Somanth Dasgupta
For ITC Ltd, one of the largest fast-moving consumer goods
(FMCG) companies, the 90th annual general meeting in 2001 was significant on at
least two counts. Chairman Yogesh Chander Deveshwar was meeting shareholders for the first
time after powering the company past the Rs 1000-crore net profit mark. Second, I.T.C. Ltd
dropped the full stops in its name and thus symbolically unveiled a revolution that had
been brewing quietly in the company’s businesses over the past few years.
Between 1996 and 1998, ITC Ltd had reshaped its portfolio
of businesses by exiting from the financial services and edible oil segments. In the next
phase, even as it consolidated earlier divisions like agribusiness, hotels and paperboard
and packaging with huge investments, it began leveraging its management skills to enter a
host of new areas with the avowed goal of becoming number one in each segment.
"ITC, as a premier ‘Indian’ enterprise,
consciously exercises the strategic choice of contributing to, and securing the
competitiveness of the entire value chain (in India) of which it is a part," says
Deveshwar.
These initiatives span branded packaged foods, apparel
retailing, greeting cards & gifts, safety matches and agarbathis. It is ITC’s
strategic intent to touch Rs 5,000 crore in turnover from this segment over the next seven
years. The exits from financial services and edible oils, together with the pre-deposit
requirements relating to the post-1983 excise case, involved a total cash outlay of around
Rs 1,200 crore. The phased programme of investment aimed at acquiring international
competitive capability has so far entailed a capital expenditure of over Rs 3,300 crore
– covering FMCG, hotels, paperboards and agribusiness. Yet feels Mr. Deveshwar,
"I believe that companies are economic organs of society and therefore need to be
ultimately evaluated in terms of the value they create for society. While all successful
corporate effort creates values, the degree of value retention within our economy is
determined by the extent to which value chains are located in India. The degree of value
retention within India is often a result of strategic choices made by companies."
The cigarettes business continues to be the mainstay,
despite the diversifications. Continuous value-addition to brands in the cigarettes
business has been the foundation for sustained growth. Two of ITC’s brands have been
rated as No. 1 and No. 2 among FMCG brands in the country according to an AC Nielson
Retail Audit. During the past five to six years, ITC has upgraded each of its cigarette
manufacturing facilities to world-class standards and set up a new factory in Bangalore.
In hotels, ITC’s plan to have an ITC-Welcomgroup
presence in key business locations in India is nearing completion. Over the past five
years, ITC has added the ITC One (the super-premium extension to the ITC Maurya Sheraton
in Delhi), the ITC Grand Maratha Sheraton in Mumbai and the ITC Sonar Bangla in Kolkata,
providing upmarket business travellers with the finest hoteliering experience. With these
hotels, ITC is well positioned to attain leadership in the Indian market.
Paperboards, paper and packaging has been another success
story. The turnaround of the paperboards business has been a source of immense
satisfaction for Mr. Deveshwar, who had been criticised when he took up the challenge in
the late 1990s. But ITC’s insights as a substantial user of world-class packaging,
coupled with its unique bio-technology-based social and farm forestry programmes, and
co-generation of power, enabled this business to turn around.
In the FMCG segment (which includes cigarettes), ITC’s
new initiatives represent a close fit between market opportunity and internal capability.
By blending proven competencies residing in ITC’s diverse businesses, the company is
creating newer business capabilities.
