Ladies and gentlemen, good day, and welcome to Q2 FY 2022 earnings conference call of Tata Consumer Products Limited, hosted by ICICI Securities. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manoj Menon, Head of Research, ICICI Securities. Thank you, and over to you, sir. Hi, everyone. A very good morning, good afternoon, good evening, depending on the part of the world you are joining from. Also, warm season's greetings to all of you, given the festive season just about going through in India at this point. At ICICI, it's our absolute pleasure to host Tata Consumer Products Limited management for the Q2 FY2022 results earnings call. The company is represented today by Mr. Sunil D'Souza, Managing Director and CEO, Mr. L. Krishnak umar, Executive Director and Group CFO, Mr. Ajit Krishnakumar, Chief Operating Officer, and Ms. Nidhi Verma, Head, Investor Relations and Communication. Now over to Nidhi for the further proceedings. Thank you. Thanks, Manoj. Good morning, everyone, and hope you had a good weekend and had the time to go through our presentation and some of the investor materials. For today's presentation, we will spend about 20 minutes going through some of the key highlights and performance updates, which Sunil will do, and then we will straight away dive into question and answer. I will just quickly draw your attention to the disclaimer statement, if you can just look through this. I would now hand it over to Sunil. Thanks, Nidhi. I will quickly jump on straight to the executive summary for the quarter, give you a highlight of where we are on our strategic priorities, and a broad snapshot of our businesses and the outlook as we see it going forward. In the interest of keeping it crisp, and presuming that quite a lot of you would have had the time to go through this deck on the weekend, I will try and hit the big points. If I go to slide number six, d uring the quarter, consolidated revenue grew 11%. Just to put it in perspective, last year same quarter, we had two businesses which we divested, which is the Empirical Food service business in the U.S. and the MAP out-of-home coffee business in Australia. That's why we're saying ex- international food service business. Bringing the two-year CAGR to 14%. India was very strong growth. We had a 14% growth on the India beverage business with a 2% volume growth. This 2% came on the back of a strong volume growth in the same quarter last year. India Foods business, going from strength to strength with a 16% volume, 23% revenue. International business grew 3%. It was flat, almost flat, it is 0.5% actually in constant currency term, cycling an elevated base driven by the trade reloading that we had seen last year, same quarter. Just to put it in perspective, Q1 last year was the peak of the trade reloading, Q2 was a bit of tapering. Q3, Q4 had come back to normalcy. More or less the international business, in terms of the macro outlook, is now back to normal. Tea cost inflation, which was impacting our margins, has tapered off. We've seen sequential improvement in gross margin for the second consecutive quarter. You could expect margins improving quarter-on-quarter at least for the next two or three quarters as we go forward. EBITDA margin for the quarter was up by 50 basis points versus last quarter. Down 50 basis points year-on-year, primarily driven by ATL investments in India business behind brand building, being up by 75% year-on-year. We continue to drive efficiencies in working capital. We've had reduction of 16 days in working capital versus last year. About 1,700 basis points improvement in free cash flow to EBITDA conversion versus the same quarter last year. In terms of results, exactly what I've talked about, 2% volume, 14% revenue in India Beverages, 16% volume, 23% in India Foods. U.S. coffee volume was flat. Constant currency growth was 1%. International tea volume growth of 1%, flat in revenue terms, constant currency. Overall, therefore, 11% revenue growth translating to 3,033 crore of top line. Quickly, H1, I will not go through all the detailed numbers, but overall, even for H1, it is 11% revenue. Please go back, Nidhi. 11% revenue. No, next slide. 11% revenue growth, consolidated revenue at INR 6,042 crore. Next slide. In terms of margins overall and growth percentages, EBITDA was up by 5%, margin down 60 basis points. That flowed through into group net profit. Again, 5% growth on group net profit. Margin 9.4%, - 40 basis points. EPS growth year-on-year is 4% now. Group net profit all in INR 302 crore, and we are sitting with INR 2,250 crore of cash. A quick highlight on strategic priorities. Just to highlight a recap, we have defined six strategic priorities: strengthening and accelerating our core businesses, driving digital and innovation, unlocking synergies and focus on cost, creating capabilities and talent and a future-ready organization, exploring new opportunities, both organic and inorganic, and embedding sustainability. Now in terms of brands, we talked about the 75% increase in ATL spends this quarter. High focus across the country. We've invested in the South behind Chakra and Kanan Devan. Tetley, as the economy has opened up and more on-premise and premium outlets get opened up, we focus behind that. Soulfull, which we had focused on integrating in the first 30, 45 days or so of the quarter, we have now started ramping up with A&P, and you should see a product pipeline starting to come out in line with our plans. Salt, same thing, we've focused on building out salt ATL. All in, you will see the increase on distribution and ATL starting to play out in our share gains. Tea up by 170 basis points nearly, and salt, a very good 440 basis points growth versus same quarter last year. We had committed to getting to 1 million outlets in 12 months. The good news is we are ahead of that number. 