By Sanjeev Sharma New Delhi, November 18th : .Powered by giant brands like Aashirvaad and Sunfeast as well as Bingo!, Classmate and Savlon by Sanjiv Puri, ITC will be in a dominant position in what analysts estimate to be an addressable FMCG market of Rs 5 lakh crore by 2035.
Chairman Sanjiv Puri has set in motion the carefully planned ‘ITC Next’ strategy.
The strategy was reformulated around portfolio revitalisation and rapid platform-based innovations, aggressive digitalisation, deeper collaborations with other businesses in the group, structural leverages, and a greater focus on margins.
ITC, an FMCG company, is the dominant brand across all product categories, including branded atta, biscuits, snacks, spices, noodles, dairy, chocolates, coffee, juices, frozen snacks, vegetables, deodorants, hand wash, floor cleansers, sanitizers, masks, and notebooks.This is something that no other Indian and multinational companies can boast to have.
Puri’s “ITC Next” strategy is based on a multi-pronged approach that revitalizes the FMCG company’s existing portfolio.This includes strengthening and scaling up proven megabrands and leveraging adjaencies through horizontal brand extensions and creating new platforms with innovative products to scale up and be market leaders in each category.
Adacencies and mega brands
ITC owns a number of huge brands like Aashirvaad and Sunfeast.of Classmate, who already hold leadership roles in the market.
Aashirvaad Nature’s Super Foods, which includes ragi flour and multi-millet mixes, gluten free flour and organic atta, as well as instant meals, chapatis and Aashirvaad Sasti dairy, is a great example of the strategy to create value added adjacencies.
ITC also fosters new channels and strengthens its brands, including Fabelle chocolates and Sunbean coffee.
To create new markets for innovative products, the overall strategy is to validate and test the business model at selected beachheads.Once a market leader has been established, the new products and brands can expand their reach to other markets.This will allow them to build a stronger brand and create new growth opportunities.
Puri’s ITC is determined to create a strong FMCG company.Today, ITC is one of India’s largest incubators of top-quality brands.
With its extensive FMCG portfolio, the Company has demonstrated that it can expand quickly in the FMCG sector overall market segment of Rs 5.lakh crore.
The total market for packaged snacks is expected to grow 4.5x from Rs 32,000 crore now to Rs 1.43 lakh crore in 2035.In 15 years the market for spices is expected to increase five-fold from Rs 22,000 crore to Rs 1.11 lakh crore.Similar industry increases are anticipated in the other category categories like biscuits, branded, atta, noodles and personal care products.
ITC FMCG products are often in the top two or third positions within their categories, giving them an unique chance to capture most of the segment growth.
Aashirvaad is India’s top-selling packaged atta brand.It has an estimated consumer spending of more than Rs.6,000 crore.
Future-ready, digital and consumer-centric
Puri’s plan to make ITC more future-ready is manifested in his efforts to drive the megatrends that emerged from the pandemic: innovation, digitization and sustainability.ITC was able to offer 120 new products thanks to the Company’s R&D Centre and the ITC Life Sciences and Technology Centre in Bengaluru.In order to further assist this goal, 9 integrated consumer goods manufacturing plants (ICML), have been set up by the company.
The use of emerging technologies like Industry 4.0 and Artificial Intelligence is helping to accelerate digitalisation pan-ITC.The technologies can also be used across the supply chain, from sourcing to manufacturing and trade engagements, through to ecommerce.A multi-channel distribution strategy has helped FMCG businesses to be more competitive.This strategy was enhanced by customised apps.
The power of synergies
The company’s synergies have also helped to boost the ‘ITC Next” FMCG strategy.
ITC’s food business is a good example of how synergies can be used to gain a competitive edge from the sourcing capabilities of agribusiness.ITC has been able to create differentiated food offerings through the expertise ITC’s Hotels division.
Stronger growth, better margins
Puri’s FMCG strategy is strong as evidenced by the segment EBIDTA (earnings prior to interest, taxes and amortization) rising by 82% this quarter compared with Q2 FY 20.This was outlined in ITC’s second quarter financial results.
FMCG companies have seen steady growth, surpassing industry peers.In the past four years, ITC has seen its FMCG revenue grow from Rs 10.500 crore to almost Rs 15,000 crore over the same period.
ITC’s FMCG sales grew by 16 percent in 2020-21, compared to the 8.5% industry average.
The FMCG segment has seen a steady increase in profitability, with EBITDA margins increasing by over 640 basis points from 2016-17 to 2020-21.
Strategy for other companies: ‘ITC Next’
Puri presented the comprehensive ‘ITC Next’ strategy at ITC’s Annual General Meeting in August.Puri aimed to create the structural drivers necessary for ITC’s next growth horizon and keep the organization future-oriented and consumer-centric.
ITC’s businesses have also reacted to new opportunities, with a sharper focus on costs management and enhanced competition to improve leadership in new segments.
Puri identified some key growth drivers for ITC’s businesses, including an asset rights strategy for Hotels, powered by the repositioned WelcomHotel brands, and new launches such as The Storii, Mementos, which are managed contracts.Mementos already has two management agreements.
Similar to the Paperboards company, it focuses on sustainability packaging and value added paper.
In agriusiness the focus is on Next Generation Agriculture driven by ITC MAARS (super app) and value-added farming.
ITC Infotech is receiving a special strategic thrust.
This wholly-owned subsidiary has experienced strong growth and profitability over the past few years.
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