Volume growth to be in focus as costs cool: Tata Consumer CEO


New Delhi: Tata Consumer Products Ltd (TCPL) expects consumer goods companies to start focusing on volume growth in the coming year as commodity costs cool, MD and CEO Sunil D’Souza said, as price-led growth of the recent past takes the back seat.

“In the food and beverages space, due to benign pricing and with costs not going up, now it’s a question of volume growth coming back,” D’Souza said in an interview. “You’ll find a lot of players shifting focus from value growth to volume growth because the cost side, rather than the pricing side, is taking care of margins. For us, foods (in India) still delivered 5% volume growth in the December quarter. Our long-term guidance is within this range.”

In the past two years, companies struggling with high food inflation and rising commodity costs had raised prices or reduced grammage to protect margins, slowing growth of mass-market products.

D’Souza’s comments align with what makers of other packaged food companies have been reporting. Earlier this week, Nestlé India’s top boss Suresh Narayanan said benign food inflation will help consumers spend more on packaged essentials.

“The overall commodity or input cost outlook going into next year is largely benign, whether it’s petroleum—and, therefore, everything else that affects the logistics or production systems—or tea or salt. The only one that is highly volatile is coffee,” D’Souza said, adding that coffee prices are rising, but forecasts say they will start to moderate in the second half of 2024.

According to a BNP Paribas report released last month, edible oil prices were down 30% year-on-year (y-o-y) in the December quarter, while crude oil was down 7% over the same period after having declined for three preceding quarters. Palm oil prices were down 6% y-o-y in the third quarter of FY24.

However, D’Souza warned of escalating coffee prices. “We are watching this closely and we’ll ensure we are protecting our market share,” said D’Souza. The company has a large coffee business. D’Souza said the overall coffee business, including coffee plantations and branded coffee, both in India and abroad, has a revenue of about 3,000 crore.

Meanwhile, demand in urban markets outperformed rural markets in the December quarter for the tea and salt maker, reflecting a broader trend in the market. This was also helped by TCPL’s own push to reach more towns and cities, apart from greater growth for its packaged foods portfolio that reported a 5% jump in quarterly volumes.

However, D’Souza expects rural areas to start recovering soon. “From what I hear, right now the recent crops have been decent; prices, whether it is pulses or other crops, are fairly decent. Given the fact that the meteorological department is predicting a normal monsoon and, of course, there will be buoyancy because it’s an election year, I would expect rural to start recovering within a couple of quarters,” he added.

On Thursday, the company that sells Tata tea and Sampann foods reported a 2% jump in volumes in its domestic beverage business, while foods volume was up 5% in the third quarter. On a 12-month basis, however, the India tea business reported a volume share loss of 20 bps in the December quarter, even as the company reported market share gains quarter-on-quarter.

“Tea prices are now largely stable and, therefore, the margins in our tea business are exactly where they should be. With volume growth coming back, and benign tea prices, we will see market share gains from here on,” D’Souza said.

Last month, the company announced two large deals—Capital Foods and Organic India—as it paves way to become a dominant player in the packaged foods market.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *