ITC Ltd, one of India’s leading conglomerates, has adopted a strategic approach to prioritise premium goods in its pursuit of higher profit margins. By focusing on premium products across various segments, ITC aims to tap into the growing demand for differentiated offerings and enhance its brand value. This article explores ITC’s strategy, its impact on the market, and provides insights into the company’s future prospects.
In response to evolving consumer preferences and rising prosperity, ITC has strategically shifted its focus towards premium goods in the FMCG (Fast-Moving Consumer Goods) sector. Traditionally, India has been a value-driven market, with consumers gravitating towards low-priced unit packs. However, changing consumer aspirations have led to an increased demand for premium and differentiated products such as fragrant body washes, value-added hair oils, and organic food items.
To capitalise on this trend, ITC has accelerated the launch of premium products across its portfolio. The company’s personal care business, which includes brands like Fiama Di Wills, Savlon, and Vivel, has witnessed a significant increase in the proportion of premium offerings, from 26% to 37% in just two years. Similarly, 35% of ITC’s packaged foods and beverages portfolio now comprises premium products.
Driving Margins through Premiumization
ITC’s strategic focus on premium goods not only aims to cater to evolving consumer preferences but also seeks to drive higher profit margins. Premium products often command higher price points, allowing companies to improve their margins and enhance profitability. By introducing premium variants and segmenting categories, ITC aims to create value-added offerings that justify higher price tags.
For instance, ITC’s packaged foods business has been segmenting categories such as atta (flour), biscuits, and noodles to introduce premium variants and increase margins. The company has also explored the introduction of high-margin products like jellies in the confectionery segment. Additionally, ITC’s strong sourcing capabilities and direct engagement with farmers through its agri-business division provide a competitive advantage in terms of quality and reliability.
ITC’s strategic shift towards premium goods aligns with the changing consumer landscape in India. As consumers increasingly seek differentiated and aspirational products, ITC’s focus on premiumization positions the company well to capture this growing market segment. The company’s emphasis on quality, innovation, and brand building has helped it gain a competitive edge in the FMCG sector.
ITC’s foray into premium goods also reflects a broader industry trend, with other major FMCG players like Hindustan Unilever Ltd, Dabur India, and Nestle India accelerating the launch of premium products to cater to evolving consumer demands. This shift towards premiumization indicates a maturing market and presents significant growth opportunities for companies that can effectively tap into this segment.
RTM Watch’s Take
ITC’s strategic focus on premium goods in its FMCG portfolio is a well-calculated move to drive margins and enhance profitability. By capitalising on changing consumer preferences and introducing value-added offerings, ITC aims to strengthen its brand equity and capture a larger share of the premium goods market. As the company continues to innovate and expand its premium product range, it is poised to maintain its competitive position and drive sustained growth in the FMCG sector.
