Tata Consumer Products MD Sunil D’Souza flagged rising food inflation and crude oil prices as risks to consumption. He said, "Thirty per cent growth for a long run, not an issue." While heatwaves hit tea volumes, the company expects a recovery as winter sets in and growth businesses expand further.
The company expects tea volumes to recover as winter sets in
Tata Consumer Products MD and CEO Sunil D'Souza flagged rising food inflation and crude oil prices as risks to consumption, even as the company expects tea volumes to recover and its growth businesses to sustain 30 per cent growth over the long term.
Speaking to businessline in a post-results interaction, D'Souza said consumer price inflation was above 5 per cent, while food inflation was approaching 6 per cent, raising concerns about the outlook for consumption. "Oil is now over $111 a barrel. At this range, it is still not something which would keep us awake, but if it starts moving beyond this, downstream inflation can continue to put pressure on margins and therefore prices and total consumption.".
Long-term growth
The company's growth portfolio, comprising Tata Sampann, Capital Foods, Organic India and ready-to-drink beverages, grew 40 per cent in Q2 FY27. D'Souza said the company remained confident it could sustain long-term growth of around 30 per cent, supported by the shift from unbranded to branded products and the expansion of e-commerce and quick commerce.
Capital Foods and Organic India recorded 24 per cent growth in their domestic businesses during the quarter, while shipping disruptions and a 10-day disruption at Mundra port in early September weighed on their reported performance.
"Thirty per cent growth for a long run, not an issue," D'Souza said, adding that margin expansion would remain a priority as the businesses scaled up. Tata Sampann's margins have improved from negative 5 per cent at the start to around 14-15 per cent, he said.
Tea volumes
Tea volumes, meanwhile, were affected by an extended heatwave, the El Niño effect and deficient monsoons, which reduced consumption and affected crop output, pushing up prices. With prices now stable and the winter season approaching, the company expects tea volumes to recover, particularly in northern India.
Tata Starbucks reported same-store sales growth of 16.4 per cent in Q2, driven by a 10 per cent increase in customer traffic and a 5 per cent growth in average transaction value. Overall revenue grew 15 per cent. D'Souza said customer traffic had started to recover after a prolonged period of weakness, supported by initiatives across food, pricing, product innovation and localised marketing.
The company plans to open 40-50 Starbucks stores this fiscal year, with expansion expected to accelerate over the next 9-12 months. The chain had 505 stores across 81 cities. D'Souza said the vast majority of its stores were profitable at the store level.
Tata Consumer Products' revenue from operations rose 14 per cent year-on-year to ₹5,661 crore in Q2, while net profit increased 16 per cent to ₹470 crore.