, the no n-branded business is just about 10% of our total India revenue. So, from that perspective, it is not as significant, but we would expect some road bumps at least in the short term.
We'll take the next question from the line of Sheela Rathi from Morgan Stanley.
My first question, again, was on coffee business. So, Sunil, if you would like to call out what kind of distribution i nnovation plan, we have with respect to taking up our coffee branded business higher from where we are today? Sunil D’Souza: So let me say, we've got significant opportunity ou t there. I'll point back to one of the reasons why now we have done a split rout es at the front end, is primarily because that was becoming the blockage for us to expand our portfolio and expand different SKUs. Coffee did grow 29% for the year and 45% for the quarter, but I think we're still scratching the surface. We've still got a significant amo unt of runway out there. This year, that remains a focus, especially with, a, the innovation s that we have planned; b, the amount of media spend that we are putt ing behind it; and c, between the enabling infrastructure that has been put into place.
And what kind of distribution the coffee business would have currently versus say our tea business? And if there is any difference here in terms of B2B or B2C strategy? Sunil D’Souza: So, it's primarily a B2C strategy. We are significantly be hind. I think we've got still a way to go. In the southern markets is where we had initially focused. There, the gaps are -- they're still large, but relatively sma ller compared to the rest of the country. We've still got -- we're not there by a mile.
We'll take the next question from the line of Percy Panthaki from IIFL Securities.
Sir, in the standalone, we have seen some kind of a margin contraction this time. I believe it' s because of higher ad spend, which is purely a phasing issue. So, can you just try and quantify that for us what is the increase in ad spend on a Y-o-Y basis as a percentage of sales so that we can get a better idea of the underlying profit growth for the stand-alone business?
So, Percy, thanks for the question. We have stepped up our A&P as Sunil mentioned earlier. It's almost 100 basis points increase over last year. So that's the one reason for a bit of underlying numbers on the EBITDA on standalone. The second, of course, is the Capital Foods, which has a marginal impact. As the full synergy benefits come through, we will see this improved.
But Capital Foods is not in the standalone, no? It's in the subsidiary, right?
Part of it is in the standalon e as well. But I think bulk of it is attributed to the A&P, which is almost 35% growth versus last year, as I said, 100 basis point improve.
Understood. Understood. Secondly, I just wanted to understand on NourishCo. What is the total distribution reach that you have right now? And how does that compare to the universe? Sunil D’Souza: So, the tota l distribution reach last year was about 650,000 outlets, which we im proved to 950,000 this year. So that's about a 50% increase. But I would say we're probably index -- if I take an index to what the universe is there, we're probably at maybe 15%, 20% of the universe, Percy, a long way to go.
Understood. Understood. And you're growing so rapidly. So, are you really just taking market share from the very small unorganized tail brands? Or is it also some amount of market share gain from the larger brands in the packaged drinking water space? Sunil D’Souza: So, our portfolio is completely different from the big boys, right? I would say in the packaged drinking water, which is Tata Copper Plus, and I'm just taking -- there will be a sig nificant amount of market share that we will be taking from other players as well as taking off from organized players, but the larger -- unorganized players, sorry. But the larger portion, I would say, is probably coming even from the branded players, r ight? Now we're the #5 water brand now in India. Tata Gluco Plus is a cup which is a completely differentiated format. I'm not sure we are taking away from the big boys. T here is enough category expansion out there given per capita consumption that we are driving for.
And Tata Gluco Plus would be approximately what percentage of your NourishCo turnover? Sunil D’Souza: It would roughly be about 40% of the tot al NourishCo turnover, 60% would be Tata Copper Plus.
Thank you. We'll take the next question from the line of Arnab Mitra from Goldman Sachs.
