172@29@17@246!~!172@29@0@53!~!|news|business|companies|on-track-to-achieve-rs-1-lakh-cr-targetfmcg-biz-by-2030-itc-927479.html!~!|controller|infinite_scroll_article.php
Moneycontrol
Financial Freedom Offer: Subscribe to Moneycontrol Pro and grab benefits worth ₹15,000/-
Last Updated : Dec 13, 2016 07:51 PM IST | Source: CNBC-TV18

On track to achieve Rs 1 lakh cr target in FMCG biz by 2030: ITC

Speaking to CNBC-TV18‘s, Sanjiv Puri, COO of ITC said that the company is looking to diversify into fruits, vegetables and seafood business soon. ITC has launched 25 products this year and may launch another few in last month.

ITC continues to have a robust profile, with each vertical having potential to grow. The company is on track to achieve its Rs 1 lakh crore target by 2030 in the Fast Moving Consumer Goods (FMCG) vertical, Sanjiv Puri, COO of ITC.

"We are focusing on strengthening our presence in existing categories," he said adding new launches will be growth drivers in future.

Speaking to CNBC-TV18’s Shereen Bhan, Puri said the company is looking to diversify into fruits, vegetables and seafood business soon. ITC has launched 25 products this year and may launch another few in last month.

Focus is on setting up of physical infrastructure to improve supply chain and cost efficiency, Puri added. The company is undertaking 20 such projects of which one has already started functioning in Kolkata.

Below is the verbatim transcript of Sanjiv Puri's interview to Shereen Bhan on CNBC-TV18.

Q: 1986 is when you joined ITC; you have pretty much worked across each of the divisions. As you look forward today at the of calendar year 2016, what is the kind of visibility you have?

A: I think ITC has a very robust portfolio of businesses, each one of them has a potential to grow in the future whether we look at fast-moving consumer goods (FMCG) where you know we have a very bold aspiration to be Rs 1,00,000 crore.

Q: By 2030?

A: That’s right.

Q: Can you give me a more immediate term target?

A: We don’t give guidance, but certainly if you look at the growth rates that we have seen in the past, we continue to grow ahead of what the industry is achieving and we continue to reinforce our market standing.
We continue to launch new products. This year itself we have 25 products in the market it could have been a little more, if you are able to do it in this quarter and we have some categories that we have got into in the recent past.

In the recent past we have done juices with B Natural, we have entered dairy with Aashirvaad Svasti Ghee, then we have gone into chocolates with Fabelle a luxury chocolate offering and then we have Sunbean coffee -- clearly we are in fact focussing on strengthening our presence in existing categories and also getting into newer ones which we are incubating right now I would say and would be engines of growth in the future for sure. And our strategy from a focus on leadership in product where we create winning products for which we set up a very significant innovation engine in the form of our life sciences and technology centre at Bangalore which has over 350 scientists and close to 500 patents as of now.

The other piece of the strategy was always on superior consumer engagement which we have always been advocating in the past and now we are moving into a phase where we want to set up the physical infrastructure to get a very efficient supply chain in place. So we have about 20 projects in the pipeline and these are in various stages of construction. One has already begun this year in Kolkata and in the 6-9 months two more will start. These are going to give us the physical infrastructure for growth as well brings in a lot of cost efficiencies.

Q: Let me start by talking to you about this integrated plants that hope to set up by about 20 is what you are targeting specifically as far as the FMCG business is concerned. What will this really mean as far as margins are concerned, what will this mean in terms of logistics costs, distribution costs for a company like yours? I am not talking you about for the next 12 months or 24 months, but over the next 3 years what kind of margin expansion can we expect because of these integrated facilities that you are talking about?

A: It is like this that as you know the food products specifically are fairly freight intensive and they are products in a range of moderate margin when you compare the gamut of FMCG products, so cost efficiency is very important there. So, what we are achieving to do there is certainly bring ourselves closer to the market, so logistics costs come down, we are able to service the market faster, we are able to supply fresher stuff to the market and our philosophy is to create integrated value chains. So, what we are also going to do and of course is subject to the limitation of the agro climatic conditions in the catchment area, our endeavour is also to work with the farmers in each one of these areas to develop an integrated value chain from farm to fork.

Q: Fruits and vegetables as well?

A: Fruits and vegetables is something that is a segment we are not into at the moment, but as you know in the last annual general meeting (AGM) chairman, Mr YC Deveshwar actually said that this is an area we will be actively exploring.

