Tata Consumer Products Ltd Management Discussions.



The world economy grew by 3.6% in 2018, according to the International Monetary Fund (IMF). The marginal moderation in growth from 2017 was primarily on account of a slowdown in Europe and Asia (particularly China). On the other hand, propelled by a fiscal stimulus, the US economy grew by 2.9% in 2018 as compared to 2.2% in 2017. Chinas deceleration follows tightening of economy-wide regulatory controls and rising trade tensions with the US. The Euro Area economy (Germany, France, Italy and Spain) navigated weakening consumer and investor sentiments, together with softening export demand. Geo-political risks increasingly took a toll on business confidence globally.


Global growth is projected to moderate further to 3.3% in 2019, reflecting concerns over potential escalation of trade tensions between US and China, unwinding of fiscal stimulus in US, weakening financial market sentiment, uncertainty about BREXIT outcome and possible slowdown in Chinese economy.


At 7.3%, India outperformed China (6.6%) in the year and emerged as the fastest-growing large economy. The key contributors to this growth include its robust private consumption, the implementation of GST, an array of structural reforms and low food inflation that was partly offset by disruption caused by the floods in Kerala.

Indias ranking in the World Banks Ease of Doing Business Index continued to improve, jumping 23 places in the 2018 edition to assume the 77th position. Another indication of the growing investor confidence is that the total FDI inflow in India in 2018 was recorded at ~US$38 billion, surpassing China for the first time in 20 years.


India is projected to remain robust and grow at a rate of 7.1% in 2019, benefitting from lower oil prices, sustained growth in private consumption and favourable monetary policy. Risk to forecast includes outcome of the general election in May 2019, monsoons and slowdown in the global economy.




Euromonitor estimates that the Hot tea category (excluding Ready-to-Drink) is a ~US$44billion industry; projected to grow at a CAGR of 5% between 2019 and 2023. Black/ Everyday Black tea forms the largest category sub-segment globally, accounting for ~42% of sales (by value) followed by Non-Black tea like Green, Fruit & Herbal, Rooibos, Decaf, etc. However, Non-Black tea commands a much higher value-per- serve in comparison to Black tea.

In the developed markets, whilst Non-Black tea category is growing, Everyday Black tea category is shrinking (with different markets witnessing varying rates of decline).

Growth within the Non-Black tea segment is observed in the Fruit & Herbal and Speciality segment. Green tea category reflects a mixed trends with declines in some developed countries.

Black tea category in India continues to enjoy good growth.

Hot tea category (excluding Ready-to-Drink) is a ~US$44billion industry; projected to grow at a CAGR of 5% between 2019 and 2023.

Production and Prices

In terms of production, the global crop position in 2018 was at similar levels as 2017, with record crop production in Kenya at ~500 million kg. Thereafter, internationally, the year opened with lower Kenyan price levels. The market is projected to see continued softness in prices, as compared to the previous year.

Indian tea production closed at ~1,312 million kg, lower than last year by 10.2 million kg (equivalent to 2016 levels, which was one of the lowest in recent times). The production was impacted by the unprecedented floods in Kerala (August 2018) and lower harvest in South India. Crop output in North India was higher by 6 million kg, despite deficits in the later part of the calendar year - due to an early closure of production in December following a directive issued by the Tea Board to curb the supply of low-quality end-of-season teas and to lend price support.

The year saw an increase in both the North and South Indian crop prices, with North Indian teas seeing the highest prices in the last five years (auction average at Rs. 152.2 vis-a-vis Rs. 144.7 in previous year). The North Indian teas prices firmed up at start of the year with strong domestic demand and exports. Demand for Indian orthodox teas witnessed an upswing in the international markets, since Sri Lankan tea production remained stagnant and the competitively-priced Indian teas were able to find entry in the Middle East/ Persian Gulf regions.

Growth Drivers

Income Levels

A growing number of middle-income and high-income households will transform the consumption profile of India.


Rural per capita consumption in India will grow faster than its urban counterpart, emulating urban consumption patterns, as metros and emerging towns drive economic growth.

Favourable Demographics

Indias median age strongly indicates that it will remain one of the youngest nations in the world with one of the largest working-age populations.

Premiumisation and Convenience

World over, there is discernible shift in preferences towards premium products, with a conscious choice for healthier ‘good-for-you products. Convenience also continues to play a key role in international markets. Young consumers increasingly seek interesting flavours and functional benefits from their teas.

