Note that this conference is being recorded. I now hand the conference over to Mr. Manoj Menon from ICICI Securities. Thank you, and over to you.
A wonderful good morning, good afternoon, good evening to everyone who's there on the call today. At ICICI Securities, it's our absolute pleasure once again to host the Results Conference Call of Tata Consumer Products Limited. Over to Nidhi from the management team for further proceedings. Thank you.
Thank you, Manoj, and thanks for hosting us. Welcome, everyone. As usual, I have in the room with me Mr. Sunil D'Souza, Managing Director and CEO, Mr. L. Krishnakumar, Executive Director and Group CFO, and Mr. Ajit Krishnakumar, Executive Director and Chief Operating Officer. In terms of format, we'll spend about 15 minutes, where Sunil will give you a quick overview of our results and performance during the second quarter, and then we'll open the floor for Q&A. I'd just like to draw your attention to the disclaimer statement, which is visible on your screen. With that, over to you, Sunil.
Thanks, Nidhi. Before I start off the call, just wanted to highlight that officially we've announced L.K.'s retirement effective today. That said, as we are in the process of inducting his successor, L.K. will stay on with us to make sure the successor lands on his two feet, and after that is in a stable position, I think. So as of now, for all practical purposes, you can continue to treat L.K. as the go-to person for all things finance. With that, I go to the executive summary. We delivered a strong quarter with 11% top line growth, 10% in constant currency. The four-year revenue CAGR is now 12% in Q2 FY 2024. India Beverages grew eight, with tea volumes up three. NourishCo grew 25. NourishCo first half is up 44.
India Foods up 16%, volumes up 6%. Tata Sampann was up 47%. International business came to the party big time this time. 13% revenue growth, 8% in constant currency, with EBIT growth of 60%. We continued momentum in India growth, combined they grew 39%, and they moved from 15%-18% contribution to India business during the quarter. EBITDA grew 30%, the margin expanded by 220 basis points, primarily driven by improved profitability in international and non-branded. On a MAT basis, our salt and tea businesses saw a marginal share loss, and I'll come to the shares when we talk specifically on those slides. Innovation is now 5.5%, while we have guided for a full year of 5%. This is the second quarter in a row that we've exceeded that.
We've achieved new milestone in our S&D journey. We had committed saying that we will have split routes in all 1 million+ towns, and substantially in all 1 million+ towns, we do have it. On top of that, we have direct distributors now in all 50,000+ towns. Just as a perspective, during that time, there was a little bit of a blip, and you would have seen some movements in the total numeric reach number. But now that the infrastructure is in place, now execution in these places will be the focus, and in addition, we will move beyond the 50,000 population to start expanding more into the rural spaces. We also announced the amalgamation of our wholly owned subsidiaries, which is NourishCo, Tata Consumer Soulfull, and Tata SmartFoodz, with the parent entity.
We do expect to see synergies in terms of back end, and more in terms of direct and indirect tax synergies. Business snapshot, I talked about India Beverages, 3% volume, 8% revenue. India Foods, six volume, 15 revenue. U.S. coffee was soft. Just as a perspective, the volume softness, when you look at it, we have already mentioned that it was to do with the pack price architecture, where we de-gram packs to hit price points, and that's why you'll see volume negative 13, revenue negative seven. International tea, 15 volume and 30 revenue. Ex-acquisitions -5 and +16. Tata Coffee, while volume was soft, primarily driven by plantations, revenue was up two, and consolidated all-in 11% revenue growth at INR 3,734. Next slide. If I move to...
Yeah, so INR 3,734, which is 11% growth on the top line, five sixty-nine crores, which is a 30% growth on EBITDA. PBT, up 36, at INR 505 crores. Group net profit, -7 . I would just like to highlight that we had a one-time gain of INR 147 crores on sale of land in Tata Coffee last year, which was an exceptional item. So that is why this shows a negative. But if, excluding, exceptional items, the growth is 24%, in group net profit. And we are sitting with INR 2,500 crores of cash. In the same quarter last year, it was about INR 2,000 crores. Against the strategic priorities, I'll straight move into the distribution slide. We had committed INR 4 million, by September 2023.
We are more or less there, it's 3.9. It was 3.9, it's moved down to 3.8, as we've actually rejigged below the lower POP strata, replacing sub-distributors in 50,000 towns with distributors. Like I said, we do believe right thing to do, and it sets us up well for the future, because now we will focus on building a super stockist and rural distributor/sub-distributor in POP strata below. We'll come down, come out with a specific target of which POP strata and how many distributors are we looking at very shortly. Direct reach continues to be strong at INR 1.5 million. We've implemented the split and 50,000 plus distributors that we commented.
Modern trade continues strong growth, exceeding the India growth number, overall India growth numbers, and e-commerce continues on a strong wicket with a 33% growth. India business, we, A&P continued to be high at 6.7%. We have powered up our brands. Now, just wanted to make a statement on tea. The shares that you see out here are MAT. On a quarter-to-quarter, it's almost flat, and just wanted to highlight that you normally see blips in market shares as tea prices come down. They are more or less stable right now, and we do believe, given both distribution expansion that we are doing along with powering brands, we will get back the tea shares quickly. Quarter on quarter, the tea share is stable. Salt, it's a mathematical exercise.
