After nearly five quarters of a decline in same-store sales growth, Tata Starbucks, a joint venture between Starbucks and Tata Consumer Products, posted a low single-digit SSG in the July-September period. This was driven by improved sentiment and out-of-home spending by consumers following the GST and income tax cuts, Sunil D’Souza, MD & CEO, Tata Consumer, told Viveat Susan Pinto in an interview. He also highlighted demand trends in FMCG and the company’s outlook for the second half of FY26. Excerpts:
Tata Starbucks has reported positive SSG in Q2 after a prolonged slowdown. Will you accelerate store launches in the second half?
Discretionary spending has revived with GST and income tax cuts. That is certainly positive for a business such as Starbucks, which depends on out-of-home eating. Having said that, we will continue to be cautiously optimistic as far as our retail expansion is concerned. We added 13 stores in the first half. We are now at 492 stores in 80 cities. While we will take this number up, the bigger focus would be to continue improving revenue growth and SSG. Our year-on-year top-line growth for Tata Starbucks was 8% in the September quarter. We see this number getting into the double-digit territory in the second half on improved consumer spending, especially in urban areas.
FMCG companies are flagging the impact of unseasonal rains on consumption. Is that a concern, especially in rural areas?
FMCG companies will have to learn to live with climate change. Unseasonal rains have been a challenge this year for beverage companies across many parts of India. For us, it has been a rainfall deficit and drought-like situation in Assam that has hurt tea production. A similar scenario played out last year too in the state. This resulted in a sharp spike in tea prices. And while food inflation is broadly stable now and tea prices have also eased, we will continue to keep an eye on commodity prices as we go ahead. As far as rural consumption is concerned, it continues to be strong. But urban markets are accelerating in terms of growth rates. This comes as macro-economic fundamentals improve, giving a boost to consumption.
Your core portfolio, led by tea and salt, reported double-digit sales growth. What explains for this?
While branded players such as us have gained from the shift to organised consumption from unorganised and loose consumption, we’ve also pushed distribution both online and offline, which has helped improve sales growth. Offline, for instance, we have around 3,200 distributors and 12,000 sub-distributors today. We have a stockist in almost every district in the country. We are also expanding our portfolio with new launches and investing in our brands. All of this is aiding sales growth.
While domestic demand is looking up, are you seeing challenges in international markets with trade- and tariff-related issues?
Yes, the tariffs on Indian and Brazilian exports to the US are a challenge that we have to navigate. The India business contributes 75% to our overall turnover and international markets contribute 25% to our top line. However, the latter is a margin-accretive business for us and adds value to Tata Consumer, which explains our interest in international operations. Having said that, international markets will grow at a slower pace versus India, where growth rates will be higher as domestic demand remains robust.
Your growth portfolio, which includes Tata Sampann, Capital Foods, Organic India, Soulfull, ready-to-drink, etc., is about 30% of your India business. Will it stay there or do you plan to grow the share of this business aggressively?
These are emerging spaces and will continue to see double-digit growth. At a broader level, we intend to keep our growth portfolio within the 30% ballpark (top line contribution) in the foreseeable future.