Tata Consumer 'cautiously optimistic' as demand stays strong and quick commerce surges

Tata Consumer Products is maintaining a cautious outlook on consumption as the impact of the West Asia conflict, food inflation risks and a weaker monsoon create uncertainty for the coming quarters. Yet, the company is not seeing any contraction in demand, with volumes holding up across urban and rural markets and newer growth engines such as premiumisation, quick commerce and health-focused products gaining traction.

“We stay cautiously optimistic,” Ashish Goenka, group chief financial officer, Tata Consumer Products, told Fortune India. “At this stage, we are not seeing any contraction in demand. The demand continues to stay robust. And we are seeing volume led growth and good demand across most of our categories.”

Goenka said the West Asia conflict could have an impact on inflation, which could eventually feed into food inflation, while the monsoon has also not been very good. Urban demand, however, has picked up significantly over the past few quarters after lagging earlier, making the recovery more broad-based.

Driven largely by the rapid expansion of quick commerce and e-commerce, consumption behaviour is changing in urban markets. These channels are speeding up product discovery and creating demand for categories such as health, wellness and convenience, as well as larger pack sizes. As quick commerce reaches more pin codes and deeper into cities, Goenka said these behaviours are beginning to spread beyond urban markets.

Quick commerce changes the consumption mix

For Tata Consumer, quick commerce has grown upwards of 80% over the past couple of years, while quick commerce and e-commerce together now account for 20% of its India branded business. The company has also tailored its portfolio for the channel, with premium, organic, wellness and convenience-led products performing particularly well.

At the same time, the company is betting on premiumisation without losing sight of affordability. Goenka said aspirations are high across both urban and rural India, but rural consumers remain more value conscious. Tata Consumer is therefore using smaller price points and sachetisation to make aspirational products more accessible. It has also expanded its distribution network through sub-distributors and distributors across more than 50,000 towns.

Innovation is increasingly being built around these changing preferences. Tata Consumer’s innovation-to-sales ratio has risen from 0.5% five years ago to nearly 5%, while it launched almost 80 new products last year. Many were first launched on quick commerce, which allows the company to obtain rapid consumer feedback and either scale or discontinue products quickly.

Health and wellness is emerging as another important growth platform, with organic food, convenience and protein seeing strong traction. The company has launched protein-enhanced water and is working on protein teas and protein-enhanced pulses, while also developing products around gut health, sleep management and inner beauty. Goenka said GLP-related consumption and nutraceuticals could see faster adoption in India and could be the next big opportunity.

But margin protection remains a priority as commodity volatility becomes the new normal. Tata Consumer has developed category-specific pricing playbooks and taken two price increases in salt this year, while making calibrated increases in tea and other categories. It is also pursuing around ₹300 crore of savings through its Opportunity Council, after crowdsourcing about 700 ideas and converting them into roughly 250 projects.

Goenka said the combination of premiumisation, a stronger mix of growth categories, supply-chain resilience and operating leverage should help Tata Consumer navigate the external pressures while sustaining growth.