We were the first of the curve last year when we started taking up price. Over the last 12 months, various other competitors have come up in price, so the whole value table has gone up, and therefore, the, you see the value share loss out here. But just as a perspective, now that we are cycling one full year, we see stability in prices. In September, we hit a 38 share, which is a 12-month high, and we do believe now that, prices are stable, we will start getting back to our, standard share gain trajectory. Just wanted to highlight that 3 years back when we took over, the share was 30, and we're now September... For the month of September, we exited at 38. We continued the momentum on innovation, pilot launch of energy product, sports drink.
We've launched ready-to-pour decoction launches in tea, value-added teas. GoFit saw an expansion with apple cider vinegar. Soulfull, which is our play in breakfast, mini meals, and snacking, having completed the breakfast portfolio, we are now starting to expand into snacking. This is the first of what I would say many more to come. Simply Better cold press oils, we launched it on Amazon Prime Day, and it is off to a fantastic start online. We've entered a significant category with vermicelli, and off to a very good start, both on the top line as well as the margin front, relatively in Sampann terms. Walnuts and seeds was our expansion in dry fruits.
We've rejigged our mixes, and we're now playing in the dessert mixes with the Gulab Jamun Mix, which again, has started to do well. We had launched Himalayan Saffron last quarter at the very high end with a QR code, etc. Now, we have entered the mid-range play also with Tata Sampann Saffron. Momentum continues in the Indian sub growth, growing 39%, now moving from 15%-18% contribution to the India business. We've reaffirmed our commitment to sustainability, and just as a perspective, it is not 2030 and 2040. We put out very, very specific targets for FY 2025/2026 on climate, circular economy, and people and community. In terms of business performance, India packaged beverages MAT share, I talked about -95 basis points, but on a quarter-to-quarter basis, it's stable.
Volume growth of 3% and value now ahead of volume as our premiumization efforts continue to play out. Coffee, incidentally, grew 17% during the quarter. Next slide. India foods, salt, I talked about the market share of salt. Overall, value-added salts are 6.6% of our portfolio, continue to climb. Overall, foods growth of 6%, revenue growth of 16%, Sampann had a strong quarter at 47%. That said, I'll guide you back to what we have said. Our long-term aspiration is a 30% growth in Sampann. NourishCo strong quarter, 25% revenue growth and INR 172 crore of revenue. We remain on track for the aspirational target of INR 1,000 crore for the full quarter. Just as a perspective, for the first half, we would have grown 44% despite unfavorable weather.
Tata Coffee, extractions grew 11%, and the stellar performance here was Vietnam, where we had a fantastic price mix realization, which contributed to the profitability. Revenue growth of +1%, plantations was -11%, as buyers hold off a bit when they see coffee prices coming off. Starbucks, we opened 22 net new stores. 24 - 2 is the number. Now we are in 370 stores in 49 cities. And Starbucks grew 14%. The focus remains on accelerating store growth so that we take full opportunity of the long-term out-of-home coffee consumption story in India.
International operations, U.K. on a very strong wicket with the entire rejigging of costs, with the relaunch of Tetley in the most sustainable pack, putting A&P behind it, revenue growth of 13%, black tea share of 19.5%. But what I'd like to point out is the fact that we have always mentioned that the opportunity is in fruit and herbal and specialty, and we've been focusing on that with Good Earth and Tetley, and now, fruit and herbal, in the month of September, we've got a 10% market share. U.S., a little bit of a work to do as coffee prices are coming off and promotional intensity starts heating up. We put in correctional actions, late in the quarter, which should start reflecting in this quarter.
But overall, more or less maintaining market share, but revenue is a bit soft. Canada, the Tetley portfolio continues to deliver 8% revenue growth and 28% overall market share. In terms of financial performance, over to LK.
Thanks, Sunil, and good morning, everyone. As Sunil mentioned, it was a strong quarter. We grew 11% in top line, 10% in constant currency. India business grew by 11%, and within that, we had India beverages growing by 8, food by 16, and overall, the growth portfolio grew by almost 40%. In terms of the international business, the growth was 8%, flat to marginally positive, if you take out the acquisition. But within that, U.K. saw good growth compared to the same period in the previous year. Non-branded business grew 3%. In terms of EBITDA, we had strong increase of 30% and with an improving EBITDA margin. India business, EBITDA grew proportionate to turnover. EBITDA margin at 15.7 was in line with the previous year.
International business, EBITDA growth was driven by pricing interventions and also savings from restructuring we did in different markets, but the major improvement was in the U.K. business. The increase in EBITDA for the non-branded primarily reflects higher prices of coffee, but also some amount of inflation coming down on freight and other logistics costs, which were high in the previous year, because of supply constraints and inflation. For the half year, similar trends, not very different in terms of follow. Consolidated revenue grew by 12% and EBITDA grew by 24%. Moving on to the actual P&L format, just want to draw your attention to a few points. We've talked about revenue and EBITDA. Talking about exceptional items, we have in this quarter a charge of INR 15 crore on restructuring costs.
In the previous year, we had the impact of a sale of property, so we had a significant exceptional income, which is not there. Hence, we are seeing that the growth in PAT is lower at 359 versus 355. The group net profit after associates is also lower because if you look at the format, you'll see the share of profit or loss from associates is lower than the same period in the previous year. Mainly due to North India plantation, which had an adverse impact, both on account of crop and prices. The trend for the half year is similar, 12% top line growth, EBIT growth of 25%, PBT before exception 29%, and lower growth of group net profit at 5%.