1.1 is the number that we hit in September, so t ime to raise the bar. We are moving the target to 1.3 million outlets by FY 2022. We are also committed saying we will increase total reach to 2x of where we were, which was 2 million outlets in September 2020, in 36 months. We've already moved it by 30%. We are exiting at 2.6 million outlets in September and continuing to add every quarter. Other thing, apart from expanding distribution, is to make sure that our team focuses on beyond tea and base salt so w e have started a premium DSR programs. We now cover about 17,000 outlets with additional salespeople, only focusing on the premium part of the portfolio and the new brands that we're launching. Sampann, Tetley, coffee and Soulfull is an example here. E-commerce, just to recap, we had started with 2.5% when we started our journey as Tata Consumer Products. It's now up to 7% of sales, continuing to show robust growth, up 39% this quarter. Institutional channel, which we had started off, is now delivering strong results, up 117%. The NourishCo business, which we are quite bullish on, and we had bought this, and we were very clear that we are going to expand geographically and portfolio. Portfolio work has started, and you'll see that in a bit, but outlet up by 39% year-on-year. Rural, which is where we have opportunity, more than urban, I would say, and we have started appointing rural distributors. We are now up to 4,000+ distributors, aiming to exit 5,000 by March. Innovation, continuing the focus, expanding the range of Soulfull. Tata Gluco+ Jelly, which we expect to be a blockbuster, started off on a very strong wicket in the NourishCo portfolio. Partnered with Tesco and the Loop system to get reusable tins into the U.K. business. As I mentioned, Soulfull, now that we finished integration, we are at 4x the number of outlets that they used to service. We are now starting our new product pipeline. This is one of the first, Soulfull 0% added sugar muesli, and we have now launched an INR 10 Soulfull Ragi Bites into the market. Sustainability remains a focus. I already talked about Loop. We are one of the founder signatories on the India Plastics Pact. We have focused on better communities. We started this program in Jharkhand. Apart from that, we have an MoU with the Indian Institute of Millets Research. Millet is a more sustainable crop, and it is a strategic portfolio for us. Helps us and helps the environment. Our sustainability efforts have got recognized. We've been rated A by MSCI ESG ratings. Sustainalytics has moved us up from severe to medium in the last update, and CRISIL released their first India ESG report, in which we are in the top set of FMCG companies. Quickly, GDP, all key markets in which we operate starting to recover. Commodities, tea prices starting to come off their high, the dark blue line in the middle, if I may, but now sort of being range-bound. That said, it is significantly below where they were in September, October 2020 but t hey are still above where they started in September, October 2019. Somewhere in between. Our pricing actions have already happened to a large extent, and therefore we would expect margins to be moving up from here on. A slight bit of an uptick in Kenyan teas with the new Kenyan Tea Act, which has got passed. It's a wait and watch for that for now. Coffee, I'm sure all of you are aware, it's moved up significantly from where it was. It has both positives and negatives for us. We've got to deal with increased coffee buying prices in the U.S. with Tata Coffee, which is our listed subsidiary, gets the benefit in terms of plantations and a little bit in terms of its extraction business. Moving straight to business performance. Before that, I'll start with India packaged beverages, 2% volume, 10% revenue, 168 basis points of market share gain. Now, j ust to caveat that this market share gain, since Nielsen has not released a September report, we've taken a rolling tree months. This is June, July, August number, but we would expect September to be coming in slightly better than this. We're keeping fingers crossed on that piece. EBIT margin has been on an upward trajectory as the inflation has tapered off, and we continue to be market leaders on the e-commerce business. India Foods, 16% volume, 23% revenue, a very strong performance. Premium salt grew by 42%. Tata Sampann grew nearly 30% on a base, which was, I think, close to a 30% in the same quarter last year as well. The EBIT margin for the quarter, however, was impacted by the portfolio mix, the mix between Sampann and salt, the investment behind Soulfull, increased A&P behind the India Foods business, and other expenses, including logistics and freight. NourishCo, I talked about 121% revenue growth. Year- to- date, they were up by 107%. Strong performance. Now with out-of-home opening, we do expect them to accelerate. I talked about new product innovation, Fruski, which we had done a pilot, successful now, and we're scaling it, and therefore starting expansion. Tata Gluco+, the jelly introduction has gone off to a very strong launch. Tata Coffee, plantations was - 24%, but extractions was positive. Very strong delivery on the EBIT line, while top line was a bit muted because of tea and lower realization even in pepper. Tata Starbucks, as the out-of-home has opened up, a very strong recovery in the quarter. We continue our journey of opening stores. In the quarter, they opened 14 stores. Now they're up to 233. Now they're present in 19 cities, which include Jaipur. 88% of stores are reopened. The good news was September 2019 same store sales is now 94% index to September 2019 so t hat shows consumers coming back into stores. Our expanded footprint will start paying dividends quickly. I n terms of international, the U.K., 1% revenue. The good news is our three-brand strategy, which is primarily to deal with the fact that we need to move from being just a black tea company into the fruit and herbal specialty and premium spaces, starting to pay results. Very strong growth on teapigs, as well as if you include Good Earth as well, we are starting to see traction in our overall tea share in the U.K. Next slide. U.S., coffee revenue growth of 1%. Tea, which had gone through a strong bump last year in the pantry loading, is now starting to normalize. Coffee bag share, flat to slight bit of a pressure, but we're confident we can get it back very quickly. Next slide. Now, Canada, again, they bore the brunt of the lockdown because the Canada lockdown continued for quite some time. Pantry loading, also given by the fact that we are the number one tea brand there, was very high last year, but now coming back quickly to normalcy. Market share continues to be a very strong story out here. Tetley gained share led by regular tea outpacing the category and specialty teas growing within the category. I hand over to L.K. for the financial performance. L.K., over to you. Thanks, Sunil, morning, everyone. I'll take you through a few slides of the financial performance. Starting with highlights for the quarter ended September. On the standalone basis, revenue increased by 14%, from INR 1,736 to INR 1,988, reflecting the growth in India beverages and Foods business. EBITDA grew by 6%. In the later slides, we'll talk through some of the reasons why EBITDA growth has