Q1 21/22

Aug 4, 2021

Ladies and gentlemen, good day and welcome to the Tata Consumer Products Q1 FY 'twenty two Results Conference Call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please 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, Mr. Menon. Hi, everyone. It's an absolute pleasure that ICIC for us to host the Q1 FY22 results conference call of Tata Consumer Products Limited. The company is represented today by Mr. Sylvia Sousa, Managing Director and CEO Mr. Hill Krishnakumar, Executive Director and Group CFO Mr. Rajiv Krishnakumar, COO Ms. Nidhi Verma, Head of Investor Relations and Communications. Having The target results for the last 14 years, this analyst and I said, we continue to have the constructive view. Over to the management for the opening remarks and the Q and A after that. Thank you. Thank you. Thank you, Manoj for hosting us and hi Welcome to the call. Hope all of you are keeping safe and doing well. In terms of the format for today's call, We will spend about 15 to 20 minutes giving you key updates and highlights of the quarter and then reserve more time to answer your questions. So without further ado, I would now like to hand it over to Sunil. Sunil, over to you. Thanks, Nidhi. I'd just like to add to what Nidhi said. So compared to our earlier calls, you would see 2 differences coming up. Number 1 is the timing of the call. We've got feedback from various quarters saying we were not giving enough time to people to digest The numbers and the disclosures before the call and therefore they would like more time so that they can ask more questions. So that's why While we were ready with our results yesterday evening, we've chosen to have this call around noon today So that all of you get time to go through, understand the details so that we can get into questions. That's number 1. Number 2 is we've already uploaded the deck. So we would want to spend time only on a few pages giving you the highlights so that again we reserve More time for Q and A in line with the feedback that we've got from various quarters. With that, I will go straight over to the executive summary. All in all, I would say we've done a decent performance for the quarter. Our consolidated revenue grew 11% year on year despite Challenging operating environment and a very high base. Just to put it in perspective, we are cycling a quarter of last year where revenue grew by 13 And EBIT grew by 43%. So on that 13%, we have still grown 11%. And this is despite a severe second wave of COVID. The India business has performed very well, while international market, As expected, saw a decline owing to pantry loading in the base quarter. Overall, India business grew by 25%, India Beverages up by 23% with a 3% volume growth, while India Foods continued its strong momentum a 20% revenue with a 17% volume growth. International business, which had shown very strong results last year, both in terms of top line As well as bottom line because of reduced promotional and A and P expenses, this time around declined 13% With an underlying decline of 16% because remember, we have also divested certain businesses which are sitting in our base, namely MAPS Coffee as well as Empirical. EBITDA margin for the quarter was 13.4% sequentially up quarter on quarter by 300 basis points, but down by 4 52 basis points Driven by A and P investments in the India business as well as last year's fee cost versus this year, there is a significant difference And that has impacted the bottom line. So the group net profit declined 42% year on year. However, adjusted for exceptional items because last year, We had a onetime gain of about INR 84 crores on account of the NaurishCo transaction that we have done, while there was offset of over INR21 crores In terms of restructuring expenses that were taken, net net INR 63 crores was sitting in the base. We don't have that. If I adjust it for exceptional items, We've declined 27%. We continue to invest behind our brands to drive long term growth. So we are close to a 50% In A and P in India this year, in this quarter, in line with the commitments that we have made in terms of strengthening our brands, And we gained market share in both the core categories of tea and salt in India. The tea market share was up by 170 basis points. And Salt, where we are number 1 by far, we continue to go from strength to strength, and our market share was up by 370 basis points. We now have a fully harmonized PAN India distribution system. There were a few pockets where we had still not in line with what we had done last September, whereas during this quarter, we have taken those on and now The entire country is harmonized on one system and in line with the commitment that we have made of Completing the Solpul integration within 100 days, well on track to achieve that. In addition, we continue to streamline operation and drive synergies, and this is driving synergies beyond what we've committed. We had committed INR 100 to INR 150 crores of synergies in 18 to 24 months when we did the integration of the food and beverage business. Having completed 18 months, we are well ahead on the INR 100 crores bottom of the Guidance that we have given and well on track to achieve both on in terms of quantum as well as in time on the INR 150 crores. On top of that, we are constantly looking for synergies, including network optimization in India. In addition, we have started an exercise On simplifying the international business, but more of that because that's right now work in process. If I go down to performance overview And go straight down to group performance key businesses for Q1 FY 2022. India Business INR 12.67 crores, volume up 3, revenue up INR 28. India Foods volume strong volume growth of 20 17, Revenue growth of 20. In this 2017, very strong volume growth by Salt, Sampan, overall top line growth of 12%, but remember it was cycling a very, very strong base of about 50% last year. CAGR still 30% plus. U. S. Coffee and International Tea, both of which Saw a strong pantry loading last year in the same quarter, a decline both in volume and revenue, But shares fairly stable. Tata Coffee had a fairly decent quarter. Volume was negative 6%, Primarily driven by Plantations