Tata Consumer Q4 Results: Profit Up 23%, Price Hikes Aid Margin Recovery

Tata Consumer Products Ltd.'s fourth-quarter profit rose in line with estimates, mainly driven by its domestic food and beverage businesses.

Net profit attributable to the maker of Tata Tea and Tata Salt rose 23% over the preceding year to Rs 268.59 crore in the quarter ended March, according to its exchange filing. That compares with the Rs 268.17 crore consensus estimate of analysts tracked by Bloomberg.

For the full fiscal, the company reported revenues of Rs 13,783 crore, up 11%, driven by its 10% domestic business growth. While the domestic food business' revenue grew 26% to Rs 3,666 crore, the revenue growth for the beverages business rose 1% to Rs 5,051 crore. Volume growth for the food business rose 2%, while it fell 1% for beverages.

The international business, however, saw constant currency revenue growth of 4%, primarily led by price increases.

Tata Consumer Q4 FY23 Highlights (Consolidated, YoY)

• Revenue rose 14% to Rs 3,618.73 crore, as compared with the estimated Rs 3,504.87 crore.

• Operating profit is up 15% to Rs 511.67 crore, as against an estimate of Rs 440.3 crore.

• Margin expanded to 14.1% from 13.9%.

• India business grew 15% to Rs 2,246.5 crore.

• International business revenue was up 6%, to Rs 984.05 crore.

• Non-branded businesses, which include plantation and extraction businesses for tea, coffee, and other produce, saw a 9% revenue growth to Rs 385.27 crore.

“We delivered strong top line growth while balancing margins in an extremely volatile macro environment this fiscal," said Sunil D’Souza, managing director and chief executive officer at Tata Consumer Products.

During the quarter, the company saw early signs of green shoots in its branded tea business. As for its core business, salt, it has gained market share despite pricing actions taken to mitigate inflation, said D'souza.

Citing Nielsen data, Tata Consumer said its market share in the salt business rose 76 basis points, while the share of tea volume saw a dip of 50 basis points due to demand challenges in some of the company's key markets.

• For the quarter, the domestic beverages business delivered 8% revenue growth at Rs 1,286 crore and 3% volume growth, recording a sequential recovery.

• The premiumisation agenda continued, with the premium tea portfolio performing better than the mass economy segment.

• The company retained its market leadership in tea in the e-commerce channel.

• The coffee business recorded revenue growth of 31% year-on-year.

• The food business delivered 26% revenue growth and 8% volume growth.

• The salt portfolio recorded double-digit revenue growth during the quarter and also during the year.

• The salt portfolio continued to record market share gains. The value-added salt portfolio grew 4.5 times during the year, partly led by new innovations like Tata Salt Immuno—salt fortified with zinc.

• Tata Sampann also recorded double-digit revenue growth for the quarter and for the year.

• NourishCo had a landmark year, hitting Rs 621 crore in net revenue, up 80%; Soulfull revenues doubled year-on-year.

• The company's innovation-to-sales ratio grew from 0.8% in FY20 to 3.4% in FY23. The pace of innovation has accelerated nearly two times as compared with FY22, with 34 new launches during the year.

• In terms of sales and distribution, the company has achieved a direct reach of 1.5 million outlets and is on track to reach four million outlets in terms of total reach in FY24.

• Channel-wise, the modern trade channel grew 21%, contributing to 14% of India's business sales in FY23.

• The e-commerce channel grew 32%, contributing to 9% of sales. About 10% of the e-commerce revenue came from new products in FY23.

During the quarter, the company said its Tata Sampann, Tata Soulfull, and NourishCo portfolios have continued their strong growth trajectory and collectively account for 15% of the domestic business now.

Tata Starbucks, the joint venture with Starbucks Corp., crossed the Rs 1,000 crore revenue mark in FY23. It recorded 48% revenue growth during the quarter, albeit on a base that was impacted by the pandemic. For FY23, the coffee chain reported net sales of Rs 1,087 crore, a 71% growth over the previous year, when it reported sales of Rs 636 crore, Tata Consumer said.

During the year, the company opened 71 stores, taking its total store count to 333 across 41 cities.

"Tata Starbucks is looking to rapidly expand its presence in the coming years, and to achieve this, we are looking to enhance its relevance for more segments of consumers," the company said in its investor presentation.

The board of the company has recommended a final dividend of Rs 8.45 per share for fiscal 2023.

Shares of Tata Consumer Products closed 0.25% higher on Tuesday before the results were declared, as compared with a 0.15% gain on the benchmark Nifty 50.