How will you manage the prohibitive costs of national distribution?
We have a wide distribution with tea and salt. But we have got to change the execution capability of the system and move from passive to more active, hence the target of 2x direct reach. By de-layering the system and optimising the backend, we think we can take at least 100 basis points off our cost, and then expand deeper into geographies and look at a bolt-on system to reach “deep rural”. We are adding another piece in S&D, which will get us there in around nine months.
There’s a buzz of a Tata “super-app” being built to serve all consumer products for the group. Tell us more.
I can’t share details but we will be part of that app. We are also going to play with digital commerce on the platforms of Amazon, Flipkart, and so on. There will be extra benefits of getting on the Tata Super app for any consumer who is buying anything to do with the group and that will be the big draw.
Is it challenging to manage old-world products like salt and new-age ones like nutraceuticals and flavoured water?
The packaged business is what we are integrating on the front end. Nourishco caters to a different channel, as does Tata Starbucks -- the business model is different. We have created a category structure where the backend is common. Legal, strategy, finance, and HR are common, as is the sales system for packaged goods. But where there are channel consumer products that includes businesses such as Tata -Starbucks then that piece remains separate.
You mention becoming a full-scale FMCG player ... what will that look like?
We will continue to focus on our core business, which has ample scope and runway for tea and salt –– to getting unbranded to branded and then growing market share within branded. We have to get our S&D and the innovation pipeline right to drive this. Then we have some fledgling brands to scale up. Tata Sampann pulses, spices, and ready-to-eat mixes are our “In the Kitchen” brand if you will. Then there is Nourishco, which has Tata Water plus and Gluco Plus and Himalayan, with each having growth opportunities. We will move into adjacencies to food and beverage and then larger FMCG
Initially no one was clear on how to move. Tea gardens stopped plucking tea. The first flush all went waste. Now the rules are clear but sporadic shutdowns are disrupting demand and supply. The pandemic led to a shortage of tea and we thought it would normalise. But there was a flood in June so the prices turned volatile. It’s a fine balance, with pricing, demand elasticity, and supply and to make sure we stay competitive. Internationally we saw huge pantry loading and now things are more normal. What worked for us as a staples player was that all consumers needed our products (tea and salt). We also leapfrogged digitally and did a lot of tie-ups and the positive is that now getting consumer mindsets to go digital is not that difficult.
Your big challenge, and where does Tata Consumer Products sit in the big picture for the group?
At the same time we are doing business, we are changing the entire back end, which is akin to running a car at 100 kilometres an hour while changing the wheels at the same time and speaks for the passion of the team. I can’t comment from the other side but I can say we would definitely like to be counted as one of the group’s most important verticals and to do that we have to ensure that we deliver what is expected from the group, which is stakeholder value. We are very focused on that.