Q3 20/21

Feb 2, 2021

Ladies and gentlemen, good day, and welcome to the Tata Consumer Q3 FY 'twenty one Earnings Conference Call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator with the pound and zero on your touch tone phone. Note that this conference is being recorded. I now hand the conference over to Mr. Manoj Menon, Head of Research and Consumer Analyst at ICICI Securities. Thank you, and over to you, sir. Hi. Good evening, good morning, good afternoon, you know, depending on which part of the world you are joining from. Welcome to the Tata Consumer Call. It's our absolute pleasure to host the management for a discussion on the q three FY twenty one results. We have with us today mister Suhil D'Souza, the managing director and the CEO from the company mister L. Krishna Kumar, executive director and group CFO mister Rajeet Krishna Kumar, COO and mister Akesh Soni, global head strategy and M and A. Over to the management for the opening remarks and for further proceedings, please. Hi. Hi, Manoj. Thank you so much. Good evening, everybody, and welcome to the quarter three results of Tata Consumer Products. I have with me my colleague here in Bombay and Nidhi, who is our head of investor relations. I'll hand over to Nidhi now. Over to you, Nidhi. Thanks, Satish. So if you could move the slide, please, Satish. Hi. Good evening, everybody. So this is pretty self explanatory. The agenda Rakesh, can you go back? Yeah. The agenda of today's call would be a quick presentation by the senior management, and then we will open up the floor for q and a. Yes. Next slide, please, Rakesh. And for those of you who are joining us for the very first time, we are Tata Consumer Products, and, we were formed, by merging the consumer products business of Tata Chemicals with Earth's Wild Tata Global beverages February 2020. So we are less than a year old in our current avatar. We, of course, are home to some of the most iconic brands like Tata Salt, Tata Tea, Tetris, Eight O'Clock Coffee, and some of the more younger and emerging brands like Tata Fun Fun and Himalayan. So that's us in a nutshell. I would like to now hand it over to Sunil. Sunil, over to you, please. Thanks, Nidip. Thank you, everyone, for joining us today. If I take you through the executive summary of our performance for the quarter ended December 2020, during the quarter, our consolidated revenue was up 23% year on year with group net profit up 29. The India business top line accelerated sequentially, while international markets also delivered a strong performance. Overall, all in, the India business grew by 36 led by packaged beverages, which was up 43 with 10% volume growth. India food business also was at 12% volume growth and grew 19% on revenue. We had sequential improvement in Narishco's performance with a 9% revenue growth. Branded International, if I exclude food service, which is the empirical food service business in The US, grew 13% with underlying constant currency growth of seven. Consolidated EBITDA for the quarter was up 12, while volume was very strong. Revenue was strong. EBITDA was up 12. With strong margin delivery in the international and India foods business, the India tea business had to walk the fine lines between margin, volume, and market share, and therefore, there's margin pressure during the quarter, while the overall year to date margins have been largely stable due to despite a period of hyperinflation in raw tea prices. Have made significant progress and moved forward with our transformation journey while maintaining our focus on volume growth and competitive market share performance, the details of which we will share in a short while. We continue to invest behind our brands to drive long term growth. But more importantly, we continue to focus on the building blocks for the future, sales and distribution, infrastructure, digital, advertising and promotion, and innovation. In line with our strategic intent of entering new adjacent categories in the food space, we have now entered into an agreement to acquire 100% equity stake in Cotterum of Agro Foods Private Limited. The brand name there is Sole Food. Additionally, we also exited the map coffee business in Australia in line with our portfolio revamp. If I want details of the performance, India business, revenue of 1,275 crores, growth of 46 per percent on the back of growth, double 3%. India grew 631 crores, volume up 12, revenue growth 90. US coffee, volume seven, constant growth of six, revenue growth 11 at 321 crores. International tea, again, a volume growth of six percent, constant currency revenue growth of seven, total revenue growth 14 at 549 crores. Foodservice, and this is the business that I was alluding to, was down 20 in volume, down 31% in down 28% on overall revenue at 56 crores. Tata Coffee, which has already declined its results, volume growth negative four, revenue up one at 200 and twin 212 crores, total consolidated constant currency up 21, including ForEx '23 at 3,070 crores. For the nine months of this fiscal year, India business built a strong volume growth of 88% on India beverages, Revenue growth of 30%, and that's primarily because of the rise in tea prices and, therefore, our pricing in the market. Revenue, 2,396 crores. India business volume, India Foods volume up nine, revenue up $171,800 crores of revenue. US coffee, double digit volume growth at 10%, revenue growth at 90, and almost a thousand crores of revenue. International tea, 4% volume, 13% revenue, almost a 1,500 crores of revenue. Foodservice, albeit improving, but still negative 35 in volume, negative 36 in revenue, 146 crores all in. Tata Coffee, volume up six, revenue up 10, and 684 crores of revenue. All in, 8,565 crores, up 18%. In summary, for the quarter, 3,070 crores, up 23% on revenue. EBITDA at 365, up 12%. Profit before tax of $290.98 crores, up 13, and group net profit at 237 crores, up 29%. Margins at 12% almost 12% on EBITDA, but down 120 basis points versus the same quarter year on year. Profit before tax, 9.7% margin, down 90 basis points, but group net profit up by 30 basis points at 7.7%. Our EPS was 2.37, up 29%, and we've got now net cash of 1,550 crores sitting on our balance sheet. For nine months, $88,565 crores, up 18%. Revenue, $12.53 crores. EBITDA up 26%, PBT, thousand 80 crores up 29, group net profit eight fifty six up 47. We have grown margins on a nine month basis across EBITDA, PBT, and net profit, and EPS up by 50% at 8.71. Now we have outlined six strategic priorities, and we've talked about it in the past, starting with strength and accelerating core business, driving digital and innovation, unlocking synergies, creating a future ready organization, exploring organic and inorganic new opportunities, and embedding sustainability. To give you a glimpse of how we progress against those priorities, starting with strengthening and accelerating our core business and powering our brands, So we have started our APL drive, especially in the South. So this is what you see our partnership in with the IPL team in Tamil Nadu. We strengthened our position on Tata Gold in the East. We ran a digital campaign for and we continue to run digital campaigns behind