Tea and Coffee, but all other businesses of pepper, extractions, etcetera have performed very well on the volume and revenue front. Overall consolidated INR 3,008 crores, 11% revenue growth for the quarter. If I move on to overall group performance, I talked about the INR38 crores up by 11 percent EBITDA INR403 crores negative INR 17 versus same quarter last year Margins at 13.5%, down by 4.52 basis points. PBT at INR342 crores, down 22 percent at 11.3% margin group net profits at 200 Negative 42 margin of 6.7 percent. And despite the fact that we have paid out more dividend This year than what we had last year, we're still sitting on INR2,169 crores of net cash. If I move on to the strategic priorities and talk a bit about where we are, just to give you some snapshots of where we are, In terms of strengthening and accelerating core businesses, our outlets Just one slide back. Yes. So I'll just talk about the details out here. We had made a commitment on Expanding our outlets where we had started from 500,000 outlets, we had said by September of this year, we should be at 1,000,000. We've ended the quarter at 820,000 outlets, well on track to reach the €1,000,000 target that we have set. On top of that, we've started our rural expansion. As I mentioned in our earlier call, we had tripled the number of Seat on street on rural, and we're targeting to expand rural distributors. We've already added 3,000 distributors. On strengthening and accelerating core, the big thing is to build brands. And as I mentioned to you, our A and P in India this quarter is up by Strengthening and accelerating core is up by 170 basis points, solid market share up by 370 basis points. Drive digital and innovation, we formulated our digital strategy. We formulated a new digital structure to make sure we are driving both efficiency and effectiveness, And we have started to put it in place. All in all, as I've mentioned in an earlier call, our entire plumbing, if I may, whether it is From a common data lake to a DMS and HFA system, a new ERP system, a new integrated business planning system and a new analytics platform, all of that in place. On the innovation side, this quarter, we've had several launches, Including Superlight in the salt business, 30% renewed salt. We're the only ones in the market with that. We've launched Chakra Gold Care. We're just about launching 8 Coffee out here, and we've expanded our Sampand range. In terms of unlocking synergies, I talked to you about delivering the INR 100 and INR 150 crores of numbers. But on top of that results Per se, our working capital is down by 2 days versus the same quarter last year, so efficient working capital management. And If you adjust for some timing differences versus last year, we have continued to deliver 101% of EBITDA into cash this year. Future ready organization, all the capabilities that we are building in terms of whether it is digital, Revenue Growth Management, e Commerce, the entire organizations are in play. And now, a, we are building out the teams and We're making sure they have got the tools to drive opportunities as they come forward. Exploring new opportunities. Organically, we have just launched on our D2C journeys. And While we started with Tata Coffee Sonix, we have now launched 1868 tea, which is a range of curated teas, Premium curated teas and just about stepping out into 8 And lastly, embedding sustainability. We have made several strides including featuring among the top 3 FMCG companies in the recently released CRISIL Sustainability Metrics. With that, I will just go straight to macro and commodity overview To just give you a perspective of where margins are headed because the one question on everyone's mind is what is tea prices doing to your overall business. So if you see the middle of the slide, that shows you how the pricing has moved, and I'll urge you to stay in the That blue line in the middle of the chart. Q2 last year was the peak of tea prices as we came out of The lockdown and a bit of flooding in Northern India. From there on, tea prices have started to ease. And you would see that reflected in our business because in the India Beverages business, if you look at gross margins, Q3 was Last year was the bottom. From there, from 'nineteen, we moved to 'twenty one and sequentially moved to 'twenty six, and you could expect to see this graph going upwards. Now from Q4 'twenty one, we did see a bit of an uptick into Q1 FY 'twenty two. That's primarily the result of 2 things happening. 1 is there was a bit of a drought scare in Assam And North India, more I would say in Assam than in Duas. That caused a bit of a pick. But apart from that, I think the 2nd wave and the lockdowns which happened, people were highly, I would say, Tense about the fact that the scenario what happened a year back with lockdowns, 50% working, Reduction in crop, etcetera, would repeat, and that is why there was an uptick. That said, from where we saw June end, we are seeing About INR 20 to INR 30 coming up already as we speak, and we do expect to see tea prices Stabilize, sort of normalize as we go forward. In conjunction with the fact that over the last 1 year, Looking at tea costs, we have taken up our prices up, making sure that we are maintaining consumer elasticity, Competitive positioning, making sure we are not compromising on momentum or growth, I would say margins On the upward trend, and you could see them coming back strongly in a quarter or 2. Coffee prices, on the other side, You are seeing an uptrend, and the spike is probably got exaggerated in the last 10 days or so As, a, the initial spike was caused by a bit of drought like conditions in Brazil, but about 10 days back, there was Frost on one of the days and people were highly skeptical about both short term and long term coffee output That's why prices went up. Two impacts on us, a positive for the Tata Coffee side and possibly could have an impact on our 8 business. But fortunately, 8 we are more or less hedged for our entire commodity input for FY 'twenty two. With that, I will move on and ask LK to walk you through the financials. Yes. Thanks, Prudhil, and good afternoon, everyone. I'll just take you through highlights and I'm on