ITC’s diversification strategy bearing fruits
Over the years, ITC Ltd has transformed itself into an umbrella group that offers a diversified product mix.
Its position in the FMCG business is on a growth curve under the leadership of Sanjiv Puri, who is taking forward the task of further diversifying the company’s business with a new zeal.
The company under Puri’s leadership has been making most of the investments around FMCG. It is making structural interventions and leveraging synergy of diversity between FMCG and other business to enhance its operational efficiencies and further expand the FMCG growth engine.
ITC is embracing digital technologies to drive productivity, improve market servicing, draw actionable insights for sharp-focused interventions, augment sales force capability, and deepen connect with retailers.
The FMCG firm has deployed innovative delivery models, alternate channels, expanding reach, pursuing agility in execution, and leveraging digital technologies to efficiently service market requirements.
To gain deeper consumer insights, it has scaled up utilisation of its Marketing Command Centre – ‘Sixth Sense’ which leverages cloud technology, cutting-edge social media engagement tools, and a digital marketing and analytics platform.
These interventions are now bearing fruit and is evident in the company’s highest ever quarterly revenue from the FMCG segment in the first half of 2020, despite challenging operating environment due to Covid-19.
The company recorded a profit after tax at Rs 3,232.40 crore on a Gross Revenue of Rs 11,891.91 crore in the 2nd quarter of FY21, thereby achieving a growth of 26% q-o-q and 1.2% y-o-y.
These numbers are backed by strong recovery in revenue across all operating segments, including staples, convenience foods, health and hygiene products leveraging the strong equity of the company’s brands and a robust portfolio of relevant and innovative products.
ITC has launched over 70 new products with compelling value propositions in the last six months.
Coming to FMCG’s others (non-cigarette) segment revenue, ITC registered figures of Rs 3,795 crore, representing a growth of 18.4% on a comparable basis on the back of increase in market standing by most major categories during the quarter.
Segment EBITDA during the period grew by 66% to Rs 366 crore, with the margins expanding by 300 bps y-o-y to 9.7%.
Staples, convenience foods and health and hygiene products — which represent 75% of the company’s FMCG portfolio — posted strong growth of 25% during the period.
Similarly, discretionary/’out-of-home’ categories posted strong sequential recovery to return to nearly pre-Covid levels. The company’s FMCG growth was led by branded packaged foods businesses that delivered a robust performance, driven by staples and convenience foods categories and launch of range of products.
ITC’s progress in the personal care segment is marked by smart acquisitions like Savlon, which recorded significant market share gains across sub-segments like antiseptic liquids, handwash, sanitisers, and soaps.
Savlon is on course to become a Rs 1,000 crore brand in terms of annual consumer spend in FY21.
The company also has to its credit the launch of wide range of innovative and first-to-market products like Savlon surface disinfectant spray, Savlon clothes disinfectant spray, Savlon spray and wipe, Savlon germ protection wipes, Savlon Hexa hand sanitiser, Savlon Hexa advanced body wash etc during this period.
ITC Liquids portfolio comprising handwash and body wash has shown a steady growth while the demand for fragrances category is picking up with rise in demand for ‘on-the-go’ consumption products.
Nimyle, a 100% natural floor cleaner, contributed to the FMCG segment performance with growing preference for natural products. Similarly, Nimwash, a 100% natural action product for cleaning fruits and vegetables, gained consumer franchise during the period.
Matches and ‘agarbatti’ business posted strong growth, leveraging strong brand equity and focused initiatives to enhance availability. The company augmented The Mangaldeep Temple Fragrance of God range of ‘agarbattis’ with the launch of Marigold and Red Hibiscus variants.
ITC’s paperboards, paper and packaging business is doing well with revenue posting strong recovery of 42% q-o-q, backed by strong export growth and consumer offtake in pharma, homecare, packaged foods, personal care — which recovered to pre-Covid levels — while wedding cards, publication, notebooks remained subdued.
The company has been able to maintain margins in this segment despite volume and pricing pressure through product mix enrichment, sharp focus on operational efficiency and structural cost-saving interventions to enhance competitiveness, leverage data analytics and industry 4.0.
ITC’s agri business too has registered a robust growth of 12.8% in a segment revenue driven by trading opportunities in rice, mustard, coffee, and higher wheat supplies for Aashirvaad atta.
The company’s value-added portfolio (ex. aqua) comprising spices for ‘food-safe’ markets, processed fruits, and frozen snacks etc is also doing well posting 25% growth in revenue.
ITC Master Chef Frozen Snacks’ consumer franchise is growing steadily, and its range is further augmented with the introduction of 13 variants, including Farmland Frozen Vegetables. Its availability is now extended to 116 new markets, taking the aggregate to 128 towns.
According to Sustainalytics – a renowned global ESG ratings company — ITC has been ranked overall number 3 globally on ESG performance in the food products industry.