Moving on to the standalone, and standalone really reflects our, tea business and the foods business. We had 11% top line growth, in the quarter and, 17% improvement in PAT. Just to mention that, the standalone also has some portions of our non-standard business, basically, the tea extraction. There is also, other income from investment and other, which is in the standalone. On a year-to-date basis, revenue from operations, 11% up, and PAT up by 20%. Moving on to segment performance for the quarter, revenue up 7%, we talked about that. In terms of segment results, you're seeing a 7% change, compared to a higher EBITDA number we talked of in the past.
The reason for, for this, being lower is because we wrote off some, assets which were, obsolete and were not being used. So, there was some amount of one-time charge that we took. So you see the depreciation is slightly higher in this quarter. That's the reason for lower growth in the segment results compared to what you see elsewhere in the presentation. International business improvement we said, is primarily because of U.K.. To some extent, other markets also had marginal improvements, but U.K. and inclusion of Joekels resulted in a 60% improvement in it. Non-branded improvement, primarily reflects, the higher prices, but there's also an element of sale of timber, of INR 5 crore-INR 7 crore that was included in the results. Segment revenue, 22% from India, 28% from international business.
In terms of profitability, India business slightly higher at 78 versus 22 for international. But as we said, the outlook for international in the medium term is to keep improving the EBITDA margin so that the difference is catching up. In terms of the half year performance, no additional call outs. The proportion of revenue is 73 and 27, and EBITDA is 76 and 24. That's it from our side. Over to Sunil.
Yeah. So in terms of, if I conclude, we've seen a stable demand trend in India, and we remain cautiously optimistic and continuing our momentum. We see demand headwinds in our international markets, even, even as we've delivered a competitive performance, and we remain confident that we can continue to deliver. In terms of the business, we again delivered a double-digit top-line growth with EBITDA margin expansions. The interventions that we put in for our India key business continue to yield results. This is the third consecutive quarter of volume-led growth. Salt, despite the price increases, we've seen volume growth and continued premiumization. We do expect that now that we've got stable pricing and we've built out more infrastructure for distribution, we continue to drive volumes. Both businesses are on a very, very strong trajectory.
JV Starbucks now has 370 stores across 49 cities. International business, we have taken structural interventions and pricing actions, which have now started to deliver margins. As I said, the U.S. is the only place where we've got to tweak in the short term right now. And we have started to put money back into A&P to strengthen brands, so that we move from a push-based model to a pull-based model internationally. On NCLT approvals, we're waiting for the final approvals to come through. The hearings are all through, and post obtaining those approvals, we expect to complete the merger of Tata Coffee business in this financial year. With that, back to you, Nidhi
Thanks. Thanks, Sunil. Moderator, we can go to the Q&A queue.
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 their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, congrats on the very good set of numbers. My first question is on your energy drink and sports drink. So, INR 10 price point with a very different brand name, Say Never. Wanted to understand, does this compete with the INR 20 price point energy drink of cola companies? Cola companies have seen spectacular success, but your pricing is half of that. So will this compete against that product? Is it largely similar, but smaller quantity? And in terms of distribution, cola companies have very strong distribution in this kind of a channel. How do you intend to compete, if you want to take it pan-India and big, how do you intend to compete in this?
Sure. Thanks, Abhinish. I go back to the fundamental premise of acquisition of NourishCo, which was that we had a good team and a good base infrastructure, and we needed geographical and portfolio expansion. We are in the process of geographical expansion. We've up to 44 plants now, and portfolio, we're expanding. We've got juice and jelly, we've got jelly drinks, and now we're just starting to dip our toes exactly into what you said, the big emerging energy market. Now, just as a perspective, you're absolutely right. As the cola companies are priced at, if I'm not mistaken, 20, in some cases, 15 for a different serving size. Our whole logic is that of the cup format. The cup format does two things for us.
A, it is a lower packaging cost, and, B, because we are distributed manufacturing, our freight cost is low, and therefore, we are able-- and of course, it's a smaller serving size, and therefore, we are able to hit a price point. We've launched it in very limited geographies right now to test the concept, to see if it works. We are quite confident that it will, and if it works, then we'll come out with a full-fledged plan on how to expand it across all the geographies. We're still not national. I would say we're about 75%-80% of the country in terms of coverage, and that's where we will play. Where we have cup lines, we will come back with an exact plan on how to play it. Early days, I would say wait and watch.
Sure. My second question is on the NourishCo and India modern trade. You have done well in most other parts of business, but when I see NourishCo, it seems much lower than the run rate which you are having. So 60% growth in Q1, dropping to 25%, which is a very big drop. Similarly, India modern trade, first quarter growth was 22%. Q2, you have not given number, but my sense is around mid-single digit. So why is there such a drop? Is there any impact of, say, the festival shifting in the modern trade, is that the reason? But I don't see that impacting your e-commerce business. In fact, your e-commerce business in India has accelerated significantly in Q2 versus Q1. So if you could explain all these three aspects.
So Abhinish, let me answer your second question first. The reason, absolutely, as you pointed out, for modern trade is a bit of shift of festivals. Because normally, modern trade loads up about 15, 20 days prior to the festival dates, and there has been a shift, a significant, decent amount of shift this year in the festival date. So we do expect this quarter modern trade to pick up quite well. I don't think there is anything else to it, because market share-wise, we're maintaining market share across all the categories that we play in. E-commerce would have performed better for two reasons. A, there is not as much loading into the warehouses as modern trade does.