Out-of-home Channels

New quick-service restaurant concepts are steadily gaining ground in consumer mindsets across the globe; offering a niche variety of innovative meal and beverage options.


We expect the current trends to continue going forward. International markets will see growth in the widening Non-Black tea category. The Indian tea industry will see broad-based growth from unbranded as well as branded business, while more consumers shift to premium products. However, Everyday Black tea category in the developed markets will reflect a declining trend mainly due to change in consumer preference.

We will address each of these opportunities with our existing product portfolio, while also launching new products and product variants to leverage consumer trends, expand the market and attract the millennial consumer group. Tea will remain a durable everyday beverage choice especially in a developing economy and face limited competition from other alternatives.



Globally, with a total size of ~US$85 billion, the coffee industry is much larger than the tea industry. Coffee has been able to better leverage premiumisation and is growing faster than tea, with a rise in out-of-home consumption at retail outlets (e.g. Starbucks and Costa) and a greater adoption of technology to recreate cafe experiences at home (e.g. Nespresso). Coffee is also the favourite beverage in most developed countries where affordability does not constrain consumption, as compared to tea which is the preferred beverage in developing countries. The coffee industry has lately seen a wave of consolidation driven by leading players like Nestle and JAB, across geographies.

Coffee has four sub-segments overall: Roast & Ground, Beans, Pods and Instant Coffee. Depending on the maturity of the market, consumers either prefer Instant Coffee (early stage market) or Roast & Ground and Pods (evolved cafe culture). At ~US$12 billion, USA is the largest coffee market by value and is projected to remain a significant contributor to the global pie. Comparatively, at ~US$0.4 billion, India is still a nascent market.

Coffee industry is estimated to be worth ~US$85 billion, with four sub-segments: Roast & Ground, Beans, Pods and Instant Coffee.

Production and Prices

Global coffee production for the 2018-19 season estimated at 16747 million bags, exceeded world consumption, estimated at 165.18 million bags. However, given the stronger growth in demand, the surplus for 2018-19 is projected to be 2.29 million bags, around 1 million bags less than in 2017-18.

This excess in supply continues to put downward pressure on prices that is likely to continue over the next few months. The year saw an increase in both Arabica and Robusta output - supported by strong Brazilian production. In case of Arabica, there was a bumper Brazilian crop, since it entered the ‘on year of the alternating ‘on and ‘off seasons. Robusta output was driven by a good crop in both Brazil and Vietnam. In case of Vietnam, there were some initial concerns around yields, given the rains; but the region saw healthy coffee production, as compared to previous year. The higher crop put pressure on prices which declined vis-a-vis the previous year levels.

Growth drivers

Maturing Coffee Preferences

Coffee drinkers in developed markets seek to celebrate coffee for its unique flavours and specific origins.

This transition is also attributed to the younger population who are more likely to consume out of home.

In the US, market growth is being led by: (a) premium or quick-service brands (e.g. Starbucks and Dunkin Donut) who are over-investing in promotions and discounts; (b) small niche brands who are capitalising on the trend towards artisanal, single-origin coffees and (c) private label-retailers who are looking at improving their margins and providing consumers with ‘value for money offerings.

Sustainable Sourcing

There is also an increased emphasis on sustainable methods of roasting and brewing, on the relationship of the farmer to the coffee industry and on the desire to inform coffee drinkers on where their coffee is sourced from and how it got to where they are.


We expect the coffee category to enjoy sustained growth. There will possibly be greater consolidation resulting in competitive pressure on small niche players. In the US market, growth is expected to arise in the case of premium or value brands, with coffee chains leveraging scale to continue offering value through promotions to consumers and increase their market dominance.



The Indian Liquid Refreshment Beverage (LRB) market (including packaged water, carbonated drinks, fruit and dairy based beverages and energy and sport drinks) grew at ~9% in calendar year 2018. Within this market, packaged water is growing faster than carbonated drinks.

Packaged water is growing faster than carbonated drinks in India.

Growth drivers

• Increasing disposable incomes

• Rising consumer awareness about safe drinking water

• Greater need for out-of-home convenience

• Shift in preferences towards healthier drinking choices (such as fruit and bottled water that have lower sugar content in comparison to carbonates/soft drinks)


Since the underlying trends for the growth of bottled water category is robust, it is expected that the category will continue to expand in tandem with greater penetration.