Slide number 37 for Those of you who have the deck, it's coming up in a minute. Yes. So starting with standalone revenue for the quarter at INR1966, an increase of 22% over the same period in the previous year. Strong performance both in Beverages and Foods. India Beverages grew by 28%, Of which volume growth was about 3%. India Foods grew by 20% with about 17% volume growth. So That we had a very difficult quarter and particularly the month of May. We saw a good bounce back in June and we are seeing good trajectory in July. Looking on consolidated revenues, up 3,008 gross, up by 11%. The growth rate is lower than what we saw in standalone because the international business declined by 13%. A combination of the fact that the previous year had A lot of fancy loading, which is not repeated, plus also due to the fact that we exited some business which we had in the same period last year, which was the empirical foodservice business. Commenting on the EBITDA, EBITDA for the quarter in the standalone business is 2 74 crores, down by 16%, Largely a function of fee cost which Suraj talked about. Fortunately, we are seeing some respite in fee cost and Hopefully, the following quarter should be better. In addition, we've had a fair amount of increase in advertising spend during the quarter because of which the profitability is lower. Similar trend on lower profitability in the consolidated results, INR403 crores EBITDA versus 486. So in addition to the point we made on India, it was the impact of lower states in international business, which is resulted in a drop in EBITDA. Moving on to the next slide. It's just a standalone consolidated results that we have released. Some highlights from the steady format. The point I want to make here is the EBIT margin, especially in consolidated at 11.2% is higher than what we saw in the previous quarter, while it is lower than the 15.6% We saw the same period last year. There is clearly an improving trend, which I want to call out. In the standalone results, you will notice that While EBIT has been lower at INR239 crores versus INR296 crores, PBT and PAT are higher than the same period last year. That's primarily because of dividend inflow. In the previous year, we had record performance of our international businesses and we chose to bring back cash into India in the form of dividends. So that's a big reason why you have an improved bottom line Notwithstanding that operating performance is somewhat lower. Moving to segment wise performance, In terms of segment revenue, we saw India Beverages 28%, of which we said volume is 3%. India affords 20% growth, Volume is 17% in that. International business, I just explained, because of pantry loading, the previous quarter was exceptional, which is not repeated. Non branded business grew by 5% in the quarter driven largely by the extraction business performance. Commenting on the segment results, The decline from $212,000,000 to $151,000,000 in the case of beverages is a function of the tea cost escalation that we spoke about plus The Q1 last year was before we started restructuring, and we did a fair amount of change in And we've also invested for future growth of the Foods business, all of which happened in subsequent quarters. Secondly, in the current quarter, there is increase in advertising, but there is also investment behind the Sole Pool brand. So we need to keep this in mind when we compare. The other comment that I want to make is the INR 96 crores of profit in quarter 1 FY 2022 is higher than what you saw for the Foods business in the in quarter 4 of last year. So overall, there is good revenue growth and improving profitability. There is some amount of on profitability ratios because of investment. International Beverages lower segment results because of what we saw primarily due to lower turnover. So net operating segment total EBIT is INR 3.36 crores versus INR 4.99 crores of last year. Commenting on the proportion of different parts of the business, India Beverages 46%, India Foods 26% and international 28%. So India is now 72% of the total revenue. If you look at the segment results, It's mirroring a similar trend, not very different. 72% of the profits come from India and 28% from the international business. So with that, I think we are concluding the presentation. So over to you to respond to questions that you have. Yes, I'll just take a brief. Anything on the outlook, Parthik. So while I said we had a decent And this is in light of the 2nd wave of COVID in India now receding. So we had for those of you who've been through the deck, We've shown our numbers month on month indexed. So May was saw a significant dip and June has come back and July has come back stronger than June. International Markets, U. S, UK, Canada now seeing a return to pre COVID demand trends. So again, We saw a dip during the quarter, and all the three markets seem to be coming back to normalcy right now. U. S. And U. K. Slightly ahead of Canada Coming back to the normal phase. In terms of business, we are very clearly focused on accelerating the momentum in our business. India Beverages, we talked about moderation of fee costs, and we will stay focused on competitive and profitable growth. We will continue distribution expansion and innovation. We had held that back during the 2nd wave because we saw execution issues, but now we will I'll start with our innovation launches very quickly. We do see significant improvement in Starbucks and further acceleration in Narishko. Just as a perspective, Larisko, despite the 2nd wave, grew by 90% in revenue terms and Starbucks was some 3 50% plus because by now the team has learned to tackle the lockdowns, drive delivery and maximize sales in a constrained environment. The international business, We will see resumption the normalization of in home consumption, and we will continue to focus on our Focus on the growing categories of non black tea and drive innovations in coffee and tea. With that, I would request for questions. So Nidhi, Manoj, up to you. Thanks. Thanks, So, Maury, perhaps you can take the questions from the Q and A queue, please. Sure. Thank you very much. We will now begin the question and answer Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. The