Daybreak - How Tata’s using “innovation managers” to enter the FMCG race

Episode Date: August 22, 2023

For the longest time, despite being a giant steel-to-software conglomerate, Tata’s consumer goods game was nowhere close to India's top FMCG companies.Ever since 2019 though, when it decided to merge Tata Chemicals and Tata Beverages as Tata Consumer Products Ltd, the FMCG arm has been on a roll. In the recent financial year alone, it introduced more than 30 new products.Meanwhile, Tata Consumer’s shares have more than tripled. The Nifty FMCG index also almost doubled. What changed?Tune in to find out.RecommendationHow Tata Consumer’s Sunil D’Souza put product launches on steroids Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first studio recording, episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Did you know last year there was this one-of-a-kind holy party on the metaverse? And you know who hosted it? Tata T. They had games and live singers and dance, the works, all in the virtual world. Another time, they set up a giant, anamorphic 3D display in Gurgao's Cyber Hub to pay tribute to India's handlooms.

For Lory, the Harvest Festival, they used AI to create hyper-personalized ad campaigns. So why is Stata doing all this using its FMCG products? Because it wants people to see that it is new age and that it wants the masses to experience all of these new technologies. And I am specifically talking about Tata's FMCG arm, Tata Consumer Products Limited. But for the longest time, despite being this giant steel-to-software conglomerate, Tata's consumer goods game was quite weak. The company wasn't seen as one that was agile, so most thought that it would never enter the FMCG Big League. Before 2019, it more or less stuck to selling just the essentials, salt, spices and pulses under Tata Chemicals Limited. and tea, coffee and water through Tata Global Beverages Limited.

Both of these were separate. But in 2019, Tata decided to merge Tata chemicals and Tata beverages. And ever since, the new company known as Tata Consumer Products has been on a role. It's been launching new products like There Is No Tomorrow. It introduced more than 13 new products in the recent financial year itself. For comparison, it was 10 in the year that ended in March 2020. That is quite a jump, no? Even the contribution of new products to the top line has seen a marked rise.

Meanwhile, Tata consumers' shares have more than tripled. So how is the company managing things at this speed? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Da Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 20thard of August. The coming together of Tata chemicals and Tata beverages was the beginning of a massive challenge for the company.

Tata's FMCG arm was nowhere close to the biggies, think Hindustan Unilever, ITC, Dabur, Britannia and the likes. So to take up this challenge, Tata hired Sunil D'Souza, a career FMCG executive as the CEO and managing director of the newly found company in April 20. The Sousa began his FMCG career in 1993 in tea sales at Hindustan Unilever, which happens to be Tata's closest rival in tea. He then went on to work with Coca-Cola and PepsiCo in India and Southeast Asia. Before joining Tata, he was the MD of Appliance Maker World Pools India Unit. After he joined Tata, between the years that ended in March 2020 and March 23, Tata consumers' revenue grew as a company. an annual compounded rate of 13% to around $1.65 billion, and its profits rose by 38% to over $144 million.

The Nifty FMCG index also almost doubled in the same period, and I've already told you about the speed at which the company has been launching new products. So what did it take Tata consumer to get here? From a slow-moving, stuck to the basics FMCG company, to this new avatar. My colleague Sita Raman, the deputy editor of the Kien, sat down with Sunil DeSuzza himself in a candid interview to find out. Stay tuned. Sita got straight to the point and began by asking DeSuzza

about how the rate at which Tata consumer has been launching new products has seen this dramatic rise. DeSuzza started by pointing to the fact that for most food and beverage companies, about 3 to 5% of sales come from innovation. And that is what Tata targeted. He said, for innovation, two muscles are required. First, they had to build consumer insights in the marketing team. So they looked at trends, insights, which consumer habits are changing, what products are

trending, and then they came out with ideas. But then they also needed a team which could turn these ideas into actual products, which is the R&D or the research and development team. So Tata built both of these capabilities from scratch. Earlier, Tata did not have specific capabilities in R&D, but larger F&B companies cannot do without it. So they built different verticals like scientific analysis and claims and consumer sensory expertise,

and they gradually consolidated all their R&D teams into three locations, Bangalore, Mumbai and Shri City, which is near Chennai. DeSuzza also gave us a fascinating example while talking about innovation. Before this, Tata did not have a dedicated innovation person in the marketing team. Now they have an innovation manager across all their categories. So Sita dug in a bit deeper and asked him about what this innovation process within the company actually looks like. DeSuzer explained how Tata concerned.

innovation process involves everything passing through what they call stage gates. It starts from ideation and concept to initial product profile, then a rough analysis of what it is, and then a prototype. After that comes the actual commercial production, launch and post-launch analysis. They set up something called the Innovation Council, which DeSuzza chairs himself. The council meets every month, and it includes all the people who must. from operations, marketing, R&D and innovation. Everybody is on the same call. And the way it works is that people have to say a clear yes or no to ideas on the call.

So there is no going behind somebody's back or trying to lobby. The idea behind this is so that the team does not waste any time trying to debate decisions. Coming up next, one Tata product where all parts of this new innovation process came together. In 2021, Tata acquired a 100% stake in Cotarumagro Foods, which is the maker of the soulful brand of breakfast cereals and millet-based snacks. The brand already had a strong presence in urban markets of South, West and North India. While making the announcement at the time, DeSuzza had said how the acquisition was a good strategic fit for Tata consumer products, because for them, it opened up significant new market opportunities in the fast-growing mini-meals segment.

DeSuza told Sita how Tata wanted to get into snacking and Sulful was the perfect path to get there. They evaluated different options for snacking and then zeroed in on Ragi Bites choco sticks. These were hollow edible sticks with cream inside. It is a sort of a sweet snack. But they had certain conditions. They did not want the outside stick to be made of maida or all-purpose flour. And they wanted the cream filling inside to be the best with as little sugar as possible. So the team spent one and a half to two months on ideation and looking at different options.

Then the R&D team spent around two to three months figuring how to make it low sugar and also as little as possible of anything other than Ragi. But even after all of this, the hollow sticks would not. bind. The team, however, kept at it and finally they did figure it up. In all, DeSouza told us that it took them nine months from start to launch. Dear listeners, this is just a small part of Sita's fascinating interview with Sunil DeSouza. They talked about a lot of other things like other products, how the timeline for their product launches has changed, what happens if a product does not work and a lot more.

I highly recommend you read the rest of the interview. I'm going to link it to the show notes of this episode. Thank you for listening and catch you on Friday with a news story. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras.

Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.