Q2 21/22

Oct 25, 2021

Ladies and gentlemen, good day, and welcome to Q2 FY 'twenty two Earnings Conference Call of Tata Consumer Products Limited, hosted by ICIC Securities. As a reminder, all participants' lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation earnings conference call. And please note that this conference is being recorded. I now hand the conference over to Mr. Manoj Menon, Head of Research, ICSA Securities. Thank you and over to you, sir. Hi, everyone. A very good morning, good afternoon, good evening, depending on the part of the world you are joining from. And also warm seasons. Greetings to all of you given the festive season just about going through India at this point. At Isek, it's our absolute pleasure to host Tata Consumer Products Limited Management for the 2Q FY 'twenty two results earnings call. The company is represented today by Mr. Sumeet D'Souza, Managing Director and CEO Mr. L. Krishnakumar, Executive Director and Group CFO Mr. Ajith Krishnakumar, Chief Operating Officer and Ms. Nidhi Verma, Head, Investor Relations and Communications. Now over to Nidhi for the further proceedings. Thank you. Thanks, Manoj. Good morning, everyone, and hope you had a good weekend and had the time to go through our presentation and some of the materials. So for today's presentation, we will spend about 20 minutes going through some of the key highlights and performance updates which Sonal will do and then we will straightaway dive into question and answer. I would just quickly draw your attention to the disclaimer statement, if you can just look through this. And I would now hand it over to Pune. Thanks, Kiri. I will quickly jump on straight to the executive summary for the quarter, and beyond. P. Vijay Kumar:] I'll give you a highlight of where we are on our strategic priorities and a broad snapshot of our businesses and the outlook as we see it going forward. And future. In the interest of keeping it crisp and presuming that quite a lot of you would have had the time to go through this deck on the weekend, I will try and hit the big points. So if I go to slide number 6, during the quarter, consolidated revenue grew 11%. Just to put it in perspective, last and future. Here same quarter, we had 2 businesses which we divested, which is the empirical foodservice business in the U. S. And the MAPS out of form coffee business in Australia. And that's why we're saying ex international foodservice business. Bringing the 2 year CAGR to 14%, India was very strong growth. We had 14% growth and A. P. Vijay Kumar:] From the India Beverage Business with a 2% volume growth, but this 2% came on the back of strong volume growth in the previous and future growth in the same quarter last year. India Foods business going from strength to strength with a 16% volume, 23% revenue. And future. International Business grew 3%. It was flat, almost flat. It's 0.5% Actually, in constant currency term, cycling our elevated base driven by the The voluntary loading that we had seen last year same quarter. Now just to put it in perspective, Q1 last year was the peak of the voluntary loading, Q2 was a bit of tapering, Q3, Q4 had come back to normalcy. So more or less, the India international business in terms of the macro outlook is now back to normal. And future growth. P. Vijay Kumar:] Our fee cost inflation, which was impacting our margins, has tapered off and we've seen sequential improvement in gross margin for the 2nd consecutive quarter. And you could expect margins improving quarter on quarter at least for the next 2 or 3 quarters as we go forward. EBITDA margin for the quarter was up by 50 basis points versus last quarter, but down 60 basis points year on year and primarily driven by and future investments in India Business behind brand building being up by 75% year on year. We continue to drive efficiencies in working capital. And future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We've had reduction of 16 days in working capital versus last year and About 1700 basis points improvement in free cash flow to EBITDA conversion versus the same quarter last year. In terms of results, exactly what I have talked about, 2% volume, 14% revenue in India Beverages, 16 Volume 23 in India Foods. U. S. Coffee was volume was flat. Constant currency growth was 1%. International tea volume growth of 1, flat in revenue terms, constant currency. And future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Overall, therefore, 11% revenue growth translating to 3,033 crores of top line. Quickly, H1, I will not go through all the detailed numbers, but overall even for H1, it is 11% revenue, just go back, maybe 11% debit, 11% revenue growth, consolidated revenue at INR 6,442 crores. Next slide. In terms of margins overall and growth percentages, EBITDA was up by 5%, and future. Margin down 60 basis points. That flowed through into group net profit. Again, 5% growth on group net profit, SG and A. Margin 9.4%, negative 40 basis points. EPS growth year on year is 4% now. And financial results. Group net profit all in INR 3,200 crores and we are sitting with INR 2,250 crores of cash. Quick highlight on strategic priorities. And future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Just to highlight recap, we have defined 6 strategic priorities: strengthening and accelerating our core businesses, and innovation, unlocking synergies and focus on cost, creating capabilities and talent and a future ready organization, exploring new opportunities, both organic and inorganic and embedding sustainability. Now in terms of brands, and future. We talked about the 75% increase in APL spends this quarter, high focus across the country. And beyond. We've invested in the south behind Chakra and Kanandevan. Certainly, as the Economy has opened up and more on premise and premium outlets were opened up. We focused behind that. Which we had focused on integrating in the 1st 40, 45 days or so of the quarter, efforts. