Description
The ppt about ITC's diversification into FMCG sector.
ITC-Diversification into FMCG
The Firm..
?
?
?
?
?
?
?
One of India’s largest Conglomerates One of the 8 Indian Companies to feature in ‘Forbes A-list’ Outstanding Market Leader in its traditional businesses-Cigarettes, Hotels, Agri Business& Paperboards. Rapidly gaining market share in IT, Branded Apparel, Packaged Food & Confectionary, Stationery & Greeting cards. Whopping Market Capitalization of $15 Billions Current Topline Figures of $4.75 Billions with a healthy bottom-line figures of $0.67 Billions(2006-07 data). The firm is on the right trajectory with a handsome annual topline growth of 20.2%.
ITC - Business Portfolio ITC
CIGARETTES HOTELS AGRIBUSINESS PAPER & PACKAGING FMCG-OTHERS
BISCUITS
CONFECTI ONERY
ATTA
PACKAGED BRANDED FOOD APPAREL
The Legacy…
? ? ? ? ?
August 24, 1910 - Started under the name of Imperial Tobacco Company of India Limited. 1925 - Packaging & Printing Business Division set up as a part of strategic backward integration 1975 - Launched its Hotels business 1979 – Made Forays into Paperboards business 1990 - Leveraging its agri-sourcing competency, International Business Division (IBD) was set up for export of agricommodities.
New Vistas…
? ? ? ? ?
? ? ?
2000 - Launched a line of high quality greeting cards under the brand name Expressions 2000 – Entered into Lifestyle Retailing business with Wills Sport 2000 - Spun off its information technology business into a wholly owned subsidiary, ITC Infotech India Limited 2001 – Came into the Foods business with the launch of Kitchens of India 2002 - Entered the confectionery and staples segments with the launch of the brands Mint-O and Candyman confectionery and Aashirvaad Atta 2002-03 – Initiated the marketing of Safety Matches & Incense sticks 2003 – Entered into biscuit segment with the introduction of Sunfeast 2007 - Entered the fastest growing branded snacks category with Bingo.2
FMCG Industry...
? ?
?
Other major players in the FMCG sector include HUL, Britannia, Nestle, Parle, P & G, Dabur. The market size of Indian FMCG sector in 2006-07 is pegged at Rs. 70,000 Crores. It grew by 26.1% in the year 2007. Key growth drivers in India include rising disposable incomes, favourable demographic profile, relatively low levels of per capita consumption, growing urbanisation and population of working women, increased penetration of organised retail.
ITC Vs. Other Players
? ? ? ? ?
?
Sunfeast Biscuits at third position with 10% market share after Britannia and Parle respectively. Aashirwad wheat flour is on top with 40% market share, virtually forcing HUL to slow down Annapurna wheat flour. Ready-to-eat Sunfeast Pasta established with 6% of volumes in branded noodles market. 8% market share in Biscuits industry(Rs 4500 Cr) & confectionery(Rs 2000 Cr) &15% Mkt share in atta and salt (Rs 1000 Cr) Radically different strategy as it offers its distributors higher margins and competitively priced products- resulted over 10 per cent market share in a short span of time." Analysts point out that operating margins for ITC are around 35 per cent as compared to 15 per cent for Hindustan Lever and 20 per cent for Nestle India.
Internal Rationale
? ?
? ?
? ? ? ?
Hedging the risk of Cigarette Business (rising duties, ban on public smoking ,anti-tobacco movements & sharp decline in cigarettes as a proportion of tobacco) Leveraging its existing Distribution Network (Reach of 3 Mn outlets vis-à-vis next largest of HUL’s 1.8 Mn) Expertise in Food & Cuisine domain from Hotel Business. Superior Sourcing & Supply chain Management Capabilities from e-choupal (2% cost savings in wheat than the market price which is a vital input in Food industry) Expertise in Brand Portfolio Management In-depth understanding on consumer behavior IT-enabled transaction backbone. For eg. E-choupal Focus on ‘Commitment Beyond The Market’ – Contributing to Competitiveness of SMEs
External Rationale
?
?
?
?
?
Huge potential Food business of Rs 550000 Cr with a healthy CAGR of 15% in Branded segment till 2010. Branded segment formed just 6% vis-à-vis 95% of Developed Markets Increasing urban female employment and increasing cost of domestic helps – demand rise in processed foods Biscuits most lucrative among food industry growing at 12-14% Poorly innovated products in most food segments.