Q: Is there is a possibility that soon we will hear an announcement on that front?

A: You should hopefully hear announcement soon on that and not only fruits and vegetables, but maybe also sea foods.

Q: That means the cold chain infrastructure will be part of these backend facilities as well?

A: It will be part of it. However, what we are looking at is not just supply them at in fresh form but what is more important is to add value by preserving shelf life, so it could be processed, it could be quick frozen, it could be dehydrated, whatever is appropriate for that commodity. So we will start with some commodities, hopefully, in the near future.

Q: When you say near future - what do you mean, over the next year perhaps?

A: Within a year for sure.

Q: What kind of investments are we talking about? I know that in your annual report you list out a number of about Rs 65,000 crore. Just for these integrated facilities, these 20 plants that you speak of, what is the kind of investment number?

A: The total investment, I think the figure I have with me is that for 65 projects that we have in place and I must say these 65 span across many segments of our business. We have an approved expenditure of Rs 25,000 crore. A substantial chunk is actually in the area of food and food processing, so that is where the bulk of the investment will be.

Q: Given what you are saying would it be fair to say that food is going to be the game changer; food is going to be the big growth engine as far as ITC is concerned going forward?

A: Food offers us the biggest area because that is the area where our enterprise strengths can be leveraged to the most. We have the advantage of a very strong agri backend and we have the advantage of the culinary expertise from the hotels. And we of course strengths of trade-marketing distribution and skills of consumer insight and brand building. So this is certainly the area that offers us a maximum leverage of our enterprise strength. So it will remain a significant portion of our FMCG play and a driver of our growth.

Q: But it also then gets a larger proportion of the investments as well, doesn't it?

A: It does get, and that is where the bulk of the investments are. But having said that let me also state that in other businesses, for example if you look at education and stationary, Classmates is a market leader today and that is another example where enterprise strengths have come together because with our paper business, we understand what it takes to provide a good quality notebook, what quality of paper is required for writing. So we are market leaders there. There are other segments like agarbattis and dhoop batti where we are number two. So while food is our largest segment but we are making good progress in most of the segments that we are into today.

Q: I know you don't give out guidance and you have a very ambitious target for 2030, but let me ask you, because this has been publicly spoken that you had a target of about Rs 10,000 crore over the next three years for your food business, my understanding is that you would probably get there sooner.

A: Sooner or later we should get there. As you know, I cannot give you a guidance in line with policy, but sooner or later we will get there for sure.

Q: Let me take a break from FMCG and talk to you about the core business which is the cigarette business and after 12-13 quarters we are seeing declining volumes, some stability seems to have returned as far as cigarettes are concerned, what is the outlook now for the cigarette business specifically also in the near-term given the impact of the demonetisation?

A: Let me break it into two -- I will talk about the industry per se and demonetisation because it is a specific event separately. So in the last few years, taxes on cigarettes have more than doubled and it is not just that taxes in cigarettes have doubled, I think the equally important issue is that the gap between cigarettes and the other forms of tobacco consumption have expanded. So any industry that is subject to such a severe increase in taxation and that too somewhat discriminatory will succumb to those pressures and that is what we have seen overtime, illegal cigarettes have been growing in fact, the recent FICCI report says that seizures this year are up 78 percent and then we have had this new pictorial warnings.

Q: What is the clarity on the pictorial warnings because we have seen this curious back and forth between the government in parliament outside parliament -- where do things now stand as far as pictorial warnings are concerned?

A: The notification stands, so all the manufactures have implemented it, but also there is this case that is currently underway at the Karnataka High Court as directed by the Honourable Supreme Court. So, on one hand there is a case and on the other hand we have complied with the regulation and the impact of that is that this is also putting pressure on the legal industry.

Recent survey was done by one of the research agencies and they found a lot of people preferring to opt for smuggled cigarettes or illicit cigarettes because they did not have the pictorial warnings. So on one hand we have the stress on account of the higher taxes, on the other hand we will have a pressure because of the unreasonable pictorial warnings and even in the US, the courts have stuck down these pictorial warnings and in countries like US also, the warning is only as a text message on the side panels and what we are seeing in the last four years we have seen that illegal industry has grown 23 percent and while illegal has grown 23 percent, total tobacco consumption in India has gone up by 18 percent.

At the same period, legal cigarette industry has declined in double digits. So no objective of tobacco control or the health objective is not being achieved and therefore it would be good if this sector is studied in details.