Tata Samphan Spices, leveraging our celebrity chef, Sanjit Kapoor. We advertised value added salts after a long time leveraging Conmanika Karanpreeti. I will talk to you about the results in a bit and continue to power a and p be behind base salt the ID and differentiation. Just as a perspective, for ATL in this quarter in India, our total ATL spend was up by 40% versus last year. If I move to innovation, which is our next big priority, beverages was up to a fast start. So we've relaunched Cutesy Green. We've launched Techie Immune Green Tea. We've launched Tata Tea World Care in select markets. Poha, which is growing five weeks, albeit on a small base versus last year. We've added to it by launching ThinPoha, and we've seen very strong traction. Apart from that, pre boiled tea start up with chai giving the convenience of boiled tea in a sachet launched in select markets and, again, off to a good start. We continued our innovation drive even on the international front. So herbal infusions in The UK, Australia, and specialty teas in Canada. Apart from that, we had launched Gudai in Chainsbury, which is off to a good start. We've extended the Gudai range by launching Kombucha. Incidenti Kombucha has won the best NPD award from the Kantar group. Apart from that, we've also taken this opportunity to leverage our infrastructure in The US to expand our India portfolio to appeal to the Indian diaspora. So we've launched QuickChai and Tata Coffee brand, in The US. With that, I'll hand over to Ajit to walk you quickly on the integration status and how we are unlocking synergies. Thanks, Anurag. As as you all recall, we have been updating on the taxes and the integration that started shortly after the merger was closed in February. So it has been almost exactly a year since we started this process. The two points I wanted to highlight at the high level. One is that this formal process that we've been running essentially concludes by quarter four in in this current quarter a. And b, the objective that we had set out in in earlier conversations with you, we have we believe we have mostly achieved. I'll highlight a couple of points from the latest quarter. I think we mentioned last time that the synergy identification had been done and that synergies that actually started flowing through. So it has been going through, and some of that has been visible inside our results. They are consistent with or slightly better than what we announced when we the original transaction was announced in May 2019. In terms of SMB, which is a significant focus, and we'll cover that more in a minute, the substantial infrastructure of the India SMB, if you could speak, that would include, for example, a consolidated product the partner. So we have essentially a distributor across most of India for our food and our beverages business. The digitization of that, when it comes to urban and complete, rural is essentially very far along in terms of its rollout. In terms of the back end, for example, the EFA consolidation that has been completed for the last release of India, We expect that to be completed by q four of this year. In terms of digital, also, have made substantial progress. We expect in India with the ERP and S4HANA in this quarter to also gone live with the after this planning software for each demand planning in q three, and the supply planning piece of that will go live now. So we are substantially along the way, and we will conclude, as I said, by this quarter. The critical piece to me here is that these are essentially enablers for the performance that we hope to generate. Some of that is already visible, and I'll hand it over to Sunil to walk through the what is meant for, for example, our cable distribution network. Thanks, Rajiv. So on this slide, you will see the integration update in terms of sales and distribution. So we have substantially completed our entire combination of distributors, and all our distributors are now 100% food and beverage. We've trimmed down the number of distributors by about 63% and got scale and focus distributors. With that said, while the number of distributors has come down by 63%, dedicated sales reps and feet on street has gone up by 30%. This is in line with our target to doubling direct distribution in twelve months from start of the integration. Outlets built, unique outlets built for three months are up by 65%. And the best part is 80% of these outlets are now billed monthly, which shows a frequency of coverage that we needed to put in place. Rural feet on street, we've got about 700 TSOs out on the streets, which is three x of the number that we had. We've got exclusive distributors and now direct servicing for a large chunk of modern trade and ecommerce. 100% of our distribution and channel partners are integrated in terms of automation, and therefore, we have real time access to data. And while we've done that, we make sure we've held a tight line on accounts receivable, and our accounts receivable base are literally halved from where they were in the month of March. It is just true that we are moving from a largely wholesale model to more of a retail servicing model. Apart from that, exploring new opportunities. We started off on our journey on exploring new opportunities. So, Sunfun, our total business is up by 40% year to date. I talked about value added salt and powering A and P behind this. The value added salt is up 110% year to date. Coffee is the other one which we have embarked on, and we have seen sequentially improved sequential improvement on this portfolio. Quarter one, quarter two, quarter three, growth of plus 30, plus 21, and plus 32, respectively. The Narishco portfolio, which started negative 68% in April, is now up 9% as we exit quarter three and going from strength to strength. I talked about the acquisition of Potaram Agro Foods, which is are exploring new opportunities inorganically. In line with our expansion priorities, we have now acquired 100% of the brand, Solefull. This tuck in include acquisition, and you'll see many more of them as we go along, will enable us us to have a better place in the better for you product category. Now this folio straddles multiple consumer occasions, breakfast, snacking, mini meals, convenience, healthy, key label, no maida offerings targeted for millennial families. It's a strong brand built in select urban and and the key out here is select urban markets because their total reach is 15,000 outlets. And just remember, our total numeric reach today is about 2,400,000. We started off in March with 2,000,000, expanding our SMB. We are now at 2,400,000 outlets. So it will start to 15,000, therefore giving us a huge opportunity to expand this brand across the country. It's got a young, passionate, purpose led management team, which we retain as we go forward. It's got in house manufacturing and R and D capabilities, allowing us for portfolio expansion very quickly. And they've got a strong NPD pipeline in the works, which allows us to expand the business. In terms of a transaction overview, we acquired 100% of the shares for a consideration of 156 crores. The company is to be renamed Tata company is to become a 100% subsidiary of Tata