Tata Consumer sees growth on the back of Starbucks, tea and salt
Tata Starbucksrecorded its highest-ever number of store openings during the year.
- It is now present in 26 cities and the number of stores increased from 221 in FY21 to 268 at the end of FY22.
- It has a leadership position in tea and salt segments, and the premium versions of the latter business are growing too.
AdvertisementAs footfalls into coffee houses picked up after the pandemic, India’s most popular coffee retail chain – Tata Starbucks, is all set for a year of growth.
In FY22, its revenue grew 77% because of record store openings and entry in seven cities. In India, the global major is in a 50:50 joint venture with Tata Consumer Products.
From its presence in just 8 cities in FY19, it is now present in 26 cities. The number of stores increased from 221 in FY21 to 268 at the end of FY22. Tata Starbucks added the highest number of stores during the Jan-Mar period.
“Revenue grew 32% YoY during the Jan-Mar quarter , partially impacted by the third wave of COVID-19. Growth was back on a strong trajectory led by swift re-opening post the third wave with 96% stores re-opened. The business was EBITDA positive for the quarter,” said a report by Motilal Oswal
It also entered seven new cities of Jaipur, Siliguri, Trivandrum, Guwahati, Nashik, Bhubaneswar and Goa. The sales in these stores grew 18% during FY22 on back of relaxing Covid-19 norms.
Leadership in tea and salt segments
Apart from ready-made coffee, Tatas are also making money off other forms of beverages as well. Tea, which has been its mainstay for long – in fact it was earlier called Tata Tea – is also aiding its growth in the FMCG segment.
Tata Consumer Products’ market share in India Tea expanded by 100 basis points to 22.2%. Its salt segment sales have been picking up too.
“Tata Consumer Products has two steady base businesses – salt and tea – with market leadership and potential for sustaining high single-digit to low-double-digit growth in revenue,” said a report by Edelweiss Research.
Its tea business reported 6% volume growth though its premium variants grew at a rate of 1.2 times of overall volumes in the fourth quarter of FY22.
AdvertisementTea prices can reduce but salt will remain high
Tea prices increased dramatically in FY21 due to lower harvest, but they have in India have come off significantly from their peak.
In FY22 too, there was a drought in Assam in May and November, which led to a shortage of the crop. But now analysts say, prices have fallen after a decent monsoon forecast.
“Tea prices are expected to be range bound or even decline to normal levels,” said a report by Motilal Oswal. As prices go down, it will boost demand.
On the other hand, Tata Salt is a household name as the brand is distributed across 2.55 million outlets, reaching 214 million households across the country.
“Salt reported 17% value and 8% volume growth. Its market share expanded by 400 basis points to 37% in FY22,” said a report by ICICI Securities.
AdvertisementThe company continued to invest in differentiated variants of salt and introduced Tata Salt Super Lite, Shuddh by Tata Salt and Tata Salt Immuno. These premium salt portfolio’s gross sales crossed ₹1 billion by growing 26% on year.
The company faced certain issues regarding the sourcing of salt due to rising freight, petroleum and energy costs coupled with erratic rainfall and drought in Gujarat – which increased salt prices.
“The company has taken a price hike of ₹4 over a base of ₹21 between July 2021 and April 2022 and management has guided further price hikes depending on the scenario while maintaining the margins and increasing the market share,” said analysts at Motilal Oswal.
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