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ITC: The rise of a challenger FMCG Brand
Pitch - 10 Jun 2014

A  multi-business conglomerate, ITC has climbed its way to the top posing a challenge to established FMCG players.

It  has been a trailblazer which has achieved significant mile-stones in its long  journey. To-day it prides itself on creating 5 million sustainable livelihoods, having created brands that are posing a serious challenge to world class brands in every category. ITC, the  Kolkata based conglomerate is a force to reckon with especially in the FMCG sector. Its new FMCG businesses have  crossed Rs 7,000 crore. This growth has been rated by a Nielsen Report to be the fastest among the consumer goods  companies operating in India.

How did a company that began as a Cigarettes and Leaf Tobacco business, become  a juggernaut in the Foods and personal care category? How did it establish its dominance in the hospitality  sector and how did it develop the paperboards business? What led it to enter  the apparel retail category? To add to this list and to establish itself as one of the largest food companies  in the country, it has also decided to enter into the carbonated beverages and  dairy businesses.

ITC  saw its other Fast Moving Consumer Goods which includes personal care and  Foods, grow 16.6 per cent in turnover to Rs 2078 crore at the start of the year. ITC's other FMCG business  has grown to become a behemoth in this category and if numbers are to be believed, it has stolen a clear march  over mid-tier peers such as Dabur Emami, Colgate, Marico and GodrejConsumer.

It's  a case of a company delivering exactly what the consumer wants, at the right  time with the help of its in-house R&D capabilities and relevant consumer insights.  As a brand that is more than a 100 years old in the Indianmarket, ITC’s biggest strength lies in  its insight into the Indian consumer.

The ITC Life Sciences and Technology Centre in Bangalore, operational since1983  not only supports and improves existing products but also creates innovations and anticipates consumer needs.  Path-breaking solutions that blend science, research and technology offer  consumers the best solutions to improve the quality of their lives.

When  ITC overtook the FMCG giant HUL in the branded food and beverage category in  the last fiscal, it was an eye-opener for analysts, marketers and consumers. As  Abraham Koshy, Professor of Marketing at 11M Ahmedabad says, "ITC has  emerged as a very stable and intelligent player even in categories with  difficult competitors. Its timing to foray into the food and packaged food  categories has been perfect and isworking well for it.”

ITC  is among the 50 fastest growing consumer products companies globally. This is  according to the seventh annual Global Powers of Consumer Products report  issued by Deloitte Touche Tohmatsu (DTTL). In fact, ITC improved its ranking to 134 from 150 last  year in the Top 250 Consumer Products Companies. The company has been able to  make an impact globallyas reflected in the list. Brand Consultant Harish  Bijoor, of Harish Bijoor Consults compares Reliance and ITC when he says,  "Today ITC’s market share is as much as that of Reliance. It’s also as  valuable as Reliance. They are the biggest market share holders in tobacco.  Hence, they could easily leverage on their brand strength to make an impact  globally.”

But  can ITC's growth wave in different sectors be attributed to its brand strength  built through the tobacco business? ITC's Branded Packaged Foods business  comprises seven popular brands -Aashirvaad, Sunfeast,Bingo, Kitchens of India,  mint-o, Candyman and Yippee.The focus is healthandbuilding trust among    consumers.

In    the biscuit category ITC’s Sunfeast has inched up by capturing market share    from both Britannia and Parle in cream biscuits. The Sunfeast range was launched in July 2003, offering    wholesome and innovative biscuits to the Indian consumers. Twelve years down the line, Sunfeast offers not just    biscuits but has spawned instant noodles and Pasta too. ITC blended multiple    internal competencies to take over the foods market by storm. Its    distribution reach is phenomenal and the foods business boasts of a solid    market position.

Chitranjan    Dar, Divisional Chief Executive, Foods Division, ITC, attributed the    company's gains in cream biscuits to its relentless focus on portfolio enrichment through innovations like    Sunfeast Dark Fantasy Choco Fills andChoco Meltz and Sunfeast Dream Cream    range. "These flavours have created excitement among consumers and significantly enhanced the consumer    franchise of the ‘Sunfeast’ brand,” said Dar. What’s helped in the process is    ITC Hotels' marketing and distribution infrastructure, which Sunfeast has leveraged to stay ahead of    the curve. Sunfeast was launched at the right time when the organised market    was expanding. This helped the brand to expand rapidly in a market, which was for years dominated by    Britannia and Parle.

