Tata Consumer Defies Urban Slowdown, Sees E-Commerce Powering Growth

Tata Consumer Products Ltd. is seeing e-commerce and modern trade driving demand for its products in urban markets, Chief Executive Officer Sunil D'Souza said on Thursday, shrugging off lag from urban slowdown.

"I am probably seeing a different picture than everyone else," he told analysts during a post-results call. "If you don't count modern trade and e-commerce and only count general trade, my urban growth is in the low single digits. Rural growth is close to double digits."

"And if I add back modern trade, which is primarily urban and e-commerce, including quick commerce, which is primarily urban, then my urban growth is also in double digits," he said.

D'souza's comments stand in sharp contrast to those of its industry peers. All companies that have so far declared their December-quarter earnings — from Hindustan Unilever Ltd. to Dabur India Ltd. — have flagged concerns over moderation in urban demand amid persistently high inflation and low wage growth. Consumers have started buying smaller packs of even premium products to manage their budgets, they said.

The TCPL chief, however, attributed the improvement in its distribution network to directly reach 1.8 million outlets and increased share of e-commerce, reflecting a shift in consumer purchasing behaviour, as some of the key factors behind the impressive volume numbers.

E-commerce grew 59% in the third quarter, with the channel now contributing 15% of total sales, slightly ahead of modern trade, he said.

Tea, which is the company's core business, saw a volume growth of 7% — a multi quarter high — and a revenue growth of 10% despite price hikes. Going ahead, D'Souza expects mid-single-digit growth in their beverage segment.

Salt, its other core segment, saw a revenue growth of 7%, driven by pricing and modest volume growth. Among other businesses, the ready-to-drink business, which includes brands like Tata Gluco+ and Tata Tea fusion, recorded a volume growth of 14% during the quarter even as revenue declined 2% as the company said it slashed prices to stave off competition from a new entrant.

Earlier this year, Reliance Industries entered the rehydration market with the launch of RasKik Gluco Energy, a drink combining electrolytes, glucose, and real lemon juice priced at Rs 10. "We have matched that price, we will make sure we build momentum back into the business," he said.

The food business revenue grew 11%, excluding Capital Foods. Tata Sampann continued its strong performance with 23% growth.

The owner of Tata Salt, however, registered a flat net profit at Rs 278.8 crore, impacted by the inflation in the tea business and high interest costs. The margin contracted to 12.7% from 15% a year ago.

"Assuming normative India tea margins (same as Q3 FY24), the consolidated Ebitda margin for the quarter would have expanded at least 75–100 bps," he said.

So far, the company has hiked tea prices by roughly 10%, passing on only 40% of the tea cost inflation to customers. The remaining 60% will be passed on gradually. Notwithstanding price hikes, the country's second-largest tea maker said it has not yet seen regional or local players eat into its market share, reversing the trend seen during the Covid-19 pandemic. That's because the inflation has happened gradually, from August to October and November, allowing them enough time to adapt to the new prices and, therefore, not be starved of working capital overnight, D'Souza said.

"We do expect pressure to continue till probably end of first quarter and early second quarter of fiscal 2026, till the new flush comes in, assuming that it will be normal...so I do expect either price increases, and in case the tea costs don't change or if the cost goes down, we get a little bit of more breathing space,” he said.

TCPL said it will continue to pursue volume growth. It expects full impact of price hikes taken during the quarter to play out in the next quarter.