Q: So the next big trigger then is GST now, we don't know whether the negotiations, which have been stalled and the bill won't come in the winter session will be taken up in the Budget session or not but there is confusion on the manner in which the cess will be levied. The fact is that it is going to be 28 percent plus a cess. Our understanding from the government is that it is not going to be a significantly higher burden than what the current tax incidence is. I know that industry has been making representations to the government, what is the situation as far as the cess and the imposition of it is concerned?

A: Tobacco is going to be the only segment that after post in the GST scenario will also have excise. So it is going to have GST, it is going to have cess, it is going to have excise and what we hear from the honourable finance minister as he has been articulated with the media that the total incidence will be revenue neutral.

Q: What is your total tax incidence currently?

A: For example, VAT is 24 percent. So GST rate of 28 percent means that there is 4 percent additional tax which has to be offset between the sum total of the cess and excise per se. Cess is supposed to be for a period of five years for compensation and over a period of time there would be calibration between the proportion of cess and excise. So I think the right thing to do would be to retain this structure that exists for excise specific length based it gives fungibility.

Q: Are you concerned that there is a thinking of ad valorem at this point in time or do you believe that you have been adequately able to explain to the government that specific works well?

A: We have been saying that specific works well and it is demonstrated by data in the past. Since 1987 when the specific system came in to play while cigarette volumes have been flattish, excise collections had grown 18 times and in the pre-1987 era, where it was entirely on the ad valorem basis, there was a lot of litigation, there was a lot of leakage of under-invoicing, there were attempts at lookalike pack something at a lower price and something at a higher price and the buoyancy was not there. Today when the tax rates are substantially higher, I suspect the leakage could be even higher. Even the working document of IMF on value added tax says that high rate of ad valorem tax is prone to leakages.

Q: So how are you preparing yourself for a post-GST world whether it is the April 1 or if September we don’t know at this point in time, but how you are preparing yourselves for a post-GST world?

A: Well, we are working with the assumption that it will be revenue neutral and given the success and the benefits that have accrued from us specific structure over time. We are assuming that it is going to be specific structure, but we are concerned if it were not to be a specific on cess -- it is going to create to a lot of leakages as far as the industry is concerned and with these assumption is what we are moving ahead and as more and more clarity will emerge as far as regulations are concerned there is a task on hand to deal with the internal processes, not only internal but we have to also work with our partners.

Q: At this point any possibility given the environment of being able to raise prices is that an option that you are looking at all today?

A: These are issues that get dealt with time to time and the trigger is always changes in the tax rates whether on the centre or the state and some time it is immediately after that.

Q: Will you wait then for the GST roll out before you take any price hike?

A: I can’t really predict that. I can only say that it all depend on factors that are there at point of time and sometime you react immediately, sometime you decide to react a little later, but at the end of the day the principal is that businesses cannot be sustained if we are not able to change our prices.

Q: So broadly what then is the outlook as far as both margins for the cigarette business as well as the volume outlook is concerned?

A: I can’t really give you a specific guidance but I think that it all depends on how the taxation structure evolves that is the biggest determinant if the taxes are reasonable and the structure were not to change -- the growth that the illicit industry is experiencing would certainly come down, the legal industry would be able to kind of also counter that, so it would certainly better for the industry than what it has been in the last 4 years, but again if the taxes go off at a much higher rate we will have pressures that is a reality.

Q: Speaking of pressures I asked you about the impact of demonetisation, what has been the impact both on the cigarette side as well as the FMCG side, because most other players that we speak to are speaking of perhaps temporary, but they are speaking of a demand setback at this point?

A: There is no doubt that this is a bold and unprecedented step to deal with the menace of black money and we have been highlighting for quite some time the growing illicit cigarettes and this itself is a big generator of black money which also funds anti-social activities. As far as the impact on various categories is concerned it varies across categories. I think consumer staples are able to have recovered much faster. The discretionary items continue to be under pressure. I can’t really predict by when the pressure would go off, there are various scenarios being articulated by experts, but we have said to ourselves is given this context we have to see what is the best we can do, so we have been working very closely with trade partners to see how we can mitigate the difficulties being faced by them and our consumers.

Q: How you taking care of working capital and so on and so forth specifically as far as partners perhaps are concerned?

A: We are looking at helping them selectively some credit we are looking at optimising our service pack. We are also in certain cases for example in the east --West Bengal and Northeast in particular this is a time where students need to buy their notebooks for the sessions and because there is an issue of liquidity, we have also reached out to schools along with our partners that if they so wish we can come to the schools and let them buy notebooks with the digital transactions -- so many schools have actually kind of envisioned interest in this so we are doing whatever we can to help the difficulty that trade partners faced and minimise convenience to consumers and that’s what we are really focussing on.