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We have now started ramping up with A and P and you should see a product pipeline starting to come out in line with our plans. Salt, same thing. We've focused on building out Salt ATM. All in, you will see the and earnings. P. Vijay Kumar:] Increase on distribution and ATM starting to play out in our share gains, Tea up by 170 basis points nearly and saw A very good 4.30 basis points growth versus last quarter, same quarter last year. We had committed to getting into 1,000,000 outlets in 12 months. The good news is we are Ahead of that number, 1.1 is the number that we hit in September. So time to raise the bar. And beyond. We are moving the target to 1,300,000 outlets by FY 'twenty 2. We are also committed saying we will increase and beyond. Total reach to 2x of where we were, which was 2,000,000 outlets in September 20. In 36 months, we've already moved it by 30%. So we are exiting at 2,600,000 outlets in September and continuing to add every quarter. And beyond. Other thing apart from expanding distribution is to make sure that our team focuses on beyond tea and base salt. So we have started premium DSR programs. We now cover about 17,000 outlets with additional salespeople and beyond. Only focusing on the premium part of the portfolio and the new brands that we're launching. And Sampan, Tetley, Coffee and Soulpool is an example here. E Commerce, just to recap, we had started with 2.5% when we and Our journey as Tata Consumer Products is now up to 7% of sales continuing to show robust growth, up 39% this quarter. Institutional channel, which we had started off, is now delivering strong results, up 117%. The Marisko business, and beyond. And we had bought it and we were very clear that we are going to expand geographically and portfolio. And future. Portfolio work has started and you'll see that in a bit, but outlet up by 39% year on year. And future. Rural, which is where we have opportunity more than urban, I would say, and we have started appointing rural distributors. We are now up to 4,000 plus distributors aiming to exit 5,000 by March. Innovation continuing to focus, expanding the range of summits, Tata LUKO plus Delhi, which we expect to be a blockbuster. Tata started off on a very strong weekend in the Narishko portfolio, and the loop system to get reusable pins into the U. K. Business. And as I mentioned, Solsys' numbers, we finished integration. We are up. We are at 4x the number of outlets that we used to they used to service. We are now starting our new product pipeline. This is one of the first soulful 0% added sugar, a new sleep, and we have now launched a INR10 soulful Rabi Bites into the market. And future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Sustainability remains a focus. I already talked about Loop. We are one of the founder signatories on the India Plastics stack. We have focused on better communities. We started this program in Jharkhand. Apart from that, and beyond. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We have an MoU with the Indian Institute of Millet Research. Millet is a more sustainable craft and it is a strategic portfolio for us, health charge and health environment. Our sustainability efforts have got recognized. We've been rated A by MSCI ESG ratings. Sustainability Analytics has moved us up from severe to medium in the last update, and CRISIL released their first India ASV report in which we are in the top set of FMCG companies. Quickly, GDP, all key markets in which we operate starting to recover. And beyond. Commodities, fee prices starting to come up their high, the dark blue line in the middle, if I may, but now sort of being range bound. And future. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] That said, it was significantly below where they were in September, October of 2020, and future. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] But we are still above where we started in September, October 2019, so somewhere in between. But our pricing actions have already and beyond. P. Vijay Kumar:] Happened to a large extent and therefore, we would expect margins to be moving up from here on. A slight bit of an uptick in Kenyan Teas and beyond. With the new Kenyan Tea Act, which has got passed, it's a weighted watch for diet for now. Coffee, and future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] I'm sure all of you are aware, it's moved up significantly from where it was. It has both positives and negatives for us. And future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We've got to deal with coffee, increased coffee buying prices in the U. S, but Tata Coffee, which is a listed subsidiary, gets the benefit in terms of plantations and a little bit In terms of its extraction business. Moving straight to business performance, before that, Yes. So aside with India package derivatives, 2% volume, 10% revenue, 168 basis points of market share gain. And future. Now just to caveat that this market share gain since Nielsen has not released its September report, we've taken a rolling 3 months. So this is June, July, August number, but we would expect September to be coming in slightly better than this, EBIT margin has been on an upward trajectory as the inflation has tapered off and we continue to be market leaders on the e commerce business. And beyond. On India Foods, 16% volume, 23% revenue, a very strong performance. And future. Premium short grew by 42%, Tata Sampan grew nearly 30% on a base which was, and beyond. I think it's close to a 30% in the same quarter last year as well. The EBIT margin for the quarter, however, was impacted by the portfolio mix, and future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] The mix between sumpon and salt, the investment behind Solfu, increased A and T behind the Indira Foods business and other expenses including logistics and trade. Naishko, I talked about 121 percent revenue growth. And future. Year to date, they were up by 107%, strong performance. And now with out of home opening, we do expect them to accelerate. And future. I talked about new product innovation, Fluski, which we had done a pilot, successful now and we're calling it and therefore starting expansion and Tata Glucoplast, the jelly introduction has gone off to a very strong launch. Catacopy, Plantations was negative 24%, but extractions was positive, But very strong delivery on the EBIT line, while top line was a bit muted because of fee and lower realization even in separate. Thanos Starbucks, as the out of home has opened up, very strong recovery in the quarter, and we continue our journey of opening stores. In the quarter, they opened 14 stores. Now they're up to 233. And future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Now they are present in 19 cities, which include Jaipur. 88% of stores are reopened. The good news was September 2019, and future. Same store sales is now 94% indexed to September 2019. So and that shows consumers coming back into stores to our expanded footprint will start paying dividends quickly. And beyond. In terms of international, the UK, 1% revenue, the good news is our 3 brand strategy, and beyond. P. Vijay Kumar:] Which is primarily to deal with the fact that we need to move from being just a black tea company and beyond. