TATA Coffee: India’s Coffee Maker?

“On the general market dynamics has been varying across most geographies, especially around instant coffee. And despite the market-related challenges that we have had, we came out with a fairly good performance during the quarter and we consolidated our presence in the MENA region. We had a noteworthy performance in Russia and similarly our green coffee sales were also pretty impressive and we actually managed record sales for the season.”

– Mr. Chacko Thomas, Managing Director & CEO, TATA Coffee on Q4FY23 Results

Stock Data
Ticker	TATACOFFEE
Exchange	NSE
Industry	COFFEE

Price Performance
Last 5 Days	-0.56%
YTD	+13.76%
Last 12 Months	+23.52%

*As of 04.07.2023

Company Description:

TATA Coffee is an Indian company and a subsidiary of Tata Consumer Products Limited, part of the Tata Group conglomerate. The company is primarily involved in the production, processing, and marketing of coffee. Here are some key aspects of TATA Coffee’s business:

• Coffee Plantations: TATA Coffee owns and manages extensive coffee plantations in India. These plantations are located in regions known for their coffee cultivation, such as Coorg and Chikmagalur in Karnataka, and Valparai in Tamil Nadu.

• Coffee Processing: The company engages in the processing of coffee beans, which involves various stages like harvesting, sorting, drying, and hulling. TATA Coffee ensures that the coffee beans are carefully processed to maintain their quality and flavor.

• Instant Coffee: TATA Coffee also specializes in the production of instant coffee. They have advanced manufacturing facilities to produce high-quality instant coffee that can be consumed easily by dissolving it in hot water.

• Specialty Coffee: In addition to traditional coffee varieties, TATA Coffee is actively involved in the production and promotion of specialty coffees. Specialty coffees are grown under specific conditions and have distinctive flavors, making them sought after by coffee connoisseurs.

• Export and Domestic Sales: TATA Coffee exports its coffee products to various countries around the world. They have a strong presence in international markets and cater to the demands of global customers. Additionally, the company also sells its coffee products within India through various distribution channels.

Financial Results:

• Tata Coffee Ltd reported Revenues for Q4FY23 of ₹723.00 Crores up from ₹656.00 Crore year on year, a rise of 10.21%.

• Total Expenses for Q4FY23 of ₹660.00 Crores up from ₹575.00 Crores year on year, a rise of 14.78%.

• Consolidated Net Profit of ₹70.00 Crores up 9.38% from  ₹64.00 Crores in the same quarter of the previous year.

• The Earnings per Share is ₹2.61, up 19.72% from ₹2.18 in the same quarter of the previous year.

Key Strengths:

• Strong Brand and Legacy: TATA Coffee benefits from being a part of the Tata Group, which is a well-established and respected conglomerate in India. The Tata brand carries a reputation for quality and trust, providing a competitive advantage in the market.

• Extensive Coffee Plantations: The company owns and manages extensive coffee plantations in India, which gives it control over the entire supply chain. This vertical integration allows TATA Coffee to ensure consistent quality and reliable supply of coffee beans.

• Diverse Product Portfolio: TATA Coffee offers a diverse range of coffee products, including roasted coffee, instant coffee, and specialty coffee. This diversified product portfolio caters to different consumer preferences and provides opportunities for growth in various market segments.

• Global Market Presence: TATA Coffee has a significant presence in international markets and exports its coffee products to various countries. The global demand for coffee continues to grow, presenting opportunities for the company to expand its market share and explore new markets.

• Innovation and Product Development: The company invests in research and development to innovate and develop new coffee products. This focus on innovation allows TATA Coffee to stay ahead of market trends, introduce new flavors and varieties, and cater to evolving consumer preferences.

• Rising Coffee Consumption: The global demand for coffee is on the rise, driven by factors such as increasing urbanization, changing lifestyles, and the growing popularity of coffee among the younger generation. This trend provides favorable prospects for TATA Coffee’s future growth.

• Shift towards Specialty Coffee: There is a growing interest in specialty coffee globally, with consumers seeking unique and high-quality coffee experiences. TATA Coffee’s focus on specialty coffees positions it well to capitalize on this trend and cater to the premium coffee segment.

Key Challenges:

“While challenges like increasing input costs and low price expectancy across key markets have played a critical role in the business performance, these impacts and challenges were partially mitigated by the ongoing cost optimization efforts and productivity projects across locations. I think it’s also a testament to the fact that we are running our plants — the instant coffee plants, at near peak capacity at the moment.”

– Mr. Chacko Thomas, Managing Director & CEO, TATA Coffee on Q4FY23 Results

Price Volatility: Coffee prices are subject to significant fluctuations due to various factors such as weather conditions, global supply and demand dynamics, and currency fluctuations. Price volatility can impact TATA Coffee’s profitability and financial performance.

Competition: The coffee industry is highly competitive, both domestically and internationally. TATA Coffee faces competition from other coffee producers, including large multinational corporations and local players. Competitors with strong brands, extensive distribution networks, and lower production costs could pose challenges to market share and pricing.

Supply Chain Risks: As a coffee producer, TATA Coffee is exposed to risks in its supply chain. These risks include climate-related challenges, such as adverse weather conditions, pests, and diseases that can affect coffee plantations and crop yields. Disruptions in the supply chain can impact production volumes and product availability.

Currency and Trade Risks: TATA Coffee exports its products to international markets, exposing the company to currency exchange rate risks. Fluctuations in exchange rates can impact the competitiveness of its products in global markets and affect profitability.

Environmental and Sustainability Challenges: The coffee industry faces environmental challenges such as deforestation, water scarcity, and the impact of agricultural practices on biodiversity. TATA Coffee needs to address these sustainability concerns, ensure responsible sourcing, and adapt to evolving environmental regulations.