Q: We were talking about the innovations across the FMCG business, but let me ask you about possible innovations on the cigarettes side. There is a lot of talk about e-cigarettes so on and so forth, is that something that ITC could consider now or in the future?

A: We are already in the market with e-cigarettes. We have a brand called EON, so we are already there it is a nascent category in India, but we are developing that.

Q: Plans to try and grow that?

A: Yes, we are continuing to invest behind it to create different options and better products over time and also to make them available to consumers. Definitely these are areas that we are looking at, a lot of health experts globally have said that these are relatively safer so we will certainly provide these options to our consumers.

Q: Also in terms of regulatory action there is a proposal that has been mooted by the cabinet, by the commerce ministry which is yet to get the cabinet’s approval to disallow any form of foreign direct investment (FDI) across the cigarette not just manufacturing, but licensing and trademark etc that is probably a good news for you because it doesn’t aide your competitors who are looking to this point in time bring FDI in?

A: We are not impacted by this for sure and also there are a fair amount of reports internationally -- because foreign brands are made in 100 different countries and there are reports that where in certain countries if a demand is created depending on tax rates and other regulatory issues like pictorial warnings the demand gets filled by the illegal channel itself and intend I think of the government is always to restrict FDI there is already a policy on it, so in line with that there is some further regulations are coming in. The information we have is really from press reports, so we have no idea on what the additional restrictions are going to be.

Q: Let me ask you about new categories and new launches. You said that you would have liked to do more than 25. What is it that we can expect in terms of new categories? You are now in the dairy markets, courtesy Aashirvaad Ghee, dairy whiteners and of course, coffee, etc. What more can we expect in terms of new categories? And is health and wellness a space at all that you would consider?

A: Absolutely. It is an ongoing effort at our end to explore newer categories. And Mr Deveshwar in the past that probably at some point of time, we may be there in every category that is called FMCG. So, we continue to explore. And areas where we find that we can leverage our enterprise strengths are areas that we are progressing forward. So, there are areas that are under exploration. And as an example, I gave you the next one that we are relatively in advance stages, fruits, vegetables and perhaps even sea-food. And health and wellness also is an area that is receiving a lot of attention from our side. So, we have started that this year with the launch of Aashirvaad sugar control release atta where the glycemic index does not spike up. And it is good for diabetic and pre-diabetic.

Q: So that is fortifying existing products that are in the market.

A: Yes. That is one very strong vector as far as health and wellness is concerned and similarly, we have an all-good digestive biscuit, which has no maida, no sugar, no artificial sweetners. And then we are going to be very shortly in the market with what we call super safe spices under the brand name of ITC Masterchef. Now, these are again spices which we have developed along with our agri business division. They have worked with the farmers under an integrated crop management system. And these are tested for more than 450 contaminates against a regulatory environment which requires to test just about nine or ten.

Q: When will this hit the market?

A: It should be there in the next quarter for sure.

Q: When you are looking across categories, you are looking at new product launches, you are looking at backing new ideas, what are the parameters that you look at because he capital allocation for you is going to be something that you decide where you put your capital and where you do not. What are the parameters that you are currently looking at when you decide where to deploy capital?

A: First is of course, the industry segment should be attractive, is there headroom for the industry to grow, and very clearly, in FMCG there is a lot of headroom to grow. You know the level of food processing is in single digits. You know our penetration levels are limited, per capita consumption is limited. And also, the unbranded and unorganised segment is many times more than the branded segment.

Q: What about the disruption from the likes of Patanjali? How are you dealing with that and what are the lessons that you have perhaps learned from the manner in which he has disrupted the FMCG market?

A: We are happy to see brands like Patanjali coming because as an organisation, we support creation of Indian brands. We know that there is a lot of royalty that is going out. So, we are happy to see that and competition is pretty good. And it creates efficiencies, it gets us to think more, re-strategise, reinvent ourselves. So, it is certainly good that is coming, that we are having Indian competitor scale up so fast.

Q: But, what is it doing in terms of pricing because they are priced significantly lower than the current competition in the landscape. What does it do now and in a slow market specifically, what does it do in terms of pricing pressure?

