Nidhi Nath Srinivas

ITC Ltd is looking to acquire more brands, especially in FMCG segments like clothing and foods. In the foods segment, ITC is exploring significant expansions in milk, soya-based foods, organic foods, spices, and edible oils. At the same time, the Rs 8,000-crore cigarettes and hospitality giant has decided not to set up any more new subsidiaries. While it is getting plenty of offers, chairman YC Deveshwar says the company will only buy brands that come with a significant market share and a snug corporate fit.

Talking to ET, Mr. Deveshwar said ITC is certainly looking for acquisitions to expand its portfolio of products. "We could do with one more brand in clothing, for example, to add to our range which includes Wills Sport and John Players. A lot of people have come to us and offered their brands. But the problem is that they only have a small market share. Since we don't need their asset base, there is little point in adding such brands to our portfolio," he said.

But while ITC is cautious when it comes to clothing, it is gung-ho about food. The company's national network for the procurement of farm produce and the retailing of consumer goods — e-choupal — has opened the possibility of expanding to several new food categories like milk, soya-based foods, value-added foods, edible oils and ready-to-eat meals.

"It may have been a conspiracy of circumstances but our past losses, plus our experience in packaged foods and culinary skills, have taught us valuable lessons. We now have the entire range of capability — from identity-preserved cost-effective sourcing from farmers, to processing and packaging, trade marketing, branding and retail marketing to services like hotels and a rural mall network. We are, therefore, confident we can do more in food," Mr. Deveshwar said. ITC already has two confectionery brands, Candyman and Minto, one snacks and biscuit brand Sunfeast, the Aashirvaad brand for packaged staples and value-added ready-to-eat meals, and Kitchens of India for recipes from its Bhukhara and Dakshin restaurants. Instead of adding more brands to these segments, ITC will now explore the potential of new value-added products like spices, milk, edible oils, to add to its existing range.

"No other packaged foods company in the country today has such identity-preserved raw material — where you know exactly which village it came from — as we do. That gives us an enormous advantage," the chairman said. Explaining ITC's strategy on branding, Mr. Deveshwar said, the company has consciously decided not to have a plethora of brands. "One thing we are very sure of — we don't want too many brands which have thin slivers as market share. Instead, it is better to have a few brands, which are at the top of their segments. That is why we are very careful in choosing prospective candidates for a deal," he said. "More importantly, we only want to acquire brands which share our values and quality platform. Otherwise, there is just too much of a difference between them and our corporate philosophy," Mr. Deveshwar added.

ITC is determined not to set up more group companies, the chairman said. He said subsidiaries falter when they are unable to keep their eye on strategic goals because of cash flow and profitability issues.

"In my view, the boards of these companies tend to be constantly anxious about the next quarter's results. This makes the company’s approach short-termish in its approach while setting targets. In areas such as retailing and consumer goods, where we are looking at long gestation periods, there is thus no point in establishing separate companies," Mr. Deveshwar said.

"I believe ITC's commitment beyond the market guides its corporate action and determines the actual strategy and path chosen. We have thus ended up becoming a more sustainable and competitive company. A focus just on financial results, though they are equally important, is not a very healthy thing," he added. Markets have been abuzz with rumours that ITC plans to prune its number of existing subsidiaries by merging them with the parent company.