Other Factors

Interest Rates and Exchange Rates

Besides the above, there are other factors that influence our industry outlook. We operate in multiple geographies; and thus, both interest rates and exchange rates across countries are of significant importance to our business.

The interest rate in India started easing out towards the later part of the year, when the countrys central bank cut the benchmark rates to boost a slowing economy with inflation remaining below target. The UK continues to witness low interest rates given the volatility and uncertainty looming around the countrys exit from the European Union. In USA, amid concerns about ongoing trade talks and the economic slowdown, the expectation of subsequent interest rate hike faded away.

The Indian rupee traded weak against most of the currencies in the initial part of the year, given the expectation of interest rate hike in USA and weak data releases in India. But it recouped some of these losses on the fading probability of an interest rate hike in the US. The currency is expected to remain volatile due to upcoming general elections in India. The British pound continued to trade with a weak bias over BREXIT uncertainty and is expected to remain volatile.

The Company did well in mitigating the currency and interest rate exposures by adhering to the approved treasury policies and are also reasonably covered in respect of its immediate trade flows.


Tata Global Beverages (TGB)


TGB is the worlds second largest branded tea company; a coffee company with a growing water portfolio. Our vision is to be a world-class good-for-you natural beverages player admired globally for our innovation and quality, a company that provides magical beverage moments to its consumers.

We are at an important stage in our journey as we look at pushing for more growth from our businesses, supporting our brands as well as identifying potential cost opportunities to ensure we are operating in the most efficient manner possible.

We remain aligned and committed to our five stated strategic pillars.

Rejuvenating the Base Business

We continue to focus on our core brands in tea, coffee and water for achieving sustainable profitable growth. We are also emphasising on brand building, premiumisation, improving distribution and developing alternate channels for growth, in key markets (particularly, India).

Investing for Growth

We are building a larger play of successful innovations across our different markets and piloting new launches to obtain consumer feedback, implement the learnings with agility to scale them up subsequently.

Driving Innovation

We are driving innovation by leveraging on the industry growth trends, building on our existing brands, fulfilling evolving consumer aspirations and creating eco-efficient, quality products.

Operating Effectively

We are exploring the right operational business structures, efficiently managing spends including commodity costs and evaluating additional avenues for creating synergies at the back end.

Reviewing Portfolio Options

We are supporting a broad and balanced portfolio of multi-category brands; while also pursuing accelerated growth in creating pan-India retail experiences through Tata Cha and Tata Starbucks.


During the year under review, in line with our strategic business objectives, we focused on investing behind core brands in India as well as international markets. We kept up the momentum on leveraging innovation to build scale in the Non-Black tea category - launching Cold Infusions in UK, piloting new variants of Eight OClock coffee in US, piloting Kombucha in Australia, entering USA with Himalayan water and expanding the ‘Supers range into Canada.

To improve effectiveness, unlock synergies, optimise costs and streamline operations we restructured our international operations-EMEA (UK, Europe, Middle East and Africa) and CAA (Canada, Australia, and Americas) under a single business operating unit "International". Most of the markets are in the similar stage of category evolution and have similar characteristics and can benefit from cross-pollination of winning ideas and strategies across countries.

Along similar lines as above, we also embarked on Corporate Entity reduction plan to simplify the corporate legal entity structure and for better administration of UK subsidiaries. Accordingly, Tata Global Beverages Services Limited, Tata Global Beverages Investments Limited and Tata Global Beverages Holdings Limited transferred its net assets and activities to its UK holding company, Tata Global Beverages Group Limited/fellow subsidiary, namely, Tata Global Beverages GB Ltd. It is expected that in the absence of any future transactions, the restructured entities will cease to trade and plan to be dormant in the foreseeable future.

Brand and Product Performance

Branded Tea India

During FY2018-19, the Branded tea business delivered strong volume and revenue growth. Every quarter saw a marked improvement in performance and growth trajectory against corresponding quarter of the previous year.

We continue to hold volume leadership position.

We achieved robust rates of growth and remained relevant to consumers, through increased support to the base business and through new product launches.

The year saw lot of investment activity for the regional brands: Tata Tea Chakra Gold (premium brand with strong equity in Tamil Nadu and Greater Andhra Pradesh) and Kanan Devan (mainstream brand with strong equity in Karnataka and Kerala). We launched two new variants in April 2018 - Tata Tea Chakra Gold Activ+ and Kanan Devan Duet - which was supported with media campaigns to drive consumer awareness.

