TCPL Prioritizes Organic Growth, Eyes Acquisitions

New Delhi, Jun 18 (PTI) Tata group FMCCG arm TCPL will continue scouting for acquisition opportunities in the market to amplify its play, while prioritising organic growth, the company said on Wednesday.

Tata Consumer Products Ltd (TCPL) acquired Capital Foods and Organic India a year ago for a combined enterprise value of Rs 7,000 crore.

“We always are in the market. We have our antennas up, and if there is something sensible at the right price, and it fits in well with our portfolio, we will do that. Rest assured, we have a sizable amount of gunpowder with us, and therefore growing organically will be the first focus; inorganic growth will be more bolt-on (acquisition) rather than anything transformative at this point in time," TCPL director P B Balaji said addressing shareholders in AGM.

Five-year-old TCPL, a relatively new company in the FMCG sector, has made some acquisitions in the past to increase its play in the food segment, which also includes Bengaluru-based Kottaram Agro Foods, the maker of Soulfull.

Replying to a query, Balaji said, the extremely high tea prices should start stabilising now. Therefore, margin and profitability will improve on tea going forward.

"The crop for tea, this year we believe it is going to be normal and definitely better than last year and coffee...the pricing is volatile, and we will need to take a very close look at that, but it looks like the crop could be normal this year," he said.

However, Balaji also added that auction prices for tea are currently equal to last year, and it is expected to soften as the season starts.

TCPL's market share in tea globally is about 20 per cent, he informed.

About TCPL's unbranded coffee business, Balaji said it's an "integral part" of TCPL's business in which it expects double-digit growth.

"We understand the commodity much better having a play in that area, and this business is well integrated with the branded business as well and we are expecting about 21 per cent growth this year," he said.

On its JV Tata Starbucks, which operates the QSR chain of Starbucks cafes, Balaji said it is focused on market expansion and therefore lot of store additions are happening.

When asked about the widening losses of Starbucks, Balaji said:" Same store profitability is under control, and most of the losses that you see are because of the expansion...in terms of stores that we are putting in place."


Over inflation, Balaji said last year, it was "very sharp", particularly in tea, which is a major part of TCPL's business.

"Our first port of call in these kinds of environments is to ensure that we really tighten our belts and get our cost savings. At the same time...we will be forced to do calibrated price increase," he said.

However, he said this has to be done judiciously as it can not price itself ahead of the market competitors.

Over impact on TCPL from Trump's new tariff regime in the US market, he said some amount of demand stress is likely to be there, but it has no major impact.

"From a competitiveness perspective, everybody is equally impacted...We have been holding pretty steady on our Eight o'clock coffee shares, and last two quarters, we are also seeing healthy growth in that portfolio," he said.

TCPL has a significant presence in the US market in coffee, tea and food segments with brands as Eight O'Clock coffee, Tetley, Tata Salt and Tata Raasa. Besides, its newly acquired businesses Organic India and Capital Food, have some presence.

"USA forms about 40 per cent business of Organic India, and for Capital Foods, it is about 10 per cent."

He also clarified that TCPL has no plans to enter into dairy business and edible oil.

Balaji said the FMCG sector is facing several hurdles, from slow consumption growth to stress in urban demand, which is a major market.

"Sunil (MD & CEO) talked about the innovation plans that are lined up, the capabilities that are being built in this business and this is fundamentally strategic for us and therefore we will continue to take care of that," he said.

Balaji said GenZ is an "opportunity" for Tata Consumer and it is reshaping its portfolio, focusing on them. "The portfolio is shaped for the future, particularly on the convenience side, digital side."

He further said TCPL is "well positioned " on the wellness products, which are in demand now, and digital initiative as e-commerce now contribute 13 per cent of its entire sales portfolio.

"Ready-to-cook is clearly a focus area for us, and we are now focusing on breakfast, mini meals, and snacking," he said, adding snacking is a "great opportunity" for TCPL, in which it has acquired Capital Foods and Soulfull, amplifying its play in the segment.