The second piece is that there is a significant amount of new launches that we are playing only online, and it is not even in modern trade and e-commerce. For example, GoFit, ACV, a lot of the dry fruits, et cetera, is primarily online. That may be the other, factor, but the bigger factor would be exactly what you said, is the shift of festival date. So that's the answer to your question number two. On question number one, it is primarily to do with weather. While we did push on, despite inclement weather in the first quarter, we had glitches in the second quarter when we had unseasonal rains, et cetera, which continued beyond a normal date.
Like I said, we had said we are setting out an aspirational target of INR 1,000 crore for NourishCo for the full year, and right now we remain committed to that.
Sure. My last quick question is on Tata Sampann. So, most of your products in Sampann are in terms of more on health and more on fiber, etc. For example, your pulses, etc., clearly on that, also seeds and nuts, all are on health platform. When I see your latest launch of the Gulab Jamun Mix, it seems a bit different. So, will it work? I understand the overall mother brand strategy, but having a dessert brand against a healthy pulses and healthy nuts and fruits, will it work?
So, let me step back. So, Amish, Tata Sampann is a pantry brand, right? Yes, and most of the categories that we have chosen to play in are on the healthy side. But if I look at the specific category of mixes, when you distill the entire opportunity out there in the mixes segment per se, you will see that there is a significant amount of opportunity out there in dessert mixes, which we were leaving it out on the table. So this is our first, again, if I say, launch and learn experiment of launching a Gulab Jamun Mix into the trade. Also, this is a very, very seasonal product, so that's why we've launched it about a month and a half before Diwali to test it out.
If this works, then we will have to step back and look at our whole portfolio play and see what tweaks do we need to make.
So thanks, that's all for me. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, please restrict your questions to two at a time. You may join back the queue for follow-up questions. We'll take the next question from the line of Manoj Menon from ICICI Securities. Please go ahead.
Sunil, just wanted, you know, a bit of a macro, marketing perspective from you. So when I broadly look at the, revenue performance, particularly volume performance of, consumer staples, you know, there is a very clear divergence, you know, between food, you know, companies and, home and personal care. While there are certain, let's say, hypotheses, which I do have, but just wanted to pick your brain, you know, on, let's say, what are those drivers which you are, witnessing? And, how do you see this trajectory, can it even accelerate, food versus HPC?
Manoj, I would not comment on broader macroeconomics and other companies. All I can say is we see a huge runway, whether it is in tea, whether it is in salt, whether it is in Sampann, Soulfull, everything. We remain focused on our categories. We remain on focus on what we can control, and what we can't, we make sure we've got adequate actions to make course corrections. In tea, we've always said that we, I mean, we see a long-term growth of 5%. We are slightly short of that. We're better than where we were a year ago, where it was in a decline. We do see a little bit of stress on rural, and this is... I mean, you see every FMCG company commenting upon it.
There we have seen an effect of inflation, we've seen an effect of erratic monsoons, we've seen an uptick on MGNREGA. But that said, again, we've seen a jump in two-wheeler sales as of late, so we remain cautiously optimistic out there. On salt, again, we've guided for a mid-single-digit volume growth, and we are more or less inching towards that, that being faster coming towards that than the beverages space. Sampann, we've always said we'll grow 30%. Soulfull is a wide, wide space. It's for us to play. We've moved from breakfast to snacking, and now I think you'll see us expanding our time and growing far, far faster. So, I do hear various chatter from various different people, but I would not comment on it without knowing the details yet.
Fair enough. Fair enough, sir. Secondly, on the distribution bit, good work, you know, by the team, till now. Would you be able to give us some quantification of the, let's say, the growth from the sales vector, which you'd have got, let's say, in the last three-to-five years? And how do you see the some quantification on how do you see this into the medium term also, on, in volume terms?
Sorry.
Volume.
So sorry. In terms of where we are getting the growth from, Manoj, actually speaking, while everyone is talking about rural stress, and we do think there is a little bit of that still left out there, for us, rural is an opportunity where we are expanding the distribution. And therefore, for us, internally, rural growth, urban growth, is working out to almost the same in percentage terms. That's number one. Number two, where we had done split route, split routes in urban areas, with the hypothesis being that we will expand the bandwidth at the front end, and therefore be able to drive depth in the outlets rather than width, we are seeing that with decent increase in lines and therefore growth rates on split routes versus non-split.
50,000+ towns, which was our depth, which was our width expansion in rural, semi-urban and rural. Early days, encouraging signs, but the reason why we are confident is because now we are going to step out beyond the 50,000+. On tea volumes itself, Manoj, I think for the last, what, about three quarters, we've been seeing about 3%+ volume growth. We've been seeing, we had seen a little bit of an upsurge on local regional brands, but now, like I said, once tea prices are more or less stable, it boils down to branding and execution, and we remain confident that we should be able to equal, if not exceed this number, towards our midterm aspiration as we go forward.
Understood, sir. Just quickly if I may, on the salt business, given the limited operating history which we have, just a question, you know, where will you put the category, you know, strength or let's say, your brand strength, you know, let's say, in terms of linkages to commodities? What I'm trying to understand is, let's say if I look at the business, like soaps, for example, or a Parachute, you know, while there is these are all brands, but, let's say, Lux is a brand, but, there is a commodity linkage where there is a necessity to drop prices or, you know, let's say, manage a profit pool appropriately, else you lose market share.