been lower. Consolidated performance, revenue up by 9%, 11% on a like-to-like basis, adjusting for exits. We had the food service business last year, which we exited. Adjusting for that, we grew 11%. Out of that, the growth in the India branded business was 17%, with beverages growing by 14% and India Foods growing by 23%. Vietnam and Tata Coffee, including Vietnam, was flat, so w as the international business adjusting for exits. EBITDA growth was 5%. We saw gross margin improvement in India beverages as tea cost came down. There was improved performance in the extraction business of Tata Coffee and required investment behind brands in India. If you move on to the next slide, which is the financials on a standalone basis. Revenue 14%, we talked about that earlier, with beverages 15% and Foods by 23%. EBITDA lower at 6%. What we need to look at on EBITDA margin is 17.5% compared to 13.6%. Now, if you compare the EBITDA momentum versus the same period last year, we see that gross margin is improving with commodity costs coming off, but the increases are being in the A&P line as well as in other expenses. There is high investment behind A&P in this quarter. It's not a reflection of all quarters to come. Come to other expenses, you will see an increase, which is again, some part of it is to do with Soulfull investment, with increase in freight and inflationary costs and some amount of fixed cost investment for building a platform for future growth. All these are contributors, and we expect EBITDA margin to show an improving trend. PAT 9.5% compared to 9.8% in the same period in the previous year. If you move on to the year-to-date September revenue up by 18%, strong growth by the India businesses. EBIT down by 9%. Again, it is a reflection of IT costs in the earlier part, which is now leveling off. PAT high by 22% overall. We've also had the benefit of higher dividend from overseas companies in the earlier quarter, which is why on a standalone basis, we are seeing an improvement in profitability. Moving on to the consolidated performance of the quarter revenue from operations up by 9%, 11% adjusting for the debt. EBITDA again, 13.9% lower than 13.4%. Reasons I explained earlier, primarily to do with higher investment in A&P, a little bit of margin erosion on the foods business, which we'll talk about in a moment, and some inflationary cost increases as well as some fixed cost investment. PBT before exceptional items, INR 364 versus INR 345, a 5% increase. PAT INR 361 versus INR 434, a 12% increase. Our group net profit increases year-on-year. If you look at the share of net profits from JVs and associates, you'll see that it is lower than the same period in the previous year. Two main moments. The loss for Starbucks is lower than in the previous year, the profits of APPL and South India Plantation is slightly lower than the previous year. These two are reflected in the share of profits from JVs and associates. Starbucks has got a very strong growth trajectory, especially in the last two months. We're very confident that the rest of the year will be a phenomenal story for Starbucks. The six-month performance, again, we cut through the trend, underlying trend. Revenue growth of 10% and profitability lower, profits lower because of the impact of peak costs and some amount of investment behind A&P. Moving on to the segment performance. India Beverages higher by 14%, and we talked through the reasons earlier, and Sunil went through it in detail. Segment results higher by 17%. It reflects the impact of improved gross margin over tea costs and notwithstanding higher A&P investment, there is an improvement in profitability compared to revenue growth. India Foods, a growth of 23% but a decline in EBIT margin. As Sunil mentioned, a small impact on gross margin as Sampann continues to grow. There is also investment behind sales tools. There is higher A&P investment, there is inflation in freight and logistic costs, and there is some fixed cost investment as we build infrastructure. All these are contributors. We don't expect this trend to be there forever. We would certainly see the margins improving from where we are today. International business, adjusting for exits, flat top-line growth, some improvement in margin because of better management of commodity costs. Non-branded business was a good period for extraction, which improved profitability, so we're seeing a 19% growth in profits. Segment-wise contribution, India Beverages 46% of revenues and 38% of EBIT. India Foods 26% of revenues and 21% of EBIT. International 28% and 31%. Those are the highlights for the quarter and over to Sunil for the outlook. Thanks, LK. Overall, in terms of the macros, I think we are seeing the second wave is receding, vaccination progressing, and therefore leading to a fast recovery. We have already seen the impact in the Starbucks and NourishCo business of the opening up of the economy. Our international markets are seeing a return to pre-COVID demand trends, and I think we are now entering a period of stable demand. Unless, if your guess is as good as mine on whether there's a third wave. Right now, we don't see that as a very high risk out here. We continue to stay focused on driving growth in the core business while adding new levers across different functions. India packaged beverages, as I mentioned to you, has seen a moderation in tea costs. That said, right now pricing is range bound. We will be dynamic in pricing to make sure we are driving competitive volume and value growth. Just as a perspective, whether you take MAT last 12 weeks, last four weeks, we have had a constant uptick in market share and we intend to continue driving that as we build margin into the business. Momentum on the India Foods business top line should continue with focus on distribution and investment behind brand and innovation. You've seen the jump on salt share, you've seen the Sampann growth coming back. We intend to keep pressing the accelerator on these features. The out-of-home business is fast moving towards normalization. Starbucks is recovering. NourishCo growth momentum should continue/accelerate from here on. Inflationary trends, especially in the India business, more in the Foods business than in the Beverage business, especially the cost of coal and energy. Apart from that, packaging freight also starting to emerge, which we will be addressing via cost optimization, productivity, focus on revenue management to try and mitigate these impacts. We will continue to streamline operations, and we are working on simplification of the international business. That is the broad outlook. With that, over back to you, Nidhi. Thanks, Sunil. Moderator, we can just go to the Q&A queue now for questions. Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question, you may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Anyone who would like to ask a question, please press star and one at this point. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Soman from Goldman Sachs. Please go ahead. Hi. Good morning. Two questions from my end. Firstly, on tea prices, you indicated that obviously we should expect sort of a steady improvement in gross margins and potentially lower tea prices. There's been some articles on the impact of higher coal prices on tea. Maybe can you give us some perspective on how relevant that is and how much of an impact that could have? Secondly, in terms of higher advertising and promotion spends, you did indicate some brands in your commentary, but can you again give us a little more color on which segments are the biggest absolute spends and the trajectory for those maybe over the next year or so? Thanks. On the tea prices, actually, if I just provide some color around it, I think the initial bump last year was a supply-demand mismatch, and that is why we had seen this rapid inflation. It started coming down, apart from a brief uptick at the end of Q1, where two things happened. There was a bit of drought conditions in Assam, and then with the second lockdown, I think there was a bit of fear saying that will it be the same impact as Q1 of last year? That didn't happen. That said, there has been a bit of issues on rainfall, etc., and that's why you've not seen it taper down more than what it has. While we do think there will be a little bit of impact on fuel, coal, etc., happening out there, we don't expect to be as severe as what we had seen last year. That said, like I mentioned, I think we have been dynamic on pricing to make sure, A, we are competitive, B, we are making sure that we're building in consumer elasticity into the equation, and most importantly, maintaining volume and market share trajectory so w e will just stay close to this. Your guess is as good as mine as to how much up or down the whole piece moves, because remember, supply will go up, but there might be a pressure on cost, so that whole equation has to bear out. Keeping fingers crossed, and we will continue to make movements as we see these prices move up or down so th at's number one. Number two, on the ATL spends, I would like to highlight that I think we made the statement earlier that we were not spending as much as we would have liked or as much as we needed to spend to build competitive strengths for our brands becaause u ltimately, building brands gives you more pricing power and builds margins in the portfolio, and therefore, you will see the spends going up. It is not that we are spending across all different brands. We've got a very clear target brand architecture that we are targeting towards, and those are the brands we are spending behind. You would have seen big money going behind the premium end of the portfolio in tea, for example, Tetley, Gold, Premium. Agni is one where we are starting to build the brand apart from just distribution. In the Foods business, premium salt is our focus. Sampann, which is a new brand for us to build, is a focus. Yeah, coming from behind, coming on to par. While you have seen percentages versus last year going up, if you look at it as a percentage of sales from TCPL and compare it to our peers, I think we're just about catching up now. No, understood. I think very clear on the second bit. I think just on the tea price again, can you give us a sense of what component or what proportion of the total tea cost or input cost would be fuel or coal? I don't think it will be significant enough. That said, I think Nidhi can get back to you separately on that exact piece. Perfect. Yeah, the impact is more significant in the Foods business, not very significant as far as tea costs. Understood. Very clear. Thank you. Thank you. The next question from the line of Tejash Shah from Spark Capital. Please go ahead. First up pertains to margin expansion or at least a positive guidance that you have given on beverage business side. Just wanted to get some insights on competitive intensity here because w e are fighting or we are competing with a lot of unorganized/regional players who are very price sensitive. When the benefit comes, how much confident are we to retain the benefit to seeping down to margin levels? That's first question. Here's the thing. Over the last, I think 12-18 months, you would have seen very clearly the large organized branded players gaining share. We've probably been at the top of the pack in terms of share gain. As prices normalize, so to speak, given increased distribution, given innovation, given brand building, we do expect to continue to drive for share momentum. We have brands straddling across the whole price range, if I may. If you actually look at our portfolio, I think we've got more of an opportunity to drive share in the mass premium to premium ends, and that is where we are focused on building our brands. That said, we even have opportunity on converting from loose to branded. That trend will continue. There will be growth on both ends of the spectrum. One is from the unbranded to branded, and the other one is, I think we will continue to gain share from regional/locals. We remain quite confident about that. Thank you. We lost your line. We'll move to the next question, which is from the line of Arnab Mitra from Credit Suisse. Please go ahead. Hi, Sunil. I had actually one question on volume growth and tea. Wanted to understand, would we be in a period of a bit of sluggish volume growth for a few quarters now, mainly because of two reasons. One is, as the commodity prices correct, do we see some of the local players or loose tea becoming more competitive versus the bigger branded players like Tata because they would adjust prices down possibly more on spot basis. Generally, the trade also doesn't like to stock up when prices are going down. Second, you mentioned the high base, and I think the second half base is also quite high for the tea business. Given these two, do you expect some bit of sluggishness in the near term in terms of tea volumes? Arnarb, if you're referring specifically to the volume sluggishness in this quarter, I would just say that I think in the last 12, 18 months, it is hard to read quarter-on-quarter or cycling versus last year because of all the multiple things that have happened