Tata To Widen Its Beverage Cart Riding On Himalayan Water
Tata Consumer Products plans to leverage water brand 'Himalayan' to launch more healthier and functional beverages.
Tata Consumer Products Ltd. plans to launch more healthier drinks under its 'Himalayan' brand as consumers look for options beyond sugary sodas.
“Himalayan is a brand with great equity in the minds of consumers and we believe we can transcend water to get into other lines of beverages,” Vikram Grover, managing director, NourishCo Beverages Ltd., now fully owned by Tata Consumer, told BQPrime in an interaction.
The company is building a “future-ready portfolio”, mainly focusing on natural and healthy beverages, he said without giving specifics.
“So far, we had a simple portfolio which was both a strength and a weakness in terms of growth,” said Grover. "Now we have expanded capacities and reach, which we believe should be leveraged with a larger number of mass-to-premium launches to broaden the beverage portfolio."
Tata's push to grow the portfolio is aimed at tapping a growing market beyond sugary sodas and bottled water. A report by Indian Council for Research on International Economic Relations estimates India's non-alcoholic beverages sector market to touch Rs Rs 1.47 lakh crore by 2030 from around Rs 67,100 crore in 2019. Juices, energy and organic drinks, and coffee-based beverages are among expanding categories.
NourishCo's portfolio comprises hydration brands like Tata GlucoPlus, Tata Copper, Himalayan and fruit-based Fruski.
“India is a highly underpenetrated market, and there are still many other functional spaces in the beverage market that remain untapped,” said Grover. “At Tata, we are looking at functional beverages as a key growth area in order to build a sizeable beverage business over a period of time.”
A functional beverage is a non-alcoholic drink with herbs, vitamins, minerals, amino acids or additional raw fruits.
The Tata firm also introduced Tata Gluco Plus jelly drink and Tata ORS+ to tap the first “normal” summer after the last two seasons were marred by weak demand and fewer launches amid Covid-led disruptions. It recently expanded Fruski to new markets like West Bengal, Odisha, Bihar, Delhi-NCR and Uttar Pradesh, after the pilot drew a strong response.
“Summer is the best time to do trials as consumers tend to try out differentiated products," said Grover. "We are able to do more trials in new geographies. In fact, we are now seeing demand outstripping supply.”
The consumer goods arm of the Tata Group bought PepsiCo Inc.’s 50% stake in NourishCo Beverages in May 2020. The joint venture was formed in 2010 to sell healthy and value-added beverages.
The move to expand NourishCo's portfolio also marks one of the first key strategic decisions by the Tata Group after deciding to consolidate its packaged food and beverage consumer goods business in salt-to-tea maker Tata Consumer.
The brands had a weak start with its reach lagging for years and largely restricted to a few states and cities. But Himalayan grew 1.8 times and reached breakeven at an EBIT level in FY22 for the first time since its inception, Grover said. Tata Copper grew "more than three times".
Overall, NourishCo grew 83% year-on-year in FY22.
The company's management , however, said the business is yet to deliver "full potential" as it was hit by pandemic. NourishCo's gross margins, according to the company, is almost similar to its tea business.
"NourishCo is in the ballpark of the tea business. In fact, once we get our innovation engine fired up, it should be slightly accretive to where the tea business would be on a steady state," Sunil D’Souza, chief executive officer of Tata Consumer, told investors in a post-earnings call.
NourishCo has got a huge headroom for growth, said D’Souza. "This is the first year in which it sees a full summer. It has also expanded geographies and capacities, all of which will bear results starting this year."
Tata Consumer has also been expanding the footprint of the beverage business to cover the entire country in search of growth, said Grover. It plans to take its direct outlets coverage to 1.5 million this fiscal from 1.3 million. As of now, according to the company, it sells its products in 45-50% of the addressable market.