But let's say in a salt business, in a scenario of which may happen at some point in time, or let's say, in a lower input cost, where will you put the price retention power or the profit pool actually can expand or not?
So, so let me put it this way. Normally, price elasticity comes when there are substitutes. The good news is there is no substitute for salt, and therefore, it's got the most of its form. It's not that people can eat less or use less of salt, unlike most of the other categories which you mentioned, which includes various factors, number one. Number two, if you look at the cost of salt, is primarily determined by two things. Number one is the cost of brine. Other three things, cost of brine, cost of fuel and logistics, right? Now, if you presume that cost of brine and logistics is equal for everyone, the only place where I am slightly off is cost of energy for conversion, because we use coal and more or less imported coal.
It's a dollar-denominated price of international coal. But that is not a very, very significant portion of my mix, and therefore, we will continue to be not insulated per se, but relatively lesser impacted with movement in commodities. That's number two. Number three, with a 38% share, we have the strength to move the market. Like, last year when we took up the pricing, historically, this company has never taken beyond an INR 1, and at one shot, I think in two quick moves, we moved out INR 5. The reason is because we were confident, A, of the brand, B, of the fact that what is hitting us is hitting everyone else, and, C, the fact that we can execute as well, if not better than everyone else in the market.
That is why you see, despite taking that steep price increase, we've more or less maintained market share. Yeah, there have been small moments, but like I said, September is back to 38, which is again a 12-month high, and we expect to keep this trajectory going.
Super, super. Thank you. Thank you, Sunil. I, I do remember last year, you know, noting that very few brands can actually have a 30, a 30% price growth and still have volume growth. Good luck, sir. Thank you.
Thank you. We have our next question from the line of Percy Panthaki from IIFL. Please go ahead.
Hi, Sunil, and congrats on a good set of numbers. My question is on the growth businesses which are high teens % of your India business. So can you give a little more color on that, as to what is the profitability of this business? Point one. Or rather, I should say point one is, what is the breakup of that? If you can, I-- we don't want exact numbers, but some color on the breakup of this business between pulses, spices, and NourishCo numbers you give, but whatever else remains in this.
Also, we did a calculation last quarter, where we said that since this business is probably not making profit right now, the rest of the portfolio actually has seen like a 200 basis points margin expansion versus four years ago, which is not very visible in the reported numbers. I think probably it might help if you also sort of highlight this to investors, that the EBITDA margin expansion is actually much higher than what it seems if you adjust for the growth business. So sorry for the long question, but to sum it up, do you think that as this business grows bigger it will have a negative mix impact on the overall sort of India business?
Or do you think that the recovery in margin of these businesses itself should nullify the negative mix impact going ahead?
So, so, Percy, Tata Consumer Products was built for growth. And when I say growth, it is, we've always said double digit top line growth and including EBITDA. We are acutely conscious of the fact that we are behind many of our listed FMCG peers in terms of EBITDA margins, and therefore, you would see us continuing to deliver EBITDA gains. Now, the mathematical formula, the way it works, is more or less we built out the fixed cost. There is not going to be a significant increase, and therefore, whatever comes in in terms of gross margin, I would say margin after promotions at the top will flow through to the bottom.
So we, we manage the India business as a whole to make sure that we're delivering this, and therefore you'll find different percentages across different businesses from time to time. Now, that said, the growth businesses are very high growth rates, and if I look at the three businesses that we classify today as growth, the NourishCo, Smart Foods, sorry, four businesses, NourishCo, Smart Foods, Sampann, and Soulfull. I would say broadly, NourishCo, Soulfull, and even Smart Foods, broadly, percentage margins are in the range of our India-based business. Sampann would be a little bit behind, probably because of the category that we play in. And this is a mix to manage for us to deliver the total India business PNL. Yes, even if within Sampann, it will slice and dice it.
Spices, mixers should be higher than our base business. Today, we're still building it out. Mixers should be higher than our base business, pulses should be slightly short of that. That's number one. Number two, sequentially, over the last three years or so, we've improved the margins in all the Sampann categories while growing the top line significantly. Number two, as we are growing these businesses, we are very, very clear we are playing for the future. It's not number for every quarter, and therefore, we are putting A&P far ahead of the curve in all these businesses. So, NourishCo, for example, today, if I turn off the tap, I am profitable. But will I turn it off? No, because I think there is a substantial headroom for growth. Similarly with Soulfull.
If we turn off the A&P tap, we are profitable. So but we are not, we are not playing this game for the next one quarter or one year. We see a substantial runway for growth. Sampann, the entire pantry space is open, and today, actually speaking, we're heading towards close to INR 900-INR 1,000 crores in Sampann for the full year. And that's, we built this in roughly about, what? Three and a half years. And similarly in NourishCo. So I would not want to slice and dice it, saying, you know, "Should I put on the brakes on this business so that my margin..." The game is to continue to deliver double-digit top line and improve EBITDA margins. So therefore, you will see EBITDA margins improving.
This quarter, for example, compared to last quarter, we've improved 200 BPS plus on last year same quarter, 200 BPS plus of EBITDA margins while delivering growth, yeah? So that would remain the objective.
Very helpful, Sunil. Just a quick follow-up on this. On the tea business in India, when you look at your EBITDA margins, and I'm not asking for the figure, but just when you internally look at it and compare it with, let's say, best-in-class tea margins across competitors, in India, do you think you're more or less there, or do you think you still have some catch up to do, according to you?
