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.

Gaurav Choudhury

August 30, 2020 / 07:50 PM IST

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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.

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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.