Tata Consumer Products Ltd., the $103 billion Indian conglomerate’s food and beverage unit, wants to embark on an acquisition binge to strengthen its position in the country’s competitive consumer products market and is in talks to buy up to five brands.
The inorganic expansion would account for a “substantial portion” of Tata Consumer Products’ future growth, according to Chief Executive Officer Sunil D’Souza in an interview. He declined to identify potential purchases but said the company, which sells Tetley tea and Eight O’Clock coffee, is “talking actively” with a number of companies where it sees good valuations.
“We are reaching out to potential targets to see if there is interest,” said D’Souza, who took over the company two years ago after working at PepsiCo Inc. and Unilever Plc. “There are regions where values are high, but given the macro situation, liquidity, tightening, and so on, I am hoping that they will become much cheaper.”
Tata Consumer Products shares rose as much as 3.2 percent in Mumbai on Wednesday, compared to a 0.9 percent intra-day advance in the S&P BSE Sensex, according to Bloomberg data.
Since its inception in 2020 as part of Tata’s 153-year-old corporate empire’s continuing restructuring, Tata Consumer Products has broadened its portfolio by purchasing shares in companies such as bottled-water company NourishCo Beverages Ltd. and cereal brand Soulfull.
According to Reuters, the company would face fierce competition in the sector from existing global heavyweights such as Unilever and Indian tycoon Mukesh Ambani’s Reliance Industries Ltd., which wants to purchase up to 60 minor grocery and household consumer products businesses within six months.
D’Souza is pushing the expansion of Starbucks Corp. stores across India as India reopens following pandemic-caused closures. It opened 50 new cafes in the previous fiscal year, bringing its total number of locations to 268 across 26 cities. Tata, which has a joint venture with the US coffee titan, wants more than 1,000 Starbucks locations in India, according to D’Souza, who declined to provide a date.
“We have a massive runway in front of us in India,” he remarked. “The question now is how quickly can we scale?”
Tata’s growth comes at a time of high inflation, as the war in Ukraine, national agri-commodity export bans, and clogged supply chains raise input costs for consumer products companies.
Companies such as Unilever’s India unit and domestic staple firms Britannia Industries Ltd. and Dabur India Ltd. have responded by boosting prices in the very price-conscious market of around 1.4 billion people, as well as reducing portion sizes in their lowest packages.
The neighboring island of Sri Lanka, a major black tea exporter, has experienced economic and political turmoil, which has kept tea prices stable. He stated that India is anticipated to have a good harvest this year, which would have pushed tea prices down in the normal course. However, the interruption in Sri Lanka has stymied exports, preventing a price decline.
“I think everyone who is now exposed to wheat, sunflower oil, palm oil is bearing the burden right now,” he stated.