My first question, again, was on the international margins. So, we've seen a big step -up in the fourth quarter compared to even the last 2 quarters. Was there anything specific this quarter which additionally led to a margin expansion? Or this is the full benefit of the changes you've done? And a related question is this coffee inflation last time did hurt your U.S. margins. Do you anticipate any pressure given the current trend from the coffee prices? Sunil D’Souza: So let me answer you r second question first. I think last time around, we were -- what's the right term, we were a bit slow on the reaction because we had not expected the pricing to move as fast as it did w hen coffee prices came down. And our reaction time on the shop floor and converting it into promotions was a bit slower than competitors. And therefore, it was a double whammy. I mean, volumes were soft, and we did not get the throughputs. This time around, we've been very agile because we saw this coming slightly early in the day, and therefore, we moved in line with coffee prices. So, I would not -- while absolutes might move up and down because of the softness on the total top line, with the price incre ases that we are now seeing coming in back into the market. Margin terms, I don't think there will be too much of an impact. If anything, we should expect an improvement. That's number one. What was the first question, sorry?
Sir, it was the 15%, the margin... Sunil D’Souza: Okay. So, on the international business, a couple of things. We had kicked off our international restructuring last year in the same quarter, ri ght? So, this year, we are seeing the full benefits of the entire -- and when I'm talking of restructuring, it's not the legal entities restructuring, the cost restructuring in the international business. So, we're seeing the full benefits of that flowing in and that's number one. Number two, last year, about this time, was when we started, how do I say, revamping our entire products/brand proposition in -- especially in the U.K., where we put in 10% Assams into the tea, brought it up to par, changed o ur entire packaging, make it -- made it sustainable, changed our executio n dynamics and went for proper distribution, execution in a heightened manner. We're seeing the benefits of all that flow in. Plus, be cause now we've got a stronger proposition in the market, we have also started to take price increases to put us on par and not at a discount to all the competitors in the market. We have taken some pricing again this year, and we are seeing our maintaining of market share despite all the pricing that t hey have taken. That's number one. Number two is also, remember the Fru it & Herbal and specialties are, a, the growing parts of the market, also the better margin parts of the market. That part of the portfo lio is also getting ramped up between Good Earth and teapigs. We are now up to a 10% share in the U.K. So, all multiple pieces flowing in, we do expect to see, as I said, the internationa l margins, right now are about 200 to 300 bps better than our India businesses -- overall businesses. We do expect to see that accretiveness to continue.
Sure, Sunil. My last question was on Salt. So, you've had a huge margin -- market share expansion. Now from here on, is the pace of expansion going to be a lot more modest given that the distribution leg h as already played in. And given that the category itself doesn't grow much, does it mean we should expect less than mid -single-digit volume growth now in Salt going ahead? Sunil D’Souza: So let me put it this way. If I rewind about 18, 20 months back was w hen we took our significant price increases, which is roughly around 30% . At that point of time, our value markets -- our overall market share was primarily driven by value and not by volume because we put our margins on track and continue d to execute. Righ t now, our growth is driven by volume and not as much value because we' ve not taken pricing, at least for the last, I think, 15 to 18 months, if I'm not mistaken. So right now, it is a pure distribution expansion, portfolio expansion. Now value-added salts are now 9% of my portfolio versus when we started with the merger 4 years back. It was about le ss than 1% out there. So value -added salt, volume growth, distribution expansion. You would have seen the recent IPL opening day, Tata namak advertisements. We're putting salience behind it. So, we remain confident of continued gr owth in market share. I do not see a reason for us to slow it down significantly.
We'll take the next question from Rohan Kalle from InCred Capital.
Just wanted to check on the non-branded business margins. So, I'm assuming you've got strong gains on lower price inventory of coffee. So, I just want to understand how much of this inventory do we have left? Assuming now you will be procuring at curr ent market prices, how should we look at these margins sustainably, at least in the near term? And second question on the asset write -downs that are mentioned in the exceptional items. I just want to understand what the INR620 million asset write-downs was? Sunil D’Souza: So let me take the first one, and I'll ask Ashish to take the second p iece. Like I said, the unbranded business is in 2 piece s. There is largely a flow -through with a delayed impact of either upper or down on coffee prices in the solubles business because we buy coffee, convert it into soluble/extractions and then sell it off. On the coffee plantations, there is a straight revenue uplift, which increases margins. Right now, we are seeing prices going up, and therefore, there is a benefit for the coffee pl antations more than soluble. On the soluble business, we do not expect too much movement because of prices going up and down. Ashish?
