Rivals square up as ITC’s FMCG play grows

The next six-eight months could see cigarette-to-chocolate manufacturer ITC push the peddle on investment in the fast-moving consumer goods (FMCG) as the need to scale up one of its most high-profile growth engines increases.

In 2016-17, ITC’s FMCG business (called FMCG-Others) had a total turnover of ~105.24 billion. In the first nine months of the 2017-18, this business had crossed ~82.77 billion (on standalone basis), implying that if annualised the segment would have an overall top line of ~110 billion.

While ITC has steadily added around ~7-10 billion in the FMCG top line in the past five years, analysts say there is still much work to do. A few years ago, the company had set a target of ~1 trillion in the FMCG top line by 2030 and while the company's CEO and executive director Sanjiv Puri indicated that the deadline (to achieve the target) could be stretched by a couple of years, it remained committed to achieving the milestone. Puri said the company would roll out nearly 30 products across categories this financial year, equal to the number it had done last year.

“There is a lot of action from ITC in both foods and personal care,” Abneesh Roy, senior vicepresident, research, institutional equities of Edelweiss, said. "Their portfolio in juices has undergone a complete transformation - moving from concentrates to fruit pulp. There are plans to scale up its initiatives in dairy, premium chocolates, snacks, branded commodities, biscuits, and confectionery. In personal care, ITC has rolled out a premium skincare range in Dermafique and acquired Charmis from Colgate-Palmolive last year, which will be pushed in the popular (skincare) segment,” he said.

So are rivals doing enough to take on ITC? Some of them are as the need to ring-fence themselves against the onslaught grows.

PepsiCo India, which competes with ITC's B Natural juices, for instance, has already dragged the latter to court for naming its Tropicana brand in its ad campaign last month. While the ads have been modified by ITC, the two firms continue to wage a stiff battle in court over the merits of concentrates versus fruit pulp in juices.

Hemant Malik, divisional chief executive, foods, ITC, declined comment on the on-going legal battle, but did say that the firm would continue to roll out new juice flavours, all endorsed by B Natural brand ambassador Shilpa Shetty, as part of its ‘not-from-concentrate’ range. “We started the not-from-concentrate initiative a year ago when we rolled out a pomegranate juice variant under B Natural, which had 100 per cent fruit pulp. We were clear that if we had to offer a truly healthy range of products, all our flavours would have to make the transition to 100 per cent fruit pulp. That has happened now,” he said.

PepsiCo has also taken the battle in juices to the next level, appointing Katrina Kaif as its first-ever brand ambassador for Tropicana (in India), tasked with pushing the ‘My Health, My Way’ global campaign (of Tropicana) in the country. She will also push a new juice range under Tropicana Essentials, which is the company’s foray into nutrient-fortified drinks.

Dabur, in the interim, which is the leader in the ~25-billion domestic juices market with Real (the brand controls over 50 per cent of the category), is planning launch of a new fruit-based beverage by June. Sunil Duggal, chief executive officer, Dabur India, said the product would be priced around 30 per cent lower than brand Real and would target the mid and lower ends of the juice market, where regional players have been active in recent years.

Sachin Bobade, senior research analyst at brokerage Dolat Capital, said Dabur’s initiative points to how segment leaders were increasingly becoming aware of the challenge posed by ITC. “There will be more such initiatives and launches coming from category leaders and incumbents,” he said. “As ITC broadens its FMCG play.” In confectionary, ITC, according to trade sources, is working on a plan to launch vitamin-infused candies, priced slightly more than the regular ~1 candies this year. Rival Parle Products proposes to counter that with its own range of candies on the health platform, trade sources said.

In biscuits, where ITC, Britannia and Parle compete with each other, the latter has said that it would put more resources behind its premium brands, investing as much as 50 per cent of its overall sales and marketing budget on these products.