We aim to double our direct distribution in 12 months: Tata Consumer chief

In a Q&A, Sunil D'Souza, who took over as MD & CEO of the company in April, dwells on his company's e-commerce strategy and other plans

Sunil D’Souza took over as managing director and chief executive officer of Tata Consumer Products in April this year, at the height of the nationwide lockdown induced by the Covid-19 pandemic. D’Souza, a consumer goods veteran, has moved with speed and agility to restructure the organisation and take advantage of the new trends emerging in the business. He lays out his plans in a conversation with Viveat Susan Pinto. Edited Excerpts:

1) What is your assessment of the FMCG market, which has undergone a transformation due to the pandemic?

I see a few trends emerging in the FMCG market. The first one is the growth in rural areas led by the government stimulus, good monsoon and the migrant movement. From that perspective, rural is growing faster than urban. Health, hygiene and trust is becoming important. Therefore, people are gravitating to bigger brands. Out-of-home remains a challenge, but in-home consumption is growing. Convenience is becoming important. Consumers are moving quickly as far as digital adoption is concerned. We are also seeing subtle signs of downtrading. But in modern trade, people are moving to larger packs. But overall, people are moving to smaller packs of bigger brands. Channel-wise, we are seeing the resurgence of kiranas. So there are multiple movements happening in FMCG. We have to tackle all these pieces as we go ahead.

2) Do you see urban growth bouncing back anytime soon?

Urban is seeing sequential improvement, which will get better. One, modern trade, which was really down, is now beginning to climb up. It is still not at the level seen before Covid-19. But it is doing better than a few months ago. Outlets are opening up and businesses are returning to normal. People are learning to live with the virus. All this will contribute to urban growth in the months ahead.

3) You undertook a restructuring of your distribution network. What is the update on this?

On the distribution front, we did four to five things. We first put a structure in place. We have split the country into eight regions. This allows us to put more focus on each geography. These geographies have been identified based on their demographics and psychographics. After this, we de-layered the distribution network. We had an intermediate layer called consignee agents in our system. In the months of July-August, we focused on taking that out and streamlining the number of distributors we had in the system. September was about putting more feet on the street. In October, we focused on common distributors for food and beverages as well as a common sales force. This has allowed us to leverage complementary strengths. Right now, we are in the process of rejigging our rural distribution. Apart from this, we have integrated the backend of the business. The aim is to harness synergies at every level whether it is manufacturing, distribution, logistics and warehousing.

4) Apart from harnessing synergies and strengths, what is the objective of the restructuring exercise?

We have set ourselves the target of doubling our direct distribution in twelve months. In 36 months, we want to double our total reach. When we started this exercise, we were at 2 million outlets in terms of total reach. We want to be at 4 million outlets in three years. In terms of direct reach, we are at 400,000-500,000 outlets, which we aim to double in a year.

5) What is your strategy on e-commerce?

We have opportunities to grow within all channels, whether it is general trade, modern trade and e-commerce. In general trade, the game plan would be to get our products into more outlets and grow share. In modern trade, the strategy would be to align our plans with our partners. In e-commerce, we've been seeing a growing trend for some time. What Covid-19 has done is it has accelerated the shift to online quite sharply. In March, about 2.5 per cent of our business came through e-commerce, now it is at over 5 per cent. In other words, our e-commerce business has doubled in terms of contribution in a matter of months. We continue to see strong double-digit growth in our e-commerce business. We expect to see our contribution from this segment to keep climbing up. We have created a dedicated e-commerce vertical as part of our sales and distribution rejig and we have injected talent to understand the business better.

6) Where do you see Tata Consumer Products five years from now?

There are six building blocks we have in place. First is to get growth from within our core categories, which includes tea, salt, coffee and our Sampann portfolio. The Sampann portfolio includes pulses, spices, ready-to-cook mixes and snacks. The second pillar is to transform the company in terms of digital and innovation. The third pillar is to have a tight focus on costs and make sure that we bring home synergies wherever possible. The fourth pillar is to create a future-ready organisation from a structure and capability perspective. The fifth pillar is to expand the portfolio both organically and inorganically. And the sixth pillar is to grow sustainably.