first question is from the line of Avnish from Edelweiss. Please go ahead. Yes. Thanks and congrats on the volume growth. My first question is on Salt. So you have reported 20% value growth. So I want to understand what is the volume growth? And how is the market share behaving in the March end? You have said 34% growth in the premium. So I want to understand the 2.40% gain in market share, is it primarily because of the So thanks, Avnish. I would say significant amount has come from volume and not in value in the overall top Growth for Salt, that's number 1. Because Salt, I think, a, we are gaining by distribution, better execution And making sure our supply chains are much more efficient. That's number 1. On the premium salt, premium salt is still a small portion of the portfolio, Abhijit, But the whole objective is it is significantly accretive to the P and L, number 1. And number 2, does great things both from a brand image perspective as well as a future growth perspective, and that's why we are focused on that. So 34% incidentally, I would just like the single biggest Item in the premium sold for us and that is we had held it back till the second wave got over, which was the super light, Which is a 30% reduced sodium. We've just launched that. So you could see this 34% holdingaccelerating as we go forward. And one follow-up, are you giving the mix of mass and premium, Paul? We have not given the mix of mass and premium, but you could touch base with Nidhi and she can give you some more color on that piece. Last question on Sampan. Q4 was disappointing and there is a recovery here. But on this small base, 30% KKR over 2 years, are you happy with that? And within Sampang, there are multiple products. So which ones are doing the best? So for Which ones are you the most confident? So, Abhneesh, I said this earlier, 30% is not a good enough benchmark for us. Our ambition is much higher, and we are working towards that. In terms of so we would target very aggressive numbers in Sampan as we go forward. That's point number 1. Point number 2, if you look at the overall segments which we play in, I think pulses, poha, spices and probably mixes in that Order is the scale of the different categories per se, but the biggest traction in terms of growth we are seeing in poha, followed by Pulses and followed by spices. MIXES is still a relatively smaller segment per se, so I wouldn't comment on growth because it's a very small base. That said, I think, like I said, Sampan across the portfolio work to do to make sure we are accelerating the entire Sampan top line. Okay. That's all from my side. That's quite helpful. Thanks a lot. Thank you. The next question is from the line of Jay Kumar Doshi from Kotak. Please go ahead. Hi, thank you. Good afternoon. I've got two questions. The first one is, tea commodity prices are down about 20% From the last year's peak, but it's still up about INR50, INR70 per kg versus the year before. So if the prices remained at current level, would you be able to recover profitability and you mentioned about recovery in profitability Over the next two quarters, were you referring to recovery of on an EBITDA per tonne basis? Or do you think that at EBITDA margin perspective you can get back to that 16%, 17% margins where T business used to generate? So let me give you a few data points before I get to answering the specific. Number 1 is while we are seeing prices coming down, They are still significantly above where we started in, say, calendar year 2019. And we do think that as we go forward, we will While they will settle down, they will still be higher than where they are in 2019. Now where they will settle, your guess is as good as mine Because there will be several twists and turns on the road as we go forward. That's number 1. Number 2, while we have taken pricing in P Over the last 12 to 15 months or so, we've taken it in different spots, making sure that we are remaining competitive both From a consumer perspective as well as from a competition and therefore market share perspective, that said, we have not translated the Tire cost increase on tea into pricing. So there is still a gap. And therefore, when the tea prices The cost comes down. We do expect a margin expansion. Now when we are talking about margins, we are talking of percentage margins And not absolute margin, but absolute margins depends on where the tea prices finally settle. But in percentage terms, I would say in a quarter or You would see us coming back to normal levels. And that is 2020 levels, 'nineteen, 'twenty levels? Thereabouts, yes. That is very helpful. And my second question is, you now have 3 brands in coffee, Tata Grand Coffee, Sonette, 8 o'clock. So what is your strategy for coffee business in India? And if you can you also mentioned about that a lot of innovations are Under way. So would like to hear your thoughts on where do you see this business and your broad strategy? So before I answer that, let me give you the landscape of the coffee market in India. The big coffee market in India is in the instant coffee business. And there is a smaller play in the whole beans and the roast and ground, etcetera, etcetera. Therefore, all the brands that we have launched So far have a distinct role to play in the different categories. Tata Coffee Grand primarily plays in the instant coffee space And is going after the roughly 2,500 crores market out there. We've got a small share, but given the distribution that we have, given the coffee expertise that we have, given the Tata Coffee that we have given the Tata Coffee brand name per se, we do think we can get to a high single digit, low double digit market share per se. Long way to go, but we have started the journey. That's point number 1. Point number 2, both Tata Coffee Sonet and 8 o'clock Coffee are targeted at a premium Consumer, the consumer who's looking for very specific origin and micro lots is what Tata Sonnet addresses, Whereas there is a consumer who is more in tune with the international trends and looking for a premium coffee from the international space, That is where 8 O'Clock Coffee comes in. Both Tata Coffee Sonnets and 8 O'Clock because they are premium and not as much scale as We have right now gone with the online model. We are testing out the waters. We will see where it goes. We are learning the D2C space. First of all, we fine tune that. And if we find that it has legs, then you'll probably see us slowly expanding into the offline space, but that is if and when at a later date. So very clearly, 3 different brands focused on 3 different segments executed differently. That's helpful. Thank you so much. Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead. Hi. Thanks for taking my question. So my question was on the volume growth slowdown you've seen in this quarter. What we've seen in most other companies is wherever the end demand has not been impacted, let's say, something like a skincare or ice cream, We have seen the May impact being made up in June and most companies have had a normalized volume growth in the quarter. So any reason why you would think your business got more impacted, especially tea because what I see is the dip in there was lot more in packaged tea rather than in foods. And is there any chance that the very high price increases that have been taken in TIA are starting to impact the demand on the slightly mid to premium price segment? So Just wanted your thoughts on that. So thanks. Number 1, I would say The cost of tea and the end cup of tea, the total price this thing is actually insignificant. So while the prices have gone up significantly, I'm not sure that has a direct bearing on the volume that you see. That's number 1. Number 2, I think it is Primarily the result of lockdowns. If I just point out to May is when the dip happened and June started coming back. Now not the entire country did not unlock in June, especially some of the southern states held on to their lock I think about the 3rd week of June and very stringent lockdowns. And in tea, remember, a significant portion of consumption happens out of home Either in the tea stalls or in the restaurants, etcetera. Even the restaurants, etcetera, even after opening up are still at a 50% capacity. So that has an impact. Like I said, June has been better than May July has been better than June. We're just hoping that this is the start of a trend where everything comes back to normal, but keeping fingers Okay, understood. That's very clear. And the second question was you made a comment about potentially looking at So broadly, will this be more about cost efficiencies, Profitability improvement projects or is this more of some potential strategic review of certain businesses? Just wanted a broad thinking on that. So let me leave you with on a strategic review basis, we do that every quarter. So there is no new news in that. And as a result of that, if you saw, we first divested MAPS Coffee and then we divested Empirical. So this is not an exercise. This is a One time overall exercise to look at the entire international business and figure out where we can simplify various things that we do. This is not a strategic review per se, but you could expect the end result to be driving efficiency and effectiveness. Okay, got it. Anshul, one last question on your standalone EBITDA margins are almost back to what they were before the pre commodity inflation started. Now, if you recover your gross margins from here, would you expect ad spends to also kind of go up back to the 7%, 8% levels? Or do you think you could end up at a significantly higher level of margins once you've recovered your gross margins back to the old level? That was my last question. So I would just leave you with one of our stated strategic objective is to strengthen our brands and make sure we are putting enough fuel behind our brands. We've already demonstrated this quarter by despite being under pressure, we have still upped the A and T in India and upwards of 50% increase On A and P, you would see that trend going up. That said, we've got our entire stakeholders, shareholders, board, everyone to manage. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So we will make sure that we are delivering good top line growth, making sure that we are doing the right things to build the business for the future while delivering short term results. Okay. Thanks so much. That's it from my side. All the best. Thank you. The next question is from the line of Parsee Pantici from please go ahead. Hi, sir. My question is on the tea prices and how the companies would respond to that. So typically we have seen that tea is a very competitive segment. And when the tea prices come down, The smaller players or sometimes even the slightly larger players pass on the benefits to the consumer. So what is your read on the situation? Do you think anything has changed because of COVID that like the small players have fallen by the way And therefore you have better pricing power or I mean just trying to understand what gives you the confidence that if tea prices come down, There won't be a pass through to the consumers. So firstly, let me just say, I don't think we made saying if the prices come down, it will not be a pass through. There will be a fine balance. There will be a pass through. There will be some part of holdback, but I'm not trying to second guess what will happen in the future. That's number 1. Number 2, we have said very, very clearly that we will strengthen both our execution as well as brands going forward. And therefore, we should be on a stronger wicket when we go out to the market. Just as a perspective, this Quarter, we have gained share 170 basis points compared to last year. And please remember, this is in spite of having And intense competition, this is in spite of having the large competitors, small competitors, everyone per se. Again, the pricing actions that we have taken, it is not a one size fits all. There are geographies in the country where we have dropped prices in this quarter. There are geographies in the country where we have taken prices up in the quarter. So depending on what we want to achieve market by market, we are going surgical behind it while making sure we're keeping the full portfolio In sight not to lose the total margins and deliveries that we have to do. Right. And While you said that you would come back very soon to the EBITDA