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Tata in buyout talks with as many as five consumer brands

Since its formation in 2020 during an ongoing streamlining of Tata’s 153-year-old business empire, which operates across dozens of sectors, Tata Consumer Products has widened its portfolio by buying stakes in companies such as bottled-water business NourishCo Beverages Ltd., as well as cereal brand Soulfull.

By: Bloomberg |
Updated: May 18, 2022 4:47:45 pm
Tata’s expansion comes at a time of severe inflationary turmoil as the war in Ukraine, national agri-commodities export bans and choked supply-chains push up input costs for consumer goods companies. (Image: Facebook/Tata Consumer Products)

Tata Consumer Products Ltd., the food and beverage arm of the $103 billion Indian conglomerate, wants to go on an acquisition spree to bolster its position in the country’s competitive consumer goods sector, and is in discussions to buy up to five brands.

A “significant amount” of the Mumbai-based firm’s future growth will come from inorganic expansion, Tata Consumer Products’ Chief Executive Officer Sunil D’Souza said in an interview. The firm, which sells Tetley tea and Eight O’Clock coffee, is “engaging seriously” with a number of companies where it sees decent valuations, he said, declining to identify potential targets.

“We are reaching out to potential targets to have a chat to see if there is interest,” said D’Souza, who took charge at the company two years ago after stints at PepsiCo Inc. and Unilever Plc. “There are places where valuations are high, but given the macro environment, given the liquidity, tightening etc, I am keeping my fingers crossed that they will become much more affordable.”

Shares of Tata Consumer Products climbed as much as 3.2% on Wednesday in Mumbai compared with the 0.9% intra-day rise in S&P BSE Sensex, data compiled by Bloomberg show.

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Since its formation in 2020 during an ongoing streamlining of Tata’s 153-year-old business empire, which operates across dozens of sectors, Tata Consumer Products has widened its portfolio by buying stakes in companies such as bottled-water business NourishCo Beverages Ltd., as well as cereal brand Soulfull.

The conglomerate will likely face stiff competition in the sector 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 small grocery and household consumer goods brands within six months, according to Reuters.

‘Enormous Runway’

As India reopens after the pandemic-led curbs, D’Souza is also accelerating the expansion of Starbucks Corp. outlets across the country. It added 50 new cafes in the last financial year, taking its presence to 268 stores in 26 cities. Tata, which has a joint venture with the US coffee behemoth, wants to have more than 1,000 Starbucks outlets in India, D’Souza said, declining to give a timeline for that target.

“We’ve got an enormous runway in front 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 turmoil as the war in Ukraine, national agri-commodities export bans and choked supply-chains push up input costs for consumer goods companies.

Companies, including Unilever’s India unit and domestic staple firms Britannia Industries Ltd. and Dabur India Ltd., have reacted by raising prices in the highly price conscious market of about 1.4 billion people as well as cutting portion sizes in the packs in their cheapest packages.

Shrinkflation Hits India’s Snacks as Firms Struggle With Costs

Tata has managed to weather that impact as the prices of the three main products it sells — coffee, tea and salt — have remained relatively stable, D’Souza said, although the firm feels the “niggling” increases in freight and packaging costs.

Economic and political turbulence on the neighboring island of Sri Lanka, a major black tea exporter, has kept tea prices steady. India is likely to have a good crop this year which would have forced tea prices down in the ordinary course, he explained. But the disruption in Sri Lanka has stymied its exports, preventing a drop in prices.

“Everyone who’s now exposed to wheat, sunflower oil, palm oil, I think they are bearing the brunt right now,” he said.

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