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Ladies and gentlemen, good day, and welcome to the Tata Global Beverages Limited Q2 FY '20 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities. Thank you, and over to you, sir.
Thanks, Reyu. On behalf of ICICI Securities, we welcome you all to Q2 FY '20 Results Conference Call of Tata Global Beverages Limited. We have with us Mr. Ajoy Misra, Managing Director and CEO; Mr. L. Krishna Kumar, Executive Director and Group CFO; and Mr. Rakesh Sony, Global Head of Strategy and M&A.Now I hand over the call to the management for their opening comments. Thanks, and over to you, sir.
Yes. Thank you, Aniruddha. So I am going to be talking through the investor presentation, which is getting uploaded. And therefore, the sequence with which me and L. Krishna Kumar will go will essentially follow what is in that deck and then we will be very happy to take your questions and comments.To start with is the disclaimer regarding certain statements made in this presentation, which all of you are familiar with. I next move to the executive summary of what is contained in the deck, which is what the whole quarter's performance summary is.The company's consolidated revenue grew by 4% to INR 1,834 crores in quarter 2 and by 5% half 1, with higher overall volume growth of 7%, both in quarter 2 and half 1 impacted slightly by lower realizations and with commodity price deflation.The consolidated EBITDA grew by 13% to INR 237 crores and by 10% in half 1. EBITDA, excluding the onetime income in the last year, if you exclude that, like-to-like EBITDA, operational EBITDA is higher by 39% in quarter 2 and by 20% in half 1. Consolidated net profit, again, excluding the one-off items of last year, the consolidated net profit is higher by 45% in the quarter and by 33% in half 1. The India Branded business, in this quarter, grew by 8% in volume terms, both in quarter 2 and half 1. U.S. coffee grew 4% and other international businesses grew 2% in volume terms in both quarter 2 and half 1.TGBL and Tata Consumer Products Business merger is going on as per schedule. We will give you a flavor of that. Acquisition of the Branded business of Dhunseri Tea was completed successfully in this quarter. So for half 1, the consolidated revenue was INR 3,731 crores, of which, 87% came from Branded business. In the non-Branded business, turnover in half 1 was INR 485 crores. That's the Branded and non-Branded breakup.In terms of the market context and in the context of the FMCG growth comments that have come, you have all been aware of that. So put our -- since this is India, part of the same, put our India growth of 8% in volume and 8% in value in that context that I just wanted to mention that. The exchange rates, U.S. dollar to INR is pretty much on track of like how it was last year. While for GBP to INR, there was a weak GBP that was there for most of the quarter. But as we speak, with the Brexit news and the -- and all that has happened in the last week, I think the pound is strengthening.So let's see where that goes because all of these exchanges, including the GBP versus U.S. dollars have consequences on our company's reported numbers. Commodity costs have been -- in India, they continue to be benign as against declining Kenyan tea prices. Coffee prices also continued the downward trend. So that's on the commodity inputs into our Branded business.Category growth outside of India and the U.S., U.K. and Canada, the Black tea is under stress as a category. And certain categories seem to be doing well, which is the Fruit & Herbal category, especially in the U.K., and Speciality category, where we also have a strong way in Canada.At a glance, therefore, if I were to call out the performance across our different key geographies, we have -- in India, we've shown an 8% revenue growth and an 8% volume growth. In U.S. Coffee, we've had a 3% decline in growth. So it's a degrowth in U.S. Coffee, but volume has grown by 4% in the Branded business. In other international geographies, which contain U.K., Canada and the others, revenue growth has been slightly on the lesser side, minus 2%, whereas volume growth is positive on 2%.Tata Coffee grew in revenue terms over what we did last year. Also on the backs of the Vietnam plant coming into production and sales being registered for the first time.Coming to India, in slightly more granular fashion, I've already talked about the overall rate. The Tata Tea Premium and Tata Tea Gold, our flagship brands, grew by high single digits in half 1 and quarter 2. Tata Tea Agni grew by double digits in quarter 2 as well as in half 1. Our Tata Tea Spice Mix continues to deliver robust growth numbers, and we have now incorporated our acquisition of Lal Ghoda and Kala Ghoda brands, which came into our fold from August 21.In terms of other updates, we've had a successful media