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Business News/ Companies / News/  Starbucks will fetch the next 1k cr faster: Tata Consumer

Starbucks will fetch the next ₹1k cr faster: Tata Consumer

We want TCPL to be a large FMCG company—first building a larger food and beverage firm and then moving beyond. We’ve defined very clearly the platforms which we are going to play in—the core tea, coffee, and salt, said Sunil D’Souza, the managing director and chief executive

Sunil D’Souza, MD & CEO, TCPLPremium
Sunil D’Souza, MD & CEO, TCPL

NEW DELHI : After the talks on acquiring bottled water firm Bisleri fell through, Tata Consumer Products Ltd said it is looking for opportunities to build its packaged foods and beverages business. The company is expanding its own portfolio with brands like Tata Copper+ water, and is exploring product integration with Tata Group-owned airlines, said Sunil D’Souza, the managing director and chief executive. It also plans to double the turnover of coffee chain brand Starbucks over the next few years. Edited excerpts:

Since talks with Bisleri are off, do you still have the appetite for a large-scale acquisition?

We want TCPL to be a large FMCG company—first building a larger food and beverage firm and then moving beyond. We’ve defined very clearly the platforms which we are going to play in—the core tea, coffee, and salt. I don’t think there will be any inorganic moves per se. Then there is Sampann, the pantry portfolio, and a ready-to-drink business under NourishCo; breakfast, mini-meals and snacking under Soulfull besides Tata SmartFoodz. We are just about wetting our feet on a protein platform. Across the platforms we will explore both organic and inorganic opportunities.

It’s not that we were looking only at Bisleri; Bisleri was for the ready-to-drink (RTD) platform which could have transformed the manufacturing as well as a distribution footprint. We will continue to look for inorganic opportunities where there is a complimentary play with the portfolio we have. On the RTD space (Tata Copper+ water, Himalayan, Tata Gluco+ drink) we are concentrating on expanding our own footprint. We have already doubled our manufacturing footprint last year; this year, you will see a similar speed. We will probably take 3-4 years to come to the level where competition is today, that is, if we’re building organically.

How do you see the entry of Reliance in beverages business?

I would not comment on Reliance’s play. They have chosen a certain way to go to market. It is serious competition, so, I will wait and watch. For our own piece, say for Fruski, we were producing at one location, we are now at a second and a third location. The game is now about how much more can we expand the portfolio to play in other spaces in the ready-to-drink market, and how fast can we expand our geographical footprint.

Tata-Starbucks crossed the 1,000 crore mark in FY23 net sales. What is driving growth?

Starbucks is a very strong brand. In FY23 we added about 71 stores, which is the highest ever. For FY24, the target is even higher. We’re now in 41 cities. A year ago we kicked off a pilot which we ran for six months before calling it a success. This involved four pieces that we could focus on—introduce more beverages beyond just coffee because a lot of Indian consumers are not coffee drinkers, and therefore, we introduced milkshakes, masala teas, filter coffee. We also got feedback that consumers would like a smaller size or a more affordable size of coffee—we tried to address both by coming up with a “Picco" size (in hot beverages). We heard from consumers that our food portions are too large, we addressed that. The last part was, we had very western interiors with slightly darker colours—consumers asked if we could make it brighter. This year, in a sizable number of stores, we will be rolling these out.

Will the next 1,000 crore for Starbucks come in a shorter time-frame?

The next 1,000 crore should be in a significantly lesser timeframe because the rate at which we are opening stores is much faster. The scope for store expansion is very, very significant and with that your toplines automatically come in.

With the Tata Group now having large aviation operations, will more TCPL products such as water, tea and food be sold in group airlines?

The group has an e-commerce platform called BigBasket, we’ve got Air India, we’ve got Taj Hotels, etc, so we’ve got various different avenues to access. But each of these companies is either publicly listed or have governance mechanisms in place. So, while we would be preferred, we have to match up on all different parameters to be on those platforms. We are now looking at which of our products we can partner with via-vis Air India—we’ve got to be price competitive and delivery competitive to make sure that we are there.

Can you summarize consumer demand as of today?

We are starting to see early green shoots primarily relieving the stress that had built up on rural demand. Given the fact that inflation is sort of plateauing, interest rates probably peaking and therefore, the outlook for future is that I would remain cautiously optimistic. That said, last year, we saw a lot of volatility, be it the geopolitical conflict, and the jump in crude and petroleum jump, coffee prices went through the roof and then started coming down rapidly. While I expect a much more stable operating environment, at least in the near term, the team is fully prepared to tackle any volatility.

Will you enter the carbonated beverages market and launch a brand similar to Campa Cola or Coca-Cola?

We will not play in the carbonated soft drinks category. I would rather stay out of that because we’ve got two large competitors of scale out there. We’ve got enough space to spaces in the ready-to-drink category.

India tea business reverted to volume growth in the March quarter after two quarters of decline. Is there a fundamental demand or pricing issue in tea?

I would say it is not only about tea growth, but if you look at all FMCG companies across India, they talked about softness in rural, inflation pinching, and therefore, demand dropping. This cycle started about three-to-four quarters back once petroleum prices and interest rates started going up. Rural inflation outpaced urban inflation and agricultural output was not the best, we also had extended monsoons, etc. All this probably impacted the rural piece. For us, the softness in demand was primarily in semi-urban, rural and largely up in north India. Probably November was the bottom, December was slightly better, January-March we saw growth. Even April has started off on a positive note. India tea market used to grow at about 5-7% in terms of volumes—while we are still not at that number, it has started to come back.

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Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Published: 26 Apr 2023, 11:06 PM IST
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