So, Percy, I would say not probably the right way to look at it, and there's specific reason why, right? I would look at margin after promotion expenses and not at the EBITDA, because when in the EBITDA pieces, you load various middle of the P&L, and depending on your scale and leverage on your fixed costs, you will have a different output there. But the margin of the promotion expenses, I would say they're in the ballpark. We're still not there, but they're in the ballpark of most of our big competitors. EBITDA percentage margins, we will be lower because the center of the P&L, some of the larger players have got significant leverage on costs, which we don't. LK, you want to add anything?
I just wanted to say that just one point, which I guess all of you are aware, that relative comparison of our portfolio versus our key competitor, I think there is scope for us to premiumize, and we are doing that pretty rapidly, and we have been making good progress in South. So I think for us, there is some scope for improvement from where we are. The only message I want to leave, because there is greater opportunity for us to premiumize and win in certain markets where relative share is probably lower. So that's an upside for us.
Yeah. So, just to add to what LK said, our strength is mass to mass premium, whereas if you look at our key competitor, the strength is from mass premium to premium. So slightly higher revenue, and therefore, even while percentage margin remains the same, in absolute INR, it is slightly higher. Per, I would say about 10%-12% higher numeric distribution, and therefore, ability to spread costs faster. And because of the larger portfolio, their central fixed costs, et cetera, the leverage that you'll get, which will translate into EBITDA percentage, we would be slightly behind. That said, that is why the whole objective is to continue to grow rapidly while maintaining fixed costs, so that we also come into the same ballpark.
Thank you. We have our next question from the line of Tejas Shah from Spark Capital. Please go ahead.
Hi. Thanks for the opportunity and, so, my first question is an extension of one of the previous participant's questions, only that, we have some very good execution on our numeric distribution expansion, both on direct and indirect. But when we see as an outsider, how should we see this lever? Is it a growth lever, or is it just a necessary condition but not a sufficient condition to kind of connect with the growth itself?
So Tejas, I would say it's a necessary but not sufficient condition for two to three reasons, right? A, total universe, 8-9 million outlets. You take your pick from whose numbers you choose. If you look at tea, as defined, it's about available in about 6 million outlets plus per se, and I'm talking about my target reach being about four. So there is still a significant amount of and we will be about 2.8-2.9 million only per tea. So there is still, I mean, half the way still to go. That's number two. Number three is, even if you reach there, the question is, how well are you executed in terms of your lines, in terms of your displays in the outlets, in terms of the right packs being available?
That's a long way to go. So it is work in process. I, I like the word that you used, necessary but not sufficient. We've got to 4 million. Now that the 4 million we've got to improve, but we've also got to go beyond the 4 million. So that is why you'll see us doing these various, different items of, whether it is split routes, whether it is direct distributors, below 50,000 up to 50,000, below 50,000, now starting to expand rural and sub distributors. We're in the middle of rejigging our entire HFA and DMS. They will probably be, what I would say, best in class by exit for this year on the front-end DMS specific, which would then enable pinpointed execution by outlet.
Got it. Got it. Second question is on the acceptability curve of NPD when it moves across channels. So, for example, you said that a lot of our launches are now focused on online. So let's say when we do something on online and it works there, and when you translate the channel, you move it to MT and then MT to GT, does the acceptability curve remains the same or it drops materially? And how it happens vice versa. Let's say you started something with GT and acceptability is very high on MT and online, how does that work?
So, Tejas, let me say, I see more of launches online than going to MT and GT rather than vice versa. I don't think we would see that other way around. Why? Because it's very easy to launch online addressing target consumer of one, right? I mean, I can talk to every single target consumer one-on-one, that's A. And B, like, I like to use this term to beat up my sales guys, saying, "When it is only the consumer and me, which is online, that is when the power of the brand comes in. After that, it is your execution ability." So for example, in tea, we are the market leaders on e-com.
So therefore, the strong hypothesis that if we get our distribution in place, there's no reason we should not be closing the gap on market share, right? But to your point, after we launch online, we do have to make tweaks. And let me give you the example of dry fruits. Dry fruits was off to a very, very strong launch online. We started hitting about INR 50-70 crores annual run rate, if I may. That's the terminology which the online guys use, right? ARR. And then we said, "Okay, it's got legs to go offline." As we went offline, we figured out we've got to make two tweaks to our packaging. It's very nice to sell a product simply with pictures and then deliver it at home.
But when people, consumers actually shop offline, they want to look at the product, and therefore, there has, there has to be a see-through window on the packaging. And the second thing is the package cannot lie flat, which is the way we were designed the package. It has to be a stand-up pouch. So right now, we're in the middle of modifying the package, because we did a trial in very limited markets in GT/MT, and we could get in dry fruits, because now, by now everyone knows Sampann dry fruit is available online. But unless we make this modification to our packaging, we can't get going. So you're right, we will, we will launch products online. We will see the acceptability, and if we find enough legs, we will go offline.
But as we go offline, we will, I think we will have to make tweaks to our product, packaging, pricing strategies.
Thank you. We have our next question from the line of Mihir Shah from Nomura. Please go ahead.
Thank you for taking my question, and congrats on a very good set of numbers. So if you can talk about the timing and the synergy benefits from the amalgamation of NourishCo's Soulfull and SmartFoodz, and kind of any quantification, or ballpark quantification impact that we can see on margins on the back of that, sir.
