Tata Consumer’s MD & CEO Sunil D’Souza believes that food inflation is putting pressure on urban spending, which is taking a toll on out-of-home consumption. In a conversation with FE, D’Souza throws light on the company’s strategy in the wake of inflationary concerns and whether volume growth will continue be weak. He also indicates how his firm is fighting Reliance’s Campa Cola in beverages, where competition has significantly grown. Edited Excerpts:
How severe is the urban demand stress?
Urban demand has softened. There is stress on urban demand, though rural demand is recovering. This has to do with food inflation, which, in turn, is putting pressure on out-of-home consumption in urban areas. For instance, the quick-service restaurant (QSR) segment is under pressure. Same-store sales have declined by mid- to high single-digits within QSRs. Starbucks is also feeling the pinch. The number of consumers walking into (Starbucks) stores, namely, footfalls or traffic has dropped. Therefore, same-stores sales are lower. We are countering this with an attractively priced menu, which includes coffee plus food options. The idea is to try and get consumers back into stores.
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Given the price pressures, is there a plan to hike the prices of your products?
In salt, we have taken a price hike of around 7% in the one-kg pack. The retail price has inched up to Rs 30 from Rs 28 earlier (for one-kg packs). In tea, we have been more cautious with our price hikes despite a sharp increase in tea costs. So far, we have passed on just around 3-4% in terms of price hikes to consumers in tea versus a nearly 30% rise in tea costs. We want to stay competitive in tea and do not want to take a big jump in prices which could hurt consumption. Coffee prices, on the other hand, have been volatile. For now, if prices remain where they are in coffee, I don’t see any major pricing action.
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