Tata Consumer Products Limited is a leading consumer goods company having presence in the food and beverages segment in both the Indian markets as well as in the international markets. Tata Consumer Products Limited is the largest salt brand in India i.e. Tata Salt and is the second largest tea company in India with its brands like Tata Tea and Tetley being dominant in the market and trusted by consumers consistently.
Tata Consumer Products operates in categories such as tea, coffee, water, and foods. Some of its well-known brands include Eight O’Clock Coffee, Himalayan natural mineral water, and Tata Salt. 90% of total revenues come from the branded food & beverages business & the rest 10% comes from the non-branded business of the company.
Before we analyze the sales forecasting of the company, we must understand their average revenue mix across products and geographies.
Sales Forecasting of the Company
We have analyzed the revenue clocked in the by company YOY for the last 10 years for sales forecasting for the next few years. For more details, you can view the presentation.
Tata Consumer Products – Overview of the revenue growth
A perusal of the revenue growth rates YOY reveals that Tata Consumer Products Limited has an inconsistent growth curve with negative growth rates of -16% in FY 2016 and very high growth rate of 32% in FY 2020. Thus, we cannot generalize the growth story of the company as there are no proper patterns, therefore, the sales forecasting of the company has to be done keeping in mind such aberrations and normalizing the deviations by understanding the reasons every year for their revenue from operations.
Decline in sales for FY 2016
In FY 2016, the company had reported a negative sales growth rate of -16%. This was primariliy on account of supply chain issues, such as disruptions in sourcing raw materials or distribution challenges, that had impacted the company’s ability to meet consumer demand and fulfill orders promptly. However, over the last few years, the company has invested in expanding its distribution centres to avoid any such decline in future.
Exponential growth numbers in FY 2020
Despite the COVID-19 pandemic, the company had managed to record its highest sales growth numbers with a record-high growth of 32%. In the year 2020, Tata Consumer Products Limited had bought out its JV partner PepsiCo in Nourish Co Beverages, therefore a large portion of the sales of the bought out entity was now being fully reported in the books of the company.
Moreover, the company had completely revamped its entire distribution network during FY 2020 pushing the sales to a record high. The company had also partnered with quick commerce operators like Zomato for faster delivery and better penetration of its products. 39 new Starbucks outlets opened in India. A combined impact of all these reasons along with some others, helped the company to achieve high sales numbers and exponential growth in FY 2020.
High growth numbers in FY 2021
Even after an exceptional year for Tata Consumer Products Limited i.e. the year 2020, the company again managed to report very high sales growth of over 20%. On 10th February, 2020, the consumer business of Tata Chemicals was merged with Tata Global Beverages Limited and Tata Consumer Products Limited was formed. Thus, this synergy was responsible for such a high growth in revenue in the year 2021. The focus of the company was in exploring both organic and inorganic opportunities in the segment and also in expanding its business through e-commerce for better sales volumes.
Growth rate of 10% in the last year
In the last year i.e. 2023, the company has reported a sales growth of 10% which is primarily driven by the introduction of innovative products by the company such as Sampann brand, energy drinks, etc. the focus has been given to the Indian food business as it is accounting for 76% of the worldwide business of the company. The company had also launched two new brands – Gofit and Simply better. The distribution system is now yielding returns and is responsible for better sales volumes of the company.
Sales Forecasting – Arithmetic Growth rate
As per our analysis, if the growth of the company occurs at a steady pace and rises in arithmetic way then the growth rate for the next 5 years will be 7.41%. The company will be moving ahead of its peers if it able to clock this growth rate.
Sales Forecasting – Geometric Growth rate
As per our analysis, if the growth rate of the company is characterized by a slow growth in the initial stages and a rapid growth during the later stages, then the growth rate for the next 5 years will be 5.94%. This is a very reasonable estimate of the sales forecasting given the strengths of the company.
Sales Forecasting – Linear Regression method
Linear regression is a statistical method used for modeling the relationship between a dependent variable (in this case, sales) and one or more independent variables (such as time or other factors that influence sales). It is commonly used in sales forecasting to predict future sales based on historical data. By employing linear regression for sales forecasting, businesses can make informed decisions regarding inventory management, production planning, and resource allocation. However, it’s important to remember that no forecasting method is perfect, and the accuracy of predictions can vary depending on the quality of the data and the assumptions underlying the model. We have analyzed the sales forecasting by the linear regression method as depicted above.
Sales Forecasting – Based on the future plans of the company
As per the official website of the company in their future plans section, Tata Consumer Products Limited has highlighted that it will be unlocking synergies post-merger of Tata Global Beverages Limited and the consumer business of Tata Chemicals. In India, the company will be investing in its core brands and expanding distribution. In the international market, the company will be focusing on USA, UK and Canada for non-black tea and coffee portfolio in these strong markets.