Tata Challenges Reliance, ITC By Triggering FMCG War: 5 FMCG Brands Will Be Acquired By Tata In Next Few Months

Tata Consumer Products (TCP) is ready to go on an acquisition spree to strengthen its position in India’s competitive consumer goods sector.

Wants Firms With Affordable Valuations

The food and beverage arm of the $103 billion Indian conglomerate is in discussions to buy up to five brands.

Chief Executive Officer Sunil D’Souza didn’t share the names of the companies but said that it is “engaging seriously” with a number of them where it sees decent valuations.

He said that he hopes the potential targets with high valuations will become more affordable  with the “macro environment, given the liquidity, tightening etc.”

New Kid On The Block

TCP was formed in 2020 during an ongoing streamlining of Tata’s 153-year-old business empire.

It has since widened its portfolio by buying stakes in companies such as bottled-water business NourishCo Beverages Ltd., as well as cereal brand Soulfull.

It will likely face stiff competition from existing global giants such as Unilever and the domestic Reliance Industries.

The latter has its own plans of acquiring up to 60 small grocery and household consumer goods brands within six months.

Expanding Starbucks Presence

In the meantime, D’Souza is rapidly expanding the number of Starbucks Corp. outlets across the country.

It added 50 new cafes in the last financial year, taking its presence to 268 stores in 26 cities with its aim being more than 1,000 Starbucks outlets in India,

Tata’s expansion plans come in the backdrop of inflationary turmoil due to the war in Ukraine, national agri-commodities export bans and choked supply-chains.

All of these have pushed up input costs for consumer goods companies. 

Responses To Input Price Hikes

Unilever’s India unit, Britannia and Dabur have responded with hikes in prices in the highly price conscious market and by cutting portion sizes in the packs in their cheapest packages.

Tata has managed to be relatively unscathed as the prices of the three main products it sells — coffee, tea and salt — have remained relatively stable.

However, the firm has been feeling “niggling” increases in freight and packaging costs, as put by D’Souza.

Tea Prices Affected Due To Sri Lanka Crisis

Tea prices also remain steady due to the economic and political turbulence in Sri Lanka which is a major black tea exporter.

India’s own crop is likely to be good this year which would have forced tea prices down in the ordinary course.

However, the disruption in Sri Lanka has stymied its exports, preventing a drop in prices.

D’Souza said, “Everyone who’s now exposed to wheat, sunflower oil, palm oil, I think they are bearing the brunt right now.”