Hi @A_shah
Tata Consumer is a stable & medium growth company with not much surprises either side.
Its revenue streams can be broadly be divided into 3 –
Stable, medium growth: Salt, Tea etc. It’s like Marico’s coconut hair oil – blue bottle. Every one consumes salt, so, no scope for high growth. And, to top it off, you can’t consume more salt too! So, volume growth is difficult as well!
Starbucks venture: I once evaluated investing purely for this venture. But, QSR/ Coffee chains in India is not as much ‘vogue’ / necessity like the west. The prices too are high. Even for me it pinched as I could not find much value.
People in India have umpteen number of options & each state has its own. Pain puri, vada pav, idly, dosa, bisibelle bath, peanut chats, lassi, tea, pizza, vada, gari, Uthappam, dhokla, Tepla, kachori, etc!
Changing eating habits & value conscious minds is not easy at all. So, this venture may remain “offbeat” & “niche”.
Even Rakesh Jhunjhunwala said in an interview that whenever he checks in Taj, he eats the free Buffett for breakfast instead of order in room and pay – an extreme example, but still is valid to drive the culture point here.
Another example, Tata Chief Natarajan Chandrasekaran comes across as a simple man with simple dressing & approachable demeanour. While a CEO from west is far more flamboyant. This is off the topic, but wanted to put across.
McDonalds market cap is 200 BUSD!!! Massive, Will any of our QSR/ coffee chains be as big? I’m not sure because of the above points.
New categories: It is entering/ entered spices, juices, energy drinks, grocery (Tata Sampann). But here it does not have the right to win. The competition is cut throat. Tatas have to fight it out. So, it remains to be seen.
The doing business in non-regulated fields in INDIA now is no longer like, “Oh, Tatas or Reliances are there, so they will win the category!”. Absolutely NO. The entrepreneurs, D2C people, PE money, ambitions, capability/ passion/ fire of people who remained in India despite western opportunities, internet, education levels, case studies of other countries, play book of Amazon etc – all mean that the level playing field is getting flat.
So, I think overall 12% to 15% growth? I think the RoE is not very high, probably a lot of goodwill on the books, not sure, you have to check it.
All the narratives are coming to roost in the current market & technically, it broke the ascending triangle pattern, indicating further down side if current support levels are broken (double bottom too).
Disclaimer: I’m not invested in the business as of now & I’m not an RIA and so this is not a recommendation or a financial advice. This is a discussion on the business aspects of the company.
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