We launched Tata Tea Chakra Gold Elaichi in Tamil Nadu and Greater Andhra Pradesh in December 2018, similar to Tata Tea Elaichi launch in North India. The product has received positive response and repeat off takes.

For the first time, we introduced a Jaago Re (Meluku) campaign for Chakra Gold. Developed specifically for the women of Andhra Pradesh, the TV commercial endeavoured to awaken women unto their own strength and self-empowerment while battling debilitating patriarchy and discriminatory societal norms.

During the year, we re-introduced our premium national brand - Tata Tea Gold - with a bold new packaging design in a premium and sophisticated golden hue. This was supported with a TV campaign that commenced from the New Year, developed along the lines of ‘dil ko na kahoge to pachtaoge.

The spice mix portfolio (Tata Tea Elaichi and Tata Tea Masala) continued to perform well in the market, having exceeded a milestone gross sales number in the reporting year.

We supported our new launch: Tata Tea Teaveda (tea with the goodness of Ayurveda).

A pilot campaign with Tata Tea Quick Chai in the beginning of 2019 was started; the product is a ‘3-in-1 tea mix that offers taste of boilable tea. This was launched with both Ginger and Classic variants in premium general trade and standalone modern stores outlets in Mumbai. Having received encouraging response to Quick Chai, we are going to step up marketing activities for increasing awareness in the next fiscal.

Tetley Green Tea achieved significant growth post an ad campaign with Deepika Padukone as the new brand ambassador. We saw a hike in the market share, improved brand awareness and increased store outlet reach.

The FY 2018-19 marked the second pilot year for Tata Fruski - our Ready-to-Drink fruit-based drink infused with green tea. It is currently available in National Capital Region of Delhi.

We grew our volumes by double digit over the previous year (albeit on a smaller base).

Tata Cha - marking our foray in the out-of-home beverage space - now operates six stores in Bangalore spanning three different formats: high street, kiosk and abbreviated. The stores have been well received by customers.

Among other noteworthy achievements of the year, Tata Teas iconic campaign Jaago Re 2.0 - ‘Alarm Bajne Se Pehle, Jaago Re- was awarded with 4 EMVIES in partnership with its media agency, Wavemaker. The EMVIES is one of the advertising industrys most prestigious awards in India, honouring the years best measurable and most significant contributions to the field of media.


In the UK, in the first half of the year, whilst we faced volume pressure in our Hot Tea business because of the prolonged summer, there was a good recovery in the second half of the year with sales exceeding expectation. UK value market share also recorded an improvement in the overall tea category especially in the declining Everyday Black tea. We launched the innovative Tetley Cold Infusions. It provides

a refreshing taste, is easy to make and offers on-the-go product proposition that is healthier than soft drinks and takes ‘tea out of the commonly known hot consumption and into a new cold usage occasion. We launched it with four fruit flavours: Raspberry & Cranberry; Passionfruit & Mango; Orange & Peach; and Mint, Lemon & Cucumber - with consumers having the option to either buy starter pack (which included a reusable drinking bottle and instruction on product usage) or refill packs. We received very encouraging response and already captured good market share in this nascent category.

In Canada, we introduced Super Teas with three variants: Immune, Boost and Antioxidant. These are Canadas first line of teas fortified with vitamins and minerals. We recorded a good growth in Tetley Super Teas , post launch (even before the integrated campaigns began across platforms i.e. TV, Digital, Print, PR and in-store marketing). Tetley Super Teas received the 2019 Best New Product Award from BrandSpark (wherein over 18,000 Canadians surveyed) and also has 95% positive consumer reviews via Chick Advisor (Chick Advisor is one of Canadas trusted ratings and reviews platform for women which provides ratings by women users across a number of categories including food, fashion and beauty products).

Teapigs, our super premium tea brand, achieved good growth led by expansion of markets and channels.

Building on the success of a Teapigs pop-up shop in Hong Kong in 2016, we opened a pop-up shop in Yitian Holiday Plaza, Shenzhen, a tier-I city in China between December 6, 2018 to January 20, 2019. Customers could sample hot and blended iced teas as well as purchase any of the several of the gifting options in the run-up to Chinese New Year.