campaign and Tata Tea Gold partnered the IIFA award ceremony that was held recently. Very good recognition of our awareness of the Tata Tea Gold in this very prestigious and widely covered event.There was also a nice campaign of Kanan Devan TVC to build awareness against adulterated teas gaining popularity, and both Tata Tea and Kanan Devan have done well in this quarter for us.We also brought our festival packs. We linked to special festivals in different parts of the country during the last few weeks, both Chakra Gold as well as Tata Tea celebrated with special packs some of the festivals that recently have been celebrated in different parts.Coming from India to the U.S., while you see it is a relatively smaller place. There has been a slight gain that we have had in value market share, and Good Earth remains stable and maintains market share on the tea side.In terms of other updates, Eight O'Clock bags volume grew while the revenue declined owing to obviously higher promotional spends and increased competitive intensity. And K-Cup volumes are also under stress.Coming to U.K. Tetley growth in the mass market of club and discounters has grown impressively but got offset by declines in certain other channels. Teapigs grows in online channels, and we are continuing efforts to increase distribution in export markets. Tetley Cold Infusions market share now is in excess of 20% of the category in the U.K. with our very successful launch of Tetley Cold Infusions.There is also a restage of the Tetley brand that we are doing after a while, and a master brand relaunch campaign has broken. The theme is Tetley. Now we are talking. A very, very interesting clutter-breaking campaign. That's gaining positive momentum and very good response on social media and digital media platforms, also in addition to its very successful coming out on this TV campaign. Green Tea category, unfortunately, continues a declining trend. So there is a mixed bag in terms of how some of our categories plays out.In Canada, the story looks good. It continues to look good. Revenue growth mainly driven by Specialty teas. We've launched the Tetley Super Teas there. It has achieved already a 2% market share of Specialty tea segment, which is a large segment in Canada, and Tetley maintains its dominant leadership position in regular black tea.Though it is facing headwinds, we continue to maintain the dominant leadership. There is also, in Canada, appropriate scale of Super Teas promotion that a new TVC that has been aired on National TV in that market.Coming to Tata Coffee, including Tata Coffee Vietnam. Like I mentioned, growth has come on account of instant coffee sales increases in its main line as well as from Vietnam. Higher instant coffee volumes with strong performances -- and this is for the peak coffee extraction business, performances in Southeast Asia and Europe, newer -- relatively newer markets for Tata Coffee B2B business.Other updates are, I've mentioned commodity prices, coffee prices. And therefore, since Tata Coffee also has coffee plantations, on the flip side, their profitability got impacted by lower commodity costs.In our JV, Tata Starbucks continued its very strong growth with 26% revenue growth in the quarter, 12 new stores opened in this quarter alone, which many of you will recognize as a significant upping of the rate of store growth.And Gujarat, when we entered with Tata Starbucks, we entered with 5 stores opening on one single day, which is quite a record for us. There is also a new effort to improve food revenues, and a Food 3.0 has been rolled out across different stores. And there is a strong focus on social media, which continues to drive consumer engagement and sales with campaigns that have been -- and plus, in terms of MyStarbucks, which is a loyalty program app, there is good traction that is coming there.Also Tata Starbucks is 100% single-use plastic eliminated from consumables and in-store secondary packaging. So it's made from good stuff. Customer connection scores at an all-time high.In NourishCo, the story is actually about Tata Gluco Plus, which continues to show strong momentum in AP and Telangana. And we've recently launched Tata Gluco Plus Lychee flavor. It's a new flavor we've launched in quarter 2, which is creating a very exciting buzz.Tata Gluco Plus is also listed in Indian Railways in certain regions. So that's a new breakthrough for them.In terms of associate companies, APPL and KDHP, in the first half, because of the peak tactical nature, both have done well in revenues. And the realization for CTC teas is the challenge. Meanwhile, manpower costs do go up with the wage revisions. KDHP has performed relatively better on the profit front.With that overall flavor of the businesses, I'm going to hand you over to L. Krishna Kumar for taking you through the financial performance in slightly more detail.