External Rationale
?
? ?
‘Fortune at the bottom of the Pyramid’
Rapid Urbanisation Change in demographic profiles -larger Percent of Youth Steady growth in Household incomes Soaring Disposable incomes Burgeoning Middle class
?
? ?
Rural & Urban Potential
Population 2001-02 (Mn Households) Population2009-10 (Mn Households) % Distribution Market(Towns/Villages) Urban 53 69 28 3768 Rural 135 153 72 627000 3.3
Source – PWC report
Universe of Outlets ( in Mn) 1
Segment Wise Break-up of Revenue (in %)
2001-02
2006-07
2001 -02 Turnover of Rs 9840 Cr
2006-07 Turnover of Rs 19505 Cr
Modalities of Diversification
?
?
?
?
Greenfield investments in Biscuits, Atta, Ready to eat & Snacks Inorganic route taken in Confectionery – acquisition of CANDICO. Incense sticks are completely sourced from cottage industries Safety matches are sourced from SSI Sector
References
? ? ?
?
www.itcportal.com www.tobaccofederationofindia.com www.biscuitfederationofindia.com www.economictimes.com
VOTE OF THANKS
CAGR of Household incomes (20022010)
25 20 15 Growth % 10 5 0 -5
Source – CMIE database
2.1
2.14.5
4.5- 11.3 11.3 22.7
> 22.7
Annual Income($ 'ooo)
Soaring Disposable Incomes
1200 1000
Disposable Income (US$/annum)
800
600
400
200
SourcePWC FMCG Study
2003 2015
0
Years
Burgeoning Middle Class
700 600
500
Households(Mn)
400
300
200
100
Source Mckinsey study
2005 Ye a rs 2025
0
Decline of Cigarettes
Year Cigarettes Others Total (Mn Kgs) (Mn (Mn Kgs) Kgs) 1981-82 86 320 406 2001-02 65 Variance -21 388 +68 453 +47 Share of Cigarettes 21% 14%
Source – Tobacco Institute of India
Change in Demographics
1999 Population (Millions) Population (<25 Years of age) 846 480 2001 1012 546 2006 1087 565
Urbanisation (%)
26
28
31
Source – Statistical Outline of India
doc_438123267.ppt
The ppt about ITC's diversification into FMCG sector.
ITC-Diversification into FMCG
The Firm..
?
?
?
?
?
?
?
One of India’s largest Conglomerates One of the 8 Indian Companies to feature in ‘Forbes A-list’ Outstanding Market Leader in its traditional businesses-Cigarettes, Hotels, Agri Business& Paperboards. Rapidly gaining market share in IT, Branded Apparel, Packaged Food & Confectionary, Stationery & Greeting cards. Whopping Market Capitalization of $15 Billions Current Topline Figures of $4.75 Billions with a healthy bottom-line figures of $0.67 Billions(2006-07 data). The firm is on the right trajectory with a handsome annual topline growth of 20.2%.
ITC - Business Portfolio ITC
CIGARETTES HOTELS AGRIBUSINESS PAPER & PACKAGING FMCG-OTHERS
BISCUITS
CONFECTI ONERY
ATTA
PACKAGED BRANDED FOOD APPAREL
The Legacy…
? ? ? ? ?
August 24, 1910 - Started under the name of Imperial Tobacco Company of India Limited. 1925 - Packaging & Printing Business Division set up as a part of strategic backward integration 1975 - Launched its Hotels business 1979 – Made Forays into Paperboards business 1990 - Leveraging its agri-sourcing competency, International Business Division (IBD) was set up for export of agricommodities.
New Vistas…
? ? ? ? ?
? ? ?
2000 - Launched a line of high quality greeting cards under the brand name Expressions 2000 – Entered into Lifestyle Retailing business with Wills Sport 2000 - Spun off its information technology business into a wholly owned subsidiary, ITC Infotech India Limited 2001 – Came into the Foods business with the launch of Kitchens of India 2002 - Entered the confectionery and staples segments with the launch of the brands Mint-O and Candyman confectionery and Aashirvaad Atta 2002-03 – Initiated the marketing of Safety Matches & Incense sticks 2003 – Entered into biscuit segment with the introduction of Sunfeast 2007 - Entered the fastest growing branded snacks category with Bingo.2
FMCG Industry...
? ?
?
