Q1FY22 Result Analysis:
1) Q1FY22 Result:
- The Revenue from Operations of the company has increased from 10.9% YoY from Rs. 2,714 Cr. in Q1FY21 to Rs. 3,008 Cr. in Q1FY22. Sequentially, the revenue from operations of the company has decreased from 0.9% from Rs. 3,037 Cr. in Q4FY21.
- Revenue of the company mainly driven by the growth of 28% in India Beverages and 20% in India Foods, International business reported lower revenue as the previous year had Covid induced pantry stocking.
- The Earnings before Interest, Tax, Depreciation, and Amortisation (EBITDA) has decreased 17.2% YoY from Rs. 483 Cr. in Q1FY21 to Rs. 399 Cr. in Q1FY22. Quarter on Quarter, the revenue of the company has increased by 33.1% from Rs. 300 Cr. in Q4FY21.
- The EBITDA margin stood at 13.3% in Q1FY22 down by 450 bps YoY and up by 340 bps QoQ.
- Loss in EBITDA Margin: India Business: mainly due to increase in A&P YoY and low-cost tea inventory in the base quarter and International Business - COVID-related pantry stocking by consumers last year.
- The Profit Before Tax (PBT) of the company has decreased from 32.7% YoY from Rs. 499 Cr. in Q1FY21 to Rs. 336 Cr. in Q1FY22. Quarter on Quarter, the PBT of the company has increased heavily by 70% from Rs. 198 Cr. in Q4FY21.
- The Net Profit of the Company has decreased from 43.5% YoY from Rs. 328 Cr. in the quarter ended 30th June 2020 to Rs. 185 Cr. in the quarter ended 30th June 2021
- The Net Profit Margin stood at 6.2% in Q1FY22 down by 590 bps YoY and up by 440 bps QoQ.
Tata Consumer- Q1FY22 Results
2) Revenue Mix:
- The India Beverages business witnessed growth in revenue from 40% in Q1FY21 to 46% in Q1FY22.
- While International Beverages has reported a heavy downfall in its revenue contribution to the business from 36% in Q1FY21 to 28% in Q1FY22.
3) Performance Highlights:
i) India Business:
a) India Packaged Business:
- Revenue for the quarter grew 24%, with 3% volume growth, impacted by the disruption caused by the second wave of COVID.
- EBIT margin for the segment improved QoQ, however, contracted YoY led by tea cost inflation and increased A&P.
- Market share leadership in tea in the E-commerce channel
- Gain of Market Share by ~140 bps.
b) India Foods:
- Revenue for the quarter grew 20%, with 17% volume growth.
- Salt revenue grew 20% during the quarter, despite a high base.
- Tata Sampann's portfolio grew 12%, due to pantry loading in the base quarter, bringing the 2-year CAGR to ~30%.
- Continued to drive premiumization with Premium Salts portfolio growing 34% during the quarter.
- Tata Sampann Spices recorded strong growth in the e-commerce channel.
c) NourishCo (100% Subsidiary)
- Revenue grew 91% YoY bringing the 2-year CAGR to 12%, despite the severe adverse impact of COVID on OOH consumption.
- The growth was broad-based with all products growing strongly, with Tata Water Plus delivering yet another exceptional quarter.
- Geography and capacity expansion on track.
d) Tata Coffee (inc Vietnam)- ~58% Subsidiary:
- Revenue for the quarter grew 5% led by the extractions business, which helped offset the decline in coffee plantations.
- The quarter saw value growth in Tea (better realization) while Coffee revenue declined YoY, due to a high base.
- Overall extraction business grew 21%, with growth seen in both Vietnam and domestic business, which was impacted by nationwide lockdown last year.
e) Tata Starbucks (JV)
- While revenue for the quarter grew 371% on a depressed base of last year, it was still 61% indexed to Q1FY20 (baseline).
- Delivery contribution increased to 27%, driven by several focused initiatives, to offset the decline in dine-in.
ii) International Business:
a) United Kingdom:
- Revenue for the quarter declined 11% (constant currency) owing to pantry up-stocking that led to 12% growth in the base quarter last year.
- Tetley continued to grow share in Fruit & Herbal segment with the new Herbals range.
- Setting up a dedicated e-commerce team for the UK and Europe and an
- integrated back end i.e., fulfillment centers for all tea brands.
b) United Kingdom:
- Coffee: Revenue for the quarter declined 15% (constant currency), due to pantry loading that led to 26% growth in the base quarter last year.
- The retail coffee category saw a decline during the quarter, lapping an elevated base of last year, however, showing signs of a rebound in June.
- Tea (excluding Empirical): Revenue for the quarter declined 8% (constant currency), on an elevated base that saw 25% growth in the base.
- Revenue for the quarter declined 25% (constant currency), due to pantry loading that led to 32% growth in the base quarter last year.
- Tetley has gained market share both in regular and specialty tea.
- The continued strong performance of the Tetley Super Teas range.
