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Time for ITC to go premium
Business Standard - 25 Sep 2013

As segments of food and personal care glimpse  profits, ITC capitalises on them

It is said that  ITC can notch up around 5 per cent of market share for any product it debuts by  dint of its distribution. It is present in categories such as personal care and  food as are other FMCG behemoths like HUL.
 
However, the breadth of its distribution and its foray in these segments since  2001 were fuelled by its tobacco business that helped fund the long-drawn  gestation of these categories. But the personal care portfolio recently, and  foods earlier, have shown signs of coming into their own. As a result, ITC has  begun to reinforce premiumisation across both of these categories to capture  the trend of upgrading.
 
Be it packaged food, which has foxed companies in India, or soaps in personal  care, ITC is ready to move its most popular brands up the value chain. New  products in food and a repositioning of its mid-segment soap brand have set the  process in motion. ITC's non-tobacco FMCG play also includes education and  stationery, lifestyle retailing, safety matches and incense sticks but food and  personal care comprise around 80 per cent of the segment.
 
Vivel, which is one of the four personal care  brands it had launched between 2005  and 2007 is the biggest brand in personal care for the Kolkata-based company,  worth Rs 500 crore. With a full-fledged campaign underway, featuring the brand  ambassador KareenaKapoor, Vivel is being repositioned as a nourishment product,  rather than its earlier singular promise of skin-softening, according to the  personal care CEO SandeepKaul. Of course, the soap brand will continue to straddle  different price-points.
 
"We would have products for all price-brackets but in terms of sheer  number of introductions, we will be larger in the premium segment than in  others," says Kaul. Essenza Di Wills was originally its premium offering  of fragrances, bath and body care products for both men and women, launched in  mid-2005. ITC also labels its Vivel Ultrapro anti-dandruff shampoo as premium.  Mass-market product launches in the near future are ruled out by Kaul.

He claims  the recent entry into the crowded deodorant market has gained significant  share. Engage, a deo for both the sexes, was launched in May and will take  two-three months for a national roll-out. "If I look at markets it is already  present in, we already have 5-6 per cent share. We are present in most markets  except for parts of south India," says Kaul. Given the low per capita  consumption of deos and a market estimated to be about Rs 2,500 crore, Kaul  expects a growth of 15-20 per cent.

ITC's  overall non-cigarette FMCG business is expected to break even sometime this  year. It was briefly in the black in the final quarter of last fiscal, before  slipping into the red.
 
Analysts point out that rather than any weakness in gross margins, it is the  heavy advertising that ITC does to further its FMCG business that forms a drag  on the portfolio's finances. In FY-13, ITC had spent Rs 806.65 crore (up from  Rs 682.69 crore, the year before). "If not for the heavy A&P spends,  ITC is already profitable in non-tobacco FMCG. But the ad spends are necessary  to complete the gestation.”
 
But of the non-tobacco FMCG play, foods, which was worth Rs 3,700 crore in  FY-13, is taking up premiumisation in no uncertain terms. The CEO of foods,  Chitranjan Dar, who drove his division to be the first segment to turn  profitable and remain there, says, "The packaging for one of our first  super-premium brands, the Choco Meltz, is a departure from our usual packaging,  to reflect the richness of the chocolate-enrobed cookies. The graphics,  cartonisation, the taste profile and the texture (presence of both molten and  crisp chocolate) are all geared to convey the premium feel." Having  achieved uptrading in premium cookies, catching Britannia, the biscuits-leader  unaware, Dar is now moving on to a category unlikely to be thought of as  premium - confectionery.
 
"We have noticed that in confectionery, there is a pronounced movement  away from basic products to value-added ones. So, Jellicious delivers on texture  beyond a jelly logenze, with a fruit and candy combination. Similarly, we have  pulled out of the regular 50-paise lacto candy and concentrate on the Re 1  lacto with more cream inside and out. We have launched a mint for adults  (mint-o Ultra mintz) that have an evolved taste palette." In confectionery  too, ITC is betting on underpenetration of the category to drive growth.

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