Tata Consumer Products Ltd (TATACONSUM) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the Tata Consumer Products Q2 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Nidhi Varma, Head of Investor Relations and Corporate Communications. Thank you and over to you.
Nidhi Varma (Tata Consumer Products Ltd): Thank you. Thank you so much everyone for joining us today. We announced our Q2 FY '27 results earlier in the evening. I hope you had a chance to go through the materials. As usual, I am joined by Mr. Sunil D'Souza, Managing Director and CEO, Mr. Ashish Goenka, Group CFO, and Mr. Ajit Krishnakumar, Executive Director and COO. In terms of the format, we'll walk you through key business updates for the first 20 minutes or so, and then we will open the floor for Q&A. So with that, I just want to quickly draw your attention to the disclaimer statement which is on your screen. With that, I'll hand it over to Sunil.
Sunil D'Souza (Tata Consumer Products Ltd): Thanks, Nidhi. So in summary, we grew top line 14% with a UVG of 11 in the India business. Salt was another strong quarter of 9% volume and 15% revenue. India tea volumes were flat. Revenue was marginally lower year-on-year.
Sunil D'Souza (Tata Consumer Products Ltd): businesses had another strong quarter. Sampann was up 57, ready-to-drink is now strongly back on the growth trajectory with 47. Capital Foods and Organic India were up 15%, but the domestic business was very strong, because international was impacted by shipping disruptions, as well as the Mundra port issue in early September. International business grew 7%, in constant currency was -2, but had a very, very strong margin delivery. Non-branded grew 12%, nine in constant currency. Consolidated EBITDA was up 18 with margins expanding 40 bps to bring EBITDA margin to 14%. Starbucks had probably one of their strongest quarters ever. Revenue growing 15% and with strong same-store sales growth. I think now they have five or six successive quarters of positive same-store sales growth and very strong results. So, India Salt cross was close to 1,100 crores. It's coming to touching distance of India tea and coffee now, up 15%. India tea and coffee largely impacted by weather, a little bit of price increases in tea and a little bit of a hangover of the disruptions in Q1 of the LPG issues, was down 1%. Growth businesses up 40 to close to 1,400 continue to be now powering ahead of our salt and tea coffee businesses. International close to 1,300 crores, up seven. Non-branded up 12 and consolidated up 14%. Constant currency was 11. In terms of first half, India salt up 11. India tea and coffee, if you remember, the first quarter was -4 on revenue. This quarter was -1. So, overall -3 as we've taken up prices. Growth businesses up 43, international up 11, non-branded up three and consolidated at close to 11,000 crore. The beauty of the portfolio, if you look at it, salt, tea, coffee, growth, international, now we've got four strong legs on the TCPL stool. In terms of financial performance, revenue up 14, EBITDA up 18, profit before taxes up 21 and net profit at 470 crores growing 16%. EPS of 4.75 and as we said, if we amortize, because we amortized certain brands, if I take that off, our adjusted EPS is 5.18. For the first half, revenue up 13, EBITDA 18, profit before tax 24, net profit up 22, adjusted EPS of 9.85. In terms of the businesses, overall our A&P to sales for the quarter was 5.5 and for the first half was 5.8. Just a perspective here is we've reclassified visibility separately and A&P separately. That's why this number you will see separately. Visibility is knocked off from revenue up top. In the ballpark, we are in the same number of about 6.3 to 6.5 in total A&P to sales. Growth businesses up 40% now contribute to 38% of India business. We've started our significant transformational journey with AI with about 1,600, 1,700 salesmen which we have on date as of now, with an objective by December to reach 100% of our sales people operating. There is a personalized AI sales companion guiding the salesmen outlet-by-outlet, SKU-by-SKU on what exactly to do. And where the salesman misses the outlet, there is a voice agent which does call up the retailer and does the ordering process. The sales executive gets a concise summary of what exactly the DSE, the DSR did at every single outlet with a follow-up on what coaching is needed out there. That's on the sales front. On the operations front, we have started deploying, we've deployed AI to recognize
Sunil D'Souza (Tata Consumer Products Ltd): and types of leaves that come into the factory so that we qualify quality and pricing of the leaves per se of stuff entering into the factory. In the Himalayan factory, we've got AI starting to do online bottle inspection. Around the corner, we've got a history of tea in terms of temperature, rainfall, crop price, etcetera. We are going to use that to start guiding our procurement team on when to buy, at what price to buy. We've already started automation with invoice validation and payment. We've got an engine running at the back end on online, on consumer insights we're feeding both to our R&D team as well as our marketing innovation. We've started trade spend optimizer as a pilot, which we rolled out for tea for the entire country starting this month and we have started to see substantial savings. And apart from that, we're looking at experimenting with AI calling for retailers where we can drop frequency to visits to outlets which order less than two times a month. So, we move from a weekly to a fortnightly frequency with the alternate week AI agent calling in to make sure no order is missed. So, these are a few examples of what is already in play. We will be continuing to make sure that we have robust business cases as we expand AI across the enterprise. We had 22 new product launches in Q2, total 36 for the first half. As I said, focused on differentiated propositions in health and wellness, convenience, and premiumization. In terms of businesses, as I mentioned, volume overall was