4) Q1FY22 Highlights:
- Despite a severe second wave of COVID, India's business performed well while International markets saw a decline owing to pantry loading in the base quarter.
- Overall, India business1 grew 25% led by: India Beverages business growth of 28%, with 3% volume growth, and India Foods business growth of 20%, with 17% volume growth.
- International business declined 13%, cycling an elevated base driven by the pantry.
- Fall in EBITDA Margin QoQ was driven by higher A&P investments in the India business in the current quarter and low-cost tea inventory that benefitted the base quarter
- The gain in market share in both the core categories of tea and salt in India.
- The Company have now harmonized the Pan-India distribution system and have substantially completed the integration of Soulfull
Earnings Call Highlights:
i) India Beverages:
- Tea prices have fallen to INR215/kg as compared to the peak of INR272/kg in 2QFY21.
- However, prices are still high due to the drought scare in Assam and lockdown restrictions, which led to an increase in Tea prices.
- With a surge in Tea prices, TCP has taken a price hike across certain geographies. However, the entire cost increase was not transferred through an increase in realizations. With falling Tea prices and lower costs, the margin is expected to improve.
- TCP has designed a strategy to gain market share across the domestic market. It has implemented different strategies for the northern and southern states.
- The India Beverages business recorded 24%/3% value/volume growth in 1QFY22, impacted by the disruption caused by the second COVID wave.
- EBIT margin for the segment improved QoQ. It contracted YoY, led by cost inflation in Tea and increased A&P.
- In addition to recording overall market share gains, the branded Tea business achieved market share leadership in the e-commerce channel.
- The Indian business faced challenges in May’21 and Jun’21 concerning last-mile logistics. Volumes were affected due to lower out-of-home consumption of Tea. However, with the easing of COVID-related restrictions, demand is expected to bounce back sharply.
ii) International Beverages:
- In 1QFY22, the growth rate in the International Beverages business was impacted owing to pantry loading in the base quarter last year.
- Tetley continued to grow its share in the Fruit and Herbal category in the UK, with its Herbals range.
iii) Tata Salt:
- TCP launched Tata Salt Super Lite. This is India’s first specially formulated 30% lower sodium salt, adding to the company’s Premium Salt offerings.
- Revenue grew 20% in 1QFY22, despite a higher base.
- It continued to drive premiumization with its Premium Salts portfolio, which grew 34% in 1QFY22.
iv) Tata Coffee:
- The India Coffee market is largely driven by the Instant Coffee segment. TCP has launched Tata Coffee Grand to cater to the INR25b Instant Coffee market. Tata Coffee’s ‘Sonnet’ and ‘Eight O’Clock’ Coffee brands aim to target premium customers in the domestic market.
- Revenue grew by 5% in 1QFY22, led by the Extractions business, which helped offset the decline in Coffee plantations.
- The quarter also saw value growth in Tea (better realization), while Coffee revenue declined YoY on a higher base.
- The Extraction business grew 21%, with growth seen in both Vietnam and the domestic business, which was impacted by the nationwide lockdown last year.
- The Vietnam business recorded the highest ever EBIT, driven by increased volumes and a higher proportion of premium blends.
- Tata Coffee: Consolidated revenue fell 9% YoY to Rs. 5.3 billion, with EBITDA declining by 18% to Rs. 90 Cr. Standalone revenue grew 2% to INR1,795m. EBITDA rose 6% YoY to Rs. 16.1 Cr. Tata Coffee overseas (Tata Coffee consolidated less Tata Coffee standalone): Revenue declined by 14% YoY to Rs. 353.2 Cr., with EBITDA down 22% to Rs. 74 Cr.
v) International Business:
- In the US Business, The Coffee business declined in the US in 1QFY22 owing to an elevated base last year. The decline seen in K-Cup was much lower than that seen in bags.
- In UK Business, Tetley continued to grow its share in the Fruit and Herbal segment, with a new Herbals range.
vi) Business Highlights:
- Ad spends increased by 53% YoY in 1QFY22. With an increase in profitability, A&P expenses are expected to increase going forward.
- Market share in Tea/Salt rose by 170 bps and 370 bps respectively. Growth in Salt was driven by higher volume as compared to value growth.
- Direct reach: TCP ended 1QFY22 with a direct reach of 820,000 outlets (v/s 500,000 outlets in Sep’20). It is looking at 1 million outlets by Sep’21. It added 3,000 distributors and is looking to triple its field force to expand its rural footprint.
- e-commerce recorded significant growth (153% YoY) and contributed 7.3% of domestic sales.
- Digital transformation: The management is laying out ERP and other systems to gather data across different business units, and design and execute a strategy to improve overall performance.
- The company is on course to achieve its targeted synergies of Rs. 100-150 Cr.
- TCP overseas Tea: Revenue declined by 2% to Rs. 5 billion, with EBITDA down 24% YoY to Rs. 35.3 Cr.
- TCP is targeting aggressive growth in Tata Sampann. It is witnessing huge traction in Poha, Pulses, and the Spices segment. There is a gradual pickup in the Mixes category.