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] B. Balaji:] Into the fruit and herbals, specialty and premium status, starting to pay results, very strong growth on tea pigs as well as if you include Burda as well, We are starting to see traction in our overall IP share in the U. K. Next slide. And beyond. U. S. Coffee revenue growth of 1%, tea which had gone through strong bumps last year In the pantry loading is now starting to normalize. Coffee bag share led to slight bit of a pressure, But we are confident we can get it back very quickly. Next slide. Canada, Again, they were the brunt of the lockdown because the Canada lockdown continued for quite some time. And pantry loading and beyond. Also given by the fact that we are the number one key brand there was very high last year, but now coming back quickly to normalcy, and future. Market share continues to be a very strong story out here. Technically, it gained share led by regulatory out and future growth. Now I hand over to Elkay for the financial performance. Elkay, over to you. And beyond. Thanks, Anil, and good morning, everyone. I'll take you through a few slides of the financial performance. And future earnings and earnings. Starting with highlights for the quarter ended September. On a standalone basis, revenue increased by 14% and earnings release, reflecting the growth in India's diabetes and post business. EBITDA grew by 6%. And in the later slides, we'll talk through some of the reasons why EBITDA growth is being robust. Consolidated performance, revenue up 0.9%, and beyond. 11% on a like to like basis, adjusting for exit. We had the foodservice business last year which we exited. So adjusting for that, we grew 11%. And future growth in the India branded business was 17%, with beverages growing by 14% and India Food growing by 23%. And future growth. Vietnam and Tata hockey, including Vietnam, was flat, so was the international business adjusting prices. EBITDA growth was 5%. And beyond. We saw gross margin improvement in India Beverages as CECOS came down. There was improved performance in the extraction business of Tata Coffee and growth high investment behind brands in India. So if you move on to the next slide, which is the financials on a stand alone basis. Revenue 14%, we talked about that earlier. Budget is 14% and assets by 23% EBITDA lower and beyond. At 6%, what we need to look at, an EBITDA margin is 13.5% compared to 14.6%. And future. Now if you compare the EBITDA movement versus the same period last year, we'll see that gross margin is improving and beyond. But the increases are being in the A and P line as well as in other expenses. There is high investment behind A and P in this quarter. It's not a reflection of all quarters to come. From the other expenses we've seen, which is again, from and future investments with increase in trade and inflation costs and some amount of fixed cost investments and future growth. So all these are contributors, and we expect EBITDA margin to show an improving trend. And future. PAT 9.5 percent compared to 9.8% in the same period in the previous year. If you move on to the year to date September revenue up by 18%, strong growth by the India businesses. EBIT down by 9%. Again, it was a reflection of IT costs in the earlier part, which is now leveling off. CAGR higher by 22%. Overall, and future. We've also had the benefit of final dividend from overseas companies in the earlier quarter, which is around a stand alone basis we are seeing and improvement in profitability. Moving on to the consolidated performance. For the quarter, revenue from operations and future. The reason I explained earlier, primary to do with higher investment in A and Ps, a little bit of margin erosion on the FX business which we'll talk about in a moment and some inflationary cost increases as well as some fixed cost investment. And future. You see that it is lower than the 28% in the previous year. Two main moments, the loss of our start up is lower than in the previous year and future. The profits of OPPL and Moltengia Plantation is slightly lower than the previous year. So these 2 have reflected in the share of profits from the region of the states. And future. Starbucks has got very strong growth trajectory, especially in the last 2 months. We're very confident that the rest of the year and future. The 6 months performance, again, we've talked through the trend, underlying trend, revenue growth of 10% and profitably lower because of the impact of fee costs and some amount of investment behind higher A and P. And future. Moving on to the segment performance. India budget is higher than 13%, and we talked through the reasons earlier, and Suneel went through it in detail. And future segments. Our segment results are high by 17%. So it reflects the impact of improved gross margin, lower fee costs. Notwithstanding higher NPE investment, there is an improvement and profitability competitive revenue growth. India showed a growth of 23% but a decline in average margin. And as Henry mentioned, and future. Small impact on gross margin as in our content continues to grow. There's also investment behind sales force. There is higher EBIT investment. There is inflation in flight and logistic costs and there is some fixed cost investment as we build the infrastructure. So all these are competitors. We don't expect this trend to be there for others. We would certainly see the margins improving from where we are today. International business adjusting to exit flat top line growth, some improvement in margin because of better management of the commodity costs. And future growth. Non branded business with a good period for extraction with improved profitability, so we're seeing a 19% growth in profits. And beyond. Segment wise contribution, India deposits 46 percent of revenues and 48 percent of EBIT. India posted 26% of revenues and 21% of our business, international 28% 31%. So those are the highlights for the quarter and our Q2MEL for the outlook. Thanks, Ilkir. So overall, in terms of the macros, I think we are seeing the 2nd wave is receding, vaccination progressing and therefore and beyond. Leading to a fast recovery, we have already seen the impact in the Starbucks and Marisko business of the opening up of the economy. And future. Our international markets are seeing a return to pre COVID demand trends, and I think we are now entering a period of stable demand unless, I mean, it's your guess as good as mine on whether there's a 3rd wave. Right now, we don't see that as We continue to stay focused on driving growth in the core business while adding new levers across different functions. India Packet Beverages, as I mentioned to you, I've seen a moderation in TCOS. That said, and future. Right now pricing is range bound, but we will be dynamic in pricing to make sure we are driving competitive volume and value growth. Just as a perspective, whether you take MAT and beyond. Last 12 weeks, last 4 weeks, we have had a constant uptick in market share, and we and we intend to continue driving that as we build margin into the business. Momentum on the India Foods business top line should continue with focus on and investment behind brand and innovation. You've seen the jump on Saltshare. You've seen the Sampan growth coming back. We intend to keep and future growth. Out of home business is fast moving towards normalization, Starbucks is recovering and nourish co growth momentum should continueaccelerate from here on. Inflationary trends, especially in the India business, and future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] More in the food business than in the beverage business, especially the cost of coal and energy. Apart from that, packaging, freight and also starting to emerge, which we will be addressing via cost optimization, productivity, focus and revenue management to try and and mitigate these impacts. And we will continue to streamline operations, and we are working on simplification of the international business. So that is the broad outlook. With that, over back to you, Niddhi. Thanks, Sunil. So and A. Anyone who wishes to ask a question Q2. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Sawman from Goldman Sachs. Please go ahead. Hi, good morning. So two questions from my end. Firstly, on tea prices, you indicated that obviously we should expect sort of a and steady improvement in gross margins and potentially lower tea prices. But there have been some articles on the impact of higher coal prices on tea. So Maybe can you give us some perspective on how relevant that is and how much of an impact that could have? And secondly, in terms of a higher advertising and promotion spends. You did indicate some brands in your commentary, but can you again give us a little more color on which segments are the biggest events and the trajectory for those maybe over the next year or so. Thanks. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes. So On the fee prices, actually, if I just provide some color around it, I think the initial bump last year was a supply demand and future. And that is why we have seen this rapid inflation. It started coming down and beyond. Apart from a brief uptick at the end of Q1, there are 2 things happened. There was a drought conditions in Assam and then and beyond. With the 2nd lockdown, I think there was a bit of fear saying that will it be the same impact as Q1 of last year. That didn't happen. That said, There has been a bit of issues on rainfall, etcetera, and that's why you've not seen it taper down more than what it has. And future. While we do think there will be a little bit of impact on fuel, coal, etcetera, happening out there, and future. We don't expect to be as severe as what we had seen last year. That said, like I mentioned, I think and beyond. We have been dynamic on pricing to make sure, A, we are competitive, B, we are making sure that we are building in consumer elasticity into the equation and most importantly, maintaining volume and market share trajectory. So we will stay close to this. I mean, what gets us as good as mine as to how much and beyond. P. Vijay Kumar:] Up or down, the whole piece moves because remember supply will go up, but there might be a pressure on cost, so that whole equation has to bear out. So and beyond. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Keeping fingers crossed, and we will continue to make movements as we see these prices move up or down. So that's number 1. Number 2 on the APL spend, I would like to highlight that I think we made the statement earlier that we were not spending as much as we would have liked and future. P. Vijay Kumar:] Or as much as we needed to spend to build competitive strengths for our brands Because ultimately, building brands gives you more pricing power and builds margins in the portfolio. And therefore, you would see the spends going up. It is not that we are spending across all different brands. We've got a very clear target brand architecture that we are targeting towards and and beyond. Those are the brands we are spending behind. So you would have seen big money going behind the premium end of the portfolio in fee. For example, Tetley, Gold, Premium, and beyond. Agni is one where we are starting to build the brand apart from the distribution. In the foods business, premium salt is our focus. And beyond. P. Vijay Kumar:] Sampan, which is a new brand for us to build is the focus. So yes, coming from behind, coming onto par, So while you have seen percentages versus last year going up, if you look at it as a percentage of sales from our TCPL and compare us to our peers, I think we are just about catching up now. No, I understand. I think very clear on the second bit. I think just on the tea price again, can you give us a sense of what component or what proportion of the local tea cost or input cost would be fuel or coal? I don't think it will be significant enough, but that said, I think Nili can get back to you separately on that exact piece. Perfect. Yes, the impact is more significant than the food business, not very significant as far as the business goes. Thank you. The next question is from the line of Peter Shah from SPARC Capital. Please go ahead. Expansion or at least a positive guidance that you have given on beverage business side. So just wanted to get some insights on competitive intensity here Because we are fighting or we are competing with a lot of unorganizedregional players who are very price sensitive. So when the benefit comes, how much confident are we to retain the benefit to see it to sleeping down to margin level? So that first So here is the thing, I mean over the last, I think, 12, 18 months, you would have seen very clearly the large organized branded players and we've probably been at the top of the pack in terms of share gain. As prices and future. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] S. P. Vijay Kumar:] Normalize, so to speak, given increased distribution, given innovation, given brand building, and future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We do expect to continue to drive for share momentum. We have brands straddling across the whole price range, if I may. And if you actually look at our portfolio, I think we've got More of an opportunity to drive share in the mass premium to premium end and that is where we are focused on building our brands. But that said, We even have opportunity on converting from loose to branded. That trend will continue. So there will be growth on both and future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] UNIDENTIFIED COMPANY REPRESENTATIVE:] One is from the unbranded to branded and the other one is I think we will continue to gain share from regionallocal. And future. Thank you. We lost the slide, so we'll move to the next question, which is from the line of Agnath Nupra from Credit Suisse. Please go ahead. I find would be in a period of a bit of sluggish volume growth for a few quarters now, mainly because of two reasons. One is, as the commodity price is correct, Do we see some of the local players or Looz Tea becoming more competitive versus the bigger branded players like Tata because they would adjust prices down and and generally, the trade also doesn't like to stock up when prices are going down. And secondly, you