ITC targets growth in non-cigarette businesses

By:Vandita Jadeja 2017-09-21

ITC Ltd, the FMCG Company manufactures cigarettes to shampoo and is now working on a strategy to reinvest itself and accelerate growth in the non-cigarette businesses especially branded consumer packaged foods, which is a segment it entered 15 years ago.

The eight point strategy, “create the new ITC” is a part of the company’s mission to reach Rs.1 trillion in revenue from the non-cigarette packaged goods business by 2030. The growth in this sector will be fuelled by the company’s entry into the vegetables, fruit and sea food market by adding one new product each quarter. The company has lined up an investment of Rs.25, 000 crore across 65 projects which include 20 integrated factories for consumer goods with logistic facilities. Out of these, three units will begin operations this year and four more over the next one year.

The fact that the capital employed and people is quite higher in the new business area, they intend to grow faster there. The company also hopes to see the economy get into a new growth trajectory which leads to higher consumption and a higher growth in the non-tobacco segment. About 80% of the capital expenditure of ITC is in the non-cigarette business which employs around 88% of the company’s total headcount. Until March, cigarettes accounted for more than 60% of the total revenue of the company.

In the eight point strategy, ITC wants to bring in products for the consumers that are superior and differentiated in the market in order to address future needs of the consumers. This will be backed by investments in research and developments as well as strategic investments in physical infrastructure and capacity building which will help the company stay close to the retail market.

ITC also has plans to scale up the existing categories in an integrated manner to boost its last mile distribution mechanism. Currently, ITC products reach 4.3 million out of the estimated 9 million retail outlets in the country. Out of this, 2 million are under the direct distribution network of ITC. The company has been working on a strategy for factory to retail point distribution within a day.

ITC aims to create Indian brands that can take to overseas markets, remain competitive in the domestic market and outdistance competition. It wants to create brands that will bring royalty to India rather than pay royalties to multinationals for selling brands owned by them. The immediate focus of ITC is on the packaged food business which had exceeded Rs.8, 000 crore in the last year and made ITC the third largest packaged food company in India.

There are tremendous market opportunities as the penetration is low and food is a big opportunity for ITC. With a strong agri backend, the expertise of hotels known for a range of quality cuisines, an expertise on food and a strong marketing and distribution apparatus can help the brand. There are 350 scientists at the research and development center at Bengaluru working on the products linked to health and wellness. The company aims to bring items to the consumer in a fresh form or in a shelf life enhanced form which could be puree, dehydrated or frozen form. ITC launched prawns in June under the ITC MasterChef brand and will launch potato in fresh form in low sugar and anti-oxidant rich.

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