Consumer Products. The transaction is expected to close by end of this quarter, and it will be integrated into Tata Consumer Products starting with the sales and distribution system and gradually the entire business. The founders and key management, as I mentioned, will continue to be with the company. And it's a strong strategic fit for our health and wellness portfolio. We we can we have they have built a platform with differentiated offerings in the health and wellness space with an estimated market size of about 20,000 crores, which is projected in the next five to six years to grow to 40,000 crores. It's adjacent to our core category of for better food products, access to a fast growing brand with a new addressable target group. Most importantly, the opportunity to expand both categories. Now just to recap, as mentioned, whether in the kitchen brand, primarily catering to pantry of the kitchen. And this one would play on the table on the go. So both the brands would complement each other appropriately. It also gives us an opportunity to new consumer occasions in breakfast snacking. And the categories that it plays in, cereals, mini meals, health snacks, and protein drinks, are currently growing at 15%, which we will take advantage of. It's margin accretive to the total business, and we will expand the portfolio in line with current consumption trends. I did talk about the synergies of 15,000 outlets versus 2,400,000, which is our total numeric reach, and therefore, scope to unlock significant synergies in sales and distribution. Apart from that, the back end in terms of procurement, manufacturing, logistics is the other piece, I think, which we can unlock. We're looking at adding the Tata brand. Consumer research shows us that adding this only strengthens its credentials and takes it completely to a new platform. We have the innovation center at Pune, which already has very strong knowledge on Millet and the like. And, therefore, we can leverage our r and d capabilities to build the platform for the future. And the strong and passionate team that we acquired with SoulPul supplemented with TCPL expertise, will create magic. Definitive agreements have been signed. We expect to close by quarter four twenty twenty one, and we will then commence operational integration. In line with our strategic priority on embedding sustainability, we continue to focus on ESG. For the second year in a row, we've featured on the CDP a minus list. In 2020, we continue our water programs of project Jalajjal and Assam, benefiting about 25,000 people. We've decreased our carbon footprint by 26% over the last ten years, and 12% of our energy is from solar. Waste management, both The UK and India, we are very much part of our base of base management processes. Sustainable sourcing, we won the trustee program, won CII Food Future Foundation National Award, which recognizes our work done. This program verified 680,000,000 kgs of Indian tea, positively impacting over 6,000,000 workers and 57,000 small tea growers. We initiated the UNICEF Malawi project this year. Apart from that, the UNICEF improving life program in Assam 02/1950 and we continue our work on health care for people in Munnar, Assam, and we are a proud supporter of the Canadian Cancer Society. In terms of macros, No big news on the left hand side. All our three major markets are coming back very strongly. And US, while it jumped into positive territory on GDP growth, UK and India still are slightly below the 0% mark. The interesting piece is the piece in the middle, which is the prices. After having a record 70 to 80% growth over last year in the months of August and September, which was quarter two for us, now we are seeing prices come down. Although that said, they still remain about 15 to 20% 15 to 30% above last year. Because while they did come down quite significantly in December, we have seen them inch up and sort of stabilize at a level early January. Coffee prices, while Arabica coffee prices saw slight uptick, Robusta was largely stable. In terms of the categories that we play in, in The US, we saw a decline in regular black tea after strong growth of q one and a decent growth in q two. But coffee continues to be high single digit, albeit off the highs of growth that we saw in the last two quarters. In The UK, after growth in q two, black tea has started to get into declining territory, but we continue to see strong growth in fruit and herbals. Canada, we saw growth both in black tea and in specialty tea, high double digits. This is because Canada was one market where the second round of COVID and the lockdowns combined with sales promotion run has spurred on the category. India, we saw 14% growth for, branded tea, a volume growth of four. Revenue growth has accelerated from six to 14. But that said, I think the entire impact of the cost and therefore pricing taken in the market are still not reflected. You could expect this number to keep climbing as we go in into q four. A quick snapshot of our different businesses, starting with India, 10 volume growth, 43% revenue. We continued with market share gains, 50 basis points versus last quarter and 94 basis points versus same quarter last year. The margins for the quarter were definitely impacted by the inflation and competitive pricing. But as I said, we've maintained a fine line between margin, volume, and share, and we think we delivered a good result. Year to date, the segment margin is still at 14% despite unprecedented inflation in tea prices. We have gone aggressive with Tata Coffee Grain. We've reformulated product as well as pricing in low unit packs. Restage of Kanandevan and Gemini, both of which play in the South, happened during this quarter. India Foods, 12% volume growth translating into 19% volume revenue growth. Third successive quarter of double digit revenue growth across the Salt and Sampan portfolio. Salt revenue was up 19 in q three with double digit volume growth. Market share, again, we've continued market share gains with the highest ever sales volume in December. Tata company portfolio grew high double digit despite in home consumption normalizing, and EBIT margin expanded despite doubling of advertising spend year on year driven by mix and a tight control on cost. Our value added sales portfolio, I talked about it, was 2.7 x versus the same period last year. Narisco, I talked about it starting from a negative base in quarter one. April was actually minus 68. It is now growing, up 9%, 33 crores in revenue. Black back in growth trajectory with very strong growth momentum in December. December was up 40%. Tata Gluco Plus and Tata Water Plus are key drivers. Himalayan is still a bit soft with on premise still being still running behind the curve, if I may. Tata Water Plus achieved highest ever volume growth in December and goes from strength to strength. And we continue on our plans and expansion both for geography as well as capacity, and making sure our innovation pipeline, is ready to deliver. Tata Coffee, we had 6% growth in plantations and overall growth of 1%. Extractions was down 3%. Top line overall 1% growth was led by Vietnam Extractions and Tea Plantations, which helped outside