Moneycontrol PRO
Upcoming Event:\Option Writing Masterclass by Shubham Agarwal: a session power packed with lots of intelligence and tactics required to sell write options, on 13th July at 5pm. Register Now

ITC’s Sanjiv Puri marks out FMCG as the big growth engine in new normal post-Covid world

Puri, who completed a year in office as the company’s chairman this May, has made no bones of the company’s intent to shed its traditionalist approach on acquisitions in the FMCG space, which may well hold pointers of what could be coming.

August 30, 2020 / 07:50 PM IST
  • bselive
  • nselive
Todays L/H

Amid Covid-induced disruptions, diversified business conglomerate ITC appears to have set an ambitious expansion of its fast-moving-consumer-goods (FMCG) business, with chairman Sanjiv Puri, clearly identifying the segment as the company’s main growth driver, with focus on new products, bold acquisitions and the high-octane marketing.

Puri, who completed a year in office as the company’s chairman, has not shied away from making the company’s intent clear to shed its traditionalist approach on acquisitions in the FMCG space, which may well hold pointers of what could be coming.

In May, it announced the decision to acquire Kolkata-based spice maker Sunrise Foods Pvt. Ltd (SFPL), seen as part of a broader strategy to fortify its position in the country’s highly competitive FMCG market that is dominated by large corporations such as Hindustan Unilever Limited (HUL) and several local players in diverse regional geographies.

The acquisition, which was completed in July, involved buying out Sunrise Foods Private Ltd (SFPL) in an “upfront all-cash consideration of at Rs 2,150 crore on a cash-free, debt-free basis”.

SFPL is a Kolkata-based family-owned company engaged primarily in the business of spices, and this acquisition would help ITC augment its portfolio in the segment where it is present with its brand Aashirvaad, whose range of spices has a strong presence in Telengana and Andhra Pradesh.


COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

Sunrise is a market leader in eastern India in the fast-growing spices category and has a brand legacy of over 70 years.

A disaggregated analysis points towards a strategic tilt towards FMCG in recent years.

The earnings before interest, depreciation, taxes and ammortisation (EBIDTA) of the new FMCG businesses has more than doubled in three years—growing from from Rs 456 crores in 2017-18 to Rs 914 crores in 2019-20.

Over an eight-year period, segment EBIDTA for the FMCG Businesses has multiplied from Rs 44 crores in 2012-13, a year before Puri was elevated to president of the company’s FMCG business, to Rs 914 crores in 2019-20, galloping at a compounded annual growth rate (CAGR) of 54 percent.

In the current financial year, in the first quarter (April-June), ITC’s staples, convenience foods and health and hygiene products, representing around 75 percent of the portfolio (excluding education and stationery products business -EPSB), grew 34 percent, despite the Covid-19-induced lockdown that severely disrupted the broader economy.

During the quarter, the company launched 40 new products, with focus on “future readiness” through a slew of first-to-market products in the hygiene and wellness space such as the Savlon disinfectant spray, the Nimwash fruit and vegetable wash, Savlon germ protection wipes, B Natural Plus immunity supporting juice among others.

“Aggregate consumer spends in the mother brands have risen to Rs 19,700 crore in 2019-20 from about Rs 16,000 crore in 2017-18. Puri has been reiterating the single minded objective to make every business a leader in the segment by strengthening competitiveness and achieving scale,” said a retail analyst, who wished not to identified.

The analyst said that ITC’s foods business, which is the third largest, rapidly narrowing the gap, with some players such as Aashirvaad (Rs 6,000 crore), Sunfeast (Rs 4,000 crore), Bingo (Rs 2,700 crore) and YiPPee (Rs 1,300 crore), achieving significant value and scale.

The restructuring of the lifestyle retailing business with the sale of the John Players brand are all measures to improve profitability of the FMCG segments, he said.
Gaurav Choudhury
first published: Aug 30, 2020 07:49 pm
ISO 27001 - BSI Assurance Mark