The possibility of subsequent COVID waves creates near-term uncertainties, Sanjiv Puri, chairman and managing director of ITC said while addressing the company’s 110th annual general meeting on Wednesday.
However, the chairman said despite the pandemic being a cause of concern for livelihoods and economic growth, the Indian economy holds immense promise and the pace of vaccination brings further optimism.
The focus of the speech, however, was on the company’s strategy it has put in place called ‘ITC Next’, outlining the company’s next horizon of growth, while being consumer-centric, nimble, and cost-efficient. The idea is to integrate digital and sustainability to create ‘disruptive business models’ in a bid to create enduring value for stakeholders, he said.
“Each of your company’s businesses has pivoted to create new frontiers for the future, with enhanced competitiveness as well as a sharper focus on cost management to strengthen leadership or rapidly attain the top positions in the case of newer segments,” Puri added while addressing shareholders.
A large part of this is likely to come from the company’s non-cigarette FMCG business which has been aggressively growing over the past few years. Puri said the company has revitalised its FMCG portfolio to address emerging trends and is identifying categories that would drive growth through both the organic and inorganic routes.
On the inorganic front, Puri said the company is actively pursuing inorganic opportunities, similar to its earlier acquisition of Savlon, Nimyle, and more recently Sunrise Foods. While Savlon (which grew 13x) and Nimyle (grew 4x) helped it capture the surge in demand in the hygiene and naturals space, Sunrise gave ITC a stronger footing in the branded spices space, especially in underpenetrated markets.
“You company will continue to evaluate such value accretive inorganic opportunities as an additional pillar of growth,” Puri added.
On the organic front, the company will invest in its core brands such as ‘Aashirvaad’ and ‘Sunfeast’ not just to give them a larger play in their core categories, but also value-added adjacencies like in the case with Aashirvaad, which expanded into organic atta and pulses, as well as in instant meals, among others.
“These purposeful brands anchor large categories and have immense headroom to grow given the relatively lower household penetration currently, and particularly with per capita incomes rising in the future. Sustained investments to drive innovation and accessibility will continue to fuel growth and enhance market standing,” Puri said.
A large part of the company’s ITC Next strategy is also its digital play, where the company is investing in cutting-edge digital technologies to add impetus across operations like marketing and commerce.
ITC’s sales through e-commerce channels more than doubled in FY21, and the company also strengthened its direct-to-consumer (D2C) platform ‘ITC e-Store’, while also introducing more ‘digital first’ brands. Puri said the e-Store is today present in 11 metros, comprising 800 products across 45+ categories, and also helps the company spot trends and gain consumer insights.
EBITDA margins of the FMCG segment improved by 640 basis points, whilst revenue increased from around Rs 10,500 crore to nearly Rs 15,000 crore in the past four years, Puri said.
“Your company continues to be bullish about the Indian consumer space. Accordingly, sustained investments are being made to build and strengthen ITC’s world-class Indian brands, which will derive fresh impetus from the strategic revitalisation of the FMCG businesses as well as the synergies of ITC’s institutional strengths, to realise our aspiration to be India’s no 1 FMCG company,” he added.
The cigarettes business, Puri said, was severely impacted by the disruptions last year, though it recovered to nearly pre-COVID levels towards the end of the year. Post the second wave, the week-on-week improvement in market conditions and easing of restrictions augurs well for a pick-up in the recovery momentum, he added.
However, ITC’s hotels business was among the most impacted by the pandemic, Puri said ‘structural interventions’ were put in place to enable new revenue streams and aggressive cost management.
For this business, the ITC Next strategy will see the company pursuing an ‘asset-right’ strategy, as part of which Puri said the ‘Welcomhotel’ brand has been refreshed, while a new boutique brand ‘The Storii’ is being introduced to offer the new-age traveler curated nature experiences.
“The business is well poised to leverage emerging opportunities as mobility increases in the future. In the medium term, the asset-right strategy is expected to double the number of properties in your company’s hotels business,” the chairman added.
Puri also spoke about the importance of sustainability, with the company embarking on a Sustainability 2.0 strategy, “Sustainability 2.0 calls for inclusive strategies that can support livelihoods, pursue newer pathways to fight climate change and enable a transition to a net-zero economy as also create an effective circular economy for post-consumer packaging waste.”