offset the decline in the India Extractions business. The India extractions business, the decline was led by a softening of the European market, which is the primary consumer for the India business. Apart from that, severe shortage of containers across the world and shipping jams did not help. The Vietnam plant is now operating at 93% capacity, and new product development is gaining traction. Tata Starbucks, we've seen strong sequential recovery with December now at 90% versus last year. We're now present in 15 stores 15 cities, 209 stores, and 92% of stores are open. The stores which are not open are primarily in office and mall complexes. They returned to being EBITDA positive in December 20 despite the pressure on the top line. The nonmetro cities are recovering faster. High Street is recovering faster. We opened 13 stores during the quarter. We continue to focus on making sure we are maintaining our momentum on new store expansion. It should be broadly in line where we ended last year. Dining capacity is still at 50%, and this is the one which is holding the top line down. That said, dining as a percentage has come back very, very strongly. And we continued our effort to bring the brand with the stay safe with Starbucks campaign, a new film on social media, launching various programs, including the Starbucks one ninety celebrating eight years in India, the Tata Starbucks empowering girls and young women program where every store supports girls education, and leveraging Indian festivals by launching the Diwali blend, Pan India, a cost of a kind initiative right now for India. On the international pieces, starting with UK, we had a 1% revenue growth in constant currency terms with volume growth of 5%. It was led by discounted channels while out of home and wholesale continued to be under pressure. Goodhart, Pee, and Kombucha, which we have launched now in The UK, continues to see good traction, especially in ecommerce. Tech Tree continues to grow share in the rapidly growing segments of decaf, fruit, herbal, and green. And we've seen strong profitability on account of good overheads management and lower trade promotions. Tea pigs, our super premium brand, grew by 32%, and we more or less maintained our market share in everyday black. In The US, coffee was a revenue growth of 7% with volume growth of sorry. Revenue growth of six with volume growth of seven, a strong uptick from previous quarters when volume declined. We had the c we are seeing the retail coffee category slowly returning to its long term average growth rates. Ecommerce channel continues to grow at an accelerated pace, and we are maintained more or less maintaining our market share around the 5% mark in The US market. Tea, excluding empirical, which is our out of home business, which has got impacted, we've seen robust growth of 18% against the volume growth of '22, especially strong growth seen in the grew Gouda new launches of Sensorial Blends, and the Tea Cateri continues to be driven by the specialty tea. I did talk about the food service business that continues to remain under pressure with the second wave of COVID not helping us, but we continue our innovation focused overall on coffee. Cafe Arriba launched in select Hispanic Florida markets and continuing to run promos behind 08:00, including raising masks to those who have served in the American military and offering free bags of 08:00 on Veterans Day. Canada, which is a strong market, exceptional revenue growth of 24% on the back of 19% volume. Canada was one market where we saw an upsurge again with the second round of lockdowns. We have not seen a similar upsurge in The UK or The US. We have seen a 41% revenue growth in specialty tea outpacing the market, and Tetley continues to be the number one brand in the market, both in regular and specialty now. We launched a range of Tetley Super three point zero range in in Canada and strong profitability in Canada driven by higher sales as well as a strong control on overheads. In other updates, we have maintained close to 30% market share and continue to run extensive ATL campaigns in Canada. In terms of award and awards and recognition for the company overall, for our annual report, we received an award from the League of American Communication Professionals. I talked about Tata Consumer Products receiving an a minus in CDP and being recognized in CDP's leadership bank for the second year in a row. Sustainable sourcing, the trustee TCP partnership, receiving an award from the CII Food Future Foundation. And six of our packing centers received food safety awards from CI one for outstanding performance. Apart from that, we were voted the number one brand in the tea sachet category for the eighth consecutive year in Portugal. With that, I hand over to mister Krishna Kumar for highlights on our financial performance. Thanks, Puneet, and good morning, evening, good afternoon, everyone. I'll walk you through highlights of the financial performance. As Puneet said, overall, it's been a strong quarter with 23% growth in top line and 29% in bottom line. Though the India business was impacted by the inflation in the tea cost, and we chose to focus on volume on share. Talking to the slide for the quarter in stand alone, in stand alone is the foods business, the tea business that also has some amount of non branded business included in the stand alone result. Turnover of $14.63 crores increased by 500 crores or 34% to $19.63 crores. EBITDA dropped from 208 to $1.97, largely a function of tea cost inflation. Overall, the food business did well with improved margins, but profitability was impacted in the tea business. Moving on to the consolidated revenues. $2,004.93 crores in the previous year, increasing by $5.77 crores or 23% to 3,070 crores. Of this increase, about roughly about 7% or little more is attributable to volume growth, and we saw volume growth across all markets and categories. In terms of operating profit, up by $13.09 crores, 12%, lower than the growth in turnover because of inflation in tea cost. Moving on to the next slide, consolidated financials. Just walk you through some of the key line items. For the quarter, revenue at 3,070 crores, up by 23%, of which 2% is FX. Roughly 7% is volume, and the balance is price increases to cover the inflation and some amount of price increases or reduced promotion intensity in different markets. The increase in EBITDA apart from the cost inflation includes also higher spend on brand and overall tight control over discretionary costs and various elements in the cost line. EBIT at 300 crores is higher by 13% compared to the same period last year. Moving on to tax, you will find the tax at 55 crores is lower compared to 75 crores in the previous year. There are three reasons for that. One is the change in mix, and it's been a strong quarter for the international business with a lower rate of tax. There's also been element of restructuring. And thirdly, there have been some completion settlement of assessments. So there have been some credits consequent to that. Talking about performance for the nine months, revenue, $8.05 $6.05 crores, an increase of 18%. EBITDA margin, 14.6%, an increase over the