FMCG firm Tata Consumer Products Ltd (TCPL) will work "very closely" with BigBasket, an e-Commerce platform that was recently acquired by the Tata Group, to drive win-win synergies in terms of costs and topline, according to the company's managing director and CEO, Sunil D'Souza.
The company, which has more than doubled the sales contribution from e-commerce channel to around 6 per cent for domestic market last fiscal, is also focussing on enhancing its direct-to-consumer channel (D2C) approach of selected coffee brands and their specific websites.
As part of the strategy, it is bringing 'Eight O'Clock', an America's Original Gourmet Coffee, under D2C besides Tata Coffee 1868 and Sonnets.
"We will be working very closely with BigBasket to leverage whatever synergies we get both in terms of topline and costs," D'Souza told PTI.
When asked about the advantages of working with BigBasket, he said, "So we have aligned partners. It is very easy to partner with a group company especially when you have a common vision of where you want to be whether it's on the e-commerce side or the FMCG space."
"A very close partnership and driving win-win synergies, I think that is going to be the key," he added.
As part of its aggressive expansion into the e-commerce space, the Tata Group had last month acquired a majority stake in online grocery seller BigBasket for an undisclosed sum.
In tune with the changing business landscape and consumer behaviour in the wake of the pandemic, D'Souza said TCPL has also hired people from outside who had worked with e-commerce portals to get the right talent.
"Because that's (e-commerce) a separate ball game, which you need to understand and very difficult to build talent from within," he added.
He further said, "So far, it seems to have worked. For example, over the last one year, we have doubled the percentage contribution from e-commerce from about 2.5 per cent to 5.2 per cent. We exited March at 6 per cent and it is continuing to grow month on month."
Stating that TCPL will also enhance its D2C brands such as Tata Coffee 1868 and Sonnets and Eight O'clock, he said, "All of these are targeted towards very specific consumers. Going online allows us to target those specific consumers in a very cost-efficient manner."
TCPL had entered into the D2C space last month by launching its premium roasted and ground coffee under the Sonnets brand, targeting mainly urban consumers seeking a special coffee experience.
When asked as if TCPL would add more brands in the D2C space, D'Souza said it would like to stabilise these three coffee brands, however, said "I would not rule out launching more brands going forward."
TCPL, which has lesser rural exposure in comparison to other rivals, is also expanding its coverage area with expansion in the network in those far-flung areas.
"Compared to the rest of the FMCG world, we are probably underweight on rural compared to urban. That said, it is not by design but it is by default because right now, we rebuilt our entire distribution system first. Focus was getting the urban, semi-urban areas in shape and that is where we focused on the integration and now we are moving towards rural," said D'Souza.
It has now trebled the number of salesforce on the ground and added about 2,000 distributors.
"The target is close to 8,000 to 9,000 distributors and that is what will give me my rural expansion. Right now, I would say we are still slightly one step behind the rest of the good FMCG companies in rural (market)," he said.
On Starbucks, D'Souza said it has a significant opportunity to expand as the business model works as same-store profitability is in a "good place" and the brand is "extremely" strong.
"It is probably the strongest brand in the QSR space in India today and if you look at footprint, we are still only 221 stores. So I think we have a significant opportunity to expand and what the pandemic has done it, it has separated men from boys," he said.
Stating that weaker players, which do not have strong business models, have shaken up and given a pause over their expansion plans, he said, "Whereas for us, we see this an opportunity and that's why store expansion, will continue to happen."
The expansion would be "deep and wide" by entering new cities and opening more stores in cities where it has existing outlets.
"It would also be in more formats. We have started a drive-through in Zirakpur (at Ambala Chandigarh Expressway) and now we are figuring out where else to take it. We have also started small engine stores, with a smaller footprint (size) as we enter into tier II and III cities, we are making sure its right business model for the geography," he added.
Tata Starbucks is a 50:50 joint venture between Tata Consumer Products Ltd and Starbucks Corporation.
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