A late entrant in FMCG and packaged foods, ITC challenged domestic and multinational companies alike, following a clear vision of its legendary former chairman Yogi C Deveshwar, to quickly scale the non-cigarette businesses of the company.
How does a company create an impact in a sector dominated by multinational companies? ITC stuck to the classic textbook approach to build the FMCG business, which today boasts of a portfolio of Rs 1,000-crore plus brands, Aashirvaad being the biggest with a turnover of over Rs 4,000 crore.
“ITC did in foods, what HUL (Hindustan Unilever) did in personal care,” said an FMCG industry expert. Because foods is largely a local subject, ITC managed to create a bigger disruption in foods where consumer trial is high, something that HUL couldn’t do in decades. ITC tapped into those categories where the share of the unorganised market was high, such as atta, where there was a need for consumer branding. “ITC mastered this art in foods. In personal care, however, there is less of unorganised play and brand loyalty is a big factor. This has been a challenge for ITC,” said the expert.
Devendra Chawla, another FMCG expert who heads Spencer’s Retail, said: “It can take years to build a distribution network in towns and villages. It takes time to learn sourcing right in food and not everyone gets consumer insights right. On all these counts, ITC has excelled. It’s this very consumer understanding that has helped ITC grow its food business on local tastes. In foods, a local company has a better understanding of the consumer behaviour. A true farm-to-fork strategy with recent acquisitions has helped ITC grow nascent categories by leveraging on these strengths.” When ITC forayed into foods in 2002 with the launch of the ready-to-eat range ‘Kitchens of India’, followed by Aashirvaad atta, the industry was bereft of major technological disruptions. ITC put in concerted efforts to build each category it entered while ticking every box in the marketing book.
Marico CEO & MD Saugata Gupta, said: “ITC did everything right because they believe in doing everything in the classical copybook way. They invested in backrooms, supply chain and innovation. They managed to create a disruption through quality products created in India, which were then rapidly scaled up.”
Every year was marked by a significant brand/category launch, leading to a non-cigarette FMCG business of Rs 11,000 crore today. The company has set a target to achieve a turnover of Rs 1 lakh crore from non-cigarette FMCG and foods business by 2030. ITC did not shy away from leveraging capabilities from its existing businesses. It used its hotels network, and based on insights from chefs, arrived at the right flavours to woo consumers. Its agri sourcing network and e-choupal helped build an end-to-end network. It also outspent other FMCG companies when it came to advertising, according to Abneesh Roy, senior VP, Edelweiss Financial Services. “ITC had the ability to plough profits it earned from other businesses like cigarettes into growing the FMCG/foods portfolios. While earlier they focused on the mass segments, in the last 5-6 years there was a clear departure from this strategy to focus on mid-to-premium end of the market to earn higher gross margins. For about 5-6 years they did not make a profit in FMCG. Now they make decent margins. This strategy was important to take on players that were already well entrenched in the market.”
Whether it is Dark Fantasy Choco Fills cookies or innovations like a pocket deo in Engage, investing in product innovation has helped ITC garner significant share of certain categories. ITC is a market leader in atta, stationary, cream biscuits, bridges segment and it’s the second leading player in deodorants, shower gels, noodles and agarbatti.
In different categories, ITC competes with PepsiCo, Nestle, HUL, Britannia and Parle, among others.
News credit : Indiatimes