Tata Group to venture into ready-to-eat food market

In FY23, Tata Starbucks has achieved a remarkable growth of 71%, crossing the Rs 1,000 crore revenue mark for the first time.

Tata Consumer Products announced in their earnings release that the year was significant for their business, as they were able to achieve a top line in the four-digit range.

The company's net sales for the year amounted to Rs 1,087 crore, and according to its earnings presentation, the business earned a positive earnings before interest and taxes (EBIT) for the year. The company acknowledged that the growth in top line for the financial year was measured against a base that had been affected by the pandemic.

Tata Starbucks achieved a revenue growth of 48% in the January-March quarter. During FY23, the coffee chain expanded by opening 71 new stores and entering 15 new cities, which is the highest-ever annual store addition, bringing its total store count to 333 across 41 cities.

According to the company's presentation, the My Starbucks Rewards loyalty program experienced a year-on-year growth of 100%, surpassing 2.3 million members.

Tata Starbucks stated its intention to rapidly increase its presence in the coming years, and to achieve this, they aim to improve their relevance to a wider range of consumer segments. The company also noted that pilot stores had shown improved operating metrics.

The company conducted a pilot program across four cities in 2022, which included introducing familiar options in the beverage menu, revamping the food menu, refurbishing store interiors, and adding a piccolo size to its hot beverage offerings. These initiatives will be implemented nationally in 2023.

In 2012, Starbucks made its entry into the Indian market by opening its first store in Mumbai, through a joint venture with the Tata Group.

Kraft Heinz Co. has cut down the number of bidders for a portfolio of Indian businesses it’s selling that includes the children’s milk drink Complan, people with knowledge of the matter said.

India’s biggest conglomerate,Tata Group and Dabur India Ltd., the $11.3 billion consumer-goods company, are among suitors selected for the second round of bidding, according to the people. The sale has also drawn interest from an arm of Cadila Healthcare Ltd. and other potential buyers, the people said, asking not to be identified because the information is private.

Kraft Heinz has been seeking about $1 billion for the assets, the people said. Besides Complan, the selling Indian business products include the Glucon D instant energy drink, Nycil talcum powder and Sampriti clarified butter, the people said.

Kraft Heinz extended gains in New York trading Friday, rising 5.9 percent to $62.90 at 9:54 a.m. after earlier touching $63.04. That’s the biggest intraday jump since May.

Tata Group is considering doing any potential deal through listed unit Tata Global Beverages Ltd., according to one of the people. Spokesmen for Tata Group, Dabur and Tata Global Beverages declined to comment. Representatives for Kraft Heinz and Cadila didn’t immediately respond to requests for comment.

Any transaction would add to the $11.9 billion of acquisitions targeting the Indian consumer industry this year, data compiled by Bloomberg show. Kraft Heinz is bringing Complan to market as U.K. pharmaceutical firm GlaxoSmithKline Plc weighs selling its stake in its Indian consumer health subsidiary, which owns malted milk brand Horlicks.

One of the persons in the know of the matter said, "The price sought by Kraft Heinz translates into more than 20 times earnings before interest, taxes, depreciation and amortization. Some potential bidders have balked at the valuation, due to what they see as lower growth prospects for certain products amid changing consumer tastes in India, the people said.

There’s no confirmation of suitors to proceed with binding offers, and Kraft Heinz could decide to keep the business, according to the people.

Tata Starbucks, a joint venture between the Tata Group and Starbucks, posted its first positive Ebitda (earnings before interest, tax, depreciation and amortisation) after sales growth nearly doubled during FY17-18.

Tata Global, in its latest annual report said Tata Starbucks, improved sales by 28% in FY 2017-18 with robust in-store performance and new stores added during the year. With the JV posting sales of Rs 272 crore in FY16-17, a back-of-the-envelope calculation shows revenue to be about Rs 348 crore during the last fiscal. “For the first time since inception, the company recorded a positive Ebitda,” the report added.

The growth is nearly double compared to a year ago period when it mostly focussed on profitability and halted aggressive expansion. However, it added nearly 25 stores last financial year.

The JV narrowed net loss marginally to Rs 30 crore during the year to March 2018 compared to Rs 32 crore a year ago. “Various in-store initiatives and the loyalty programme coupled with the ambience provided in stores resulted in improved existing store performance,” the annual report said.

