Tata Consumer Products aims for mid-teen revenue growth and a 50-70 basis point EBITDA margin expansion by FY27. The company is banking on its fast-growing 'growth portfolio' and a new push into frozen foods to drive results, despite integration challenges with recent acquisitions.
Detailed Coverage
Tata Consumer Products, a key player in the Indian fast-moving consumer goods sector, has outlined a roadmap to reach mid-teen revenue growth by the end of the 2026-27 financial year. Management is balancing this top-line ambition with a focus on operational efficiency, targeting an improvement in EBITDA margins of 50 to 70 basis points.
Scaling Acquisitions and Growth Brands
A significant portion of the company's recent performance is tied to its 'growth businesses,' which include brands such as Sampann, Soulfull, Capital Foods, and Organic India. This segment reported a 47% growth in the April-June quarter and now accounts for 36% of the company's total India business. While these brands are gaining momentum, CEO Sunil D'Souza noted that the process of scaling Capital Foods and Organic India has proven more complex than initially expected. The company attributed these hurdles to the effort required for category building and refining distribution strategies in new markets. Management maintains an optimistic outlook, targeting a growth rate of 25-30% for these specific brands as operational strategies mature.
Strategic Push into Frozen Foods
To diversify its presence beyond staples and beverages, the company is entering the frozen foods segment. The rollout is starting in the National Capital Region (NCR) before expanding to cities like Mumbai. This phased approach is designed to test the viability of their cold-chain logistics before committing to a larger national footprint.
Managing Commodity Costs
Profitability remains a key area of focus amid volatility in raw material prices. The company is dealing with inflationary pressure in tea prices and packaging costs, which are sensitive to fluctuations in crude oil prices. To protect margins, the company has implemented selective price hikes, including a recent increase of ₹2 on salt packets. These pricing actions, combined with adjustments in the product mix, helped the company report a 29% growth in EBITDA during the first quarter, despite a 12% rise in revenue.
In the international segment, the company has seen seven consecutive quarters of market share gains in the US. While rising coffee costs recently put pressure on international margins, the management expects these costs to moderate later in the year, which could provide further support to overall profitability. Investors will be tracking the company’s ability to sustain margin expansion while managing the integration of its newer acquisitions and the successful execution of the new frozen foods category.