Tata Consumer Products Ltd (TCPL) is viewing the current food inflation as a “short-term blip” and expects it to moderate in the next two quarters, along with a revival in consumer demand, according to its Managing Director & CEO Sunil D’Souza.
TCPL rules out price hike amid pressure
TCPL, the FMCG arm of the Tata Group, has ruled out any immediate price hike despite margins being under pressure, as it wants to “continue the volume momentum” as part of its growth ambitions.
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“We are a growth company, and we will target double-digit top-line growth (revenue) and bottom line (margins) ahead of the top line, accepting for the right short term, which is the next two quarters,” D’Souza stated, as per ET. He also stated that food inflation remains high and in October, it was almost at double-digit, impacting urban consumption to a bit. However, the good news is the vast majority of India lives in the villages and the rural demand has started to come back after being under pressure for some quarters.
“In the short term, probably for a quarter, or maybe two quarters, you would see a pressure on margins. But I do expect momentum on top line and market share to continue,” he said.
FMCG majors experience sluggish growth in urban markets
Recently, several listed FMCG makers in their latest September quarter results reported an impact on their earnings due to high food inflation, which slowed down the pace of urban consumption. “Food inflation is a short-term blip and over the next two quarters, I do see that moderating and when that moderates, we do see demand coming back,” he added.
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In segments like tea, in which TCPL is a leading branded player, the company saw an increase of about 25-30 per cent in raw material prices but it did not pass on the price hike to end consumers. “We don’t want a demand shock coming in. So we have to be comparative. We have to make sure the category continues to be chugging along. So we have translated bit by bit, and we will be taking gradual price increases,” he further said.
According to D’Souza, he is a “firm believer” that margins will come back if structural costs are right, but if you lose on market share, “getting it back is a very expensive and tiring climb back”.
“Structurally, in the last five years, we had a 12 per cent top line, 14 per cent EBITDA growth and close to 20-23 per cent of net profit. We aim to continue that trajectory going forward,” he mentioned. When asked about the price hike, D’souza said besides the tea and salt category, he did not see “any significant increase”. “Pulses (Tata Sampann) did have inflation in the first six months, and there, we calibrated the prices very quickly,” he said, adding that “gradual price increases in tea and salt have already taken it and the balance would be minimal”.