in the market. I'd just like to point out that we are cycling a very high growth number of last year, and despite that, we've grown this quarter. That's number one. Number two, losing shares to locals. Remember, this downward trend has started sometime around beginning of this calendar year, and it is trending downwards, albeit in bits and spurts. Despite trending downwards, the organized players have gained share. The local As and local Bs, as we call them, have actually lost share. There is no reason for us to say that trend will turn dramatically. You're right about the fact that there might have been a downstocking when the first round of price stabilization happened. I think given the fact that we are, at least in the Indian context, we count in consumer staples, I don't think there is that much of an inventory ups or downs, especially in the branded players' portfolio. The locals and loose will obviously be playing that game. For us, I don't think inventory movements at retail is such a big segment. We do think if you look at past trends, the tea business has been showing high single-digit volume growth, and there is no reason for us to believe that as we enter a normal phase, that trend should not continue going forward. Okay, thanks, Sunil, for that. My second and last question was on working capital so t his reduction you've seen, is there any fundamental change in how much tea inventory you hold in terms of your business? Is there any fundamental change in the business thinking on that? Arnarb, actually, the working capital movements which have happened are primarily on account of two things. One is receivables and the credit that we give out into the market. If you remember, in September last year, we started reworking our entire distribution system. We trimmed from 4,500- odd distributors to 1,500 distributors of scale. We also moved into a significantly cash business in general trade. The receivables that sit on our books are primarily to do with the e-commerce and modern trade, which is in line with industry. In general trade, we were not in line with industry, and we used to give credit, which we pulled back significantly. That's one piece. Second on tea is we are making sure that while we are booking inventories, it's not necessarily we are paying for them today. We're taking advantage of our market strength to make sure that we look not to carry inventory on our books, and this is the model that we will continue to adopt going forward. Okay, that's very clear to me. Thanks, and all the best. Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead. Hi. Thanks for the opportunity. I've got two questions. The first one is on Foods margin. If I look at 23% growth and yet 18%-19% decline at the EBIT level, what percentage of this, if you can give us some color, could be attributable to Tata Sampann? When do you expect the margins to come back to 15%-16% for Foods? Are you planning any price increases in salts to offset the impact of higher freight? Very quickly, there is an impact of mix, but it is not significant because gross margins are broadly flat to a slight bit of a moment. While the Sampann salt and Soulfull portfolio is playing out, it is not as much of an impact on the gross margin. The impact is actually more below the gross margin line, in line with increased A&P spends behind the Foods business. We do need to build Sampann into a stronger brand. We do have opportunities to drive premiumness in salt, and we are seeing that play out in the share gains that we are seeing in salt. Apart from that, we have investment behind Soulfull, which was budgeted for, especially now that we have built a distribution which is 4x of where it was when we acquired Soulfull. We will continue to power Soulfull brand strength to make sure that we build the business there. Apart from that, there's been a small bit of reallocation of corporate costs as the food business becomes bigger. Apart from that, as I mentioned, we've seen a bit of inflation creeping into freight, logistics, warehousing, etc. That said, I think L.K. T alked about it. Going forward, we should start seeing the margins on the business go forward. We will make sure that we are balancing top line and margin growth because we do believe that the big opportunity for Tata Consumer Products is to build a far larger foods business than what we have today. I wouldn't give too much importance on this quarter. I think we have to look at it in the context of wanting to build a larger food business. Certainly, this is not the margin acceleration for us. That's very helpful. One quick one. There was an article of Tata Industries looking at moving Tata Q brand to Tata Consumer Products. Any comments you can offer on overall ready-to-eat opportunity, and what are your thoughts? I would just not want to comment on media speculation. You will always find a lot of things written about Tata Consumer going after 10 different things. We do see a large opportunity in the food business, and we remain committed to growing both organically and inorganically. Ready-to-eat is an area of interest for us, and we are evaluating it among other opportunities. Thank you so much. Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead. Hi, sir. My first question is on the salt business. just wanted to understand what has led to such a robust growth in the salt business, something which is such a penetrated category. I understand obviously that the market structure is such that there is a significant unorganized business which will lose share to the organized. The kind of growth that you have done, does it suggest that the pace of shift from unorganized to organized, it has accelerated above normal in this quarter for whatever reason, or should we take this as the normal pace of shift? Percy, you're right about the growth in the salt business. I think it is driven by two or three different factors playing out. Number 1 is the distribution increase. When I mentioned that we moved from a 2 million outlet reach to a 2.6 million, that holds true almost similar numbers both for Beverages and Foods as we expanded distribution. That's number one. The more important piece is we moved from about 400,000-500,000 outlets that we used to touch in both the businesses directly up to a 1.1 million. The execution in stores has become a lot better. That's the first piece. Second piece, we are playing the portfolio. As I said, we have an opportunity both. Number one is Tata Salt, in terms of market share is probably 5x-6x, if not more of the next largest competitors, and all the next four