same period last year. So on a YTD basis, operating margin is higher than the previous year. So for the quarter, we have been impacted by pre cost inflation. PAT, $8.60 crores compared to $5.85, a 47% increase. So overall, strong YTD performance, little bit of impact on margins in India, and that's consistent with the overall trend for the industry, and we are focusing on volumes and gaining market share. Moving to the standalone financials. Revenue up by 24%. Operating margin lower than operating margins for the quarter stand alone, lower than the previous year, again impacted by key costs. PAT is also lower because of the reasons that we have explained. For a nine month, revenue from operations, by 22% and VAT, high by 19%. Operating margin, stable for nine months in India compared to the same period last year. Moving on to segment performance. India beverages, an increase of 46%, and we saw earlier in summary slide that the revenue growth was about 10%. India, of course, an increase of 19% in revenue, of which 12% was volume. International's average, an increase of 9%. And the underlying volume growth is different in different markets, but roughly a 6% growth in coffee and a 6% or thereabouts growth in tea, excluding auto foam. So overall, it's been a quarter of robust volume growth coupled with price increases. Moving on to the segment results. In India segment, profit lower by 38%, 79 crores versus $1.28, largely a function of tea cost inflation in India. India puts a strong profit growth, 41% improvement, good growth in salt volumes. But in addition to growth in salt volumes, it's also an element of premiumization as some of the new salt variants and new softened variants have done exceedingly well, improving the premiumization and the level of premiumization in the product mix. International beverages, $1.23 crores versus 79 crores, an increase of 56%. The volume growth is a major contributor. But in addition, it is also mixed because we had strong performance in Canada, outstanding performance by TBREAKS, which is a premium brand, and also an element of cost control, which helped to achieve a fairly record operating profit from the international business. If you move on to the pie chart on the right, India beverages 45% of the total revenues. India affords 22%. Together, India business accounts for almost two thirds of the total revenue. Moving on to the segment results. India beverages, 27%, lower in relation to turnover this quarter. So on a YTB basis, the trend is different. International beverages profitability contribution to the total is higher at 41% compared to the earlier quarter. So that's it on the financials. We're happy to answer any questions. I'll just walk you quickly through the outlook for the business. All of you are aware that the COVID nineteen vaccination programs have started in various countries, and this should help with economic growth beginning next year. The Indian economy especially seems to be in a recovery path with key macro indicators moving up and all in home consumption categories normalizing. The second wave of COVID nineteen in The US and UK does present us some level of uncertainty because, a, we are not seeing the pantry loading that we saw last time around. And second, we are seeing lower footfalls in retail stores, and that could put a bit of pressure. Fee inflation, we talked about it. In India, it remains a challenge in the near term. But given all the building blocks that they are putting in place, we remain very, very confident of the medium to longer term. But we need to navigate margin pressure while staying focused on volume and share growth in the near coming quarters. The distribution expansion in progress and growth in a a momentum in India food beverages and ready to drink business, we expect to see continued momentum in these businesses. The addition of SoulPool will now give us an opportunity to expand our product portfolio and participate across multiple consumption occasions and multiple categories. The international business is expected to normalize once the vaccination program is complete, which hopefully should be either late q four or somewhere in q one, we should start seeing trends coming back to normal. Meanwhile, we will continue our transformation journey that will help us deliver on our strategic priorities. With that, we come to the end of this presentation, and we would open the floor to questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question are requested to use handsets for asking questions. Ladies and gentlemen, we will wait for a moment to answer the question to your service. To ask questions, please press star and 1. The first question is from the line of Adnan Midra from Credit Suisse. Please go ahead. Yeah. Hi. Good evening. Thanks for taking my question. My first question on the salt business where you've seen this very high growth in the last couple of quarters in the value added premium salt business. So my question was that in terms of after the go that you've seen, approximately, what part of your call for for you would be, you know, beyond will be value added? And do you get a sense that there is an actual offset growth in these these these products to the level of your growth, or there is a bit of distribution for pipelining as you have expanded distribution? And where I'm getting at is, you know, do you see this one time very large jump here, or do we see this actually being a very fast growing segment within your call, let's say, for a three to five years here also? So so let me let let me leave you with two or three points, and I'll ask LK to jump in. Number one is we have seen share gain in salt. So it is obviously not only volume and distribution expansion that has led in in in part to volume growth as well as share growth. That's number one. Number two, we've always maintained that we have a good opportunity in Salt to expand the business both on the March end where we have local brands and unorganized players as well as on the premium end. With that, we are now, I mean, focused on the higher end, and we are seeing traction there. But we are also seeing growth on the lower end. So I would say it's a combination of distribution expansion. It's ATL as well as expansion of portfolio because of which we are seeing growth. I do not think distribution, and channel loading, if that is what you're referring to, has played any significant part in the salt growth. Okay. Thanks thanks for that. And my second question is on Soulful. So congratulations on the acquisition. So, you know, Soulful, of course, we have been a lot of the validation opportunities, but it has a very niche, you know, extremely health oriented positioning. So would you, in the, you know, medium term, use this to broad based into existing products also in this segment? Or do you think think the brand is has got its strength in its mission, you know, if you will probably want to keep in that range? So so one of the biggest reasons why we've acquired Soulful is this current positioning of Better For You, and it's resonating with consumers in places where it plays. They've got a very strong product pipeline, and we see an opportunity to grow just