So these companies are already consolidated, right? So, basically, the larger objective is simplification. There will be some amount of rationalizing the support costs because of combining entities. But in business, not very significant benefit. There will be, however, some benefit on account of GST, more cash, little bit payment, because for us, we have an inverted duty structure. That means, you know, our input costs are higher in terms of than the output GST. Whereas for the other companies, it's reverse. So we'll have some cash flow and a little bit of payment benefits, not significant. In addition, because our carryforward loss, we'll be able to absorb some of the losses of these companies, which will give us a benefit on the tax line.
Again, it will be, overall a number of all things put together would be in the range between INR 50 crore-INR 100 crore, somewhere in between, all things considered, some of it cash flow, some of it payment.
Got it. Thank you for that. So my second question is on margins. When we see the international margins on a sequential basis, you know, they appear to be down, while on a YoY, there's still an expansion. So how should we think about international margins from here on? Was it, seasonality? Second subpart is on the India margins again. You know, they appear to be lower largely. Is it a function of higher ad spends or anything else, you know, would be pulling down India margins, you know, tad bit? And lastly, on the non-branded margins, it appears to be higher than the branded ones. If you can share, how should we think about that as well?
So I'll start with the non-branded margins first. Non-branded margins is primarily a factor of coffee prices and, great performance by our Vietnam business on the price mix. I mean, there's no capacity changes. It is just that we played the right game on the price customer/price mix, of Vietnam, and that's why the margins look better. I think they will continue to be in a decent range going forward because, the focus on making sure that, we derive value out of all our investments has come in. That's number one. Number two, on the international piece or the India piece per se, you have to remember two things. We have seasonality in our businesses, especially for, tea and coffee, more tea than coffee.
For international, I would urge you to look at year-on-year and not quarter-on-quarter, because there will be changes that we will do in, especially on AMP, et cetera. This quarter, we have spent higher, and why have we spent higher? Because we rejigged our entire packaging with our investments into the Eaglesc liffe factory. We came out with a more sustainable Tetley pack. We took some time to get into the trade. We took pricing to make sure it stabilized, and after it has stabilized, now we have put A&P behind it. Apart from that, we're expanding distribution, which as you realize in international market, does require listing fees, et cetera.
Further, our Good Earth, for example, which we were only piloting in Sainsbury's, now we have decided to take it across, and we are now entering multiple geographies. We've launched Joyfull in Tesco. There's initial activation fees, et cetera. So therefore, I would urge you to look at year-over-year and not quarter-over-quarter. That's number one. In the India business, we do not look at it again, similarly on quarter-over-quarter, because the tea business in India, you do realize, is highly seasonal. The north kicks in in Q3, more in Q4, and tea prices are dramatically different on what you buy in Q1 versus Q4. So this will go up and down. The balanced businesses will more or less remain steady.
There will be a little bit of cost movement here and there, as, for example, we've invested ahead of the curve on sales and distribution, in splitting the routes and putting the distributors in all 50,000+ towns, which in my mind is the right thing to do, because it's not washing off for quarter-to-quarter. But as you build out the distribution system for the long run, this is the right thing to do.
Thank you. We have our next question from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Yeah, hi. My first question was on the Sampann 47% growth, seems to have stepped up, and also higher than your normal, 30% range. So is there a significant pricing step up due to commodity, underlying commodity here? And also, if you could help us understand how much of the volume growth is being driven by incremental distribution and addition of new segments outside the pulses? If you could just give us some flavor on both of those other than pricing.
So let me answer your second question first, is the whole premise of doing split routes in the million-plus towns, was the fact that we thought there was a bandwidth release which was needed at the front end, and if you did that, you would get growth. So whether it is in beverages or it is in foods, we are seeing incremental growth in the split routes rather than the non-split routes. So that, that's number one. Number two, Sampann growth, that is why we have constantly guided for a 30% growth in the medium term. This quarter, I think we've delivered beyond that on the base business, as well as there is some inflation effect, especially in the areas of pulses, et cetera.
But while we will continue to push the needle to the maximum, longer term, we do stay committed to the 30% growth for Sampann.
Is there a significant or a significantly increasing contribution from the newer segments like dry fruits and others, or they are still very small in the mix in Sampann?
So right now they are small, because the big, big pieces in Sampann, if I look at it, it is pulses, basmati, spices, and then we've got all the other new categories. But do realize that the new categories have just got launched probably in the last 12, 18, 24- months per se, and it takes time to build up. Yeah, so but, but whichever category we are entering, we are confident that we, A, the categories are large, because, let, let me put it this way, the expansion is not a mindless expansion.
It is a roadmap drawn out about two years back, of which categories we should enter, and what size we will get to, A, and B, the reason why we get into those categories is specifically because we've got, growth, this thing, we've got a specific, target. We've got, ability to create a difference. There is a trust deficit in that category, and therefore we'll be able to get a decent market share.
Thank you. We have our next question from the line of Sheela Rathi from Morgan Stanley. Please go ahead.
Yeah, thanks for taking my question. Hi, Sunil. So my first question was, again, with respect to the growth businesses. So if I see, from FY 2022 to FY 2024, we have almost doubled the share of growth businesses from, you know, 10% to 18% now. So Sunil, should we see a similar trajectory to play out, say, in the next two years, that, you know, the share of these businesses could be circa, you know, 40%, or say 50% in the next three years?
