ITC, the 113-year-old FMCG major, has been making significant strides in diversifying its revenue streams away from its traditional cigarettes and leaf tobacco business. Over the years, the company has focused on developing a robust portfolio of non-cigarette FMCG products, creating a range of successful mother brands. ITC’s transformation from a predominantly cigarette-focused company to a diversified FMCG player has been a gradual process. The company’s CEO, Sanjiv Puri, acknowledged that the journey to diversify began around 2008, and under his leadership, ITC embarked on the ‘ITC Next’ strategy. This strategy aimed to innovate products, create brands, and allow professional entrepreneurs to build businesses in the FMCG segment.
Puri mentioned the company’s endeavour in constructing a robust and competitive FMCG business prepared for both present and future challenges, aiming for increased profitability. He highlighted the implementation of a digital framework called DigiArc, designed to establish an intelligent enterprise system using technologies like AI and Industry 4.0. This system spans across various domains such as insights, product development, supply chain, distribution, and content-to-commerce, aiming to improve efficiencies, enhance flexibility, and bolster overall competitiveness. Puri emphasised the rapid growth of digital commerce and the pursuit of new growth avenues through high-value products and services, focusing on the convergence of digital technologies and sustainability.
ITC’s foray into the food business, supported by its presence in the hotel industry, laid the foundation for its success in the FMCG segment. The company leveraged its understanding of product distribution, gained from its strength in the tobacco business, to aggressively diversify into various product categories. Additionally, ITC invested significantly in brand building and utilised its cash flows from the cigarette business to create stronger brands in the FMCG segment.
ITC’s non-cigarettes business has witnessed remarkable growth over the years. According to the company’s latest annual report, its non-cigarettes FMCG business contributed 17% to the overall revenue in FY14, which grew to 25% in FY23. The segment has grown over 31-fold and currently forms over two-thirds of ITC’s net segmental revenues. This growth can be attributed to the company’s focus on developing mother brands in various product categories.
Like its peers, ITC has recognized the importance of digital channels in its FMCG business. The company has been investing in its direct-to-consumer (D2C) platforms, allowing customers to buy products directly from the company website. This digital push enables ITC to gather first-party data and market its offerings more effectively.
RTM Watch’s Take
ITC’s strategic focus on diversifying its revenue streams and building FMCG mother brands has yielded impressive results. The company’s ability to leverage its distribution network, invest in brand building, and tap into its core competencies has propelled its growth in the non-cigarettes FMCG segment. With its digital initiatives and continued investments in start-ups, ITC is well-positioned to further strengthen its presence in the FMCG market.
