Tata Consumer’s Growth Steams Ahead, but Margins Lose Flavour

Tata Consumer Products just served up a quarterly profit that jolted the market awake. Net profit for the March quarter shot up 59% year-on-year to ₹3.45 billion, which could make analysts revisit their models. Sales jumped 17% to ₹46.08 billion, fuelled by robust demand and a flurry of new product launches. And if that wasn’t enough, the board sweetened the deal with an ₹8.25 per share dividend, signalling confidence that this momentum isn’t just a one-off.

Investors may cheer the numbers, but sustaining this brew could prove tricky.

The real engine behind this quarter’s surprise was volume growth. The India-branded business, excluding new acquisitions, posted an underlying volume jump of 5.9%. Tea volumes rose 2%, salt volumes 5%. The India foods segment was a standout, clocking 27% revenue growth. About 17% of this sales growth was led by homegrown brands. It was on the back of a 6% volume surge and a 31% leap in value-added salt products. Health-focused brands Tata Sampann and Tata Soulfull raced ahead with annual growth rates of 30% and 32%, proving that wellness sells—even at a premium.

Globally, Tata Consumer’s international business grew 13%. The US tea business was up 15%, and while the UK sales dipped, margins actually improved. South Africa and the Middle East were the real overachievers, each notching over 20% growth for the year. The international push is clearly paying off, especially with premium brands such as Teapigs and Good Earth leading the charge.

The rub? Margins didn’t keep up. Consolidated EBITDA margins shrank by 250 basis points to 13.6%, even as revenue and profit soared. The culprit? Relentlessly high tea and coffee prices. If tea inflation had played nice, margins would have expanded. Instead,

Tata Consumer had to settle for an 8% EBITDA increase on 16% higher sales, reminding that operating leverage works both ways when commodity prices boil over.

TATA Namak
If Tata Consumer wants to keep this hot streak alive, it must bet big on innovation and premiumisation. The company rolled out 41 new products this year, pushing its innovation-to-sales ratio in India to 5.2%, a sixfold rise since 2020. New launches like Tata Tea Gold’s instant tea premix and Tata Lyfe Alkaline Water are aimed at urban consumers who seek novelty and convenience. The ready-to-drink beverages business, after a sluggish start, bounced back with 17% volume growth in January-March thanks to fresh flavours and a tilt toward functional drinks.

Marketing muscle is another key ingredient. Tata Consumer spent 7.1% of sales on advertising this quarter, and it’s paying off. Tata Salt’s market share is up, and its “Namak ho Tata ka” campaign is winning industry accolades. The company’s digital-first approach is helping it reach new, younger consumers in urban markets.

Looking ahead, Tata Consumer’s ability to keep beating profit estimates will hinge on several factors. Sustaining volume growth in a market where consumers are increasingly price-sensitive will require a careful balance of innovation and pricing. Margin recovery will depend on how commodity prices evolve and the company’s ability to pass on cost increases without losing market share.

The integration of recent acquisitions like Capital Foods and Organic India will need to deliver not just revenue growth but also the promised boost to margins. Continued investment in brands and distribution, especially in digital and quick commerce channels, will be crucial to staying ahead of both established rivals and nimble start-ups.

The real test will be whether Tata Consumer can make such performance repeatable, not just exceptional. Investors looking for consistency, not just flashes of brilliance, will want margins as well as marketing to hold up when costs rise again.