With 116 stores until March, a back-ofthe-envelope calculation shows that each Starbucks outlet sold coffee, snacks and merchandise worth Rs 3 crore. That’s more than rival Coffee Day Enterprises, which runs the country’s top coffee house chain, Cafe Coffee Day, and had retail revenue of Rs 1,590 crore from 1,722 outlets, or about annual sales of Rs 90 lakh per store. Jubilant FoodWorks, which runs Dunkin’ Donuts and Domino’s Pizza in India, clocked Rs 2.6 crore per store.

Starbucks, which started operations in India in October 2012, recorded the fastest store expansion in the company’s 45-year history in the initial few years.

Also, for global coffee chains including Starbucks, consumers are attuned to a takeaway culture, which helps them add margins at very little cost. In India, however, office-goers and students go to cafes to relax and spend hours over coffee and snacks. Real estate costs in India are high, making it important for retailers to realise average price per square foot of space.

Starbucks expanded its partnership with Tata Group beyond India by launching the latter’s single-origin coffee in the US and Himalayan mineral water in Singapore nearly two years ago.

Tata Global Beverages Ltd today said it would exit loss-making subsidiaries and focus on profitable ones that can be scaled up.

The company, however, would have to maintain subsidiaries in certain locations, owing to legal issues, Chairman N Chandrasekaran told shareholders at the annual general meeting here.

"The whole idea is to have subsidiaries which can be scaled up and are profitable," he said.

"It is important to pick up growth rate and grow profitably. Growth in the domestic market is required. Mix of product portfolio is critical and is going to be a big focus for us," Chandrasekaran said.

The growth, he said, could be either organic or inorganic.

Tata Global Beverages' market share in the domestic tea market was 20 per cent, while it was three to four per cent for coffee.

The company would make an investment of Rs 150 crore in addition to the ongoing capex of Rs 300 crore, he said.

Regarding the Tata Starbucks outlets, he said that each store takes two to three years to achieve break even, but the coffee chain as a corporation had already achieved the same.

In his speech to the shareholders, Chandrasekaran said the company posted a flat revenue growth of one per cent in the last fiscal.

Referring to international markets, he said growth continued to suffer because of marginal presence in many overseas countries.

Even though in volume terms, the company continued to be "number one" in the Indian market, the same was not true in value terms, he said.

On prospects in West Bengal, the top company official said the Tata Group is committed to the state and looking for the "right opportunity" in terms of investment.

"We have good presence of TCS and companies like TGBL and Starbucks are present (in West Bengal). When the opportunity comes, we will definitely invest in the state," Chandrasekaran added.

After acquiring Gurugram-based GrocerMax in June last year,Tata Group has jumped into the online grocery shopping bandwagon with the soft launch of its e-tailing platform StarQuik.com. The founder of GrocerMax K.Radhakrishnan is currently the Co-founder at Tata Starquik.com.

The brand, which was launched in December last year, has tasted an unqualified success and is pretty happy with the business model and is hopeful of extending the services to all Star Bazaar stores soon.

K.Radhakrishnan, Co-founder, Tata StarQuik.com during India Food Forum 2018 said, “We are now opening in Thane and plan to soon cover whole of Mumbai. Then we go to Bengaluru and Pune. In next one year, we will be in all the cities where Star Bazaar is like Gujarat, Bengaluru, Pune, Mumbai and Hyderabad.”

Starquik is the Omnichannel arm of Star Bazaar Retail where Star Bazaar is a B2B partner. The idea behind launching the brand was to extend the service coverage area of store using the online services.

Radhakrishnan said, “So Starquik is an online site and we sell 10,000 items that are sold in the Star Bazaar store within 3-hours to the customers door-step that covers all perishable, fruit and vegetables, milk, meat, fish, dairy, all FMCG and general merchandise. I doubt any other player anywhere else in the country is doing the kind of model that we are doing.”

According to Radhakrishnan, in grocery, being big does not ensure success. It takes several decades to be able to understand the supply chain and the consumer aspirations and expectations and there are very few players internationally who have done grocery online retail successfully.

“I think we have a model which is a winner and we are capable enough to compete competitors like Amazon. There is enough space for everybody. It is a US $300 billion market. So it will take a long time to get saturated. We have no worry at all,” asserted Radhakrishnan.