by distribution expansion in the first place and then focusing on product expansion. As said, right now, I do not think there is an intention to dilute the positioning of the product because if anything, it plays up to what we, bull's eye of what exactly we were looking for. Okay. And if I may just ask one last question on international margins, we've seen an expansion this year. Some of it may not be sustainable because we would have had COVID benefits or better mix and things like that. But what is FY '20? Are there some components of the margin expansion of cost savings which would be permanent in nature? And if you could highlight what will be those areas? That was the last question from my side. So I think there's there's two, three things here. I think the COVID impact, really, there is a onetime impact, and there is a continuing impact of COVID. COVID come at the mark. I'll come to pass a bit. Right? So overall, what COVID has done is it has increased consumption in home. Tea is a winner when it comes to consumption in home. And even among coffee, because people are drinking coffee at home, brands which get it in house in in home consumption have a higher growth rate. So that's apart from sanitary loading and all that, which you saw in quarter four or quarter one, there's a slight uptick in categories. That's the message I want to leave. How much of that will continue? We believe some of it will continue. The second part is premiumization and, you know, mix. And I think a fair bit of that is is sustainable because, clearly, that's come because a lot of people are now buying online, and they're willing to experiment and buy a newer newer brand, newer brand. And the product portfolio and the margin has more and more part of the portfolio gets sold through online is also improving. And we have I mentioned about TPx, which is our premium offering having record growth. In Canada, we have seen very good growth in some of our specialty fee, herbal offering. So people are discovering that, and and some of that is going to stay. So I think some element of mix is going to stay. Question mark is how much of slight uptick in category volume growth will stay. Right? Some of the projects will remain. On the cost front, yes, there there has been a lot of work on the cost, and I think there is further work which can be done in terms of cost. And that said, we need to do more in terms of making it sustainable. We also have an element of and looking into the future of sterling sort of stabilizing from the Brexit load, and the future will have a continuing somewhat favorable impact. I think many factors are working in favor in addition to COVID. But we have to work hard to make it sustainable, and the demand of how much of this will continue, we need to watch. Thank you so much, and all the best. Thank you. The next question is from the line of Pershi Pantaki from IIFL. Please go ahead. Hi. Good evening, team, and congrats on a set of good numbers. I have two questions. Let me put both of them upfront. So first is pretty straightforward. If you can give some idea on Soulful in terms of the total turnover and the gross margins of the company, that would be really helpful. And secondly, on the price increases, see, you have done 43% value growth and 10% volume growth. So that's approximately 30% price increase you've taken. And I have two sub questions to this. So first is the 30% price increase Yeah. And correct me if my inference here is wrong, is higher than what the other large player in the market has taken. So does this sort of not worry you from a competitive standpoint? Because if not now, over a longer period of time, this price differential I mean, will it sustain and at what cost? So that is sub question one. And sub question two is that the fee cost has already come down, and it's just a matter of time when, I mean, your inventory runs out or whatever couple of months here and there. It doesn't matter. And in context of that, how do you see your margins going ahead in terms of I know that there will be a significant pass through back to the consumer either in terms of MRP reductions or higher promotions, etcetera. But since the declining tea prices will be so sharp given that they are at such a high base, is there any chance that there will be some retention of this going forward? So firstly, let me take a contact answering your questions, and then I'll ask mister Krishna Kumar to jump in. Number one is on SoulPool. It's about 39 crores of turnover in the last fiscal year, and margins are accretive to our business. That's number one. Number two, on the pricing itself, here's the point. I did mention that it's a fine line to work between margins, volume, and market share. That said, just as a perspective, I think the critical point to note is market share. I did mention that we have gained share quarter on quarter, and we are up by about 90 basis point versus same quarter last year. So you will see that we are not seeding ground significantly to competition. In fact, we are inching ahead. That's number one. Number two, while you mentioned that tea prices are coming down, the costs are coming down, You're right. But I did say that they were still about December, they did come down. In January, they started inching up by about 10 rupees a kilo again at auction. So I would say they're operating between about a 20 to 30% premium about 25 to 30% premium on the same period last year. Now how fast they will go down and where they will go down, I I mean, your guess is as good as mine. But our calculation is, hopefully, once the new crop comes in, which is April, sometime May, is when you will start seeing prices to start softening. And after that, yes, there might be an unwinding, but we will play it by the year, make sure that we are being competitive. At the same time, we're making sure we're protecting volume and share. I'll ask LK to add if I missed anything. So I just two additional comments. One is the 30%. There is this element of mix also that there's some element of minimization in that. So the mix may not be like to like when you compare it with somebody else. And secondly, you are basing your view based on a period. Right? The timing of pricing fees may be different for us versus competition. I think some price moves have also happened subsequent to this quarter, so I could not be fixated about an accounting quarter. But we are conscious of the of the pricing of of competition, and we, to this side, are conscious of the level of share gain that we want to have. Firstly, just the other thing I would like to add is, remember, one of the critical pillars for us to increase our market share and, therefore, volume is also our execution out in the market, whether it is in sales and distribution, whether it is in ATL spending or in innovation. We did show you an acceleration in innovation. On sales and distribution, numeric reach as measured by Nielsen, we started off with 2,000,000 outlets March. And right now, we've exited December with close to 2,400,000 outlets. And I did talk about a higher level of spending on API to build our brands with very, very targeted spends by geography. So we remain quite confident of continuing our momentum on market share. That's very helpful. Thanks a lot. Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead. Hi, team. Thanks for the opportunity. On last call, we had called out the synergy benefits of 2%, 3% that we had identified at the beginning of the year. It will start surfacing a bit from 3Q itself. So where are we on that? And is is there further room to see that advantage in fourth quarter as well of this year? So so we have put in as Adeed had presented, we have put in most of the blocks in play for realizing the synergies from the integration. I would say we are much ahead on if not ahead of plan in terms of execution to realize those synergies, whether it is delayering of distribution, restructuring our go to market for rural markets, whether it is moving from wholesale orientation to a retail orientation, all those blocks fell into place more or less, I would say, by December, though there is still some work to be done till end of this quarter. But the synergy numbers should now start flowing in. In terms of the back end, also, started the integration. Again, again, Ajith presented that almost half the country, the back end has got synergized in terms of logistics and warehousing. Rest of the half of the country, again, should be done by end of this quarter. So we had given a guidance of 2% to 3% of synergies, and we remain very, very confident of delivering it on or before time or ahead of, estimates. Second, Sunil, since, so it has been a completely online or MS team kind of management of businesses across. And I believe now as market has opened up, perhaps you would have stepped out and met the team and perhaps done some ground checks also, assuming that you have acquired a company also in this period. So is the priority list in terms of to do list, which you started with at the beginning of the year and after doing some of these checks or or or on the ground checks, has it changed or the priority list remains the same? I I think the list is a very, very long list, except in the priority list doesn't change. So I don't think anything has changed in terms of the priorities. If we just execute the priorities that is listed on, I think we will be in a good place. Sure. And as I'm keeping, our JV numbers have been very volatile on last three quarters. So we had 43 crore loss and then 38 crore bad profit. And then, again, it has dropped down to three for this quarter. So what exactly if if if you can explain what is going on there and in terms of volatility part. Okay. So the share of profit from JD and Associates. Right? Yeah. Because the JD, we are I talked about the material one. Right? We have we have, you know, we have Starbucks, and we have a JV in so as far as Starbucks is concerned, it has been a challenging because of COVID. And, progressively, quarter on quarter, they are improving. But we are not seeing so that that is why it is we have this business in markets like South Africa, which are doing exceedingly well. There is then the third element is the plantation company in North And South India. Because of the fee price increases, they have also run well related to the previous year. Right? So overall and there is a element of volatility quarter on quarter. Right? So the general story is the challenges on business like Sabah, mitigated by the plantation companies and markets like South Africa, which have done better. I'm not talking about quarter to quarter. I'm talking about overall for the business. And quarter on quarter, what you need to remember, the volatility apart from you know, Starbucks is an improving trend, so you should check that. But as far as the plantation company, especially North India is concerned, there is volatility because a lot of the crop comes in in the second quarter. So second quarter seems to will be a big profitability coming down a bit in quarter three, and then, you know, not having much growth in quarter four. So that volatility of plantation will be there. But the underlying story is the plantation companies doing well compensating for, you know, accounting workers in in in Sabah. Sabah said has been doing well progressively, and I think following month of December, they were positive in cash flow. So the sequential drop is largely to do with plantation business volatility rather than Starbucks. So it depends on the period. That's why I'm not commenting. It will just take yep. I'm just saying Yeah. So it's a good look. The plantations were impacted in quarter one because of the lockdown. Starting thereon, I think the plantation business has picked up. Starbucks was severely impacted and is now picking up. So, I would say right now, all look to be in the positive direction. But like I said, Starbucks is still at 90% of last year levels. EBITDA positive in the last quarter. And right now, she's back to get back quickly. Sure. That's all from my side. Thanks a lot of the questions. Thank you. The next question is from the line of Devika Jain from Lucknow Investment. Please go ahead. Hi. So, basically, when the new chairman joined Tata Group, he stated the vision to reduce the number of listed entities within this group. So do you see a consolidation of consumer entities within Tata Consumer? Like, could you throw some light on that? So so the new chairman's mantra was simplify, synergize, and scale, and we are fully in line with that, and we are working towards those objectives. Okay. And one more question is what is your vision for the NarishCo? Sorry? What is NarishCo? Vision for NarishCo. Yeah. Vision for NarishCo is, obviously, we saw great potential in the brands that they have, albeit it was restricted very much in terms of geography. Tata Water Plus, Tata Gluco Plus have been very strong. And like I said, we exited December with some growth. We see geographic expansion, capacity expansion, and portfolio expansion as being the key, and we see this business as growing multiple over the next few years. Okay. Thank you so much. Thank you. The next question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead. Yeah. Hi. So the data can be why you you said again, mark 24 bps in this quarter. So with the increase in direct and indirect reach, how is the market share increase expected in next three to five years? So so we've got a very clear objective to continue to grow our market share. And remember, this '94 basis points is just as you started our execution drive, which fell in place in December. And the numbers of 94 basis points at December 2020 versus December 2019. Yeah? As we start executing and expanding our reach, especially direct reach, expanding our portfolio, making sure we power it with innovation and ATL, we do expect continued share momentum. Okay. And with the with the decline of more than 20 more than 25% tea prices recently, and we have already taken price increase as on a date. So can we expect the gross margin likely to be normalized in this coming quarter? As I mentioned, we've taken price increases, but not completely in line with the fee cost. Fee costs are expected to normalize by, I would say, early quarter one of next year. Till then, I did mention that it's a fine line to walk between margin, volume, and