Yes. Thanks, Ajoy, and good morning, afternoon, evening, everyone. So if you look at the performance highlights, and I'm going to comment on both the stand-alone and the consolidated results. Stand-alone revenue from operations, which is primarily the India business, grew by 8%, and we talked earlier that we had good volume growth of 8%. And in particular, we saw good volume growth in Tata Tea Gold, which was relaunched, and also in Agni and Spice Mix and some of the new offerings. We have also launched, on a pilot basis in Mumbai, Quick Chai 3 in 1, with also should be in the other markets pretty soon.So overall, I think it's been a good quarter from a top line growth perspective for India, and we are also looking to launch new variants on the premium side over the next few months in modern trade and e-commerce.Coming to the consolidated results, you will see a 4% top line growth, which is 5% in underlying terms. Here again, overall, not only for India but in consolidation as well, we have a scenario where volume growth has been fairly good, given market environment. But given the softness in the commodity price environment overall, the price realizations have been lower. So you are not seeing the same amount of top line growth as you'd normally expect when pricing and commodity prices are better.In the international business, there has also been some restructuring of the Australian business with the result that we are getting some royalty as opposed to some turnover we had in the previous year. So that's also contributing to the number of revenue growth.Tata Coffee had a good growth of 18%. It had a revenue of about INR 24 crores from Vietnam. We have a good order book for quarter 3 and going into part of quarter 4. We have good marquee customers making with a [ standard ], started receiving orders.As far as EBITDA is concerned, we have pointed out that there are exceptional -- there are one-off items. And if you look at -- simply look at the other income line this quarter versus previous year, you will -- we start to stand out. And the second area which we talk about when we come to taxation and profit after-tax is through the deferred tax accounting, but I'll come to that later.So if you adjust for the exceptional income in the previous quarter, the underlying growth in EBITDA is about over 20% for India and over -- about 39% in the consolidated results.I'm not going to repeat for the half year, but largely, the trend is the same with the headline numbers being 7% growth in the stand-alone and 5% in consolidated. And if you adjust for one-offs, I think there is some growth in EBITDA in India as well as a significant growth in consolidated results.I'm just going to talk through the financials -- the consolidated financials, and I'm going to focus on the quarter before I comment on the half year. You'll see revenue of INR 1,834 crores versus INR 1,761 crores, which is a 4% increase and that is 5% in underlying terms.The EBITDA increase is 13% on a reported basis, but you should be aware that there is the one-off other income. If you adjust for that, the growth rate is higher as mentioned in the earlier slides.No major change in exceptional items. If you look at profit after tax, it's INR 143 crores versus INR 125 crores, reflecting both changes of tax rate in India as well as some change in mix in the overseas markets.If you come to -- and these results are flowing through to PBT, but if you come to the group net profit, you'll find that there's a decline. And if you look at the detailed revenue statement, you'll see that under the headline, which says share of profits from JVs and Associates, you'll see a INR 58 crore number in the same period last year and a INR 9 crore number in the current period. That's a delta of INR 50 crores. That's explained by 2 things in the previous year and if you -- we have disclosed in our results in the previous year that we accounted for deferred tax credits in our joint ventures of about INR 37 crores. So there is a onetime credit in the previous year.Coming to the current quarter, because of the change in tax rate, we had to reverse a deferred tax asset not only here but in other parts of the business. So there is a net charge of INR 14 crores. So the net of these 2 accounts for, largely, the delta of INR 50 crores that you're seeing there.So the other point that I want to clarify is, in terms of the taxation rates, we have prepared the results based on the reduced statutory rate. However, we've had to reverse [ some ] carry-forwards and deferred tax we had not only in the JVs but also in some of the companies that have been consolidated.So if I just look at the quarter results and flowing through, while there is a benefit in tax rate, there is an offset in terms of some of the provisions we had to take. So in the quarter, there is a net impact. There was impact of INR 9 crores, including the deferred tax on the JV that we -- I referred to earlier.So if you adjust for the one-offs on a group consolidated net profit, on a like-to-like basis, it's up over 40% compared to the same period in the previous year.So moving to the balance sheet, no major changes. Yes, I think just 2 points I'd call out is that there will be an increase to the capital employed on account of acquisition of the branch in Rajasthan. Part of it is accounted as branch and part of it goes to goodwill, but a substantial value is captured under the branch heading, which we will amortize over a period of time.In working capital, like you'll find that working capital is lower -- marginally lower than the same period last year. September is usually a peak period that we have inventory. Notwithstanding that sales have grown, we have managed to keep a tight rein on working capital.Moving on to segment performance. You will see that there has been -- Tea segment has grown 4%. Profits are higher if you remove the one-off adjustments we talk of. Coffee profits are significantly higher driven in part by good sales in the extraction business in Tata Coffee and also the performance of Eight O'Clock. Of course, Tata Coffee performance will come in the non-Branded line that you have in your segment results.So that's it from our end. We have a summary of this shareholding pattern. And as Ajoy mentioned, we see -- merger scheme with Tata Chemicals seems to be on track, and we have the Tata Chemicals' AGM, which is just probably getting over, and our AGM scheduled for Monday.We are excited in this merger. As we have been saying, it gives us the avenue to expand business fairly significantly from where we are and also capture synergy and, in a way, create a new high-growth organization. That's the ambition.So with that, I will hand over to any questions that participants may have.