put together don't total up to the share that we have in Tata Salt. We've got a very strong brand. As long as we drive distribution, build the brand, and expand the portfolio, we do believe we've got significant opportunity for growth, and that's what we are seeing playing out. Yes, this quarter was a good top line to achieve. Just keeping fingers crossed that we will continue to deliver good volume and revenue growth as we go forward. My second question is on the Sampann business. I'll restrict myself only to the salt and pulses part of it. Between these two, over the next four to five years, where would you put the greater percentage of your marketing budget between the pulses and the spices business? Let me say, I don't think we've got to that level of detail in terms of the split of the marketing thing. I'll be quick to say that whether it is in salt or in beverages or in Sampann, I think we've got an opportunity to build distribution and power our brands to drive top-line growth. Sampann has a huge runway to play with. As we expand our portfolio, we need to build it into a stronger brand. We've just started the journey, and we will continue to tweak our strategy as we go forward. Do we see material aggression on the spices business side? I ask because this is, first of all, a large industry, and a proven business model with many players there, and we know that this business can make a 20% EBITDA margin once there is enough scale. Do you really plan to push this much more aggressively than the pulses business, where the business model itself is a little sort of undiscovered, and the margins in any case will be very low? I would say it is not an or game, it is an and game, and that's why we are building Sampann as an overall brand. You're absolutely right, the margins in the spices segment are very good. We've been doing a lot of work behind the scenes on making sure that we're getting the product formulations right. As you rightly mentioned, spices in India, it is not a one-size-fits-all, especially when you go to the blended categories. Even in the pure, the way coriander, for example, is perceived in the north versus the south is different. The color, the flavor is different, similarly with chili, both the heat and the color percentages. We are right now in the middle of, or we've just about finished an entire exercise on figuring out how we go laser-focused on building one national brand, but making sure it's got different variants to appeal to different people in different markets. The margins are attractive, and you will see acceleration behind spices as we go forward. Okay, sir. That's all. Thanks, and all the best. Thank you. The next question is from the line of Alok Shah from Ambit Capital. Please go ahead. Yeah. Hello, sir. Thank you for giving me an opportunity. Sir, firstly, I want to clarify one point on the ad spend. Sorry, Alok. You didn't come across clearly. Can I just ask you to repeat it, please? Yeah, sure. Is this better? Yes, much better. I just wanted to clarify one thing. On the ad spend, I think initially you mentioned that this level of ad spend may not sustain. On an absolute basis, if I were to look at three Q4s which was more normal quarter, like the current quarter, our ad spend on a standalone basis has been in the range of about INR 125- odd crore, and currently it was INR 133 crore. Should we build a moderation from the current level? You think this current run rate over INR 130- odd crore should sustain considering the brands that we aspire to build? Alok, I'm not sure I got the details, but just to give you a perspective, we are coming from behind in terms of spends behind our brands. On an ATL basis, if you look at percentage to sales compared to a high single digits, lower double digits that most big branded players in the FMCG spaces would spend, we are significantly lower down, and therefore you would see this upping. The idea was, in the synergies, we've taken out significant amount of cost, and a large part of that has been redeployed into building brands and building distribution. I don't think we intend to reduce ATL as a percentage of sales. If anything, we would maintain/make sure that we've got enough firepower for our brands going forward, especially as we build the premium ends of our portfolio. Got it. Just one follow-up on that is that when we look at a lot of other consumer goods companies, it's also because of the share of the personal care, home care, etc., where the margins are more than 55%-odd. In our portfolio, the margin would not be that high. As you said, the higher focus would be on the ad spend towards the premium brand. Is that understanding correct then? That is one piece. The other piece is in the FMCG business, you normally follow a ratio of share of voice to share of market, right? You want to make sure that you are competitive in distribution as well as competitive in reaching the minds of the consumer. The SOV to SOM benchmark that we follow makes sure that in the categories that we are playing in, we are up there. SOV has to be slightly higher than the share of market. That's the way it is indexed. While I do understand that in other parts of the FMCG business, there are higher margins, and therefore it affords higher A&P, but in the categories that we are playing in, we will be highly competitive. Got it. That's it from my side. Thank you very much, and good luck. Hi, moderator. Perhaps we can go to the webcast now to take a couple of questions. Yeah? Sunil, there is a question from Aditya at JST Investments. He's asking, "What is the vision for the Foods business? After Soulfull, are we looking at more healthy brands under our fold? Absolutely, like I said, I think we see the biggest runway for growth in the Foods business. We are looking at opportunities both from organic as well as inorganic perspective. Just to highlight, we are sitting with INR 2,250 crore of cash. We have enough firepower if and when we see opportunities. Like I earlier mentioned, just because we've got money in the pocket and we enter a supermarket, we don't have to buy anything. What we are very conscious about is we've got to create value for shareholders, and therefore we take hard looks at both the strategic and financial fits. We've probably passed significantly more opportunities than we've ever done in the past. Yes, we are constantly scanning the horizon on any and every opportunity. Okay, thank you. Next question is from Saurabh Shah. He's asking if we have any plans to review the international business, especially given higher investments that may be