share. The tea prices have been volatile through this year. They did come down, and, I mean, and December probably saw the bottom. But, again, it has started to inch up in January, so I wouldn't hazard a guess on where it is headed and how it is headed. Only when the next season crop comes in, we do expect to see normalization. Thank you so much. Yeah. Hi. We can take couple of questions from the webcast now. I think the first question is from. And his question is, what will this impact on the company post budget disallowing amortization goodwill for the actual income? Okay. Could you take this? So we are just still reviewing the the fine print. But, yes, the they they there could be an impact in cash terms, but not so much in the company terms. So we are trying to quantify that, but there could be some cash outflow won't impact. Yeah. And another question is from Nathan. He is from Swiss PMS, I guess. He said, we have made an acquisition of Kota Ram. Also, we have brand called Pasta, which is also ready to eat, cook, although not in current consumers. So do we have any plans to integrate outside businesses? So I I will take this, actually. So so, Nikhil, Farsa is actually a private label brand of Tata, and it is not owned by Tata consumers. So it is their private label, and it will continue to be there because it's part of their strategy. So full, which we are acquiring, is a brand which is largely into breakfast series and healthy snack category, and that is that is fairly different from what what Kafka said today. Himanshu Nair, he his question is, can you share your plans for Tata Coffee brand in the branded coffee market? Yeah. I I I do believe that with the Tata Coffee heritage and the origins with us, given the Tata brand name, I do think we can make a significant make a decent dent into the coffee category. Nestle and Unilever dominate this category. Today, we have an insignificant share. Will we become very, very significant? Probably not, but I do think we can make a meaningful play in the coffee category. Distribution, brand, ATL, and disruptive innovation is what will play a part, and you will see these things coming out very quickly. So so, Raymond, we can take one one last question. Maybe, you know, from from Securities Investment. Sure. The next question is from from Securities Investment Management. Please go ahead. Yeah. Hi. Thanks for the opportunity. Just had three questions. One, on the tea business, you know, if you could just provide how is our market share more trend in Hindi speaking belt region, you know, last couple of months, you know, last nine months, how is the market share move? Second is on the Sampan, you know, brand and and the India food business. You know, we have been launched quite a couple of products, you know, before taking over as well. And in last month, nine months, we also added new products to the portfolio. So if you could just provide a more granular detail of how the product scale up has been and, you know, are there any products that are more 50 karat or plus 100 karat kind of a scale? You know? So how much of the growth is coming from new launches and the scale up of the existing which we have? So any any color you can provide on that? That's all. Thank you. So I'm not sure I got the question on t shares, but we did talk about growth versus last quarter as well as growth versus last year same quarter. And we have seen growth almost across all geographies. That's number one. Number two on Samphan, I think right now, the growth is still happening on the categories that we the products that we acquired, and we are seeing that through a simple formula of fusion and ATL. We're just embarking on our expansion of the Zampan portfolio, and Poha, Tim Poha, showed you is one example. But Poha, for example, we've added for the last one year. Right now, we're seeing about five x growth on that for our portfolio and adding thin for our to it, it will only expand the business. But on some point, both for spices and pulses, you could expect to see more of the rapid launches coming up very quickly. So on TV, what I meant is, you know, before we took a a market share in the Hindi, speaking well region was low single digit. So how is that move, you know, for us? Sorry. I didn't get you. And what region? Our market share in the Hindi bill Hindi speaking Belgian region has been low single digit in the tea business in the tea business. So how has that moved for us in the last nine months? I am not sure that I actually, one of our from the territories is in the Hindi speaking world. Punjab, Haryana, UP, all these places, Delhi remain a very strong market for us. I'm not sure of the data on single digit. In fact, those are some of our stronger markets. So say MP and other markets, you know, Rajasthan, you know, and those are the areas where, you know, market share has been traditionally low. So as I mentioned, I won't comment state by state per se, but overall, we're gaining market share, and we are happy to see the momentum. Okay. Thank you. I think do we have we can take one last question. Sure. We take the next question from the line of Nikhil from SIMPL. Please go ahead. Hello? Hello. Am I audible? Yes. Yes. Go ahead. Yeah. Sir, thanks for the opportunity, and congrats on good set of numbers. Sir, my question was on Starbucks where you mentioned that we are operating at 77% and still return EBITDA positive. So is it some structural changes at the operating level which we have brought in which has helped us to reach this level, which means that probably as we come back to that 100% of the revenue of our pre COVID operation, our margin profile could be much better than what we were doing earlier. So has there been any structural changes which we have brought in at the operating level? So so 77% is the index of the same store versus last year, the comps. But overall versus last year, because of the addition of stores, we are operating about 90%. So, a, we've increased scale and therefore leveraged fixed costs and the support center head office costs, if I may. That's number one. Number two, there's been a very, very strong focus on costs both at the center as well as in the stores, especially on rentals and other other things. I think the team has done a phenomenal work of renegotiating rentals, etcetera. Going forward, now how those costs play out, your guess is as good as mine. But I do expect because of our continued trust on opening new stores, and as I mentioned, we expect to open close to the number of stores that we opened last year, even this year. So we do expect that we will come out stronger out of the COVID impact as we exit, and the business should be on very strong momentum. Fine. Thanks a lot. Yeah. I think we are good to go. So over to Unity. Yes. So in the interest of time, we are concluding. But if you have any further questions, please feel free to get in touch with us. And thanks for joining again. And thanks ITBC Securities, for hosting us again, and we look forward to meeting you all next quarter. Have a good evening. Thank you. Thank you. Thank you. Thank you very much. On behalf of ICHS Securities Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.