[Operator Instructions] The first question is from the line Jigar Shah from Maybank.
Congratulations for good results. My first question pertains to the margin expansion Y-o-Y, excluding the onetime income in the previous year's second quarter. What would you attribute that to? And how much of that is sustainable?
I think this is -- on an overall basis, I think there are a number of elements. A substantial part is due to also commodity prices, but there are 2 elements of commodity prices, something which is relating to market and something which is relating to initiatives in terms of changing where we buy from or looking at opportunities on improving the efficiencies in the system, right? So that's an area. The answer is part of that will certainly be -- and even if, though, there are commodity price decreases, we have not taken up prices even though -- while on an overall basis, we have flat, but there are certain blends where costs have gone up, we have not taken up prices. So we feel that a significant part of this margin will be sustainable because they're relating to initiatives and, where we needed to correct prices, we have corrected prices. But yes, if commodity prices go up, there is always a risk of short-term pressure on the margin. In addition, we have reduced fixed costs quite significantly. You've seen that most of the cost items are well under control. In fact, in the international business, you will find that margin expansion is there. If you work out the residual numbers taking Tata Coffee consolidated and these numbers, you'll see, overall, both in the coffee business and the tea business, that margins have expanded largely because of cost measures. We -- there is some benefit because advertising expenditure, if you look at on a consolidated, it's slightly lower compared to the same period last year. So there is always -- on a sustainable basis, there is no guarantee that this is the level of advertising expenditure going forward. And there could be quarter-on-quarter variation in advertising expenditure. So that's the overall trend.
Okay. If I may squeeze one more question quickly. The overall economy is slowing down. Consumption, in particular, has shown a bit of compression and many companies have reported low growth. Your volume growth is excellent, and Starbucks also has shown 26% growth, which is very good. So how do you read the on-ground demand situation going forward? And in Starbucks, whether, this year, we can expect, by end of it, 200 stores?
You want to comment on that.
So we, as a matter of the policy with Starbucks, our joint venture partner, don't give forward store numbers, so you will have to excuse me, Jigar, but all we can tell you is that the growth rates you are seeing in terms of store openings, and it's very healthy. And obviously, we are very keen to keep the momentum going. About the market conditions -- I mean, the demand situation in India, yes, I sort of hinted at that in my commentary that, while most other FMCG companies have talked extensively about a slowdown, et cetera, et cetera. Actually, what we are reporting is a growth in our volume as well as value numbers over what we have been able to achieve over the last few quarters. So we are on a growth trajectory. We are doing several things very well. And I think these also -- when it comes down to peak, it's not totally reflective of what the entire FMCG sector picture is like. Between urban and rural, I can tell you that we really are making very strong gains in urban and in modern trade and in metros. Yes, the rural is under strain, but we were able -- we've been able to overcome that actually by accelerating much more. So we are very happy. In fact, I remember, in the last couple of months, several people have asked me to comment on the slowdown story. And I said I'm not seeing any so...
But having said that, I think there has been some slowdown in the rate of growth in some of the rural markets compared to the urban markets. In a relative sense, we are seeing that.
Sir, very heartening to know and wish you all the best going forward.
[Operator Instructions] The next question is from the line of Percy Panthaki from IIFL.
My first question is on the competitive landscape in India. Can you give some flavor on that in terms of what is the overall industry growth versus the 8% that we've done? And how is the other large players in the market performing in terms of relative market share to us?
