Tata Consumer Products in talks to buy up to five brands
Tata Consumer Products Ltd., the food and beverage arm of the $103 billion Indian conglomerate, wants to embark on a wave of acquisitions to strengthen its position in the country’s competitive consumer goods sector, and is in talks to buy up to five brands.
A “significant part” of the Mumbai-based company’s future growth will come from inorganic expansion, Tata Consumer Products managing director Sunil D’Souza said in an interview. The company, which sells Tetley tea and Eight O’Clock coffee, is “seriously engaging” with a number of companies where it sees decent valuations, he said, declining to identify any potential targets.
“We are reaching out to potential targets to discuss interest,” said D’Souza, who took over as CEO two years ago after working at PepsiCo Inc. and Unilever Plc. “There are places where valuations are high, but given the macro environment, given the liquidity, the crunch, etc., I’m crossing my fingers that they become much more affordable.”
Since its inception in 2020 during an ongoing rationalization of Tata’s 153-year-old business empire, which operates in dozens of sectors, Tata Consumer Products has expanded its portfolio by buying stakes in companies such as the bottled water company NourishCo Beverages Ltd., as well as the Soulfull cereal brand.
The conglomerate is likely to face fierce competition in the industry from existing global giants such as Unilever, as well as Indian tycoon Mukesh Ambani’s Reliance Industries Ltd., which plans to acquire up to 60 smaller brands from groceries and household consumer goods within six months, according to Reuters.
As India reopens from pandemic-induced restrictions, D’Souza is also accelerating the expansion of Starbucks Corp outlets. Across the country. It added 50 new cafes in the last fiscal year, increasing its presence to 268 stores in 26 cities. Tata, which has a joint venture with the US coffee giant, wants to have more than 1,000 Starbucks outlets in India, D’Souza said, declining to give a timeline for that goal.
“We have a huge track ahead of us in India,” he said. “Now the game is how fast can we scale?”
Tata’s expansion comes at a time of severe inflationary turbulence as war in Ukraine, nationwide agricultural export bans and strangled supply chains drive up input costs for consumer goods companies.
Companies including the Indian unit of Unilever and national commodity companies Britannia Industries Ltd. and Dabur India Ltd., responded by raising prices in the highly price-sensitive market of around 1.4 billion people, as well as reducing portion sizes in the cheapest packages.
Shrinkflation hits Indian snacks as companies battle costs
Tata has been able to weather the impact as prices for the three main products it sells – coffee, tea and salt – have remained relatively stable, D’Souza said, although the company is feeling the “slight” increases. “freight and packaging costs. .
Economic and political turmoil on the neighboring island of Sri Lanka, a major exporter of black tea, has kept tea prices stable. India is expected to have a good harvest this year, which would have lowered tea prices in the normal course, he said. But the disruption in Sri Lanka hampered its exports, preventing a drop in prices.
“Anyone now exposed to wheat, sunflower oil, palm oil, I think they’re bearing the brunt of it right now,” he said.
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