Tata Consumer feels the heat as RIL’s Campa Cola disrupts beverages market

New Delhi: Packaged consumer goods maker Tata Consumer Products Ltd (TCPL)on Friday highlighted the intensity of competition in the bottled beverages market with the entry of players like Reliance Industries-owned Campa Cola that is adversely impacting the industry at lower price points.

“A new player coming in with a different price point disrupts the industry. While on paper it is ₹10 versus ₹10, the other piece that you have, I mean... it didn't surface quickly enough, was that while the ₹10 was the same to the consumer, the trade price was dramatically different. So, the other big multinationals adapted their pricing on the trade very, very quickly. We did not,” Sunil D'Souza, managing director and chief executive officer of Tata Consumer said during the company’s post-earnings call when asked about the entry of Campa Cola and the challenges it poses.

Dip in revenue for ready-to-drink business

On Friday, the company said revenue for its ready-to-drink business declined 11% year-on-year in the September quarter due to unfavorable weather and competitive pricing actions. TCPL sells ready-to-drink beverages under brands such as Gluco Plus, Tata Fruski  and Himalayan. It also has a large packaged tea and coffee business.

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In 2022, Mukesh Ambani-led RIL acquired Campa Cola, once a popular substitute to established cola brands, from the New Delhi-based Pure Drinks Ltd.

To be sure, while its availability is still limited, Campa Cola is offering more affordable pricing compared with Coca-Cola and PepsiCo. While the latter two brands sell 250ml bottles for ₹20 each, Campa is selling 200ml for ₹10.

Tata Gluco Plus’ pricing was reset in response to competition, with encouraging initial results, according to the company’s investor presentation released Friday.

“I am here for the long haul and I will not forgo market share. We have gone in there, we made the corrective actions, we've taken down the price. And that's why I emphasize the impact was on Tata Gluco Plus only, not as much on Tata Copper Plus...and therefore we have re-indexed our pricing...We do expect, I would say, by the end of this quarter we should be back to our 25-30% growth levels,” he added.

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Reliance Consumer Products Ltd (RCPL) has been gradually getting aggressive in soft drinks.

“It is expanding the availability of its Campa brand in new markets at significantly cheaper prices compared with Coca-Cola and PepsiCo products. Campa is available in PET bottles and is thus able to bypass the tough and time-taking job of creating infra for bottle collection. Although rural remains an attractive growth opportunity, we would continue to closely monitor the Cola war,” analysts at Nuvama Institutional Equities said in a note released last month.

Meanwhile, commenting on demand, D’Souza said rural markets are recovering. The company sells packaged salt, tea, coffee, bottled water and pulses in India. However, he cautioned against softening demand in urban markets.

"I think a good monsoon and therefore the kharif crop is only going to help in the rural recovery. But it is still not at the stage where it gives us a double-digit volume growth and a penetration growth, et cetera. But while this has happened, urban has softened. As I said, I think we are probably underestimating the stress on the consumer in terms of the food inflation, et cetera,” he said.

D’Souza said stress on consumer spending continues to impact the broader consumer goods industry.

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