So since we are talking tea, we will -- obviously, my comments are confined to that. So there are at least 3 broad agencies that estimate category growth. One is obviously, Nielsen, and Nielsen covers its own sample and reports category growth. Then there is the Kantar Worldpanel that also gives its estimates, and then there are other hard data of consumption, production. So if we look at all of that and take therefore a very objective and a balanced view, our growth that we are showing is ahead of what the real category growth is, but there is category growth happening. So that's point number one. Without commenting on others, all we can say is that we are experiencing marginal share growth. So we probably that -- and in terms of competitive landscape, there are the large organized sector branded tea companies, there are the regional branded tea companies and then there are local players. Each of them have their own dynamics and growth story or decline story. So relative to all of that, we have done well in Tata Tea in India.
But there is market share gains that we've experienced.
Yes.
Okay. Sir, a couple of accounting questions. If you can give the effective tax rate that we are likely to see, both in the stand-alone and the consolidated, for FY '20 and for FY '21? That's the first question on accounting. And secondly, it's again on a stand-alone and consolidated separately, if you could tell us what is the -- India's 116 impact?
Okay. So I -- we don't -- I can't give you the specific rate, but I'll give you some pointers for the tax rate, right? So like I said, as far as the Indian business is concerned, we will over around the effect -- new reduced effective tax rate of around 25%. Generally, it should be around that. There are some small, I think, differences, but I don't think they'll be material. This quarter, because of one-off [ trading ] of our deferred tax and MAT credits, it's not a representative quarter. As far as the current -- then there's -- as far as the consolidated results go, really it's a function of mix effect because different countries have different tax rates. I know all of them have been coming down. So there will be some variation compared to -- so I can't give a specific number. The other thing that you -- that will have a bearing on the tax rate is the dividend declaration that we do because, to the extent we have profits, we do declare a dividend. And I think the structure of that will also create sometimes an additional cost in the stand-alone, right? But we are seeing reforms and it is our reforms that could change, but the workout to that is, sometimes, when it's during declaration, the tax rate will go up. So that's about the pointers that I can give you. Your second question was on the impact of Ind AS. And there is no material impact on the PBT, right? But you will see that depreciation has gone up compared to the previous year, and there is some increase in interest, right? So -- but from a PBT perspective, the impact is insignificant. That's the overall picture.
But on EBITDA, there will be an impact. So you have done a 40% sort of...
That's correct. EBITDA will be higher. I agree so. That's correct.
I just wanted to understand, on a like-for-like basis, this 40% would look like what number?
No, what is the 40% that you've got, I'm not able to relate to the percentage that you've got.
The EBITDA growth that we've seen on the consol books about 40%.
I think you should assume that the CapEx -- the level of CapEx is not significant for us, right? And so you have a figure of depreciation for the previous year, right? So it's really an adjustment between the interest and depreciation, right, that you are really looking at when it comes to what we got -- the movements in EBITDA. And we have both the increased numbers. If you go with those increased numbers, you won't be far off.
Okay. Okay. Got it, sir. Got it, sir. If I may squeeze in a last question on Tata Coffee. If I do a consol minus stand-alone, the gross margins have expanded by 720 bps, and this is despite increased trade spend in Eight O'Clock. So what is the reason for this gross margin expansion?
I'm not commenting on the numbers because I don't have your computation. But gross margin alone, maybe -- because you said despite the expense, so chances are not all the expenditure is netted off against income. There may be some items of promotion expenditure and advertising which is coming later. So we'll have to look at that in commenting on it, right? So there is also some new products that have been introduced. We have a balanced range. So we are also contributing to premiumization. So there are a mix of factors, I can't comment on your specific numbers. But I would suggest that you touch base with Ashish or Rakesh if you want specific clarification. Yes.
[Operator Instructions] The next question is from the line of Ekta Bhalja from Karma Capital.
Can you give the organic volume growth in the quarter, domestic?
Organic?
Excluding Dhunseri?
Dhunseri is very, very small. I don't think it'll move the needle that much.
And in terms of volume -- sorry, in terms of value?
Both. It will not make any material change to the numbers. By [ adjusting ] variability, if -- it happened towards the end of the quarter, right? So that's the reason why it's going to be...
Okay. So what was -- the acquisition was effective which day?
They've completed it on 21st. But actually, the 21st of August. So end of August is when it was done. So you have about a month, but that, again, is not a [ nominal ] month.