Building on the health and wellness platform in Poland, we re-launched the Vitax Health Secret line with a new packaging design. Vitax Health Secret is a range of functional, high quality infusions with five unique fruit flavour blends loaded with the goodness of natural ingredients.

Road Ahead

Indian market continues to provide lot of growth opportunities and will remain a key focus for us.

The Company is looking at strengthening its presence in tea and entering adjacent natural beverage categories by leveraging brands such as Tata Fruski and also leveraging from the Tata Cha platform.

During the year, the Company also embarked on an exercise to benchmark our Sales and Distribution infrastructure in India, to identify gaps and find ways to improve.

Digital capability building was identified as one of the key areas where we needed to build proficiency; it now forms an integral part of our Sales and Distribution Transformation project starting in the next fiscal. Post completion, it is expected to increase productivity for the business by increasing visibility with real-time reporting, improving efficiency and enabling faster decision making.

Tata Global Beverages Limited has entered into a non-binding term sheet to acquire the branded tea business of Dhunseri Tea & Industries Limited (DTIL) for an aggregate consideration of upto Rs 101 crores. The tea market of Rajasthan is dominated by strong local brands. Lal Ghoda and Kala Ghoda, brands owned by DTIL, are among the leading local brands in Rajasthan. This proposed acquisition will help the Indian tea branded business gain a foothold in the market. Further, the sales and distribution network of the proposed acquisition can further bolster the growth of other Tata Tea brands in that market. The proposed acquisition shall be subject to due-diligence, definitive binding agreements and applicable board, shareholder, statutory/ regulatory and other third party approvals, as may be applicable.

Tetley remains a key power brand for your Company and we will keep supporting its growth. We will build on the success of Cold Infusions in the UK, by expanding the range and entering different geographies. We look to scaling up new product launches like Supers and Kombucha. We will continue to invest in our innovation platform to identify new products to build market share in tea as well as look for additional opportunities to build efficiencies across the supply chain with cost-transformative projects.

We will continue to invest in our innovation platform to identify new products to build market share in tea as well as look for additional opportunities to build efficiencies across the supply chain with cost-transformative projects.

Branded Coffee



The FY 2018-19 was the first full year of business operation post the change in the Pods agreement with Keurig for Eight O Clock (at the start of 2018). The result reflects higher sales due to direct billing to customers in many channels. The profitability was impacted by one-time costs for transitioning into the new arrangement, as well as higher industry competition following lower commodity costs.

After a gap of few years, we started advertising again for Eight O Clock brand. The brand campaign was launched for both Television and Digital channels and also led to uplift in the coffee sales with an objective of improving our brand image with our customers.


We had entered into a licensing agreement with Caffitaly in 2014 (with the acquisition of MAP brand) for coffee capsules. In the past few years, we had been facing challenges in ramping up the MAP coffee capsules business post the entry of second licensee. We terminated the relationship as of December 31, 2018 and entered into a licensing agreement with K-fee, owned by global innovator and quality supplier Kruger (currently #2 system in Australia). This change is expected to further fuel our growth aspirations in coffee in Australia.


The year saw good growth for Roast & Ground and Hot Tea Shops (HTS) (albeit on a smaller base); however, the business faced pressure in the Instant Coffee segment.

We changed the packaging for our Instant Coffee product, while improving the communication of our product proposition to consumers.

Road Ahead

Eight O Clock remains a key power brand for TGB and we will keep supporting its growth. A detailed plan to improve market share in the US coffee category has been developed and will be executed over the next few years.

We believe that K-fee represents a better capsule category opportunity in the Australian market; the first branded K-fee capsule plays to be launched in 2019.

We remain committed to growing our branded coffee business in India and will focus on increasing distribution and share in the southern states before expanding to the rest of the country.

Other Branded Business - Water India

NourishCo Beverages, our joint venture with Pepsi in India delivered good growth on account of improved performances by Tata Gluco Plus (TGP) and Tata Water Plus. TGP remains a star performer product with milestone sale achieved during the year. This year also marked our entry into Odisha market where we were able to replicate the successful business model established in Andhra Pradesh, Telangana and Tamil Nadu. The product is in the process of being rolled out in West Bengal, Bihar, Jharkhand and Delhi.


The FY 2018-19 was the first full year of pilot for Himalayan in USAs premium water space. The performance of the pilot has been mixed and the Company is evaluating alternate routes to market.

