High tea prices could impact near term margins of Tata Consumer Products

Price hikes, distribution rejig and higher in home consumption to offset some of the pressures

After rising 83 per cent from mid-April to its highs in early September, the stock of Tata Consumer Products has shed some of its gains. While the long-term growth story remains intact, the near-term concern is about margins which could be hit on account of rising tea prices. 

Tea auction prices, according to analysts at Spark Capital, have almost doubled since the lockdown, which are expected to impact the gross margins in the September quarter. Analysts expect the gross margins in the tea business to be impacted by 450-500 basis points (bps) in the quarter. 

However, what should mitigate the increase in