flat for tea and coffee. Revenue was minus one. But just as a perspective, Q1 was volume plus two, value minus four. As we took graduated, calibrated price increases in tea, we've come to a flat volume and revenue minus one. So, from a minus from a 6 percentage difference volume value we're one here and as we've continued taking graduated price increases, we expect the equation to start turning value greater than volume starting this quarter. Next. Salt we took price increase of about 6%. We moved from 30 to 32 for the orange bag in May. October first week, we moved another two, so the 32 has become 34. But this is reported before that happened. So, volume was up nine. Revenue was plus 15. Value added and premium salts continue to deliver 2x the growth of the base salt business. Continue to expand their contribution to the portfolio. Sampann strong quarter, revenue of 57 driven by strong volume growth as well. Dry fruits and cold pressed oils now combined ARR of 1,000 crore plus and we will continue to expand the portfolio with margin expansion as we go forward. RTD having reset the entire business has now started delivering strong results, volume up 34, revenue up 47. Growth remained broad-based across the portfolio both with the base business as well as innovation driving toplines. Capital Foods and Organic India, overall 18% in Capital Foods, 9% in Organic India. Domestic business was strong. If I put both together, 24% top-line growth. As I said, this this quarter, the disruption in shipping and I think about 10 to 12 days of disruption at the Mundra Port was the prime reason for international not coming to the party completely. But we firmly believe that having reset the go to market in India, Capital Foods and Organic India are on a strong growth wicket. International overall negative 2% in constant currency, lapping a high base, but overall revenue of seven. The UK was impacted by the continued heat wave for the quarter. The good news is the weather has turned and I do think UK is going to come back strongly because share continued to hold out. Revenue declined
Sunil D'Souza (Tata Consumer Products Ltd): 8% in the UK, but US business grew 4%, expanded margins, with 6% constant currency growth in coffee. Canada continued their strong growth with 8% constant currency, and South Africa also had a very strong quarter. Non-branded business grew 9% on an elevated base of last year. Robusta and Arabica prices continue to soften, impacting realizations, but margins continue to be healthy for the plantations business as well. The soluble volume grew 21% as we executed strongly both operationally and made sure that deliveries kept pace. Starbucks, as I mentioned, had a very strong quarter. It's the fifth successive quarter of same-store sales growth, 15% top line. We had calibrated store openings to get our new business model in place. More or less, I think we've got got it, and we've seen strong growth in traffic as well, roughly close to a 10% growth in traffic to the stores. Revenue was up 15, opened seven stores, and we've now at 505. You can expect acceleration of stores going forward. Over to Ashish for the financials.
Ashish Goenka (Tata Consumer Products Ltd): Thanks, Sunil. So, as Sunil mentioned, our top line grew 14% this quarter. We added 700 crores to the turnover. EBITDA growth was ahead of top line at 18%, and that led to a 14 40 basis point margin margin expansion. And adjusted EPS grew at 17%. In terms of first half, the growth has been at 13%. Again, I think overall EBITDA growth was ahead of top line at 18%, and then that led to a 60 basis point margin expansion for the first half. Adjusted EPS, again, grew ahead of EBITDA growth at 21%, coming in at at 9.85. Looking at segments, India for the quarter, there was a bit of a contraction on the margins largely on account of the inflationary pressures that we are seeing on tea and salt. Having said that, of course, we have taken calibrated pricing, which should start showing in quarter three. Both international and non-branded had a very substantial improvement in profitability and leading to an overall improvement in segment margins by 50 basis points. The same is reflected at a first half level where all three segments have actually improved on profitability across India, international, and non-branded, leading to an overall 100 basis point in segment margins overall. That's pretty much the summary of financials. I think I'll hand back to Nidhi now for anchoring the Q&A.
Nidhi Varma (Tata Consumer Products Ltd): Thank you. Moderator, maybe we can go to the Q&A queue to take the questions.
Moderator: Certainly. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Mihir Shah with Nomura. Please go ahead.
Mihir Shah (Nomura): Hi, good evening. Thank you for taking my question, and congrats on a great set of numbers. My first question is actually on tea. Sir, if you can just talk about is the procurement for the year largely done in tea? What is the level of inflation that you are seeing on a Y-o-Y basis? And can you share the quantum of price increase that you putting through? We are seeing some kind of price increase in the market. So, that's question number one.
Sunil D'Souza (Tata Consumer Products Ltd): So, overall, see, broadly, while tea volumes have been flattish, volumes value has been flattish, market share is stable. So, there's it's not that things have moved. It's overall industry has been soft. I think if I look at overall third-party numbers, it's about -6 is what the number shows. So, from that perspective, I think we are in a not too bad space. We've taken pricing, roughly, I would say, between Q1 to now, you would have seen roughly around 8% to 10% pricing, which is in line with the inflation that we've seen in tea. While the initial bump in the Q1, Q2 was about that percentage, 7% to 8%, right now, if you look on a week-to-week basis, it's broadly in the 2% to 3%. So, we have covered more or less for the inflation in tea that we had seen, but it has
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