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ITC Takes a Big Bite of FMCG Pie
The Economic Times - 19 Oct 2012

Gains in biscuits, snacks & noodles and headway in soaps and shampoos help co forge ahead

In August when ITC cornered a share of more than 28% in cream biscuits in urban  India as per Nielsen data, it was a wake-up call for the largest cream biscuits  maker Britannia. Although Britannia did not share data with ET, numbers  obtained from an industry official suggests that ITC may have nosed ahead of  Britannia in this segment by roughly 1 percentage point, at least for the month  of August. However, both ITC and Britannia declined to confirm this (Britannia  did not respond to an email with questions on the threat from ITC).

Biscuits  is just one fast-moving consumer goods (FMCG) category in which the cigarette,  hotel, paper and packaging giant has garnered scale and share. Within foods,  salty snacks and noodles are two categories in which ITC is making rapid gains;  and, in personal care, the Kolkata-headquartered marketer is making headway with  its shampoos, skin care, and soaps. This combined assault within the consumer  space–along with contributions from fragmented categories like stationery –  helped ITC’s non-cigarette FMCG business clock a top line of Rs 5,545 crore in  fiscal year 2012, with foods bringing in 60% of those revenues. More  importantly, the company has hit near breakeven levels, according to a recent  Credit Suisse report.

“Despite  being relatively new in all these segments, we have been witnessing rapid  growth and have established significant market standing across most  categories,” says ITC Ltd executive director Kurush Grant, who heads the FMCG  business that includes cigarettes, packaged foods, personal care products and  stationery products. If, in cream biscuits, ITC is taking the fight to Britannia’s labels like  Bourbon, Treat and Pure Magic with its own battery of brands like Dark Fantasy,  Choco Fills and Dual Dream Cream, in noodles it has thrown down the gauntlet at  Nestle’s Maggi. As per the recent Credit Suisse report, ITC’s instant noodles  brand Sunfeast Yippee! has gained double-digit market share within two years of  launch, and is the second largest brand after Maggi.

Nestle has now started to offer aggressive discounts and incentives to retailers on  Maggi to protect its market share. Although a Nestle India spokesperson termed  the initiative as a dealer engagement programme, a recent report by Kotak  Institutional Equities said Nestle’s discount scheme for Maggi is possibly the  first in 10-15 years. Credit Suisse also points out that in salty snacks, ITC had gained a 15% market  share in June with Bingo! potato chips, a business that has broken even in five  years. PepsiCo is the leader in this business, and its spokesman said the  company has strengthened its market position over the past year with the help  of 25 new product and variant launches, including Baked Lay’s, Aliva Multigrain  Waves, Kurkure Puffcorn and Kurkure Monster Paws.

In personal care, the Credit Suisse report says ITC has gained a 6% share in the  highly competitive soaps market within four years of launch and 2% in shampoos.

Manish  Jain, a financial analyst with Nomura Equities Research, says the gain in  market share in soaps is impressive, considering the presence of established players  like Hindustan Unilever and Godrej Consumer Products. “The shampoo performance  has been somewhat underwhelming, although the anti-dandruff segment is growing  faster.

To correct this, ITC has re-launched various varieties,” adds Jain. Devendra  Chawla, president, Food Bazaar category at India's largest retailer Future  Group, says the success rate of ITC’ FMCG brands is better than the norm in the  FMCG industry in which 70% of the launches don't make the cut after the first  two years. “ITC has shown the courage to launch multiple products in a year  unlike most other FMCG companies that might launch at best 2-3 products  annually,” says Chawla.

ITC’s  decision to begin bottom-up in FMCG may have worked in its favour. As Credit  Suisse analyst Arnab Mitra says: “Unlike P&G, which starts with premium  products and slowly moves down the pyramid, ITC has started at the bottom of  the pyramid to build volumes in trade, leveraging its strong distribution, and  then focused on premium products backed by very strong advertising support.”

ITC  recently revamped the entire FMCG portfolio by launching a richer and premium  variant at each level. As Mitra points out, ITC has managed to reduce the share  of mass market glucose biscuits from over half of biscuit sales five years back  to less than a fourth now with premium launches like Sunfeast Dark Fantasy.

And, in staples,  ITC has consolidated its leadership position aided by the strong performance of  Aashirvaad  Multi Grain atta. In personal care, ITC has launched premium products across  its three main brands: Fiama Di Wills, Vivel and Superia. ITC’s divisional  chief executive (personal care) Sandeep Kaul says the Vivel brand is now used  by one-fifth of Indian households.

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