Okay. Will you be commenting now on the numbers of this deal?
No. We -- I don't think we will be commenting on the numbers of Dhunseri right now because we don't want to form a view based on 1 month, right? So let us be in this business for a while and then we'll talk about more about it.
No, I was saying in terms of full year FY '19 numbers if you could share that?
FY '19?
For Dhunseri branded Tea business, so that we could have some idea on how the business will perform this year.
Okay. We'll share the growth and all that in subsequent -- maybe 2 quarters down the road, right? So when we talk about performance for the year-to-year [indiscernible] effect of Dhunseri brand. It's a little early right now.
Sure. And just to clarify the other income in the [ day ], if you could share the amount of onetime and what it was pertaining to?
That is in the presentation, right? So see that. And basically, if you just compare the other income, that's what it is. That is the moment substantially. [ It's obviously closer ]. That is given in the presentation.
Okay. And lastly, the international tea business, like you said, has seen a margin improvement. So would that also be largely because of lower advertising expense? Or do you see in that...
No, it's the combination of gross margins, fixed costs, a lot of fixed cost rationalization and as well as a bit of advertising, but I don't think advertising -- if I take the international, was very different and have been lower in U.K. and higher in Canada or something like that. I would not see that as a very significant number. Yes, there was an impact of approximately INR 2 crores.
So large -- the margins will be [ sustaining ]?
The margins are really driven by cost efficiency and fixed cost reduction to an extent.
Okay. Okay. And my last question was regarding the appointment of new CEO. When can we expect an announcement?
When the announcement is ready.
When we are ready, we will definitely make an announcement. So you'll have to wait for that.
The next question is from the line of Anmol Grover from Albatross Capital.
Congrats on a good quarter. I just wanted to know your advertisement and sales expenses have de-grown year-on-year and grown quarter-on-quarter, and that declined year-on-year as a percentage of revenue as well. Can you comment on that?
No. I think there is -- I think you're looking at advertising and sales only, right? So I'll make 2 comments, right? First is that it's not necessarily the percentage of the trend, that's the first point. The second, and you will probably see, it's also due to [ risk facing ]. You may see some changes in some quarters. The second part is that there were some launches. It's also to do with phasing of new launches. Like last year, we had a brand [ launch a quarter or 2 quarters ] something like that. So when we launch a new product, then it will impact a different quarter.The other and most important point that we need to keep in mind is that, ultimately, when we are selling, it's a combination of advertising and selling as well as promotions, right? And under the accounting standards, some of the promotions are also netted off against sales. So we actually use a mix of promotion, advertising and selling. So the comparison has to be considering all that together, right? So it's not a trend that you will draw a conclusion from.
Okay, for funding?
Yes, that's [ difficult ].
Okay, for funding, sir, can you share the advertisement number for this quarter?
It's there in the result, advertising for the quarter. Have you got the results?
Yes.
On consolidated basis, advertising fees is INR 137 crores compared to INR 142 crores in the same period last year.
Okay. No, I mean, you said you'd also started, which -- okay, I'll come back to this later in the telephone line. One more thing, do you tend to see the advertisement sales number increasing in the second half? Or will it have the same term?
I'm not commenting on specific second half performance.
[Operator Instructions] The next question is from the line of [ Rahul Mehta from Mukund Capital ].
Yes, my question is for Mr. Misra actually. I have a couple of questions. Mr. Misra, your profit in 2009/'10, that is 10 years back, was about INR 390 crores. And today, after 9 years, the profit is around INR 425 crores, INR 450 crores. So if you see over the last 10 years, the profit has grown at not more than 2%, 2.5%, 3%, which is less than inflation. So in reality, Tata Global has actually de-grown over the last 10 years. So what do you have to say about the future strategy? I mean what is the game plan to actually be like other FMCG companies which are growing at 10%, 15%, 20%, 25%, 30%, 35%? When are we going to grow in double digits? It is 10 years since I'm holding the shares, and I have not got anything except last 2 years or 3 years where the stock has gone up from INR 80 to INR 90 or so. So I am a worried shareholder holding the shares for the last 10 years, not knowing where is this company headed. The only hope I have is Starbucks, but in the last 5 years, Starbucks has grown from 0 to INR 163, whereas, in China, we have 5,500 outlets. So what is basically the game plan? Why are we not growing fast?
