Tata Global Beverages (TGBL) reported tepid third quarter earnings on Wednesday, as higher commodity costs, exceptional losses and its focus on preserving market share even at the cost of profit margins weighed on consolidated net profits.

The world’s second-largest branded tea maker said its consolidated net profit declined by 10.94 per cent to Rs 64.06 crore for the quarter ended December 31, 2011 while net sales stood at Rs 1,793.20 crore, up 11.9 per cent year on year. “Costs of coffee went up substantially and competitive intensity in major markets too increased. The coffee business faced one of its worst periods and came out on top preserving its market share. While our US subsidiary Eight O’Clock Coffee has held back our performance in the December 2011 quarter, it’s now turning around,” Percy Siganporia, managing director at Tata Tea. The company’s consolidated raw material costs rose 13.38 per cent to Rs 698.29 crore.

Kaustubh Pawaskar, an analyst with the research firm Sharekhan said, “The result is mediocre and below our expectations. The decline in margin can be attributed to high cream coffee prices, increase in advertising spend.” The company’s consolidated advertising and sales charges for the third quarter soared by 22.26 per cent to Rs 340.62 crore.

Siganporia said the company had managed to turn around all its operations, which had issues retain value market leadership in tea in India with Tata Tea, getting sales growth in UK and turning around its ‘problem child’ Poland.

“For the first time every brand in our South Asian portfolio has grown. We are getting it right across more geographies, products and segments and we have reduced costs by around Rs 40 crore,” he said.