Road Ahead

Our water business and liquid beverages are an important category for future growth. We will explore opportunities to further scale up this business.

Tata Starbucks

Our 50:50 JV with Starbucks Coffee improved sales through good growth in same store sales and expansion of stores. Tata Starbucks kept up the momentum in expanding the store base and added 30 new stores to reach 146 stores by the end of FY2018-19; this is in excess of the 25 new stores we added in FY2017-18. We entered a new city market: Chandigarh. The new stores were added across multiple formats, including (a) smaller footprint stores to increase penetration in existing cities (e.g. Mumbai and Bangalore), (b) new formats (highways such as Mumbai-Pune and Bangalore-Tirupati and shop-in-shop such as Westside Bangalore) and (c) high-profile coffee-forward stores (e.g. store in Vittal Mallya Road in Bangalore).

Road Ahead

Tata Starbucks will continue with the accelerated store growth, entering new cities and exploring new store formats.

Non-Branded Business

The FY 2018-19 ended on a better note for our unbranded business, in comparison to 2017-18 despite the crop loss following adverse weather conditions. The Extraction business performed well (both tea and coffee), Operating profits improved over previous year driven by improved extraction business performance, strong focus on cost management and monetisation of non-core assets whilst Plantation performance was impacted (impact of floods and drop in price realisation of Pepper and Arabica offset by improved performance in Robusta).

Tata Coffee Limiteds state-of-the-art freeze-dried Instant Coffee plant in Vietnam has been inaugurated. Freeze-dried coffee is a growing segment worldwide in the premium Instant Coffee space. This expansion is expected to strengthen our capabilities and facilitate growth in coffee extraction and further expand our global footprint.

Tata Coffees expansion into Vietnam is expected to strengthen our capabilities in the premium Instant Coffee space, facilitate growth in coffee extraction and further expand our global footprint.

Tata Coffee has received various rewards and recognition during the FY 2018-19. Noteworthy among them is "Best Green Business Award" from Economic Times Now, for the Sustainable and Green practices at Coffee, Tea and Pepper Plantations. This is an acknowledgement of the Companys efforts and best practices for judicious use of the natural resources and the Companys initiatives for water conservation, conservation of natural resources and the focus on staying carbon negative. In addition, Nespresso has released the Limited-Edition sleeve of Nespresso Mylemoney. This coffee had the Iconic Kents with the larger Arabica lot from Tata Coffees Mylemoney Estate.

Road Ahead

We expect our non-branded businesses to perform steadily, going forward, driven by the onset of Vietnam operations along with normal weather condition and crop output expectation. It will be critical to build the customer pipeline and meet revenue targets at the Vietnam plant; however, the price realisations are expected to be soft for most of the year.


During the reporting year, we achieved strong revenue growth despite intense competitor activity across markets. We were driven to gain volumes and reinforce brands with investment to ensure long term health of the business.

Consolidated business

Key financials

• Revenue from operations at Rs. 7252 Crores, higher than the previous year by 6% (3% on a constant-currency basis). Excluding the impact of business exit, Revenue from operations grew by 8% (5% on constant currency basis). The increase in revenue is led by the growth in Indian tea brands, the Pods model change in US coffee and improvements in Coffee Extractions business in India.

• Profit before exceptional items and taxes at Rs. 768 Crores, marginally lower than previous year. This is due to higher tea commodity costs in India and increase in promotion and advertisement spend to support brands, which was partly

offset by some softening of tea and coffee commodity costs in the international market.

• Exceptional items include redundancy costs due to organisational restructuring in international operations to the tune of Rs. 25 Crores and past service cost for the UK Pension scheme of Rs. 8 Crores (pursuant to a recent judicial ruling).

• Group net profit for the year at Rs. 457 Crores, lower than previous year mainly due to higher exceptional items, one-time tax credit mainly in the US in the previous year coupled with the lower share of profits from associate companies and joint ventures, due to one-off items.

