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ITC eyes bigger slice of food business
The Times of India - 31 Jul 2014

ITC, the  tobacco-to-FMCG-to-hospitality conglomerate, is planning to expand footprint in  foods business with an entry into new segments such as fruit juices, tea,  coffee and chocolates. At the 103rd annual general meeting (AGM) here on  Wednesday, ITC chairman Y C Deveshwar said, "We are on a  take-off point but we are building the company for the next 100 years. We want  to grow in new areas...in areas of fruit juices, tea, coffee, chocolates and in  dairy products. There will be new gestation. This is the best time to absorb  the cost of gestation of new area and build the company for tomorrow."

ITC had earlier expressed its intention to enter into new food categories like  dairy and wellness ranges but this is the first time there is an official  statement from none other than its chairman on possible foray in beverages and  chocolates. Deveshwar was responding to the shareholders during the AGM here.

The over-Rs  45,000 crore conglomerate is also planning to zero in on wellness and  functional foods and eyeing a major chunk of this growing category in India. It  has quietly entered the wellness and functional foods mart with Farmlite, a  nutritional biscuit, a few months back. The foods business has achieved a  turnover of Rs 5,700 crore in 2013-14 and constitutes a substantial portion of  new FMCG business of the company.

Sunfeast  and Aashirbaad - the two major brands of ITC foods - have each crossed Rs  2,000 crore mark already going by consumer spends. The other major food brands  and sub-brands of the company include Bingoo, Yippee, Mint-O and Candyman.

Elaborating further plans about wellness and functional foods, the ITC chairman  said it is working on areas like foods for cardio-vascular diseases and  diabetes.

When asked about the possibility of crossing Rs 10,000 crore mark in the foods  business, Deveswar said he would wish to do it fast but there is a delay in  implementation of projects in different level across various states. He also  made it clear that in future, ITC would like to enter any category that comes  under FMCG. "Our company is aiming for a revenue of Rs 1 lakh crore from  the new FMCG business alone by the year 2030," Deveshwar later added.

Commenting on imposition of higher tax on cigarettes, the ITC chairman said,  "I am of the view that it is a tactical approach that cigarettes are being  taxed heavily. Let me tell you, only 12% tobacco use is legitimate cigarette  consumption. On the rest, there is very little tax increase on other  areas."

According to him, the Kolkata-based conglomerate was in  constant dialogue with state and central government for an equitable approach  on taxing cigarettes. As many as 83% of pre-tax profit comes from cigarette  business for ITC. In the last Union Budget, the government has imposed a steep  hike of 11%-72% excise hike on cigarettes.

During the first quarter of FY15, ITC has witnessed volume decline of about 3%  in the cigarettes business, according to analysts, and the scenario is likely  to continue for the next couple of quarters at least.

Deveshwar also said that royalty payments should only be permitted between  unrelated parties based on purely commercial considerations with no or little  government intervention. This, according to the ITC chairman, will facilitate  Indian enterprises in accessing intellectual capital to compete effectively  with international players in Indian global market.

"Such a policy would framework would go a long way in creating a  level-playing field for Indian enterprises besides ensuring that the twin  deficits do not get further aggravated as India's private consumption market  grows," he said.
 

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