Tata Consumer Products (TCPL) is looking to throw its weight behind coffee brands and expand their reach. The move is aimed at premiumisation, accelerating the pace of innovation and tapping into the increasing preference for coffee among young consumers.
While the company will continue to leverage TCPL’s existing distribution network, alternative channels will also fuel growth and innovation in the coffee segment. TCPL’s distribution reach has grown at a rapid pace over the last couple of years and at the end of December 31, 2022, it stood at almost 1.4 million outlets. Overall, TCPL’s modern trade channel grew 17%, contributing to 14.8% of India business sales; and the e-commerce channel grew 34%, contributing to 8.2% of India business sales during the December 2022 ended quarter.
“As we have continued to build distribution in the south region, which enabled us to sell our coffee portfolio in high-salience markets. Also, innovation contribution to sales for e-commerce stood at 11% during third quarter and the channel has played an important role in new coffee launches for us,” Puneet Das, president for packaged beverages (India and South Asia), TCPL, told FE.
At present, branded coffee forms a small part of TCPL’s beverage portfolio, but the segment is expected to grow significantly fuelled by multiple factors, said Das. TCPL’s coffee revenues have grown 34% in the 9-month period year-to-date, according to the earnings performance reported by the company for the quarter ended December 2022.
With younger consumers are drinking more coffee, well-travelled Indian consumers’ willingness to experiment more and the rise of speciality coffee shops have led to consumers being more aware of different kinds of coffee and wanting to re-create a café style experience in the comfort of their homes.
“Increasing affinity for coffee, premiumisation and convenience are strong consumer trends that are positively impacting the growth of this segment in India,” said Das.
The company is offering a range of coffee spanning across instant, filter, premium and specialty coffees to cater to multiple consumer needs. The company is also innovating to differentiate its coffee portfolio in order to keep pace with consumer trends and expanding its target addressable market. “The coffee portfolio for us was a single brand/limited SKU about four years ago. Since then, it has grown from strength to strength, and the growth is coming both from the base variant as well as the innovations,” said Das.
Apart from continuing the focus on the south market, TCPL sees potential to strengthen its presence in other markets across India, and several of its new launches are targeted towards these geographies.
TCPL’s coffee portfolio currently includes Tata Coffee Grand Premium, a 100% coffee blend targeted at non-south markets, Tata Coffee Grand Classic, an instant coffee with flavour-locked decoction crystals, Tata Coffee Gold, a premium freeze-dried coffee and Tata Coffee Quick Filter, a filter coffee-like taste in a convenient format. Tata Coffee Café specials range includes café style cappuccino and Tata Coffee cold coffee—a liquid coffee mix in various flavours. Sonnets by Tata Coffee, its D2C brand, is a premium micro-lot roast and ground coffee.
Several of these offerings are in line with TCPL’s premiumisation agenda, and growth of its D2C offerings is part of the strategy. With Sonnets, the company will continue to strengthen and scale the brand. During the year, it launched a range of new season offerings under it.
“While the contribution of D2C offerings is quite small currently, we are seeing strong traction with consumers. As coffee drinking culture continues to strengthen in the country, there is a growing appreciation for high-quality micro-lot coffees with various notes and flavour profiles. We will continue to add on new variants and formats and grow this range via this emerging channel,” said Das. Additionally, with 8’O Clock, the company is evaluating opportunities from India perspective, as its continues to build and grow Tata Coffee Grand portfolio, he added.