needed in the domestic business. I would treat this as two separate pieces per se. I don't think we will shy away from higher investments in the India business. You've seen us up our A&P, increase our distribution, strengthen our entire digital innovation pipeline. We're making the investments that are needed in the India business. That doesn't mean we've got to move away from the international. International is a separate piece, which we've always mentioned, saying that it's a stable business with decent market shares. We right now focus on three big markets. It's a good cash flow business. The focus there is to make sure that we get our strategy right. I think we've got a few pieces right. For example, in the U.K., which I pointed out with the three-brand strategy, we're looking at cost and optimization in those businesses to make sure that they're fueling their own growth from simplification, et cetera, that we're looking at. Okay, thanks, Sunil. Moderator, we can go back to the Q&A queue. Thank you. The next question is from the line of Sheela Rathi from Morgan Stanley. Please go ahead. Hi, Sunil. Thank you for the presentation and thanks for the opportunity. I just had one question, and this is on the inflation on the packaging side for both paper and plastic. Is this something which is worrying you in terms of being more long-term as compared to the inflation and other raw materials? If yes, then is the company thinking about doing something around it? That's my question. Sheela Rathi, you're absolutely right. For us, it's a tale of two cities We have seen tea price inflation coming down strongly and benefiting the India packaged beverages business. On the other side, there is, I would say, oil and liquidity-led inflation, which we are seeing starting to nudge up in the Foods business, per se. Yes, it is having an impact on packaging, freight, logistics, etc. It is starting to creep up, and like I mentioned in my outlook, we're looking at various different levers that we have, which includes revenue management, which includes packaging sizes, pricing as part of that, various discretionary spends, A&P, the right level to make sure we're trying to balance it. I do see the oil-led inflation probably lasting out longer than all the other pieces put together. Sunil, where I was coming from is less to do with oil, but more to do with the supply constraints, which could build up in the medium term, especially on supply of paper and plastic due to concerns on ESG. That's where I was looking at, that is this inflation here to stay because the supply could be an issue in the medium to long term. Let me say, we don't see supply constraints as being an issue. Right now, for example, a significant portion of our salt packaging is already recyclable. We are moving to recyclable packaging in beverages as well, in line with our commitments on ESG, etc. We don't see supply constraints as being an issue out there. We do see costs creeping up because of fuel and oil-led inflation out there. Okay. Thank you. Moderator, I'll just take another question from the webcast. Sunil, Chanchal is asking, in NourishCo, you've got water business, right? Between water business and food business, which will ramp up faster given both have huge opportunities? Chanchal, I would say it is again, not an or this thing, it's a and. We've got opportunities in both the businesses. Like I said, NourishCo, I think is on a real roll. A 107% growth year- to- date, despite the fact that we saw a lockdown. The great news is I think we've got the business models right. I didn't mention it on the call, Himalayan business has broken even in the last quarter. After so many years of having the business, we've actually turned the business on the profitability front. You've seen the increase in number of outlets. You've seen the new product pipeline starting to come out. Fruski, which we started as a pilot in Hyderabad and Vizag, very quickly we ran out of capacity. Now we've added capacity, and we'll start ramping that up. The innovation in the cups, which is a very unique package, and we're the leaders in that. The jelly has started off on a, I normally don't use this term, but gone off like a rocket, and I hope to continue that momentum. Accepting both of them have different priorities. We'll continue to stay focused to make sure we leverage both of them to get our growth aspirations right. Moderator, we can go back to the Q&A queue now, please. Thank you. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead. Hi, Sunil and team. I just had one question, which is pretty much a top-down. Based on what you are seeing in different parts of the portfolio in India, given that you have a recently diversified portfolio now versus what it was five years back. When I say diversified, it could be region, it could be products, it could be SKUs. Given the sort of inflation what we are seeing in general in the economy, which is probably happening after a decade, and also in conjunction with some commentary which we heard from companies like Unilever, etc., that it seems to be hurting demand a t least that's what their prognosis is. Just wanting to understand, based on what you are seeing, and not necessarily what a Nielsen number says on market growth, etc. If you could give some examples on what the consumer is actually saying or behaving currently in terms of SKUs and where their opportunities lies for you within that parameters. Second, does this have any sort of an impact for you in your business plans for, let's say, innovation over the next 12- 18 months? Thank you. Manoj, I am not a forecaster. All I can say is I've been hearing bits and snippets of what various people are saying. You would have heard this chatter about rural being slower than urban, and lot of this is coming out of various different categories which Nielsen is tracking. I would say for us, actually, it is not as much of a concern as it would be for many other companies, because like I said, our urban footprint is far stronger than rural, so rural is more of a share opportunity for us. That's number one. Number two, in terms of outlook, I'm not sure it is a sustained long-term problem simply because, A, we've had a good monsoon, MSPs are good. We're coming out of the COVID wave, which this time around actually impacted the rural heartland, and I think consumers were not very sure. I do see improvement from here on. Again, don't take my word for it, because like I said, I'm not a forecaster. I just try and distill what I'm hearing around. You would also hear different companies talk of stress