margin, which you used to do before the inflation hit, I'm sure that that's not the end objective. I mean, even before the inflation hit what margins you had, you would want to Spanned on those margins. So would you give some kind of idea as to in the medium term, What kind of EBITDA margins you would consider reasonable for your tea business and for your salt business? So, Pankaj, I'll just give you a little bit. We've got More internal pressure to deliver good profitability than outside pressure, right? So we will continue to make sure that we're delivering top notch results. Like I said, I've always made the statements, and we will make sure that we're gaining market share, driving strong double digit top line, Keeping costs very, very tight and making sure that there is a flow through on the bottom line. So as we get to scale and keep our fixed costs constant, you should start seeing The shape of the P and L come back very strongly. Right, sir. And my last question is that In terms of the growth of the India Tea business and the market share gain, which would you say are your sort of Top performing or best growing states in India? So Ideally, the larger states is where you should grow to make the biggest impact. So this is scattered across the place. Most of the southern states and some of the northern states are the big picture apart from a few in the west. That said, We've got a very clear state by state objective, state by state strategy, including which brand to play in what state at what pricing To make sure that when we put the whole picture together, we're landing up on top. Thank you. The next question is from the line of Teta Shah from Spark Capital. Please go ahead. Hi, sir. Thanks for the opportunity. So my first question pertains to cost synergies and other expenses. So last 4 quarters since inflation started or hyperinflation started, we did very well to absorb GM pressure at EBITDA level. But last two quarters, that element is missing. And you had called out that there was some one off Cost in last quarter's other expenses are employed both because of some integration and capability building costs. So just wanted to understand On that line item in particular? If you're looking at employee cost per se, you will see last quarter to this quarter is broadly constant And this is despite the fact that we've given salary increases, etcetera, and built extra capability to both. But I'll ask LK to come in and comment. I You should just there are different elements when you look at quarter to quarter. Overall, the message, I think I made the point is that And if I can just add, Please separate out the synergies piece and the investment piece. And the point I made, Mr. Pankaj, last quarter was also that there is When you look at quarter to quarter, there are some costs which we have to account in the quarter, but it's not a balancing with revenue and other things in the same quarter, right? So that's the point I was trying to make When we talk about employee cost, that we have if we take employee cost as an example, right, we may have increased people in certain functions, But that in that quarter, we've recruited so there will be increase. So that doesn't mean that you're going to compare it with revenue and percentage and a quarter About the benefits, as we build infrastructure, we increase sales force, we invest in IT, these are all part sometimes because we do a particular study in a quarter, Got it. Got it. So my next question pertains to recent changes in the leadership team. And pardon my ignorance here, but most of the changes shared in on PTT are also are mostly replacement except Mr. PV Swaminathan, Global Digital Officer. So just wanted to understand what is the digital road map for the company? And is it largely internally led? You want to expand the same in form of online direct to these consumers, that kind of initiative as well? So digital It's all encompassing. It is not only just driving efficiency within the company. Like I said, we've right now finished laying out the base plumbing In terms of ERP system, business planning system, a common data lake, setting up an analytics platform. So right now we are at the stage where we are able to collect data from across the organization, but we need to now figure out how to leverage that data Using analytics to drive both efficiency as well as effectiveness. So there is work happening across different functions whether it is a frontline sales to enable better selling or procurement to enable more cost effective procurement or to your point Within the organization, driving digitization to help reduce bureaucracy, enable speed up decision making, etcetera. Apart from looking at how to engage with consumers, whether it is on media or it is on commerce and online sales, So across the board, so Swamy and team are responsible for this entire strategy per se. And I did mention in my overview saying that we've sort of finished the strategy and a broad Structure to make sure that we are able to execute this strategy. Now we will start both staffing as well as executing against this. Okay. And so last question pertains to Naresco. Kanri, you mentioned in your opening remarks also that despite the second wave, Naresco did very well. If you can share some thoughts on the brand and midterm target here. And are we sensing that the scalability in Nevesco is way, way easier than Sampan? And if you can comment on the So I would not want to compare Asampan and Narishko. I would say there are opportunities in both of them. And there are completely 2 different opportunities per se. In Sampan, it is more about product and price. In Narishko, it is about scaling geography and portfolio. Now just as a perspective in Narishko, if I dissect the pieces, all the brands have done well, but relatively Tata Water Himalayan have done significantly well. Remember, last year at the same time, Himalayan was an outsourced distribution. We took it in house and started scaling it through. So we are extremely bullish about where Narishco can go because especially like I said, Despite the lockdown, we have grown 90% on Marishco. So the objective for them is not percentage growth, it is multifold growth, And that is what