Tata Plans To Hike Tea Prices Amid Rising Input Costs

Sunil A D'Souza, CEO and MD of parent company Tata Consumer Products, noted that while Several factors have impacted overall volumes, the company anticipates an increase in demand moving ahead

Tata Tea plans to raise prices across its entire brand portfolio in the coming months to push profit margins affected by rising input costs, a senior executive announced on Wednesday. Sunil A D'Souza, CEO and Managing Director of parent company Tata Consumer Products, noted that while overall volumes have been impacted by factors such as urban flooding, a sluggish rural economy, and a general slowdown in growth, the company anticipates an increase in demand moving forward.

The company reported a 1 per cent increase in profits for the July-September quarter, despite an 11 percent rise in revenues. However, it has noted that tea prices have surged by over 25 per cent this year due to supply disruptions. To address this, Tata Tea has begun implementing "calibrated price increases" aimed at avoiding demand shocks while remaining competitive in the market, D'Souza explained to reporters at an event.

"... You would see some price implementations every quarter, if not a fortnight, and over a two-to-three-month period, we should be equalising margins," he added. 

Reports indicate that Tata Tea commands approximately 28 per cent of the tea retail market in India, positioning it as a key competitor to Hindustan Unilever (HUL) in this sector.

Expanding on the rising tea prices, D'Souza noted that overall tea production has decreased by 20 per cent, while exports have simultaneously increased. He pointed out that the tea board has decided to halt the plucking of tea leaves earlier than usual, shifting from mid-December to the end of November, which will further impact supply.

Regarding Starbucks, D'Souza explained that the 18 per cent decline in sales can be attributed to the effects of urban flooding and broader economic conditions. However, he expressed optimism about a newly introduced product line that could help boost sales.

On the topic of volume growth, he mentioned that the company anticipates an increase in rural demand, driven by improved monsoon conditions and enhanced distribution efforts.

Additionally, Tata Tea has partnered with Salesforce to launch an integrated sales and service platform called 'Mavic.' This initiative aims to increase revenue while reducing costs, although D'Souza did not specify the expected benefits from this collaboration.

Salesforce's India head, Arundhati Bhattacharya, highlighted that the company achieved 35 per cent growth in FY24 from its Indian operations and expressed hopes for continued rapid growth in the market.