in different parts of the country. I wouldn't be too worried about that because for us, very simply put in the categories that we play, if I take tea and salt, I do think we've got share opportunities in branded, and we've got the opportunity move from unbranded to branded. Similarly, in salt, we've got opportunity both on the premium space as well as below out there. Sampann is literally white space, which we've got to go out, and Sampann, Soulfull, Marico, we've got to go out and chart out our own trajectory. While we would keep a close eye on trends as they happen, I would be more keen on making sure that our share aspirations and our top-line aspirations remain in the right place. Thank you. Thank you, Sunil. Absolutely clear. Thanks. Good luck. Thank you. The next question is from the line of Devika Jain from Ratnabali Investment Private Limited. Please go ahead. Hi. Good morning, sir. I just had one question. I wanted to understand how do you plan to capitalize group company advantages? Basically, what is your strategy to go about it and be less group dependent at the same time? Thank you. If I got your question right, we work very closely with different group companies, albeit in the right legal and governance framework to make sure we are leveraging all the advantage that the Tata Group brings to the table. For example, in the whole Tata Digital sphere, which is actually owned by Tata Sons, we are making sure that we are staying close and collaborating with companies to derive maximum amount of synergies. Okay. That's about it. Thank you. Thank you. The next question is on the line of Sumant Kumar from Motilal Oswal. Please go ahead. Yeah. Hi, sir. Can you talk about the other expense trajectory from here? We have seen a overall YoY and QoQ increase. What will be the trajectory from here? The expense is going to stabilize or going to moderate from here? LK, can I request you to take that? Sorry, I'll take it. I think, as we expect that as business grows, the proportion as a percentage to sales will improve, right? I'm not commenting on quarter and quarter. The elements of this are an investment in building capability. As you get more sales, the percentage to sales we expect to come down from where it is today. There is also some element of inflation which is there. We don't think that will be there forever t hat also will normalize. As we do, we have some further initiatives on restructuring and all that, which are not complete, which also could give us a fillip. Overall, in the medium term, we would expect an improvement in the percentage to sales and not where we are today. Okay. The second question is the Foods margin. Can you discuss about that? We have seen a significant decline in Foods margin. What will be the normal trajectory for Foods margin in the annual basis? I'm not talking about quarterly numbers. Number one. Number two the tea side, we have seen a 2% kind of growth on maybe because of high base. With the expansion in the reach, we are not expecting a lower single digit kind of growth in the tea. The question is not clear. Let me try and answer the tea thing. Like I said, I think I answered it earlier on the call. Longer term, we do expect mid to high single-digit growth that was prevalent in the tea business. There's no reason for us to change our views on that. I would urge you not to draw too much into the quarter-on-quarter moves up and down out here, simply because it has been a very, very volatile environment. On the foods business, again, L.K. mentioned this is not the long-term numbers that we are seeing. We want to continue to move it upwards, and I think you will see that coming forward. Okay. Thank you so much, sir. Thank you. The next question from the line of Shirish Pardeshi from Centrum Capital. Yes, go ahead. Hi. Good afternoon, Sunil and L.K. Thanks for the opportunity. I have two questions. If I look at the food part of the business towards total branded business, it's already moved from 23% to the highest of 25%. Would you help me to understand where do you see this business to settle, maybe medium to long-term, maybe another two to three years? In the food space. Again, to reiterate, TCPL aspires to be a large FMCG company, and as a first step in that, we want to build a large F&B company. In that space, we see food as the bigger growth driver. You see focus on growing salt, of course. You see the focus on expanding the Sampann portfolio, and you would also see us make inorganic moves like we made in Soulfull. Moderator, we will take one last question now, please. Thank you. The next question is from the line of Jayant Mamania from Care PMS. Please go ahead. Yeah. Hi, Sunil. Good afternoon. I have a couple of questions. One is regarding the single-origin coffee Sonnets that we have launched, and we have launched more variants also recently. Can you tell us how big it can be in a period of two years, and is there any plan to launch offline? Let me say it's not only Tata Coffee Sonnets. We've started our D2C play because we do think this was a long-term trend which would have come about anyways, and the COVID environment has probably accelerated that. We do see a place for D2C brands because, A, it helps us play in premium categories at a very low cost. B, it helps us to reach target consumers and communicate with them directly. C, more importantly, we get the feedback real time on how consumer trends are moving. We've launched Tata Tea 1868, we've launched Eight O'Clock Coffee, and we've launched Sonnets. We are seeing a decent response. I do think we can accelerate this. I would not hazard a guess on how big it can be, because we've got to get several pieces right, both in terms of the communication and the logistics as we roll this out. That said, the focus on D2C brands will continue to be there. If we see that they are decent enough to necessitate or there is an opportunity to move them into premium retail outlets, we will take a call at the right time. Yeah. Okay. In case of tea, what is our average domestic price realization this quarter and in the corresponding quarter? I think I will let Nidhi revert to you separately on that very specific question, and she'll get back to you. Okay. Thank you. That's all. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Ms. Nidhi Verma for closing comments. Yes. Thank you so much everyone for your time today. I recognize we have run out of time. If you have any further questions, please feel free to get in touch with me. Have a very happy festive season ahead. Thank you. Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.