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ITC's Diversification Strategy Bearing Fruits
ITC is embracing digital technologies like never to drive productivity, improve market servicing, draw actionable insights for sharp-focused interventions, augment sales force capability and deepen connect with retailers.
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ITC over the years has transformed itself into an umbrella group that offers a diversified / varied product mix. Its position in the FMCG business is on a growth curve under the leadership of Mr Sanjiv Puri who is taking forward the task of further diversifying company’s business with a new zeal.
The company, under the guidance of Mr Puri, has been making most of the investments around FMCG. It is making structural interventions and leveraging synergy of diversity between FMCG and other buinesses to enhance operating efficiencies and further expand FMCG growth engine.
ITC is embracing digital technologies like never to drive productivity, improve market servicing, draw actionable insights for sharp-focused interventions, augment sales force capability and deepen connect with retailers. It 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 & 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 1st half of 2020 despite challenging operating environment due to Covid-19.
The Company recorded profit after tax at Rs.3232.40 on a Gross Revenue of Rs.11891.91 crores in the 2nd quarter of FY21 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 & hygiene products leveraging the strong equity of the company’s brands and a robust portfolio of relevant and innovative products. ITC has registered profit after tax of Rs.3232.40 crores during the period and launched over 70 new products with compelling value propositions in the last 6 months.
Coming to FMCG – others (non-cigarette) segment revenue, ITC registered Rs. 3795 crores representing a growth of 18.4% on a comparable basis on the back of most major categories enhancing their market standing during the quarter. Segment EBITDA during the period grew by 66% to Rs. 366 crores with margins expanding by 300 bps y-o-y to 9.7%.
Staples, convenience foods and health & hygiene products which represent ~75% of the company’s FMCG portfolio and 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. 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, sanitizers and soaps. Savlon is on course to become a Rs. 1000 crore brand in terms of annual consumer spend in FY21. The company also has to its credit 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 Sanitizer, Savlon Hexa Advanced Bodywash, etc. during this period.
ITC Liquids portfolio comprising Handwash & Bodywash has shown 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 & Red hibiscus variants.
Company’s paperboards, paper & 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, home care, packaged foods, personal care which recovered to pre-Covid levels while wedding cards, publication, notebooks remain 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 has registered robust growth of 12.8% in segment revenue driven by trading opportunities in rice, mustard, coffee, and higher wheat supplies for Aashirvaad atta. Company’s value-added portfolio (ex. aqua) comprising spices for ‘food-safe’ markets, processed fruits, frozen snacks etc. is also doing well posting 25% growth in revenue.
ITC Master Chef Frozen Snacks’ consumer franchise is growing steadily, and its delectable 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.
ITC’s diversification strategy, which took shape under the aegis of Mr Puri and involves innovation in business models to synergise the building of economic, ecological, and social capital as a unified strategy, is powering its ESG performance as well. According to Sustainalytics – a renowned global ESG ratings company ITC has been ranked overall #3 globally on ESG performance in the Food Products industry.