For    the year ended October 31, 2013, ITC’s cream biscuit market share stands at    around 25 per cent in value, according to industry sourceswho quoted    all-India Nielsen numbers. The market share numbers for Parle Products and    Britannia for the same period were under 20 per cent.

For    the quarter ended December 31, 2013, ITC's new FMCG businesses registered a    healthy revenue growth of 16.4 per cent. ITC is also the only Indian company    to be rated among the Top 10 global FMCG companiesin terms of value creation    during the period 2008-2012 by Boston Consulting Group. ITC Foods has drawn    on its internal resources like the agri-sourcing strength of e-choupals, its    knowledge of Indian cuisine, capabilities in product development, sales and    distribution to scale up volumes. Superior consumer insights and smart sourcing have    helped ITC maintain the edge.

The    personal care industry in India is on a growth curve. It is driven by rising    consumer incomes and the rising awareness about glooming and personal care    among them. ITC has risen to this opportunity too, resulting in an expanding    Personal Care products range that has madeits presence felt in the market. In    July 2005, ITC embarked on the Personal Care business. "Essenza Di Wills”, "Fiama Di Wills",    "Vivel", "Engage" and "Superia" are some of the    brands in this category which have received a positive response in the    market. The personal care business continues to growespecially in the    Deodorants category where the "Engage” range continues to receive good response from consumers.

Sandeep    Kaul, Chief Executive, Personal Care Products Business, ITC Ltd explained how    ITC was moving forward in the personal care category, "Research and product development    expertise focused on addressing the needs of various consumer benefit    segments are being leveraged to launch innovative and differentiated product    offerings in the Soaps, Shower Gel, Skin Care, Face Wash and Deodorant categories under    the ‘Fiama Di Wills’, ‘Vivel’, ’Engage’ and ‘Superia’ brands".

ITC    has extended its distribution reach to the tier 2 and tier 3 cities, with    these cities also driving the growth of the company. These markets contribute    to 30 per cent of the turnover of the FMCG industry. ITC has been quick to adapt to these markets providing    products at affordable pricing. The contribution of these markets has been    increasing for ITC and account for l/3rd of the business in the FMCG category    for ITC.

ITC    entered the education and stationery business in the premium segment in 2002    and in the popular segment in 2003. Classmate became the largest Notebook    brand in the country in 2007. The products were a result of ITC's insights into the Indian    consumer. It provided great value in terms of product and pricing for the    Indian consumer. In March 2014, ITC’s stationary business had earned a    revenue of Rs 1000 crore in consumer spends. ITC has managed to provide    unique and differentiated products in the Paperkraft and Classmate ranges. In    January this year, ITC's Paperkraft launched "Glowin the Dark” and    "Twin Ruling" notebooks that boasted of cutting edge design. Till a    decade back the stationery industry in India was highly unorganised but with    the entry of international players like Office Depot, Staples the competition has gone up. The organised    market for notebooks is Rs 4000crore and ITC’s Classmate has managedto become the market leader with a 20 per cent share. It is way ahead of the other national brand Navneet and other    regional players. ITC is set to expand further in this segment. Brand Saathi is another soon-to-be-launched brand    which would cater to the less prosperous markets. Yet another premium    offering on the anvil is Classmate Pulse. Notebooks comprise almost 85 per    cent of the company’s revenue whilethe remaining 15 per cent is from other stationery products.

Speaking    about ITC's differentiated product offerings, Chand Das, Chief Executive,    ITC's Education and Stationery Products Business says, “Classmate is today    India’s largest and fastest growing stationery brand backed by superior    consumer insight, product innovation, brand & trade marketing &    supply chain collaboration. ITC’s education and stationery product brands - 'Paperkraft’,    ‘Classmate Pulse', ‘Classmate’ &‘Saathi’- offer consumers a wide range of    differentiated products addressing the specific needs of each segment."

Today,    ITC is firmly established as a fast growing FMCG brand that has a significant    market share which is on a growth path. It is able to come up with game-changing innovation, and has the distribution    capabilities to reach out to its target group of consumers. It is able to match the evolving tastes of consumers and has stood    thetest of time. It has remained competitive through the years and is not just surviving but thriving among competitors.    It has accepted that innovation is an imperative to beat them all and is focused on it.

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