the team is focused on. That's all from my side and thanks and all. Thank you. The next question is from the line of Sumit Kumar from Motilal Oswal. Please go ahead. Yes. Hi, sir. So my question is regarding the food business margin. So we have seen in through past 2 quarters 13.5%, 13.6% kind of margin. But when going by the data for the Q2 and Q3 of 2021, the margin was in the range of 15% to 16%. Can you talk more about the how what is the sustainable margin in the food business going forward? I think we would certainly improve from where we are. And remember that we are like again let me again repeat. We are investing on portfolio. We are investing on faster growth in somewhat right And we are investing in we talk about digital as an example, right? We are investing in digital and some of the costs below that we've grown by the foot investment, Right. Actually, the revenue growth has reoriented structure to get started, right? But that won't happen in a quarter. Long story short, it is impacted by some of these initiatives, Okay. Moderator, we'll go to the webcast and take a couple of questions from there. Sure. Yes. Okay. So there is a question from Aditya at Goldman Sachs. He is asking why is there such a pronounced impact for India beverages in May June, was this supply driven or demand driven? Yes. So Essentially, I think I did allude to it in an earlier answer. This was not a supply driven issue per se. As in this year, there was no issue of ROTI and therefore finished goods and package. But that said, There was severe challenge on last mile logistics as infection spread across the board both within our team And across different partners, including distributors, CNFA, etcetera, etcetera. So that was one big challenge. But I think the real impact in terms of volume, etcetera, that you see is driven more by the fact of the lockdowns, fact that a significant amount of consumption happens out of home, in restaurants, the tea stalls on the roads, etcetera. And in several parts of the country, it was almost a total standstill. So I would say demand driven, but it is not as in consumers drop demand, it is simply because the demand was not accessible, As simple as that. So and like I said, June has come back compared to May and July has come back better than June. So We are, I mean, I think, significantly en route to getting back to a normal business cost. And there is a question on Simpant and Adithya I think that's been answered by Sunil in one of the earlier questions. There is a question from Devanshu at Yes Securities on instant coffee. Again, I think Sunil has addressed this question earlier in the call. There is a question from Rohit from EnTrust. He is again asking about the dichotomy in volume growth between India Foods and India Beverages, which Sunil has just answered, talking about the out of home phaliency of tea. There is a question from him on what are the medium term plans to scale up the India branded coffee business? And any thoughts on divesting non coal business in India and international? Yes. So I take the medium term plans in The India branded coffee business, I did talk about we've got 3 brands now out there, 8 O'clock, Sonnets as well as Tata Coffee Grand. Turner Coffee Grand is probably a low single digit share in the instant coffee market right now. We do believe if we play Right, we should be able to get to a high single digit, low double digit market share, and that remains the ambition. And this is This will not happen as a result of only the execution that we have in the market or the products that we have in the market. You'll see both execution scale up as well as innovation pipeline beginning to play out, a very exciting innovation pipeline, I would say. So that's number 1. On the looking at the non core businesses per se, I did talk about saying we look at it on a constant basis. It is not a one off exercise that we do. And as a result of that, you've seen us divest MAP As well as empirical in the short term, but even over the longer term, if you look at the company, We walked out of Russia, we walked out of China and most recently we walked out of Czech. So taking decisions on what doesn't fit in or what is not performing It's not a very difficult decision for us to make. Moderator, we'll go back to the Q and A queue now, please. Sure. Thank you very much. The next question is from the line of Biraj from Securities Investment Management. Please go ahead. Yes, hi. Thanks for the opportunity. Most of my questions have been answered. I just have two questions. On Sampan, if you look at the overall business scale, it was still around final growth, excess all kind of a scale business. So it's not much of a scale yet. And we talked about aggressive growth going forward. So can you kind of give some color because in last Year or 2 or more, we have seen many new launches as well. So are there any product brands which are more than 30, 50 crores kind of a scale? What's the coverage of existing products which we have been launched? All year we were primarily into category A Stores and probably in the main metro cities. So how is the coverage now? What is the roadmap there? And of the products which have been launched, what is the repetitive sales kind of any indication you could say how is the traction building up On existing sales for some point. And second is on the synergies part, I think a quarter or 2 back you talked about a run rate of being around 6 crores to 7 crores So, Manth, how is that now? Just 2 questions. Thank you. So, let me start with your second question 1st, the INR 6 to INR 7 crores that you alluded to was purely cost synergies. We had still not counted revenue synergies. And when we had made the commitment, it was INR 100 to INR 150 crores of cost and revenue. And I did It was INR 100 crores to INR 150 crores of cost and revenue. And I did talk about we are right now already ahead of the INR 100 crores per month run rate. A significant, significant amount coming from cost itself, which is directly bankable. So that's number 1. And we remain confident of getting to that INR 150 crores run rate. Again, significant portion coming from costs more than revenue synergies per se within the 24 months