Fortune Scrip     

Published: February 15, 2025
Updated: February 15, 2025

Tata Consumer Products

Indian FMCG shogun in the making

This fortnight, we have picked Tata Consumer Products (TCPL) as the Fortune Scrip. Belonging to the illustrious house of the Tatas, it is an emergent FMCG giant. With its registered office in Kolkata and corporate headquarters in Mumbai, the company is the world’s second largest manu facturer and distributor of tea and a major producer of coffee.

Formerly known as Tata Finlay, then renamed Tata Tea and yet again renamed Tata Global Beverages Ltd, it once again changed its name to Tata Consumer Products Ltd after the consumer products business of group company Tata Chemicals was merged with Tata Global Beverages in 2020. Then followed an acquisition drive. The group took over Bengaluru-based Kottaram Agro Foods, the owner of cereal brand ‘Soulful’, the bottled water business of Nourish Co and Tata Smart Foodz. Going a step further, TCPL acquired Big Basket, a well-established and reputed distribution outfit, renaming it Tata Neu.

Thus was born an emergent domestic FMCG giant, with all Tata consumer products businesses brought under one roof along with a number of acquisitions. The company now aims at being the largest Indian FMCG company, sidelining foreign multinational behemoths like Hindustan Unilever (HUL) and Nestlé.

BRANDS APLENTY

TCPL operates in the food and beverages industry, with 56 per cent of its revenues from India and the balance 44 per cent from its international business. Today, it controls Indian and interna tional brands like Tata Tea, Tata Salt, Tetley, Eight O’Clock Coffee, Good Earth Tea, Tata Sampanna and Tata Starbucks. Tata Tea is the largest-selling tea in India, while Tetley is the biggest-selling tea in Canada and the second largest selling tea in the UK and the US.

The company operates several subsidiaries, including Tata Coffee Ltd, Tata Starbucks Ltd, Tata Cha, Tata Global Beverages, Tata Consumer Products International, Tata Consumer Products (UK) Ltd, Tata Consumer Products (Australia), Tata Global Beverages’ America Inc, Amalgamated Planta tions Pvt Ltd, Tata Tetley, Eight O’Clock Coffee, Earth Tea, Tata Salt and Tata Sampanna.

TCPL has made rapid strides on the financial front. During the last five years, its sales turnover has expanded from Rs 5,690 crore in fiscal 2020 to Rs 9,998 crore in fiscal 2024, with operating profit almost doubling from Rs 804 crore to Rs 1,590 crore and the profit at net level inching up from Rs 844 crore to Rs 981 crore.

MONEY MUSCLE

Its financial position is very strong, with reserves at the end of March 2024 standing at Rs 13,511 crore — almost 14 times its equity capital of Rs 95.28 crore. But we have not selected TCPL as the Fortune Scrip on account of its past performance. We strongly feel that its prospects going ahead are even more promising. Consider:

• Through organic as well as inorganic expansion, TCPL is on a rapid growth path. The consumer market in India - the most populous country globally - is all set to register the highest rise in high-income households, according to a report by BMI. The country currently ranks fifth but Fitch Solutions Company predicts that a 29 per cent increase in real household spending will push India into the first two spots. The FMCG sector is a cornerstone of the Indian consumer market, driven by everyday essentials like food, beverages, personal care products and household items.
• India's large youth population is also a major driving force for increased consumer spend ing. Approximately 23 per cent of the country's population is estimated to be between 20 and 33 years old and BMI expects this group to spend big on personal care products and electronics. The report predicts that this spending will grow by an average of 11.1 per cent annually to $ 76.2 billion by 2027, due to a technology-literate urban middle class with increasing amounts of disposable income that would be spent on aspirational products such as consumer electronics. The Indian consumer market is expected to reach Rs 1.18 lakh crore ($ 18 billion) by December 2025. The CAGR of this industry is 31.6 per cent. The consumer market constitutes 65.2% of the total GDP of India. TCPL constitutes 70 per cent of the total Indian consumer market.

TEA SUPREMO

• The world's second largest manufacturer and distributor of tea is the largest manufacturer of tea in India. The company manufactures 70 million kg of tea in a year, controls 54 tea estates, ten tea blending and packaging factories, and employs around 59,000 people. It owns 51 tea estates in India, especially in Assam and West Bengal in eastern India and Kerala in the south, and in Sri Lanka. It is the largest manufacturer of Assam tea and Darjeeling tea, and the second largest manufacturer of Ceylon tea.
• TCPL is the world's second largest manufacturer and distributor of tea, and the largest tea company in India. It has reached this position, thanks to innovation, strategic alliances and acquisi tions. This continuous focus on product innovation and adaptation to consumer preferences, such as launching new tea blends and catering to evolving consumer tastes, has resulted in its products and brands being widely visible in over 50 countries.
• Tata Tea is the biggest selling tea brand in India. Tetley is the largest selling brand in Canada and the second biggest selling brand in the UK and the US. The consolidated worldwide branded tea business of TCPL contributes around 86 per cent to its consolidated turnover. There are tremendous growth prospects for TCPL teas in India and global markets going ahead.

GLOBAL APPEAL

• TCPL products are highly popular not only in India but also globally. Its products have strengthened its presence in the key focus markets of the UK, the US and Canada. Tetley, Good Earth and Teapigs are its core tea brands in these markets. The company has also launched new products in its Eight O'Clock coffee portfolio and RTD portfolio with Teapigs Kombucha, Teapigs Cold Brew and Good Energy (a natural energy drink).
• The management has converted what was originally a tea and coffee company into a multi category FMCG company by resorting to the organic as well as inorganic route. Sunil D'Souza, MD and CEO, puts it succinctly, "The company's vision now is to emerge as a larger packaged food and beverages company and eventually as a significant FMCG player."
• The company is very keen to expand its product portfolio. The architect of the reconstructed TCPL, group supremo N Chandrasekaran, insists, "Our acquisition journey is not over as yet. We will continue to look for right acquisition opportunities in different categories with a view to leveraging its product portfolio, expanding distribution network and product innovation, as well as entering new categories. We are on a mission to create a premier and pace-setting diversified FMCG company."
• TCPL has been added to the benchmark Nifty50 index, replacing state-owned GAIL. Thus, the company that operates Starbucks cafes in India joins FMCG peers such as Hindustan Unilever, Nestle and ITC in the blue chip index. This inclusion in the Nifty50 has led to buying of TCPL shares by exchange traded funds (ETFs) worth Rs 760 crore.
• For the fiscal 2025-26, the government has presented the budget which has raised the income tax exemption limit to Rs. 12 lakh per annum, shifting Rs. 1 lakh crore in the hands of the people. This is bound to give a big boost to consumption and consumer companies will be the biggest beneficiaries of this budget. This is a very good news for Tata Consumer Products. With the rapid growth of the company, its stock price has also shot up to cross the Rs 1,000 mark. As the company is expected to scale newer heights going ahead, there is tremendous scope for the stock price to cross the Rs 2,000 mark too. Discerning investors should have this stock in their portfolio.