He further added, “We are a part of TATA company, so trust that comes from the name of 150 years of existence is huge and the other thing is that no one does 10,000 items in 3-hours to customers door-step.”

The brand, which was launched in December last year, has tasted an unqualified success and is pretty happy with the business model and is hopeful of extending the services to all Star Bazaar stores soon.

Elaborating on the business model, Radhakrishna said, “We have a asset-like variable-cost model and we operate on top of the Star Bazaar stores. We are paper-less, error-less platform and we have built very good front-end and we have our own open source, ERP system at the back. We work with 14 apps which inter-link into each other. We track everything. Technology is actually not really visible but present at the back-end. ”

“Enhancing the customer experience is built into the model but it will keep on evolving. So I think just doing the basics right is a great service for the consumers today as far as grocery is concerned. The consumer is struggling to buy grocery in an easy manner at the same time they also want to save money. Either it is too difficult and you save money and actually go through the hardships or the product is too expensive. We believe we will give convenience as well as saving and great quality merchandise to the customer,” concluded Radhakrishnan.

Tata Sampann has launched ready-to-cook multi-grain khichdi mix which it will sell in 28 cities through e-commerce portal Amazon, Star Bazaar outlets in Mumbai, Pune and Ahmedabad.

"Our approach is to bring to consumers, products that are at the intersection of modern science and traditional Indian wisdom. Khichdi is a perfect example of this wisdom and with the ready to cook Khichdi mix. We are delighted to bring a unique combination of convenience, taste and nutrition to our consumer's plate," said Richa Arora, Chief Operating Officer, Consumer Product Business, Tata Chemicals.

The khichdi mix has been formulated with food connoisseur and Tata Sampann's brand ambassador Chef Sanjeev Kapoor and is inspired from the Guinness World Record winning khichdi made with the company's products at World Food India in November 2017, the statement said.

Tata Global Beverages posted a 39.1% rise in net profit to Rs 120.25 crore for the June-September quarter in comparison with the same quarter of the previous fiscal, which saw Rs 86.32 crore.

Net revenues stood at Rs 1,692 crore, up by 6% from Rs 1,621 crore in the comparable quarter in 2016. Operating profits were up by 23% to Rs 208 crore compared to the corresponding quarter of the previous year, due to improved operating performance, good cost management and lower finance costs.

Group has completed the restructuring of its Russia operations, resulting in the sale of two of the company's overseas subsidiaries, Sunty LLC and Tea Trade LLC.

L Krishnakumar, Chief financial officer of Tata Global Beverages said “The company witnessed a good performance in its India business. While July was a slow month due to GST, August and September saw double digit growth. The quarter saw a number of new product launches across geographies and continued investment to strengthen our brands. The company will continue to innovate in tea, coffee and water with new blends and beverage experiences”.

Tata Global Beverages, the world's second largest tea company, announced the pilot launch of its first tea cafe "Tata Cha.”

Tata Global Beverages Regional President Sushant Dash said “It is our first entry into retail space; this is the pilot project we are starting with. We are planning to open four stores in the pilot phase in Bangalore. We will then consolidate, understand how the pilot goes, before we think about what the next step should be. His whole idea behind entering into Quick Service Restaurant (QSR) and tea cafe space was twofold. The first was this was a growth segment as eating out had been growing at an exponential rate second 70 per cent of consumption in the country in terms of one drink as beverage even out of home was tea”.

Company official said in a statement “The idea behind was to match the two of them given that people are going out, people drink tea, and Tata Global Beverages is best positioned to bring tea to customers, so we thought of getting into retail space and talking of tea cafe," he added. Tata Cha is designed to reflect the heritage of Tata Global Beverages while embracing local culture. The core objective was to create a space that was warm and nurture a "renewed love" for tea”.

Tata Cha will have three formats of stores large which will be about 1300-1400 sq ft, abbreviated around 700 sq ft, and kiosk which will be mostly at malls, IT parks, institutions and offices. Over the next three months the company intends to operationalize all the four stores in Bangalore. Responding to a question about launching in Bangalore, Dash said it "is one among the most cosmopolitan cities of the country and it might surprise many that there are more cups of tea that are had in country, than Coffee, our internal number show that 37,000 cups of tea as compared to 17,000 cups of coffee. It is significant difference in terms of tea and coffee."