A: It is like this that ultimately, you have to assess the value that you are giving to the consumer. So, your price has to be aligned to the value that the consumer gets. So, more than what competitive actions are, it is about the value that you are providing to the consumer. If you are providing superior value, you have a right to also retain superior value yourself. Now if we are going to compete on a like to like product, we have a right to realise similar kind of value. So it will depend on the segments we are in.

Q: But, input costs now putting pressure, raw material costs putting pressure on margins?

A: Yes, for sure. All the input costs are for sure going up.

Q: And do you believe that that is going to hit margins by significantly or do you believe that you will be able to absorb them, pass them on, what is the situation at this point in time?

A: It is going to be a mixed bag considering the situation as far as the economy is concerned and the fact that growth rates are muted. So, we have to choose a pass that is optimal.

Q: How much have raw material costs gone up by?

A: It depends again. We are into such a diverse range of categories, so to give one figure is very difficult. But there is significant increase whether you look at paper or you look at oil or you look at wheat or sugar. It is a significant increase across.

Q: Let me ask you about each of your businesses. We have talked extensively about cigarettes and FMCG, but what about the Hotels business? What is the outlook now as far as both expansion and given the fact that it sort of continues to be a sluggish environment, what is the outlook for the hotels business?

A: We are, as you know, the greenest hotel chain in the world and we are offering responsible luxury to the consumers. It is also well acknowledged for its service and food and beverage cuisine that it offers. And some of the properties are also being recognised. For example, the Grand Bharat is amongst the top-floor globally among the best hotels and resorts in the world as per the Conde Nast Travels and in Asia, it is number one.

It is true that the industry per se is reporting a muted performance in the recent past, but if you look at the potential of this sector, the potential is enormous. India is home to just about a percent of the global tourists. And I understand that the government has a target to take that up to 2 percent. So, certainly there is a lot of headroom. And when the upturn happens, at that time, you can create assets, you have to create it with a belief in the future. So we are very optimistic that in the medium term, the Indian economy will do much better. It is already the best performing globally, it will do much better and there will be a lot more demand for hotel rooms.

Q: How much are you investing in the hotel business? What kind of expansion can we expect over the next year or two?

A: We have a pipeline of 10 luxury hotels which will give us additionally about 3,000 rooms across various cities and one in Colombo. The other important dimension is that this is also very important from the national economy perspective. It is a lot of multiplier on the employment per se. And it is therefore, rightly an area of national priority. It aligns therefore, well with our aspiration also to make a growing contribution to the Indian economy. So, we will for sure remain invested and continue create assets. Our strategy is not about being asset light or heavy, what we say is asset right strategy. So, it will be a mix of our own properties as well as certain properties of partners that we manage so that we can give a competitive and a compelling offer to our consumers.

Q: Any acquisitions that you could possibly look at on the hotels side?

A: There is on that we have done in, we have bid for this hotel in Goa which was under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act put up by IDFC. That is in litigation right now. It is now in the Supreme Court, so let us see what happens to that.

Q: But acquisitions in general, because for instance, your foray into the juice market was courtesy an acquisition. So, are we looking at entering new categories by way of acquisitions or beefing up certain segments by way of acquisitions?

A: We are absolutely open to that and anything that is synergestic with our plans and portfolio, we will be keen. And of course, as long as we get it at the right value.

Q: Anything identified so far?

A: Nothing specifically that I can say that we are working on right now. But we are open to it across FMCG and other businesses including information technology.

Q: So, you are looking at acquisitions in the IT space as well?

A: Yes, we are open to it. If we get the right opportunity.

Q: What is the aspiration on the IT side? I asked Mr Deveshwar this question in our last interview as well. This is a space that is seeing significant amount of pain. Even the incumbents, the TCS and Infosys of the world are facing that pressure because of the disruption that we are seeing in technology and disruption we are seeing in the business model. But this is the business that you want to hold on to and a business that you want invest in?

A: Absolutely. In fact, our aspiration for every segment is to be leader. But I know in the information technology space... (Interrupted)

Q: You are not. You are not one, two, three, four or five.

A: We are not there. So, whilst the aspiration will be to get into leadership, in the foreseeable future, our focus is on scaling up this business and we believe there is room for specialised and niche players.

Q: So, what would your specialisation be on the IT side if I were to ask you that? What is the vision that you have for yourself?

A: There are really two pieces to this specialisation. One is, one of it again comes through our enterprise strengths. So, because we are in so many industry verticals, I can offer cutting edge domain centric solutions. Example being, trade-marketing and distribution or loyalty, just to give some examples. So, that is one piece of the specialisation that will come.