Performance Snapshot

The consolidated financial highlights for FY 2018-19 are as follows:

Rs. in crore
2019 2018 Variance
Revenue from operations 7,252 6,815 437
Profit before exceptional items and taxes 768 774 (6)
Exceptional items (net) (33) (21) (12)
Profit before tax 735 753 (18)
Profit after tax 474 567 (93)
Group net profit 457 557 (100)

Key Financial Ratios

Ratios 2019 2018 Change
Debtors Turnover 10.91 10.99 -1%
Inventory Turnover 2.62 2.55 3%
Interest Coverage Ratio 15.64 19.11 -18%
Current Ratio 2.93 2.54 15%
Debt Equity Ratio 0.14 0.13 3%
Operating Profit Margin % 9.9% 10.8% -9%
Net Profit Margin % 6.2% 8.1% -23%
Return on Net Worth % 5.7% 7.5% -24%


Change in Return on Net Worth is mainly on account of lower group net profit, as explained above.

Standalone business

Key financials

• Revenue from operations at Rs. 3430 Crores, higher than the previous year by 7%. This was driven by

improvement across all major brands in the Indian Branded tea portfolio.

• Profit before exceptional items and taxes at

Rs. 576 Crores, lower than previous year mainly on account of higher tea commodity costs and discretionary/one-off items.

• Profit after tax at Rs. 411 Crores, lower than previous year due to exceptional profits on divestment of our investment stake in an associate and a subsidiary in the previous year.

Performance Snapshot

The standalone financial highlights for FY 2018-19 are as follows:

2019 2018 Variance
Revenue from operations 3430 3217 213
Profit before exceptional items and taxes 576 608 (32)
Exceptional items (net) - 115 (115)
Profit before tax 576 723 (147)
Profit after tax 411 534 (123)

Key Financial Ratios

Ratios 2019 2018 Change
Debtors Turnover 21.53 27.23 -21%
Inventory Turnover 2.61 2.52 4%
Interest Coverage Ratio 44.70 45.55 -2%
Current Ratio 3.92 3.21 22%
Debt Equity Ratio 0.00 0.02 -95%
Operating Profit Margin % 12.6% 14.7% -15%
Net Profit Margin % 11.4% 15.9% -28%
Return on Net Worth % 9.5% 13.4% -29%


Change in debt equity ratio is on account of lower debts.

Net profit margin and return on net worth are lower mainly on account of exceptional items in the previous year.


We have a system of documenting and reviewing key risks. Apart from management reviews, the risks are also periodically reviewed by the Board and Risk Management Committee. The Audit Committee has additional oversight in the area of financial risks and controls.

Some of the key risks and uncertainties that our businesses deal with, are explained below:

Changing Preferences

Over the past few years, in UK, USA and other developed markets, there is a decline in the Black Tea category.

Our portfolio has a higher weightage of Black Teas.

The non-black category is growing and we are rejigging our portfolio with various innovative products in keeping with this trend.

Customer consolidation and competition

Customer consolidation coupled with intense competition may adversely affect market dynamics and put pressure on pricing and promotion. We review and monitor the pricing and promotion strategy very closely and benchmark against industry practices to manage intense competition and increasing costs. Further, we collaborate with key customers to enhance our performance and relationship. We continually focus on improving cost efficiency and our ability to meet customer expectations, to reinforce leadership positions in core markets.

Product Innovation

Innovation fundamentally carries inherent risks attached to its success, to minimise such risks we have a structured innovation process from ideation to post launch.

Product safety and integrity

As a natural beverage company, we ensure that our products comply with product safety regulations, which is essential to bring them into a supply chain or marketplace and uphold our reputation. We have established a company-wide Quality Assurance programme, along with product testing and product traceability programmes. Our suppliers are directed to comply with clear and stringent norms for raw material safety and quality. Product compliance is supported by seeking external accreditation programmes.

Plantation Yield

Dependence on rainfall, aging of crops and exposure to pest attacks are challenges faced by the plantation verticals of key subsidiary. These factors along with internal cultivation process could impact sustainable incremental yield and profitability. Our subsidiary undertakes various initiatives such as irrigation facilities, replantation of crops with new varieties, implementation of integrated pest management processes and other cost management initiatives to improve plantation yield and profitability.

Market Volatility

Tea is a multi-harvest agricultural commodity and is sold through public auction or by private agreements. There is no futures market in tea. Price levels reflect supply/demand position and as an agricultural crop supply/demand balance may change quickly when weather conditions are adverse. To manage supply risk, the Company spread its buying between public auction and private agreements.