mentioned the high base and I think the second half This is also quite high for the tea business. So given these 2, do you expect some bit of sluggishness in the near term in terms of tea volumes? Yes, Atanwita referring specifically to the volume sluggishness in this quarter. I would just say that I think in the last 12, 18 months, it is It's hard to read quarter on quarter or cycling versus last year because of all the multiple things that have happened in the market. A, I'd just like to point out that we are cycling a very high growth number of last year and despite that we've grown this quarter. That's number 1. And future. Number 2, losing shares to locals, this thing, remember this downward trend has started sometime around end beginning of this calendar year and it is trending downwards, albeit in bits and parts. And beyond. And despite trending downwards, the organized players have gained share. So the local As and local Bs, as we call them, have actually lost share. And beyond. And there is no reason for us to say that that trend will turn dramatically. You're right about the fact that there might have been a downstocking when the first round of Price stabilization happened, but I think given the fact that we are, and beyond. At least in the Indian context, we count in consumer staples. I don't think there is that much of an inventory ups or downs, especially in the branded players portfolio. The locals and loos will obviously be playing that game. And future. P. Vijay Kumar:] But for us, I don't think inventory movements at retail is such a big segment. We do think If you look at past trends, the tea business has been showing high single digit volume growth and beyond. And there is no reason for us to believe that as we enter a normal phase, that trend should not continue going forward. Okay. Thanks, Suneen, for that. And my second and last question was on working capital. So this reduction you've seen, is there any fundamental change in how much and beyond. B. Balaji:] The inventory you hold in terms of your business, is there any fundamentally change in the business thinking on that? And future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So Adam, actually the working capital movements which have happened are primarily on account of 2 things. 1 is receivables and the credit that we give out into the market. If you remember, in September last year, we started and beyond. B. Balaji:] Reworking our entire distribution system, we trimmed from 4,500 distributors to 1500 distributors of scale. We also moved into a cash business into or significantly cash business in general trade. So the receivables that sit on our books are primarily to do with the e commerce and modern trade, which is in line with industry. And future. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] S. Vijay Kumar:] In general trade, we were not in line with industry and used to give credit, which we pulled back significantly. So that's one piece. And beyond. 2nd on tea is we are making sure that while we are booking inventories, it's not necessarily we are paying for them today. We're taking advantage of our market strength to make sure that we look not to carry inventory on our books and this is the model that we will continue to adopt going forward. Okay. That's very clear, Selim. Thanks and all the best. Thank you. The next question is from the line of Jaykumar Joshi from Kotak. Please go ahead. Hi, thanks for the opportunity. I've got 2 questions. The first one is on food margin. If I look at 23% growth and yet 18%, 19% decline in at EBIT level. What percentage of this, if you can give us some color, And when do you expect the margins to come back to 15%, 16% for Foods? So are you planning any price increases in Salts to offset the impact of higher freight? So very, very quickly, I mean, and beyond. There is an impact of mix, but it is not significant because gross margins are broadly flat to slight bit of a moment. So and future. While the Kampan Salt and Soulful portfolio is playing out, it's not as much of an impact on the gross margin. And future. The impact is actually more below the gross margin line, in line with increased A and P spend and beyond. P. Vijay Kumar:] Behind the food business, we do need to build Sampan into a stronger brand. We do have opportunities to drive premiumness in Salt and you're seeing that play out in the share gains that we are seeing in Salt. Apart from that, we have investment behind Sol Pool, which was budgeted for, Especially now that we've built a distribution which is 4x of where it was when we acquired Soulfull, and future. We will continue to power Soulfull Brands' strength to make sure that we build the business there. Apart from that, there's been a small bit of and [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Reallocation of corporate cost as the food business becomes bigger. And apart from that, as I mentioned, we've seen a bit of inflation creeping into freight, logistics, warehousing, etcetera. So that said, I think LK talked about it. Going forward, we should start seeing the margins on the business go forward. And beyond. We will make sure that we are balancing top line and margin growth because we do believe that the big opportunity for and future. P. Vijay Kumar:] I will not give too much importance on this quarter. We have to look at it in the context of wanting to build a larger Fit business, right? And we certainly this is not the margin activation for us. That's very helpful. One quick one, there was an article of Tata Industries looking sort of moving Q2. Any comments you can offer on overall ready to eat opportunity? And what are your thoughts? I would just not want to comment on media speculation, right? You will always find a lot of things written about Tata consumer going after 10 different things. We do see a large opportunity in the food business and we remain committed to growing both organically and inorganically. I'm very, very pleased, it's an area of interest for us and we are evaluating it among other opportunities. Thank you so much. Thank you. The next question is from the line of Pasi Pankaj from IISL. Please go ahead. My first question is on the Salt business. So just wanted to understand what has led to such a robust and beyond. The growth in the salt business something which is such a penetrated category. Now I understand obviously that the market structure is such that There is a significant unorganized business, which will do share to the organized. But the kind of growth that you have done, does it suggest and [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] About the growth in the Salt business, I think it is driven by 2 or 3 different factors playing out. Number 1 is the distribution increase. And future. When I mentioned that we moved from a 2,000,000 outlet REITs to a 2,600,000, that holds to almost and future. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Similar numbers both for beverages and foods as we expanded distribution, that's number 1. But the more important pieces, we moved from about enterprise 100,000 outlets that we used to touch in both the businesses directly up to 1,100,000. So the execution in stores has become a lot better. That's and beyond. The first piece, second piece we are playing the portfolio. As I said, we have an opportunity both. So number 1 is Tata Salt In terms of market share, it's probably 5x to 6x, if not more of the next largest competitors. And all the next 4 put together don't total up to and beyond. S. Vijay Kumar:] The share that we have on Tata Salt. So we've got a very strong brand. So as long as we drive distribution, build the brand and expand the portfolio, we do believe we've got Significant opportunity for growth and that's what we are seeing playing out. Yes, this quarter was a good top line to achieve. Just keeping fingers crossed that we will continue to deliver good volume and revenue growth as we go forward. Right. My second question is on the Sampan business, and I'll restrict myself only to the salt and and future. Between these two, over the next 4 to 5 years, where will you put and beyond. B. Balaji:] The greater percentage of your marketing budget between the pulses and the spices business. And beyond. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So let me say, I don't think we've got to that level of detail in terms of the split of the marketing this thing. I'll be to say that whether it is and beyond. P. Vijay Kumar:] In salt or in beverages or in Sampan, I think we've got an opportunity to build distribution and power our brands to drive top line growth. Sampan has a huge runway to play with. And future. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And as we expand our portfolio, we need to build it into a stronger brand. We've just started the journey, and we will continue to tweak our strategy as we go forward. But do we see material aggression on the spices business? I ask because this is, first of all, a large industry and proven business model with many players. And we know that this business can make a 20% EBITDA margin once there is enough So I would say it is not our game, it is an and game and that's why we are building Sampan as an overall brand, but you're absolutely right. The margins in the spices segment are very good. We've been doing lot of work behind the scenes on making sure and beyond. B. Balaji:] That we're getting the product formulations right. As you rightly mentioned, spices is in India, it is and beyond. Not a one size fits all, especially when you go to the blended categories. While the pure even in the pure, the way and P. Vijay Kumar:] Coriander, for example, is perceived in the north versus the south is different. The color, the flavor is different. Similarly, with chili, both the heat and the color percentages. So we are right now in the middle of just about finished an entire exercise on figuring out and beyond. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] B. Balaji:] As we go laser focused on building 1 national brand, but making sure it's got different variants to appeal to different people in different markets. The margins are attractive and you will see acceleration behind spices as we go forward. The next question is from the line of Aloksha from Amtech Capital. Please go ahead. Yes. Hello, sir. Thank you for giving me an opportunity. Sir, firstly, I want to clarify one point on the ad spend. So if I recall correctly, You didn't come across clearly. Can I just ask you to repeat it, please? Yes. Sure, sure. Is this better? Yes, much better. Okay. So I just wanted to clarify one thing. On the ad spend, I think initially you mentioned and currently it was RMB133 crores. So should we build a moderation from the current level or do You think this current run rate over 130 or crore should sustain the brands that we aspire to build? So, Alok, I'm not sure I got the details, but just to give you a perspective, and beyond. B. Balaji:] We are coming from behind in terms of strength behind our brands. On an APL basis, and beyond. If you look at percentage to sales compared to a high single digits, low double digits that most big branded players in the MCG Spaces would spend. We are significantly lower down and therefore you would see this upping. The idea was in the synergies, we've taken out significant amount of costs and a large part of that has been redeployed into building and Brands and Building Distribution. So, I don't think we intend to reduce ATL as a percentage of sales. And future. If anything, we would maintainmake sure that we've got enough firepower for our brands going forward, especially as we build the premium ends of our portfolio. Got it. Got it. And just one follow-up on that is that when we look at lot of other consumer goods companies. It's also because of the share of the personal care, home care, etcetera, where the margins are more than 50 But in our portfolio, the margin will not be that high. So As you said, the higher focus would be on the ad spend towards the premium brand. Is that understanding correct then? So that is one piece. The other piece is in the FMCG business, we normally follow a ratio of share of voice to share of market, Right. We want to make sure that we are competitive in distribution as well as competitive in reaching the minds of the consumer. So the SOV to SOM benchmark that we follow make sure that in the categories that we are playing in, we are up there. SOV has to be slightly higher than the share of market. That's the way it is indexed. So while I do understand that in and future. Other parts of the FMCG business, there are higher margins and therefore it affords higher A and Ps. But in the categories that we are playing in, we will be highly competitive. Got it. Got it. That's it from my side. Thank you very much. Good luck. Hi, moderator. Perhaps we can go to the webcast now to take a couple of questions. Yes? So, Sunil, there is a question from Aditya JST Investments. He is asking what is the vision for the foods business? And after Soulful, are we looking at more healthy brands under our fold? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So absolutely, like I said, I think and beyond. We see the biggest runway for growth in the foods business. We are looking at opportunities growth and beyond. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] S. Vijay Kumar:] Just to highlight, we are sitting with INR2250 crores of cash. So it is we have enough firepower if and when we see opportunities. But like I earlier mentioned, just because we've got and we enter a supermarket, we don't have to buy anything. What we are very, very conscious about and beyond. P. Vijay Kumar:] We've got to create value for shareholders and therefore we take hard looks at both the strategic and financial fits. And beyond. We've probably passed more significantly more opportunities than we've ever done in the past. But Yes, we are constantly scanning the horizon on any and every opportunity. Okay. Thank you. So next question is from Saurabh Shah. He is asking if we have any plans to review the international business, investments that may be needed in the domestic business. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Now I would treat this as 2 separate pieces per case. And beyond. I don't think we will shy away from higher investments in the India business. And you've seen us up our A and P, increase our distribution, and future. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] S. Vijay Kumar:] So we're making the investments that are needed in the India business. That doesn't mean we've got to move away from the international. International is a separate piece, which you've always mentioned saying that it's a stable business and beyond. P. Vijay Kumar:] With decent market shares, we right now focus on 3 big markets. It's a good cash flow business and the focus there is and beyond. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] To make sure that we get our strategy right, I think we've got a few pieces right. For example, in the UK, which I pointed out with the 3 brand strategy, and beyond. We're looking at cost and optimization in those businesses to make sure that they're fueling their own growth from simplification, etcetera, that we're looking at. The next question from the line of Sheila Rathun from Morgan Stanley. Please go ahead. Hi, Suneel. Thank you for the presentation and thanks for the opportunity. I just had one question and this is on the inflation on the packaging side for both paper and plastic. Is this something which is worrying you in terms of being more long term as compared to the inflation and other raw materials? And if yes, then is the company thinking about doing something around it? That's my question. And beyond. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So, Sheila, you're absolutely right. I think basically for us, it's a tale of 2 cities, right? And beyond. We have seen tea price inflation coming down strongly and benefiting the India Packaged Beverages business. But on the other side, there is, I would say oil led, oil and liquidity led inflation, which we are seeing starting to and such. P. Vijay Kumar:] Najaf in the foods business per se. So yes, it is having an impact on packaging, freight, logistics, etcetera. It is starting to creep up. And like I mentioned in my outlook, we're looking at various different levers that we have, which includes revenue management, which includes packaging sizes, pricing as part of that, various discretionary spends, A and P, the right level to make sure we are trying to balance it. But I do see the oil led inflation probably lasting out longer than all the other pieces put together. Efforts. This is Neil. Where I was coming from is more to do less to do with oil, but more to do with the supply constraints, which could and build up in the medium term, especially on supply of paper and plastic due to concerns on ESG. So that's where I was looking at that, is this inflation year to stay because the supply could be an issue in the medium to long term? Let me say, we don't see supply constraints as being an issue. Right now, for example, estimates on EAC, etcetera. But we don't see supply constraints as being an issue out there. We do see costs creeping up because of fuel and oil led inflation out there. Okay. Thank you. Moderator, I'll just take another question from the webcast. Sunil, Chanchal is asking and beyond. In NareshCo, you've got water business, right? So between water business and food business, which will ramp up faster given both have and future opportunities. So, Sanchil, I would say it is again not our listing, it's and. We've got opportunities in both the businesses. And beyond. But like I said, Marisko, I think is on a real roll, 107% growth year to date despite the fact that we saw lockdown. The great news is I think we've got the business models right. Just I don't I didn't mention it on the call. Himalayan business has broken even in the last and future quarters. After so many years of having the business, we've actually turned the business on the profitability front. You've seen the increase in number of outlets. You've seen the new product pipeline starting to come out. And beyond. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] S. Vijay Kumar:] Key, which we started as a pilot in Hyderabad and Vizag, very quickly we ran out of capacity. Now we've added capacity and we'll start ramping that up. Innovation in the cups, which is a very, very unique package and we're the leaders in that. The jelly has started off on a, I normally don't use this term, but gone off like a rocket and I hope to continue that momentum. So it's and executing both of them have different priorities, and we'll continue to stay focused to make sure we leverage both of them to get our and A. The next question is from the line of Manoj Menon M from ICICI Securities. Please go ahead. Hi, Sunil and team. I just had one question, which is pretty much a top down. And beyond. Based on what you are seeing in different parts of the portfolio in India, given that you have a reasonably diversified and future growth. When I said I will spread it could be a region, it could be products, it could be SKUs. Given the sort of inflation what we are seeing in general in the economy, which is probably happening after a decade and also in conjunction with some commentary which we heard from Companies like Unilever, etcetera, that it seems to be hurting demand. Actually, that's what their prognosis is. So just wanting to understand, based on what you are seeing and not necessarily what a Nielsen and future. If you could give some examples on what the consumer is actually saying or behaving currently in terms of SKUs and where their and future. 2nd, does this have any sort of an impact for you in your business plans for, let's say innovation over the next 12 to 18 months. Thank you. So Manoj, I mean, I am not a forecaster. And beyond. All I can say is I've been hearing bits and snippets of what various people are saying. So you would have heard this chatter about rural being and a lot of this is coming out of various different categories that Nielsen is tracking. I would say for us, actually it is Not as much of a concern as it would be for many other companies because like I said, our urban footprint is far stronger than rural. So rural is more of a share opportunity for That's number 1. Number 2, in terms of outlook, I'm not sure it is a sustained long term problem simply because, SMEs. We've had a good monsoon, MSPs are good. We're coming out of the COVID wave, which last time this time around actually impacted the rural heartland. And I think consumers were not very sure. So I do see improvement from here on. Now again, don't take my word for it because like I said, I'm not a forecaster. I Yes, Ryan. This is still what I'm hearing around. You would also hear different companies talk of stress in different parts of the country. Again, I wouldn't be too worried about that because for us very simply put in the categories that we play. If I take Pea and Salt, I do think we've got share opportunities in branded and we've got the opportunity move from unbranded to branded. And beyond. Similarly in Salt, we've got opportunity both on the premium space as well as below out there. And Sampan is literally white space, which we've got to go out and Sampson, Solpul, Marisko, we've got to go out and chart out our own trajectory. So while we would keep a close eye on trends as they happen, and future. I would be more keen on making sure that our share aspirations and our top line aspirations remain in the right place. Thank you. Thank you, Sunil. Absolutely clear. Thanks. Thank you. The next question is from the line of Devita Arahim from Gatma Bali Investments Private Limited. Please go ahead. Hi, good morning, sir. So I just had one question. I wanted to understand how do you plan to capitalize group company advantages. So basically, what is your strategy to go about it and I'll be less group dependent at the same time. Sorry, if I got your question right, and future. We work very closely with different group companies, albeit in the right legal and governance framework to make sure we are leveraging and beyond. All the advantage that the Tata Group brings to the table. So for example, in the whole Tata Digital Sphere, which It is actually owned by Tata Sons. We are making sure that we are staying close and collaborating with companies to derive maximum amount of synergies. Okay. So, okay, that's about it. Thank you. Thank you. The next question is from the line of Sumant Kumar from Ujjal. Please go ahead. Yes. Hi, sir. Can you talk about the other expense expenses going to stabilize or we're going to moderate from here? LK, can I request you to take that? Sorry, I'll take it. So I think We expect that as business growth, the proportion as a percentage of sales will improve, right? So I'm not commenting on quarter on quarter. I said what this the element of this are an investment in building capability. As you get more sales, the percentage of sales we I would like to come down from where it is today. There is also some element of inflation which is there. We don't think that will be there for us. That also will normalize. And as we do, we have some further initiatives and beyond. So overall, in the medium term, we would expect and improvement in the percentage you said and not where we are today. Okay. And the second question is the food margin. Can you discuss about that we have seen a Significant decline in food margin. So what will be the normal trajectory for food margin in the annual basis? I'm not talking about quarterly numbers. So number 1. Number 2, the tea side, we have seen a 2% kind of growth on maybe because of high base. But with the expansion in the reach, we can't we are not expecting a lower single digit kind of growth in the T. Let me try and answer the thing. Like I said, I think I answered it earlier on the call. And future. Longer term, we do expect mid to high single digit growth that was prevalent in the tea business. There is no reason for us to change our views on that. And beyond. I would urge you not to draw too much into the quarter on quarter moves up and down out here simply because it has been a very, very volatile environment. On the foods business, again, LK mentioned, this is not the long term numbers that we are seeing. We want to continue to move it upwards, and I think you will see that coming and The next question is from the line of Suresh Sadeshi from Central Capital. Please go ahead. Hi, good afternoon, Sunil and Elke. Thanks for the opportunity. Have two questions. If I look at the food part of the business towards total branded business, it's already moved from 23% to the highest of 25%. Would you help me to understand where do you see this business and beyond. Again, to reiterate, TCPL aspires to be a large FMCG company and as the first step in that, we want to build a large F and B Company. And in that space, we see food as the bigger growth driver. So you see efforts. P. Vijay Kumar:] Our focus on growing salt, of course, you see the focus on expanding the Sampan portfolio and you would also see us make organic inorganic moves like we made in SG and A. P. Vijay Kumar:] Moderator, we will take my last question now, please. Thank you. The next question is from the line of Jan Mammania from Clear BMS. Please go ahead. Yes. Hi, Sunil. Good afternoon. I have a couple of questions. One is regarding the single origin coffee SONET that we have launched, And we have launched more variants also recently. So can you tell us how big it can be in a period of 2 years? And is there any plan to launch offline? So let me say it's not only Tata Coffee Sonnets. We've started our D2C play because we do think This was a long term trend which would have come about anyways and the COVID environment has probably accelerated that. We do see a place for B2C brands because, a, it helps us play in premium categories at a very low cost B, it helps us to reach target consumers and communicate with them directly and C, more importantly, we get the feedback real time on and beyond. So we've launched Tata Tea 1868, we've launched 8 O'clock Coffee and we've launched Sonix. Now we are seeing a decent response. And future. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] I do think we can accelerate this. I would not hazard a guess on how big it can be because we've got to get several pieces right, and future growth. P. Vijay Kumar:] Both in terms of the communication and the logistics as we roll this out. That said, the focus on D2C brands will continue to be there. And future. And if we see that they are decent enough to necessitate or there is an opportunity to move them into premium retail outlets, We will take a call at the right time. Yes. Okay. And in case of tea, what is our average domestic price realized in this quarter and in the corresponding quarters. I think I will let Nidhi revert to you separately on that very specific question And she'll get back to you. Okay, okay. Thank you. That's all. That's all. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Ms. Nesli Verma for closing comments. Yes. Thank you so much everyone for your time today. I recognize we've run out of time. So if you have any further questions, please feel free to get in touch with me. And have a very happy festive season ahead. Thank you. Thank you. On behalf of ICESYS Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your line.