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Tata Consumer sets sights on 5 key growth drivers, embracing inorganic strategies when essential

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Tata Consumer has outlined its strategy to enhance its total addressable market by pinpointing five key platforms. The company’s foremost objective is to fortify its current businesses while simultaneously pursuing opportunities in adjacent sectors within the food and beverages industry.

“After evaluating several factors, including market opportunity, profitability, and our overall competitive edge, we’ve narrowed the universe down to five key platforms — current core (tea, coffee, salt), pantry (pulses, spices, staples, dry fruits), liquids (water, ready-to-drink), mini meals (breakfast cereals, ready-to-eat, snacks), and protein (plant-based meat, plant protein powder),” Sunil D’Souza, the company’s Managing Director, said in an address to shareholders, in the company’s latest annual report.

According to D’Souza, Tata Consumer, which had terminated discussions to acquire Bisleri, a packaged water brand, in March this year, will persistently evaluate new segments and categories based on their potential for expansion.

“We will take the inorganic route where necessary, to acquire capabilities we do not possess or need to develop quickly, as long as they meet our strategic and financial filters and align with our long-term objectives,” he said.

In its recently published annual report for FY23, Tata Consumer acknowledged that its profitability was adversely affected by input cost inflation and unfavorable currency movements. The company highlighted that it has taken necessary measures such as implementing corrective price adjustments and implementing structural cost-saving initiatives to address these challenges.

“The macro environment was indeed challenging due to geopolitical tensions, decadal-high inflation hurting demand and consumer choices, monetary tightening, and rising interest rates, impacting the global economy,” D’Souza said.

For the quarter ended March 2023, the company recorded a net profit of INR 268 crore, marking a significant 23% increase compared to the previous year. Additionally, revenue from operations witnessed a year-on-year growth of 14% to reach INR 3,619 crore.

Recognizing that “market disruption has become the new norm,” the company highlighted several key trends in its observation, including digital marketing, e-commerce, the emergence of direct-to-consumer (D2C) brands, and evolving consumption patterns. These trends were identified as both creating new opportunities and reshaping the landscape of the fast-moving consumer goods (FMCG) sector.

According to the quarterly sector update from research firm NielsenIQ, India’s packaged goods sector experienced a noteworthy recovery, achieving double-digit value growth of 10.2% in the January-March 2023 quarter. This growth rate surpassed the previous quarter’s performance of 7.6%.

At a national level, the consumption growth of food in the first quarter witnessed a significant increase, reaching 4.3% compared to 1.6% in the last quarter of the previous fiscal year. This growth was primarily driven by staples. The research firm projected a 7%-9% expansion for the FMCG market throughout the entirety of 2023.

“Value growth has been driven by revival in consumption of rural markets and traditional trade which were under duress for more than a year. In line with stabilisation in retail inflation, price growth further dropped in the first quarter, aiding revival in consumption growth this quarter,” the research firm said.

During the year, Tata Consumer said it increased its direct distribution by 15% and has a current direct reach of 1.5 million outlets and infrastructure to launch 200 new products annually. “The focus will be on strategic initiatives such as expanding distribution network, accelerating growth through portfolio expansion and strong focus on innovation.” it added.

The company highlighted that the planned merger between Tata Consumer and Tata Coffee Limited, intended to establish a more streamlined organizational structure and capitalize on synergies, is anticipated to be finalized in 2023.

SnackTeam
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