Other major players in the FMCG sector include HUL, Britannia, Nestle, Parle, P & G, Dabur. The market size of Indian FMCG sector in 2006-07 is pegged at Rs. 70,000 Crores. It grew by 26.1% in the year 2007. Key growth drivers in India include rising disposable incomes, favourable demographic profile, relatively low levels of per capita consumption, growing urbanisation and population of working women, increased penetration of organised retail.
ITC Vs. Other Players
? ? ? ? ?
?
Sunfeast Biscuits at third position with 10% market share after Britannia and Parle respectively. Aashirwad wheat flour is on top with 40% market share, virtually forcing HUL to slow down Annapurna wheat flour. Ready-to-eat Sunfeast Pasta established with 6% of volumes in branded noodles market. 8% market share in Biscuits industry(Rs 4500 Cr) & confectionery(Rs 2000 Cr) &15% Mkt share in atta and salt (Rs 1000 Cr) Radically different strategy as it offers its distributors higher margins and competitively priced products- resulted over 10 per cent market share in a short span of time." Analysts point out that operating margins for ITC are around 35 per cent as compared to 15 per cent for Hindustan Lever and 20 per cent for Nestle India.
Internal Rationale
? ?
? ?
? ? ? ?
Hedging the risk of Cigarette Business (rising duties, ban on public smoking ,anti-tobacco movements & sharp decline in cigarettes as a proportion of tobacco) Leveraging its existing Distribution Network (Reach of 3 Mn outlets vis-à-vis next largest of HUL’s 1.8 Mn) Expertise in Food & Cuisine domain from Hotel Business. Superior Sourcing & Supply chain Management Capabilities from e-choupal (2% cost savings in wheat than the market price which is a vital input in Food industry) Expertise in Brand Portfolio Management In-depth understanding on consumer behavior IT-enabled transaction backbone. For eg. E-choupal Focus on ‘Commitment Beyond The Market’ – Contributing to Competitiveness of SMEs
External Rationale
?
?
?
?
?
Huge potential Food business of Rs 550000 Cr with a healthy CAGR of 15% in Branded segment till 2010. Branded segment formed just 6% vis-à-vis 95% of Developed Markets Increasing urban female employment and increasing cost of domestic helps – demand rise in processed foods Biscuits most lucrative among food industry growing at 12-14% Poorly innovated products in most food segments.
External Rationale
?
? ?
‘Fortune at the bottom of the Pyramid’
Rapid Urbanisation Change in demographic profiles -larger Percent of Youth Steady growth in Household incomes Soaring Disposable incomes Burgeoning Middle class
?
? ?
Rural & Urban Potential
Population 2001-02 (Mn Households) Population2009-10 (Mn Households) % Distribution Market(Towns/Villages) Urban 53 69 28 3768 Rural 135 153 72 627000 3.3
Source – PWC report
Universe of Outlets ( in Mn) 1
Segment Wise Break-up of Revenue (in %)
2001-02
2006-07
2001 -02 Turnover of Rs 9840 Cr
2006-07 Turnover of Rs 19505 Cr
Modalities of Diversification
?
?
?
?
Greenfield investments in Biscuits, Atta, Ready to eat & Snacks Inorganic route taken in Confectionery – acquisition of CANDICO. Incense sticks are completely sourced from cottage industries Safety matches are sourced from SSI Sector
References
? ? ?
?
www.itcportal.com www.tobaccofederationofindia.com www.biscuitfederationofindia.com www.economictimes.com
VOTE OF THANKS
CAGR of Household incomes (20022010)
25 20 15 Growth % 10 5 0 -5
Source – CMIE database
2.1
2.14.5
4.5- 11.3 11.3 22.7
> 22.7
Annual Income($ 'ooo)
Soaring Disposable Incomes
1200 1000
Disposable Income (US$/annum)
800
600
400
200
SourcePWC FMCG Study
2003 2015
0
Years
Burgeoning Middle Class
700 600
500
Households(Mn)
400
300
200
100
Source Mckinsey study
2005 Ye a rs 2025
0
Decline of Cigarettes
Year Cigarettes Others Total (Mn Kgs) (Mn (Mn Kgs) Kgs) 1981-82 86 320 406 2001-02 65 Variance -21 388 +68 453 +47 Share of Cigarettes 21% 14%
Source – Tobacco Institute of India
Change in Demographics
1999 Population (Millions) Population (<25 Years of age) 846 480 2001 1012 546 2006 1087 565
Urbanisation (%)
26
28
31
Source – Statistical Outline of India
doc_438123267.ppt