Cyclical swings in coffee commodity markets are common and the most recent years have been especially volatile for the price of coffee. Increases in the cost of green coffee could reduce our gross margin and profit. There can be no guarantee that we will be successful in passing commodity price increases on to our customers without losses in sales volume or gross margin. Precipitous decreases in the cost of green coffee could result in significant headwinds causing us to lower sales prices before realising cost reductions in our green coffee inventory. We have a robust framework in place to protect our interests from risks arising out of market volatility. The Strategy and Planning team, based on market intelligence and continuous monitoring, advises the sales and procurement teams on appropriate strategy to deal with such market volatility. We have an established commodity risk management framework and hedging policy that guides us to manage such risks.

Volatility in commodity prices will also have an impact on the business. Further, political, social and weather changes may impact commodity availability as well. We focus on development of market relationships, innovation of alternate supplier channels and exploring alternate sources of teas in other parts of the world to safeguard the earnings and availability.

Currency volatility

Volatility in currency exchange movements like USD GBP, CAD and AUD can pose challenges to our operations through earnings dilution. We have established currency hedging policies and practices to manage these risks.

Cyber Security

As a global organisation, we are increasingly dependent on IT systems and are exposed to breach of information security that can cause interruption to operations or breach of sensitive information through unforeseen and ever-evolving cyber-attacks.

We have a robust information and security policy and insurance along with renewed monitoring system to safeguard our resources against any unforeseen events.

Legal Non-Compliance

Being in the beverage industry, we are subject to extensive laws and regulations which are complex and changing. As these regulations could affect our performance and reputation, we have developed a legal organisation at the regional levels.

TGB and its subsidiaries are assisted by their legal departments and/or external legal advisors to take steps to ensure that they comply with applicable laws and regulations. The emerging regulations are closely monitored to help the business for compliance readiness. In addition, we have developed and implemented internal policies and procedures to ensure compliance.


As we continue our journey towards higher business growth, we focus on building a more agile and effective organisation. We restructured our business operations from three regions with support functions managed globally, into a two-region structure (India and International Business) with direct line reporting of support functions to Regional/Country Heads resulting in re-alignment of the matrix structure.

Our leadership is committed to drive the following as the four pillars of our people philosophy.

High performance culture

As part of the Global Reward Strategy we continue to sharpen our focus on rewards differentiation for our top performers. The Global Reward strategy has a strong linkage to actual business performance and is aligned to external market realities.

Build and develop talent

We have taken steps to help employees upgrade skills and capabilities through multiple internal and external platforms globally. We have launched ‘Edge for Me - TGBs e-learning platform to augment the classroom programs and promote anytime learning. We have institutionalised the Management Trainee programme ‘Emerging Leaders Plus this year, for building the leadership pipeline.

Drive high levels of engagement

We continue to focus on engagement activities across geographies with the implementation of the learnings from employee engagement survey (YOU Survey) at three levels - global, country and manager levels. Engagement building initiatives like talks on health & wellbeing in the UK; team get-togethers, employee meets with leadership, wellness initiatives in India; and targeted lunch & learns and team activities in the US continued in the last year.

Rewards and recognition

Perfect Cup celebrations (TGBs awards programme) along with the Strategy Cascade meet were held across India, the UK and the US. Additionally, 3,900 monetary and non-monetary peer-to-peer rewards were shared globally on our online rewards and recognition platform ‘Brewing Brilliance.

The overall industrial relations environment across the organisation has been productive and stable.


Our internal financial control framework commensurate with the size and operations of the business and is in line with requirements of the regulations. We have laid down adequate procedures and policies to guide the operations of our business. Unit/functional heads are responsible for ensuring compliance with the policies and procedures laid down by the management. Our internal control systems are routinely tested by the Management, Statutory Auditors and Internal Auditors.

The Tata Code of Conduct has prescribed guidelines outlining the key disclosure and governance requirements besides mandating the observance of applicable statutory requirements by us. TGB and its senior management have affirmed adherence to the Code.


The internal audit function carries out a focused and risk based annual internal audit plan approved by the Audit Committee. The internal audit primarily focuses on the adequacy of appropriate systems and controls.

The internal audit reports are reviewed by the Audit Committee periodically.

Cautionary statement

Certain statements made in this report relating to the Companys objectives, projections, outlook, expectations, estimates, among others may constitute ‘forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations, projections etc., whether express or implied. Several factors could make a significant difference to the Companys operations. These include climatic conditions, economic conditions affecting demand and supply, government regulations and taxation, natural calamity, currency rate changes, among others over which the Company does not have any direct control.