ITC the changing dynamics of FMCG game
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ITC the changing dynamics of FMCG game 11-September-2020 03:41 |
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At the AGM of ITC in July 2015, YC Deveshwar declared his ambition of making ITC non-cigarette FMCG segment a business by 2030. With the company making about crore of revenue in this segment in 2015-16, the target would mean a growth of 10 times from today size Tobacco Shop.
Inherent demographic advantages of our country Newport Cigarettes, increasing disposable incomes, rising brand consciousness of consumers and the deep pockets that the company has, might help the new Chairman, who assumes office early next year, achieve this target.
Following Deveshwar decision to diversify the company revenue stream away from cigarettes, ITC entered the FMCG segment in 2001-02, with the launch of ready-to-eat foods under the brand of India
Today, several launches in segments such as food, personal care, clothing and stationery later, the non-cigarette FMCG division is the second biggest contributor to the top-line, bringing about 20-25 per cent of the company total revenues that includes hotels, paper/packaging and agri-business.
Contribution of cigarette sales to total revenue has been steadily decreasing, from over 80 per cent in 2001-02, to less than 50 per cent now.
But several regulatory restrictions and low volumes notwithstanding, cigarettes continue to be the cash cow, with the company being able to predominantly pass off duty hikes to customers.
Cigarettes bring about 75-80 per cent of the pre-tax profits.
The non-cigarette FMCG business on the other hand, turned the corner only in 2013-14, more than 10 years after the launch. In 2015-16, the segment contributed a mere crore out of the company total pre-tax profits of crore.
While any FMCG business may require advertising spends of about 10-20 per cent of revenues, it is not necessarily highly capital-intensive.
In any case, the company has had deep pockets for both, thanks to its rich cash flows from the cigarette business.
It also has the advantage of tapping the distribution network of cigarettes for FMCG products and the advantage of backward integration for raw materials such as wheat, potatoes, milk and so on, through its agri-business.
Making a markBut being a relatively late entrant in a segment entrenched with MNCs, ITC continues to be an ran in many of its product offerings Marlboro Cigarettes.
It made a mark in only few brands such as Sunfeast biscuits, where it has taken on Britannia and YiPPee! noodles, which took on Maggi (Nestle).
The company entered the personal care segment with the launch of soaps, shampoos, shower gels and conditioners under brands such as Fiama Di Wills and Vivel in 2007-08.
But even after several other launches and range extensions into segments such as fairness creams, deodorants and face wash, ITC is not among the top three players in any of these segments.
Hindustan Unilever, Procter and Gamble and Godrej Consumer are among those with a good hold over these segments.
HUL has 40-50 per cent market share in soaps and shampoos. All this implies relatively lower pricing power for ITC and hence, margins.
This apart, divisions such as stationery, incense/match sticks, retail, and so on Cheap Cigarettes Free Shipping, considered part of the FMCG business are not game changers either.
Next big ideaTo quicken its pace of growth, the company has recently acquired brands such as Savlon Wholesale Cigarettes, Shower to Shower talc and B Natural juices.
While brands such as Dettol have good recall, in the juices category, Dabur Real and Pepsi Tropicana have a market share of over 50 per cent and 25-30 per cent, respectively.
Dairy seems to be its next big idea in FMCG Carton Of Newport 100S, with the company launching Aashirvaad Ghee late last year. It expected to roll out several value added milk products in future.
While ITC backward integration with farmers can help here, this segment is overcrowded with organised players such as Nestle, Amul, Mother Dairy, and so on, and several unorganised and regional players as well.
Related articles:
Cheap Cigarettes For Sale Online
How To Stop Smoking Tobacco
Inherent demographic advantages of our country Newport Cigarettes, increasing disposable incomes, rising brand consciousness of consumers and the deep pockets that the company has, might help the new Chairman, who assumes office early next year, achieve this target.
Following Deveshwar decision to diversify the company revenue stream away from cigarettes, ITC entered the FMCG segment in 2001-02, with the launch of ready-to-eat foods under the brand of India
Today, several launches in segments such as food, personal care, clothing and stationery later, the non-cigarette FMCG division is the second biggest contributor to the top-line, bringing about 20-25 per cent of the company total revenues that includes hotels, paper/packaging and agri-business.
Contribution of cigarette sales to total revenue has been steadily decreasing, from over 80 per cent in 2001-02, to less than 50 per cent now.
But several regulatory restrictions and low volumes notwithstanding, cigarettes continue to be the cash cow, with the company being able to predominantly pass off duty hikes to customers.
Cigarettes bring about 75-80 per cent of the pre-tax profits.
The non-cigarette FMCG business on the other hand, turned the corner only in 2013-14, more than 10 years after the launch. In 2015-16, the segment contributed a mere crore out of the company total pre-tax profits of crore.
While any FMCG business may require advertising spends of about 10-20 per cent of revenues, it is not necessarily highly capital-intensive.
In any case, the company has had deep pockets for both, thanks to its rich cash flows from the cigarette business.
It also has the advantage of tapping the distribution network of cigarettes for FMCG products and the advantage of backward integration for raw materials such as wheat, potatoes, milk and so on, through its agri-business.
Making a markBut being a relatively late entrant in a segment entrenched with MNCs, ITC continues to be an ran in many of its product offerings Marlboro Cigarettes.
It made a mark in only few brands such as Sunfeast biscuits, where it has taken on Britannia and YiPPee! noodles, which took on Maggi (Nestle).
The company entered the personal care segment with the launch of soaps, shampoos, shower gels and conditioners under brands such as Fiama Di Wills and Vivel in 2007-08.
But even after several other launches and range extensions into segments such as fairness creams, deodorants and face wash, ITC is not among the top three players in any of these segments.
Hindustan Unilever, Procter and Gamble and Godrej Consumer are among those with a good hold over these segments.
HUL has 40-50 per cent market share in soaps and shampoos. All this implies relatively lower pricing power for ITC and hence, margins.
This apart, divisions such as stationery, incense/match sticks, retail, and so on Cheap Cigarettes Free Shipping, considered part of the FMCG business are not game changers either.
Next big ideaTo quicken its pace of growth, the company has recently acquired brands such as Savlon Wholesale Cigarettes, Shower to Shower talc and B Natural juices.
While brands such as Dettol have good recall, in the juices category, Dabur Real and Pepsi Tropicana have a market share of over 50 per cent and 25-30 per cent, respectively.
Dairy seems to be its next big idea in FMCG Carton Of Newport 100S, with the company launching Aashirvaad Ghee late last year. It expected to roll out several value added milk products in future.
While ITC backward integration with farmers can help here, this segment is overcrowded with organised players such as Nestle, Amul, Mother Dairy, and so on, and several unorganised and regional players as well.
Related articles:
Cheap Cigarettes For Sale Online
How To Stop Smoking Tobacco
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