To be sure, in the pre-GST transition phase the company was clocking “decent double digit growth rate”. The new GST rates were implemented from September 22 after the announcement by the Centre on August 15th.
“I had not expected to see that much disruption as we did see, both in general (GT) and modern trade (MT). MT, obviously because they were down stocking, because they wanted the right price on the shelf, GT because 22nd (September) onwards we started to pass the extra GST as a discount, and retail and general trade sees this as margins, so that probably we didn’t calculate in as much detail,” D’Souza told analysts in its earnings call on Monday.
The company in its earnings release said the Capital Foods’ sales, especiallyin MT, were adversely impacted in September following the GST rate change announcement.
Capital Foods and Organic India reported revenues of Rs223 crore and Rs133 crore respectively for the quarter. A year back, Capital Foods sales was Rs 206 crore and Rs 102 crore by Organic India. Capital Foods is the parent company of the Indian Chinese Ching’s Secret, and condiments brand Smith & Jones. Organic India sells healthy tea and supplements.
However, the company’s ready to drink business was not impacted by the GST transition phase even when the GST rate came down. D’Souza said the impulse consumption nature of this business ensured there was no impact. “…People don’t wait to drink a bottle of water or GlucoPlus, while for everything else you can hold back purchases. And that you can see in Capital Foods, Organic India and Tata Soulfull,” said D’Souza. Tata Consumer Products on Monday also announced that its standalone net profit for the second quarter ending September 30th grew by 28% year-on-year (yoy) to Rs 285 crore, while revenue from operations grew 18% yoy to reach Rs 3,595 crore. “This was the second consecutive quarter of double-digit growth in the India core business across both tea and salt,” said D’Souza.
D’Souza said the second quarter acted as “the bridge” between the first quarter which was pressurized on margins and the third quarter when it expects tea prices to come back to normal. He, however, said coffee price movement needs to be watched out for going forward.
The international business revenue of the company grew 9% yoy in terms of constant currency growth. Tata Consumer Products said its joint venture coffee cafe chain Starbucks had a revenue growth of 8% yoy during the quarter and has positive same store sales growth. The brand now has a total of 492 stores across 80 cities with seven new stores added last quarter.
On Monday, Tata Consumer Products Ltd closed at Rs 1,199.5 per share, registering a 2.95% rise from its previous closing price.