Okay. Are you finished, Rahul?
Yes.
Okay. So all I can say is I don't want to go back 10 years. I think you should be more in the present. And obviously, at this point in time, we have had strategies to overcome some of the stresses in the international businesses. And the relative increase of the India play in the portfolio, and we've done a lot of such corrections to address some of those things.And where we are standing today is, I commented about the fact that we are bringing back growth in the business, and we have taken other strategic moves such as, now the Consumer Products business of Tata Chemicals is merging with this, which is going to unlock good synergies, and we will now have a portfolio, which will not only consist of beverages, which is largely tea, but we will also have foods business, packaged foods business, starting with, of course, Tata Salt but also Tata Sampann pulses and derivatives of pulses like [ raisin ] and such like Tata Sampann spices, both single-origin spices as well as mixes, and we will have ready-to-cook foods. So if we are bringing other categories in, the fact that Tata Global Beverages, post this whole consummation of the merger, which is soon, will change its name and therefore its vision to Tata Consumer Products Limited or Tata Consumer Products from Tata Global Beverages, is a sign of the fact that we are now poised at this point where your company has put the platform there for growth and profitable growth. I thank you for your patience of having held the shares. I would hope that you will have the patience to see the unlocking of everything that we have done in setting up the platform. So that's on the TGB side. On the Starbucks side, what I want to tell you is this is actually, if you ask and if you look at the quotes given by Howard Schultz a few months back. And actually, I'm witness to facts, the rate at which Tata Starbucks in India has grown in the first 4 or 5-odd years is actually faster than China grew at this point. It took off later. So at this point, Starbucks is very satisfied, and we are very happy with the rate of growth, and we are accelerating. So it doesn't worry me where we are today. But of course, China is a much bigger economy than India, we must all accept it. We may not reach the figures that China has. But certainly, this is the beginning of the Starbucks journey. So those are the few things, Rahul, I wanted to mention to you.
I appreciate that, sir. I appreciate the efforts the management is putting into bring TGBL back on the growth trajectory, but I have certain things in my mind, which, if implemented, like why don't we merge Tata Coffee with Tata Global One? Why don't we have [ selling ] shares of Tata Sons, which are sitting idle on the balance sheet of Tata Global, INR 1,500 crores and deploy...
Rahul, with due respect, I think this is a call on the quarter performance, and there are other people. We are happy to meet with you in person, if you come over, and listen to your suggestions, right? So this call is official, if you keep it to this quarter's results and give people to comment on it. We're happy to meet with you and take your suggestions.
The next question is from the line of Anubhav Sahu from MC Research.
I have a couple of questions. One is, sir, wanted a few comments on U.S. business strategy, particularly with respect to Eight O'Clock. So sir, wanted -- what is your assessment on the business strategy which you did about 1.5 years back in terms of direct sales? How satisfied you are on that? And what are your comments on the targets [ of the tax increase ]?
No. I think we are -- we could have done better is the answer. I think we have -- overall, I think the transition from Keurig has been good. But we have not actually achieved the kind of numbers we hoped to achieve. A couple of reasons, one has to do with the strength of the retail and the fact that we made a change gave some of them an opportunity to ask for different terms. And secondly, I think, overall, in the [ pulse ] market, there is increasing competitive intensity. And there's more players coming in and private label seems to be doing better than some of the standard players. So the competitive intensity and the retailer impact has been higher than we expected. Having said that, the business is growing, and it's profitable. And there are certain initiatives, which will further unlock profitability over the coming year.
Okay. Fair enough, sir. And sir, wanted your clarification on the profitability of Starbucks and NourishCo joint venture. Are we already breakeven at the net level and what the...
I think NourishCo is at breakeven and Starbucks is also at cash breakeven. At store level, they are definitely breakeven, but cash breakeven after common and other costs. In terms of reported profit, because of all these deferred tax and things which we talked about and also the lease accounting standard, there is an impact on that at the interest and tax level. But operationally, I think they are doing fine, enjoying the results.
That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.
Yes. Thank you. Thank you. And I'd like to thank all the analysts for dialing in and showing your keen interest in Tata Global Beverages as it transitions into its new avatar of Tata Consumer Products. Thank you, everyone.
Thank you. Thanks for coming on the call.
Thank you very much. On behalf of ICICI Securities Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.