time line that we had laid out. Now if I come back to Sampan per se, the big categories that We are playing around and we'll be focused on will be poha, pulses and spices, not necessarily in that order. But just as a perspective, your question about repeatability, If there is one thing that I have figured out as a result of multiple market visits, consumer touch points as well as talking to retailers, All that you have to do is make sure the consumer takes Sampan home once because once you've done that, given the quality of the product the fact that we deliver to our promise, you would find a very, very, very high sticky rate. So the question then is to make sure, A, we've got the right product portfolio per And number 2, we are executing it and getting into distribution on scale. Now just as A very simple example, right now we are slicing and dissecting about which product to focus in which market in the Sampan portfolio. For example, there is Masur which sells in the east of the country and Tur which sells in the west of the country. So there are different formulas that we are adapting to make sure that we Driving scale, which is relevant in that market. Apart from that, the sales team is now immensely focused on making sure that they're driving Right now, like I said, we've got 820,000 direct outlets. They are now focused on driving distribution of into a significant number of those 820,000 outlets. Again, we just want to make sure that we get into the relevant outlets so you'll not see it reaching all the 820,000 outlets, But definitely where this category is relevant and the stores are significant, you will see the sales team pushing in. So of the $1,000,000 target which will be eventually by September end, what is the relevant coverage for Sampan brand? And where would we be right now? Right now, we are very small in the scheme of things. Again, it is not a percentage growth that we're seeking for Sampan. It is a multiple growth. I would say please watch this space. Okay. Thank you. Good luck. Thank you. The next question is from the line of Amkit Kanodia from Smart Sync Services. Please go ahead. Thanks. My question was related to the BigBasket acquisition So just to draw an analogy with what happens with us, say, the Mato like thing wherein they have all the data of the customer all around the country, who is ordering what and what. And So how much of that we think can play a role in our journey as well, specifically in terms of Tata Sampan going forward With this big basket acquisition by Tata Sons. And has this any role to play in the last quarter as well? So let me give you 2 specific answers to that. Number 1, in any business, once you have got consumer data, you can leverage it to the hilt In terms of what is the profile of the consumer, how often do they buy, what are the products other products that they buy. So there's a whole range of analytics which you can do to it. So Consumer data in any form or manner is extremely valuable. So that's one piece. The second piece is BigBasket is a group company, and we are working Closely with them trying to figure out areas where we can cooperate and we can drive mutual synergy. Right. And so one thing again related to that only. What I noticed, We generally order a lot from Big Basket and many products which were earlier sent non branded, but we are seeing a lot of Tata consumer product in that, specifically like say Dania or something like a good powder. So how do you see the margins in these products compared to the other projects? See, as we expand the portfolio, each product is dependent on Scale and margin profile and what is the incrementality that it brings to the profile, that is one piece I would leave on the table. The other piece I would say you would find enhanced availability and visibility of Tata, Overall Tata Consumer Products, but more specifically Tata Sampan products, not only in Big Basket, but also in Amazon, Flipkart and all the other platforms. And this Soulfood integration is still not done? So current numbers do not include any sales of Soulfood, right? Solful integration started at the end of the quarter, middle to end of the quarter. So the Solful numbers Are collated into this, but the integration is just about complete. I would say that real traction begins now. Okay. Thank you so much. That really helps. Moderator, we'll just take one last question now. Sure, ma'am. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead. Hi, thanks for the follow-up. A quick one, what is the profitability of POHA? And is it comparable to Pulsar Spices? And what is the threshold you have in terms of What are the categories in Staples that you are not present in which are which fit into your criteria from a profitability So let me leave you with we've done a very, very detailed analysis Every possible segment that we could enter in the pantry space, which is where Sampan is focused on, and we have made Specific choices depending on scale of that segment, profitability in that segment, fragmentation, number of competitors, Growth rate, what does the Tata name do in that space, what are the capabilities that we have, what differentiation can we bring to bear, And then we made a conscious choice to play or not play in certain categories. All that I would leave you with is we've got an internal threshold on which we play, But we also got in some categories where the percentages are lower, we've also got a plan on how to move the margins upward through Either procurement efficiencies or scale efficiencies are bringing in differentiation and a premium play later on. Understood. Thank you so much. Yes. Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to Mr. Manoj For his closing comments, over to you, sir. Thanks. Thanks, Tata Consumer team for the opportunity to host. Didi, would you want to have any closing remarks from your side? Yes. Thanks, Manoj, for hosting us and thanks everyone for joining and for your time. If you have any remaining questions, please feel free to get in touch with me. Thank you, and thanks from everyone here. Thank you, members of the management. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. You for joining us and you may now disconnect your lines.