Yes, on the second bit, as I was explaining earlier, this is largely a part of our annua l review process that we look at all assets and across various parts of business, lookin g at the capacity utilization. On a most prudent basis, we have taken provision on some of these assets.
Ladies and gentlemen, I would request Ms. Nidhi Verma to kindly proceed w ith the next question on the webcast. Over to you, ma'am.
Sure. Thank you. So, there are a few questions on the webcast link. Okay. I ’ll just read those questions out. The first question is from Kajol. She's asking, "Can you please provide some more light on the subdued performance of Starbucks during the quarter?" And -- yes. Sunil D’Souza: We've already talked...
Yes, we've already answered that during the opening remarks, Kajol. There is another question from Nikhil. How long will it take for it to complete the integration of acquisitions? And when can we expect margin expansion based on these acquisitions? Sunil D’Souza: Yes. So, we've always guided for 100 -day integration. We remain on track for -- so Capital Foods, we acquired F ebruary 1. So, by April end, we will complete the acquisition [integration]. Like I said, 95% of our front -end distributors are already billing Capital Foods, and we are on our way. So, we will complete Capital Foods in 100 days. Organic India was 16th April. We will co mplete it in 100 days. And post that, you will sta rt to see margin expansion coming in.
Yes. Thank you. There is a question from Keshav. He's asking, "Is there any update on the rights issue and any timeline?"
So, Keshav, we are on track on the rights issue and the process is on. And I think we should be able to conclude it by early quarter 2.
Thank you, Ashish. There is a question from Jigar. He's asking, "What is the reason of profit decline even though revenue has grown? So, I think this has been explained enough, Jigar. It's led by exceptional charges. Net of that, the profit has actually grown 42% as we've seen. There is a question from Samar. He's asking, "Can you give some color of the business of Starbucks again in terms of its revenue and earnings to overall business?" So just -- I think you're asking about the accounting treatment. It's shared... Sunil D’Souza: So, Starbucks is not accounted for in our consolidated. We consolidate it as part of associates and JVs, INR1,200-plus crores of top line, which has grown at 7% for the quarter.
Yes, I think that's pr etty much it from the webcast. Sorry, there is another question asking if there are there any plans on entering the BPC segment? Sunil D’Souza: So, like I sai d, we've alway s said that we want to be a total FMCG company. Right now, we are focused on being a food and beverage company. I think we've shown our intent very clearly to grow organically and inorganically. We do think there is still a runway left there. Once we think we've exhausted the runway out here and we see a bigger opportunity in moving beyond food and beverage, we will definitely look at that.
Okay. And I think there is another housekeeping question from Neeraj. H e's aski ng, "Is the decline in In dia business EBIT margin, like what is leading to that? Why is it declining from 15.5% to 12.9%." That's his question. It is led by the amortization charge, Neeraj, yes. Sunil D’Souza: Amortization of Capital Foods.
Yes. Okay. And there is on e question asking what would be the growth strategy for Tata Sampann moving forward? Sunil D’Souza: So, Tata Sampann, we very clearly said that we want to be a total pantry brand. We've identified very clearly the categories that we want to play in Tata Sa mpann. Right now, we are in pulses, spices, and a variety of other pantry products. As we gain scale and improve both our brand strength and therefore, pricing power and our back -end procurement, we continue to improve margins on Sampann.
There's a question from Sachin asking, "When you say growth businesses will be 30% of the consolidated revenue, does it also include Capital Foods and Organic India?" Sunil D’Souza: Yes. We said before we did this integration -- we did these acquisitions; we had said we expect growth businesses to account for 20% of our top line and growing at 30%. Just as this thing last quarter, we grew at 18%. Going forward, with Capital India -- Capital Foods and Organic India, we expect growth businesses in India to be 30% of our portfolio, growing at 30%.
Thank you. Thank you, Sunil. I think we've covered most of the questions, actually, all of the questions on the webcast now. So yes, with that, I th ink there are no further que stions in the Q&A queue as well. I would just like to take this opportunity to thank you all for joining the call. If you do have any remaining questions, please feel free to get in touch with us. Thank you.
Thank you very much, ma'am. Thank you , members of the man agement. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.