Tata Consumer weighs its next price move

Tata Consumer Products Ltd (TCPL) anticipates continuing double-digit revenue expansion in FY27, fueled by robust consumer demand, growth in volume-led expansion, and momentum from its expanding food and beverage divisions, stated its MD & CEO Sunil D Souza. The FMCG giant announced a 12% increase in revenue, a 19% rise in EBITDA, and a 29% boost in net profit during the June quarter.

Souza hinted at possible selective price hikes across certain categories if rising commodity, packaging, and energy costs persist. The company attributes its growth to a strong volume-led surge across all categories, indicating a solid underlying demand. He believes the recent recovery in consumer demand is due to measures like income tax relief, GST recalibration, and government capital expenditure.

Souza highlighted that TCPL's performance mirrors the broader FMCG sector's recovery, with volume growth seen across major categories. He stressed that price-driven growth is temporary, while volume-driven growth is fundamental. The tea and packaged beverages business showed a 2% volume growth despite a 4% revenue decline due to lower tea prices being passed on to customers.

The company remains confident in maintaining double-digit growth while enhancing profitability through premiumization, innovation, and scale benefits. TCPL's growth businesses like Tata Sampann, Capital Foods, Organic India, Soulfull, and ready-to-drink beverages grew by 47% in the June quarter, contributing nearly 30% of India's business.

These faster-growing sectors are expected to continue benefiting from consumer trends like health and wellness, convenience, and digital commerce. Despite pressure from higher costs, TCPL has so far avoided broad-based price increases. When prompted about pricing actions, Souza mentioned that the company would adjust prices across categories depending on input costs and market conditions.

For instance, TCPL increased the price of salt by Rs 2 per pack to tackle higher coal costs, energy expenses, and currency fluctuations. In tea, selective price hikes were initiated due to a 7-10% rise in tea prices. The company aims to preserve profitability without overburdening consumers. Souza emphasized that TCPL's pricing strategy focuses on remaining competitive against local brands while ensuring product quality and extensive distribution.

The biggest risk to the ongoing recovery, according to him, is persistently high petroleum prices, which could potentially derail the growth if they remain elevated and cannot be offset.