Hi there 👋🏽

This is a quick summary of the video I watched recently. Video Link -

Summary -

  1. The video starts by saying that there might be 20% earnings growth in the price for Tata Consumers (Video was uploaded on March 21)

  2. Mental Model: Michael Porter’s 5 forces
    • Supplier Power - Bargaining power is affected as the supplier is becoming a competitor
    • Buyer Power
    • The threat of New Entrants - Introduction of private labels in FMCG space for example, by Amazon, Big Bazaar, etc.
    • Threat of Substitution
    • Competitive rivalry

  3. Tata Consumers is a part of Tata Sons, so it would be influenced by Sons. N. Chandrashekharan, the new Chairman of Sons plans to fix the negative things in the balance sheet and simplifications of processes and structures. The video then covers some changes being brought in for the above - For Tata Consumers, we saw the de-merger of the Consumer Products Business of TCL into TGBL (Beverage Business). In the last few years, because of these capital allocation changes and capital structure simplifications, the market cap has increased significantly - This will be applicable for all the conglomerates.

  4. Reason for the merger - Shift to Indian focus from International focus

  5. Products -

  • Tata Salt (17% revenue share): Tata might be the largest producer. The salt industry is growing at 5% however the Tata Salt Volumes is growing by 6.5-7% because of market share increase (currently at 30%). High entry barrier - Voluminous product, less value to weight - so for retailers they would prefer the one with the high brand value

  • Tea: Current market Share - 20% (as compared to HUL - 23%).The distribution network for Tata Tea is expanding - high growth rate expected. Prices are highly volatile

  • Tata Sampann (Pulses, Spices, RTC, etc): 1% is branded market and the rest 99% is unbranded for pulses as compared to 30% branded for spices.

  • International Business (38% revenue share): Tea consumption has been decreasing on an international level. Mature market - not a growth area - 5% growth rate

  1. Earnings growth -
    • Sunil D’ Souza has joined the management team (Ex-Whirlpool, Ex-Pepsi)
    • Sales Representative has increased by 30%
    • Distributors have consolidated (merger of beverage and CPB) - cost savings
    • Expansion: Acquired Soulful - current reach: 15k outlets, Tata reach: 0.5mn outlets
  2. Anti-thesis
    • Volatile business ( affected by commodities)
    • Expansion doesn’t play out
    • Difficulty in creating brand value for pulses and spices/ Entry of private labels
  3. Financials ROCE is depressed because of the goodwill (because of the acquisition)

That’s it!