So thanks, Sheela. So fundamentally, we've said, Tata Consumer will deliver double-digit growth and, EBITDA ahead of, that double-digit growth, right? So if I, if I peel back, if I take my base categories of tea and salt, we've always said mid-single digit volume and a few basis points on that of price, which will not get me to the double-digit growth. And therefore, the growth businesses have to be delivering substantially more than the base businesses. All I can say is I, I think we've made our aspirations for this year at least very clear. With Sampann, INR 900-INR 1,000 crore. For NourishCo, we've already said the aspirational target for this year is INR 1,000 crore, and we do remain... We do seem to be on track to deliver that. Soulfull is on a very strong trajectory.
We are moving from now breakfast into the larger snacking occasions, which should deliver us more. So yes, the short answer to your question is, I think you will see substantially faster growth in the growth businesses, compared to our base business.
... Sure. And the second part to the same question is, how should we think about the growth businesses in terms of, say, you know, you talked about tea, we are more on the mass and, you know, mass premium side, mid-premium side. How would you categorize your growth businesses? Will it be mid-premium or premium, or, you know, will there be a share of mass in this growth business also because we are also doing pulses?
So I would, Sheela, I would split the businesses and talk about it. So if I talk about Soulfull, I would say it is mass premium to premium. If I talk about NourishCo, it is more, I would say 90% mass and 10% premium, because we do have Himalayan out there. We've launched Himalayan saffron, we've launched ready to drink coffee, which is again premium. But as a percentage of the mix, it will be relatively smaller. Sampann largely would be a mass, but again, I would put a fine line out there. In whichever category we play, we do command a premium on the base portfolio. For example, our pulses would be roughly a 10%-15% premium over every local, every regional competitor, if I may.
Similarly, our spices would be benchmarked to the national players and more or less in that ballpark on the pricing. So it depends which category is where we're defined, and even within that category, it depends on who is the benchmark and what are we going for. The big play would be Sampann. The big play would be the NourishCo mass. These would be probably, like I said, Sampann would be 10%-15%, if you take pulses. NourishCo would be in the mass pricing range.
Thank you. We have a next question from the line of Sumant. Sorry, ma'am. Go ahead, please.
Yeah, we'll just go to the webcast for a question, and then we can come back, if that's okay. Yeah. So Sunil, there is a question from Saurav Patwari, Quest. He's asking, for some time, we started with pulses, basmati, et cetera. Incrementally, we seem to be moving towards ready-to-cook products like vermicelli, tea mixes, et cetera, and high value trust deficit categories like dry fruits, saffron. What is the strategy moving towards higher margin products, given the distribution and brand awareness is being established over the last few years? Also, on saffron, we launched one in Sampann as well as Himalayan. Is there a change in strategy on both the products, strategy or both the products can coexist as premium and super premium?
So let me put it this way. Like I mentioned earlier, it is not that this is not we're thinking on our feet. This is a roadmap drawn out on which categories we are going to enter. We drew it up about 24 months back. Every category was defined in size of category, margins, right to succeed. Do we have the differentiation and ability to differentiate the product itself? Is it trust deficit? Because the Tata brand name does magic in trust deficit categories. So all the launches that you see are the result of that roadmap which is drawn. There would be products which would be high margin, there should be each, each of these categories has a role to play in our portfolio.
There would be some which will drive for volume, this, there's some which will drive for, margin, and of course, there will be some which will drive for imagery. So, there is a roadmap, and we are following that roadmap. The answer to the saffron question is, yes, we did launch saffron under Himalayan. This is saffron from Kashmir. It is accompanied, every single pack is accompanied by a QR code, which gives you the authenticity, of the saffron which you have sourced, but that is at the very, very high end. Sampann, is more or less, as I just mentioned, is a mass premium sort of, brand, and therefore, we do think saffron, given that it is a high trust deficit category, high margin, high value category, we've got...
We can make a play in that, and that's why we've launched Sampann out there. We do think both the brands can play in the same space over a period of time.
Thank you. Moderator, we can go back to the Q&A, please, and just take one last question, perhaps, given the time.
Sure, ma'am. We have a last question from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Can you talk about NourishCo channel expansion and key estate expansion we have recently done?
Sorry, this is-
NourishCo.
NourishCo is, as I said, geographical and portfolio expansion. In geographical expansion, we've got about 44 plants, if I'm not mistaken, right now. We cover about 650,000 outlets. Just as a perspective, the large players, I would say between 4-5 million, easily. Therefore, while we have kept up the geographical footprint in terms of manufacturing, we've still got a long way to go in terms of distribution, and that remains the opportunity. As we build out our distribution, adding to the portfolio and strengthening our depth in the outlet is the other opportunity, and that's why you would see us testing out energy drinks or sports drinks.
Okay. In the food category, we have seen our product launches strategy is majorly focused towards premium products. So do we have a strategy to launch or planning to launch to mid to mass segment also going forward?
So Sumant, I would launch products where I can make money, as simple as that, right? I would be very happy to launch high, high volume and high margin products, but I would struggle to find them. So like I said, we've looked at the entire food and beverage space, looked at where are the spaces where we can create meaningful scale, and make money there, and that is the play that you are seeing play out.
Thank you. I would now like to hand the conference over to Ms. Nidhi Verma for closing comments. Over to you.
Thank you everyone for joining us, and thank you, ICICI Securities, for hosting us. In case there are further pending questions, you can reach out to us. Our contact details are mentioned in the investor deck. Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.