Tata Consumer Products Ltd. made an announcement recently to acquire Capital Foods and Organic India for a total cumulative amount of ₹7,000 crore. To fund its acquisition, it announced a ₹3,500 crore rights issue after seeking board approval. 

According to the comments made by Suni D’Souza to ET, MD, and CEO, the acquisition enables the company to move beyond commodities into fast-growing, high-margin, value-added food segments. 

telegram channel

Moreover, the stock has been a five-bagger for the last five years, giving a return of 428 percent. So, how will this new acquisition endeavor affect business prospects in the future? Can it continue the bull run in the future as well? Well, let’s dive deep to find the answer. 

Tata Consumer’s business segments 

One of the top businesses in the Tata Group, Tata Consumer Products Ltd. is active in the food and beverage industry both domestically and abroad. It is the second-biggest tea company in the world, with a strong market presence and market leadership in numerous areas. 

Apart from South Asia, primarily India, it is also found in several other regions, such as North America, Australia, Europe, the Middle East, and Africa. 

It has a reach of 200 million households in India. Approximately 24 percent of innovations are focused on Health and Wellness. In FY23, the company launched 34 new products in India and other geographies.

During the financial year FY23, the company increased its direct distribution by 15%. Tata Consumer currently has a direct reach of 1.5 million outlets across India, a more than 2x increase from two years ago. 

Source: Annual Report (FY23) 

Let’s take a look at some of the business segments the company operates in.

BRANDED BUSINESS 

1. Packaged Beverages 

● Tea 

● Coffee 

2. Foods / Packaged Foods 

● Salt, Pantry stapes (Tata Sampann) 

● Breakfast cereals, snacks (Tata Soulfull) 

● RTE/RTC (Tata Sampann Yumside) 

● Other (Protein – Tata Simply Better, Tata GoFit) 

3. Liquid Beverages / Ready-to-drink (NourishCo) 

NON BRANDED BUSINESS 

● Tata Coffee India 

● Tata Coffee Vietnam 

● Tata Tea Extraction Inc.

JOINT VENTURES AND ASSOCIATES 

● Tata Starbucks (50:50 Jv) 

● Amalgamated Plantations Private Limited (Appl) 

● Kanan Devan Hills Plantations Company Private Limited (Kdhp) 

Recent Acquisitions and What it Mean 

Capital Foods and Organic India 

According to Sunil D’Souza, Organic India gives the ₹14,000 crore producer of Tata Tea, Tetley, and Salt access to the pharmaceutical distribution network for the first time. 

Moreover, TCPL and Capital Foods founder Ajay Gupta have a deal in place for him to keep advising the FMCG (fast-moving consumer goods) business. 

Organic India sells tea, supplements, organic infusions, and other health products, while Capital Foods, valued at ₹5,100 crore, owns well-known brands like Smith & Jones and Ching’s Secret. For Organic India, TCPL will pay ₹1,900 crore. 

Capital Foods offers a portfolio of products for in-home consumption in rapidly expanding categories under its umbrella platform brands. In categories such as blended masalas, soups, chutneys, and sauces, Ching’s Secret dominates the market for Desi Chinese goods. Italian and other Western cuisines can be prepared at home with the help of Smith & Jones. 

With ₹3,000 crore in cash on hand, TCPL has been searching for strong food and beverage (F&B) brands, but it has made it clear time and time again that it will not overpay for acquisitions.

1.5 million of the 3.9 million outlets in TCPL’s distribution breadth are directly served. With a market share of 0.4 million for Capital Foods and 24,000 for Organic India, both acquisitions have the potential to grow shortly through wider distribution. 

NourishCo 

NourishCo aims to provide the most relevant and meaningful hydration solutions in the non-carbonated, ready-to-drink beverage segment in India, fulfilling consumer needs around energy hydration and wellness. 

NourishCo, the liquid beverage business, has been on a strong growth trajectory since its acquisition by Tata Consumer in May 2020. The business achieved significant growth in topline, despite the pandemic and its high salience in ‘Out of Home’ channels. 

TATACONS’s strategy of purchasing the remaining interest in NourishCo JV from PepsiCo is paying off, as the company is quickly broadening its distribution network, capitalizing on the strength of its current portfolio, and introducing cutting-edge products in the ready-to-drink (RTD) and non-carbonated (NCD) beverage segments. 

FY 22-23 FY 21-22 FY 20-21
Topline (INR Crores) 621 344 188
Distribution Coverage (outlet reach) 6,52,000 4,54,069 2,76,541

As per the Indian Council for Research on International Economic Relations (ICRIER), the non-alcoholic beverages market is expected to register a CAGR of 8.7% over CY19-30 to INR1.47t from INR671b in CY19. Because of the recognizable “Tata” brand, TATACONS’ entry into this market is anticipated to be revolutionary, especially given the industry’s rapid growth.This can be seen through a strong 80% topline growth in FY23 to ₹621 crores v/s ₹344 crores in FY21. 

The segment is growing robustly on the back of strong market acceptance, synergies from a deep distribution network of other product categories, and premium quality offerings. The business handles both manufacturing and distribution using an asset-light model. It keeps allocating its resources primarily to branding, marketing, and sales supervision. 

Source: Annual Report (FY23) 

Tata Coffee’s merger with Tata Consumer 

Tata Coffee and Tata Consumer Products Ltd. merged on January 1, 2024. As per the plan, TCPL Beverages & Foods, a wholly-owned subsidiary of TCPL, will merge with Tata Coffee’s plantation business. TCPL will issue one equity share for every 22 equity shares held in Tata Coffee to existing shareholders.

The management of the company proposed this merger to create synergies and increase efficiencies by streamlining the operational and management structures. 

Tata Coffee presently operates a global consumer product business, offering a range of food and beverage products. TCL and its affiliates primarily engaged in the extraction of instant coffee, branded coffee, and plantation operations. 

Tata Consumer Products financials 

Values in Rs crores 

2020 2021 20222023
Sales 9,637 11,602 12,42513,783
Net profit 460 930 1,0151,320
Net profit Margin4.8% 8.0% 8.2%9.6%

The revenue of the company increased by 11 percent to ₹13,783 crore from FY2022 to FY2023. Over four years, the company’s revenue increased by a three-year CAGR of 12 percent. 

The profit of the company increased by 30 to ₹1,320 percent from FY2022 to FY2023. For four years, the company’s net profit increased by a three-year CAGR of 9.1 percent. 

In ₹CrIndia BeveragesIndia FoodsUS CoffeeInternational TeaTata Coffee (incl. Vietnam)Consolidated
Revenue  5051  3666  1489 2100 1360  13783
Revenue growth 1%  26%  15%   3% 27% 11%
% of Revenue 36.6%  26.6%  10.8% 15.2% 9.8%
Volume growth -1%  2%  -11% -4% 3%

Now, when you look at the revenue for specific segments for the financial year FY2023, the India Beverages segment leads with a contribution of about 37% to the consolidated revenue. So, one could say that the acquisition of NourishCo is yielding results. 

Well, so far, we have seen how the company has seen robust growth due to acquisitions and their plans to enter new segments through the same. So, will the acquisition of Capital Goods and Organic India propel the company to become the leading FMCG company in India? Let us know in the comments below. 

Written by Nalin Suriya S.

the stock screenerstock heatmapportfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make a well-informed investment.


Start Your Stock Market Journey Today!

Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!