homeearnings NewsTata Consumer expects volume pressure in Q4; sees potential for ready to eat market in India
Tata Consumer expects volume pressure in Q4; sees potential for ready-to-eat market in India
Tata Consumer Products Limited came out with its Q3 earnings. In an interview with CNBC-TV18, Sunil D'Souza, MD & CEO, Tata Consumer Products, shed light on the company’s Q3 performance and outlook. D'Souza believes the company might see some volume pressure in the coming quarter. However, ultimately he sees volume growth coming back to the 5-7 percent range. Also he sees huge potential for the read-to-eat market in India.
In an interview with CNBC-TV18, Sunil D'Souza, MD & CEO, Tata Consumer Products, said that he sees huge potential for the ready to eat market in India.
"If you look at India, current addressable market of ready-to-eat is about Rs 150 crore plus and there are significant Indian companies, which have made significant businesses out of exports and the footprint for those exports, which is primarily the Indian diaspora, matches the footprint that we have, which is UK, Australia, Canada and the US. That is Rs 1,700-2,000 crore upwards is the current potential. So we do believe that once we get our export licenses, we can build a sizable business," he explained.
On Starbucks, he said, "During this quarter, we opened 13 stores, we are now at 246 stores, and we are in 26 cities. If I compare Starbucks same store sales - December 2021 to December 2019, we were up by roughly 2.5 percent. So we are now above the COVID-19 level."
Tata Consumer Products Limited recently came out with its Q3 earnings. The company reported a revenue of Rs 3,208.3. crore in the quarter ended December 31, 2021, which is a 5 percent increase as compared to the corresponding quarter in the previous fiscal. The company also reported a consolidated net profit of Rs 290 crore, which is 22 percent higher year-on-year.
Shedding light on the quarterly performance, he said that Q3 earnings were on a high base. He explained that the company hiked its prices this year and tightened working capital by 14 days to deal with cost pressures. Elaborating on it further , he explained that energy prices have been going up, along with brine prices.
"Q3 earnings are on a very high base; free cash flow is up by 30 percent versus same quarter last year, there's volume growth across all categories, market share growth, outlet expansion. This year, as we've taken price hikes on one side, tea costs have come down, so margins have broadly normalized," he said.
"On the food side, very specifically, the impact is on inflation, energy prices are going up because you got to get brine evaporated to make salt. So one is energy prices and the other is that extended monsoons impacted our brine capacity a bit in Gujarat. So prices of brine shot up. So overall, we had significant inflation on salt and therefore we took price hikes - between August and December; we have taken about 15 percent increase," he added.
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On volume growth, he said that the company has outpaced the industry. Going ahead, he added that slight pressure in volumes is likely in Q4.
"We have outpaced industry in terms of volume growth. Overall, tea volumes were up by about 5 percent. I do believe this quarter volumes might be under pressure, but it will end up positive. But going forward, we do see ultimately volume growth coming back to the secular 5-7 percent and therefore we are not worried," he said.
Watch the video for the full interview.
First Published: Feb 3, 2022 12:49 PM IST
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