Trump Tariffs Could Aid Tata Consumer's Coffee Business, Says CEO D'Souza

Trump tariffs are likely to give Tata Consumer Products Ltd a competitive edge since the US mainly imports coffee, according to its Chief Executive Officer and Managing Director Sunil D'Souza.

However, the real impact will depend on the final tariff rates. "If I take 10% as a normative norm, our big business in the US is coffee, and coffee is not produced in the US... it's all imported," D'Souza said during a post-earnings call on Wednesday.

"Therefore, from a competitive standpoint, we stand on an even keel with other players. In fact, because we are manufacturing onshore, we might have a little bit of a handicap in our favour as we go forward," he added.

Again, the US doesn't grow tea, and, therefore, on tea, there will be a little bit of difference if someone is manufacturing in Canada versus the UK, but not significant enough, according to D'Souza.

The US is one of the world's largest coffee importers, but India's share of coffee exports to the US is relatively small, accounting for just about 1% of total Indian exports. Brazil and Colombia are the primary exporters.

For the quarter ended March, Tata Consumer's US tea business saw a strong 15% growth, while US coffee grew 3%. For fiscal 2025, the overall US revenue grew 2%, while earnings before interest and taxes grew 11%.

The company derives about 29% of its revenue from international markets. It, however, does not disclose the specific contribution of each market.

For categories like supplements, infusions, and the rest of the India business, including salt and staples, he believes there won't be any changes from a competition perspective due to tariffs, as they are supplied out of India. "But, overall category-wise, there might be a bit of pressure as inflation builds up."

TCPL's recently acquired Organic India brand, which sells supplements, teas, and infusions, generates almost 40% of its revenue from the US.

India is among a number of countries rushing to negotiate trade deals with the US during Trump's 90-day pause on higher tariffs, which ends on July 9. India was set to face 27% US tariffs before the pause was announced. Since then, Delhi and Washington have been working towards an early conclusion to trade negotiations. Officials of both countries have begun formal talks on a proposed bilateral trade agreement from April 23.

While TCPL raised coffee prices in India, it avoided raising prices in the US, which has impacted its margins. "Because there was so much volatility, we had not gone in with a price increase," D'Souza explained.

However, despite the looming risk of a recession, the company has announced a price hike set to take effect in June. "So, you will start seeing the margins coming back in the U.S. on the coffee business."

On recession concerns, D'Souza said, "Fingers crossed... For now, I’m not sure about where it's headed. But tea and coffee are basic consumption categories and not discretionary products. So, while there may be some impact from recession, I don't think it will be significant enough."

Coffee prices remain near all-time highs, a key monitorable going into the financial year ending March 2026. It's difficult to predict a clear trajectory for coffee prices at this point, he said. "We did see a brief dip when tariffs were announced, but prices have since started climbing again. So, I'm not sure where it will settle."

There are a few indicators to watch — crop forecasts from Brazil (arabica) and Vietnam (robusta) are slightly below expectations, which could impact pricing. Besides, the large players have started to shorten their hedging cycles, which suggests further volatility ahead. "So, I wouldn't put out a forecast — we’ll continue to respond to market movements,” said D'Souza.

TCPL's local packaged coffee business, which includes brands like Tata Coffee, grew 44% in the March quarter, bringing full-year growth to 33%.