Tata Consumer Products Limited

Tata Consumer Products Limited delivered a 10% consolidated revenue growth in Q1 FY26, reaching ₹4,779 crores. Despite this, consolidated EBITDA saw an 8% decline, translating to a 250 bps margin contraction, primarily attributed to higher tea costs and coffee price corrections. However, PBT grew 10% to ₹465 crores, and total net profit increased by 15%, resulting in a 12% year-on-year EPS growth, benefiting from the absence of interest costs post-rights issue.

The India branded business demonstrated a UVG of 6.8%, with core categories like tea and salt achieving double-digit growth in both value and volume. Value-added salts notably grew 31%. The growth businesses, however, grew 7%, which was below management's expectations, mainly due to the RTD segment being impacted by early monsoon and unfavorable weather. Sampann continued its strong momentum, growing 27% and is now tracking an Annual Run Rate (ARR) of ₹200 crores.

The international business maintained its momentum with a 5% constant currency growth. The U.S. market showed strong performance, with coffee growth at 20% and a 4% market share. Starbucks, the coffee chain joint venture, returned to same-store sales growth in April and June, despite a decline in May due to geopolitical tensions and store shutdowns in North and Northwestern India. Six new Starbucks stores were added during the quarter, focusing on footprint expansion across metros and smaller cities.

EBITDA margin was significantly impacted by input costs, with 160 bps attributed to tea costs and the remainder to coffee price corrections. Tea prices are currently favorable, being 13-15% below last year's levels, and are expected to trend lower. Management anticipates tea gross margins to normalize to a range of 34-37% by Q3 FY26. Non-branded business margins corrected sharply from 22% to 12% due to falling coffee prices, which impacted profitability in that segment.

The company continues to focus on strategic priorities, including maintaining A&P-to-sales in the 7% range, with an aim to increase it to 7.5-8% in the short to medium term. Multichannel capabilities showed strong growth, with e-commerce (including quick commerce) growing 61% and modern trade growing 21%. The pharmacy channel rollout expanded to 40 cities, and the vending business now holds a 5% share in the bean-to-cup market with 5,000 machines.

Capital Foods and Organic India, acquired businesses, faced transitory^📎 issues in Q1 FY26, including capacity constraints for noodles, inventory rightsizing, and supply chain hiccups related to exports and imported ingredients. Management stated that most of these issues are being addressed, and they expect these businesses to stabilize and achieve a year-on-year growth of about 30% from Q2 onwards. Organic India's e-commerce revenue grew 3.5x year-on-year, demonstrating strong channel response.

The RTD business under NourishCo experienced a 13% revenue decline despite 3% volume growth. This was attributed to the re-indexing of prices to retail that occurred in Q2 of the previous year. Management expects that as the company cycles this re-indexed pricing, volume growth will translate into value growth, projecting an 'upwards of 30%' growth for NourishCo over the next three quarters.