The pandemic’s second wave is much more widespread than the first, affecting rural areas that were largely untouched last year, said Sunil D’Souza, managing director and chief executive of Tata Consumer Products Ltd, which owns brands such as Tetley tea, Himalayan bottled water and Tata Salt.
In an interview, D’Souza said the impact of the pandemic in rural markets may not affect it much because it had just started expanding into these areas. The company, he said, has sufficient cash reserves and will look at both organic expansion and acquisition opportunities to grow its business. Edited excerpts:
How is the second covid wave impacting domestic business?
This (second wave) being much more widespread than the first wave, which was more metro-centric and in big urban agglomerations; we see it go down to rural areas, and that creates a little bit more stress.
For us, it doesn’t make too much of a difference because we’re just starting to build out our distribution in rural. So, we see an opportunity in rural, albeit the overall opportunity might be slightly lower in the shorter term.
On the channel side, we see a repeat of what happened in the first wave. In modern trade, we see lower footfalls, e-commerce again is starting to accelerate, and there’s a slight bit of a tweak on the kiranas—last time they saw rapid offtake.
We will see a rapid offtake, but we see the picture unfold more towards the end of April, early May because, unlike last time, it is not a national lockdown. It’s moving by geography, and there are timing restrictions. For us, the impact is adjusting our supply chains to make sure we’re able to tackle those restricted timings.
We don’t have issues with primary logistics, infrastructure but we do have distributors scrambling to get to the market because markets are only open from 7-11 am. For us, demand more or less doesn’t seem to be too much of an issue; it’s about manoeuvring our supply chains to meet that demand.
But we do see the impact on people in our system starting to climb up. And, for us, it is always safety first. We’ve already covered our entire frontline with covid insurance. We are also pushing for vaccinations. But in some places, we’ve had a severe impact on people.
How will rural versus urban demand play out this time?
Last time, rural was still largely untouched, and, therefore, it was on a roll. We also had a good monsoon, MSPs (minimum support prices for farm output), direct benefit transfers and reverse migration. So all that was driving rural demand, which had come back quite strongly.
Right now, I don’t think the question is whether you are seeing the virus hitting rural at some point. I think it’s already hitting there. I would say it’s even keel for both urban and rural in terms of impact. How they will come out and how quickly and which one will outpace the other, I’m not very sure. However, I hear about a good harvest, good monsoon, and, therefore, a future that is still strong on the agricultural front.
How would you sum up the consumer sentiment right now?
Consumer sentiment for me is cautious. People don’t know what is happening. They see big headlines, and this time around, they are hearing more people they know getting impacted. So, I would think the sentiment is a bit cautious, and discretionary spending will probably take a back seat.
The company recently acquired Kottaram Agro Foods, the owner of Soulfull brand. Has this business been integrated?
Soulfull fitted into our strategic set of platforms that we wanted to play in. We had a gap in mini-meals, healthy snacking, and breakfast—Soulfull fitted in perfectly. They had also cracked technologies, which we would have taken slightly longer to crack, and they got to a decent strength in both categories and locations in which they played.
In terms of the team, to ensure that we keep the entrepreneurial spirit alive, the marketing and category innovations all stay separate. We’ve integrated the pieces where we think we can bring value, which is the back-end and the front-end, especially the distribution. They were in 15,000 stores; right now, I’m in about 2.4 million or 2.5 million stores. So if I can get it into my distribution system and scale it, that gives it enormous leverage. I think by the end of this month, we should be done with that integration.
Are there any gaps in the portfolio you would address through new products or acquisitions?
Our ambition is to become a large FMCG company. We have clearly decided to first double down on food and beverages and then move beyond. In F&B, we have distilled down a number of categories that are out there—we went through 30 scale categories which are about ₹5,000 crore, looked at the strategic options in each, including margins, how concentrated is it, what technologies do we have, the Tata brand connect, and then we’ve distilled it down to four platforms for today and one for the future (in food and beverages). Soulfull fitted into mini-meals, snacks and breakfast, for instance.
We will look at both organic and inorganic spaces. Organic will be extensions or adjacencies, which we can get into very quickly; but where we cannot, we will look at inorganic growth. We’re sitting with a significant amount of cash on our balance sheet. So, that is not going to be a hindrance for us to go and make aggressive moves, but within the guardrails of the strategic and financial frameworks.
