Tata Consumer CEO Sunil D'Souza on Chasing Growth, Bold Bets and the Allure of India's FMCG Market
Sunil D’Souza, MD and CEO, Tata Consumer Products (TCPL) was handed decades-old tea and salt businesses to create a fast-moving consumer giant. Six years on, he tells Yuthika Bhargava and Vikash Tripathi how TCPL now stands with the ‘big boys’ of the space
What was the first task you took up once you joined TCPL?
In May [of 2019], Tatas merged Tata Global Beverages with the food division of Tata Chemicals. The chairman [N Chandrasekaran] explained to me that this was the foundation. His point was: ‘I want to be an FMCG [fast-moving consumer goods] company. Why am I only in the business of tea?’ By the time I signed up, I knew the overall agenda.
You must have come in with a plan; did Covid change that?
Ajit [Ajit Krishnakumar, chief operating officer, TCPL] and I did several induction meetings. Broadly, we knew what we had to do. Unfortunately, because of Covid, you couldn’t do it in person. But the good news was it was almost like ripping out the entire old distribution and fitting in a completely new one. Because of Covid, there was minimal noise.
Tata was long seen as a tea and salt company. With new products, are you seeing that perception change?
I think first is changing the perception internally, to say that we are not only a tea and salt company, we sell multiple products.
Externally, initially it was tough because we were competing with retailers. But the good part was we established a name in the market.
I remember a retailer saying that once a consumer takes home [Tata] Sampann [a brand offering kitchen staples], they don’t look at anything else.
The past six years have seen high inflation, shifting consumption patterns and demand changes. How difficult was it to build a company from scratch in that environment?
Actually, when you are doing everything from scratch, it’s easy. If something already exists and you have to dismantle it, then it becomes difficult.
We didn’t have much earlier. Vikas [Vikas Gupta, global R&D head, TCPL] probably had 10–15 people in R&D. Today, we have a science team, an entire chef and food team, process technologies and a packaging team. If it had already been there, ripping it out and rebuilding would have been much more difficult.
The other thing we have been very clear about is consumer trends. As soon as we see a trend, we get on top of it and start running with it. We have built this company around agility.
What are the categories that you decided to be in?
Dry fruits; we didn’t need an acquisition. We have done the base dry fruits under Tata Sampann, and now we are launching the flavoured ones.
But take Capital Foods’ Schezwan chutney, we knew we didn’t have the brand or the technology, and it would take a very long time to build. Similarly, Organic India, the supply chain, the connection with farmers and the factory in Lucknow, we would have taken forever to build that.
I would never play in regular oils because I don’t think we would make a difference there. But cold-pressed oil is a trust-deficit category; no one really knows whether it is genuinely cold-pressed, and the Tata name works there.
What are the categories that you won’t be present in?
We look at every category in terms of size, growth rate, margin and the number of players. If there are too few players, say just two, then there is a risk of getting trampled when they compete. If there are too many, it means no one has really figured out how to differentiate. What will I do there?
But if it's a trust-deficit category, the Tata name does the magic.
We are very clear, we are not going to play with biscuits. There are two large players with strong distributed manufacturing, strong cost structures and backward integration.
We are also not going into carbonated beverages. And we are not going to play in regular edible oils. But we will play in cold-pressed oils because that is a trust-deficit category.
What about the concern that if you continue to invest in acquisitions, there might be pressure on returns?
Whenever we do an acquisition, we build a business case, and that business case has to pass a certain IRR [internal rate of return].
Second, remember we are not playing this game for the next one or two years. This is Tata, a group founded in 1868 and still going strong.
That doesn’t mean we won’t create returns. Excluding acquisitions, we are at about 30% return on capital. Look around—who else is growing at 30% today in the FMCG space? Unless we have aggressive growth targets, we don’t go after it.
Why hasn’t India been able to build a global consumer brand?
I wouldn’t comment on why that hasn’t happened. For TCPL India remains the biggest growth opportunity. We are already a global company, about 35% of our revenue comes from outside India. But those markets grow at about 5–9%, while India is delivering double-digit growth.
About 40% of Organic India’s business comes from the US. We also have Tetley, which is a global brand.
What are TCPL's ambitions within the group?
We are not competing within the group. We are focused on our own space—the FMCG sector. As long as we deliver strong performance in our category, the group is satisfied. What the chairman pushes for is that in any business we operate in, we should be among the top-tier companies.
Fast forward 10 years, where do you want to stand in the Indian kitchen?
With Tata Salt, we probably already have the most penetrated FMCG brand in the country. Even in brand recall, top-of-mind awareness is around 88–89%. In a way, we are already present in almost every kitchen.
We aim to be among the top two or three FMCG companies in the country. We will be a multi-category player.