Second is that over time, as we service clients and as ITC Infotech also services ITC, there are capabilities that it has developed. And where in these capabilities we identify there is an opportunity to specialise because the level of specialism right now is limited and in future, there will be a demand for much greater specialisation.

Q: So, what is the growth of non-ITC clients for instance for the Infotech business?

A: Bulk of our business is non-ITC.

Q: What is the size of the business today?

A: Today, it will be about, last year it was about Rs 1,500 crore.

Q: And what is the aspiration? Where do you see it maybe in the next five years? Will that be driven through an acquisition? The jump in growth that you expect.

A: We will grow both organically as well as if there is an opportunity, we will grow inorganically. We would certainly want it to grow at rates that are significantly higher than the industry which is what we have been seeing in the past. So, we want to continue those growth rates. And invest behind certain capabilities that are going to be important tomorrow. And like you said, this industry is getting disrupted, there is a lot of focus on digital today. A lot of focus on artificial intelligence and automation and big data and so on and so forth. So, here are lots of opportunities to make some investments that will become very relevant for the future.

Q: We started this conversation talking about the efforts on the larger integration as far as your facilities were concerned, really juicing out the efficiencies at the backend and improving margins. If I were to ask you to draw out a roadmap for us in terms of where things currently stand and where we could perhaps see things over the next three years, what is the vision that you have both in terms of the kind of margins, adjustment that you could see on the upside as well as the different landscapes that you believe ITC will believe ITC will be able to play in significantly.

A: Again, because of the diversity that we have, we have to look at margins from a segment perspective. So, our aspiration is very clearly leadership, not only in terms of the size and our market standing, but leadership in the financial performance.

Q: That is what I was going t ask you, things like return on capital employed (ROCE), what kind of parameters are you going to judge your performance by?

A: Certainly, it is going to be best in class for that industry segment. So, when I deal with the paper segment, I will benchmark to the paper industry. When I deal with staples, I benchmark with staples. When I am dealing with stationary products, I benchmark again to that industry. So, we want to be best in class there. As far as financial metrics are concerned. And equally, our aspiration is multi-dimensional and that is what throws up a lot of challenge and passion in the organisation because it is not just about market standing and financial metric.

The other two dimensions receive equal amount of attention. Environmental sustainability and inclusive growth. Even if you look at a segment like paper, there is 2,50,000 hectares of forests that we have created, more than a 100 million man days of employment. First paper company to be Forest Stewardship Council certified and all our mills are certified right now. So, it is all on the three dimensions that we will for sure evaluate performance of every segment we are into. And in each of these dimensions, the aspiration is to ultimately get to a leadership position.

Q: And is the focus now going to sharply be on profitability at least as far as the FMCG business is concerned where losses have declined, but is the focus now going to sharply be on the road to profitability?

A: Profitability has always been at the core of our focus. There are really three vectors that we focus on in any business. Am I providing consumers with winning products? Am I providing consumers with products that they like to adopt? Do I have the best in class consumer or customer engagement? And am I best in class as far as cost efficiency is concerned? So these are three parameters. We passionately drive and against each one of them, there are robust strategies. For example, our supply chain physical infrastructure that we are creating is to drive cost efficiency over a period of time. And because our businesses in FMCG have started at different points of time, on aggregate, results reflect the performance of businesses which are in various stages of maturity as well as the cost of incubating new businesses.

So, there is a much more robust performance of segments that are relatively more mature as compared to segments that are nascent. But very clearly, internally, it is very important for us and this is the single most important parameter that we watch in every business and it is very important for us because if these parameters are diluted or we fall in that, we will never create value in the long term. So, the focus is on and overtime, as we scale up and as we mature in these businesses, the results will be there. And all our traditional businesses, for example, even paperboard, we are the leaders on profitability.

Q: But what is the internal aspiration in terms of for instance one of your tried and tested Aashirvaad for instance, where do you see that brand over the next 5 years in terms of size?

A: It already a Rs 3,000 crore consumer spent and year on year it has grown much faster how the branded packaged atta has grown and I think that growth will sustain, it is a very strong brand and if it is going to grow at a rate that will be substantially higher, we are very confident on what that segment is going to grow.

Q: Is that also some rationalisation that we can expect as far as your current product portfolio is concerned, things that you expected to have performed in a certain way, but probably didn’t match the expectations, is that rationalisation reassessment process underway as well?

A: It is very much an ongoing process. I think that what we call internal vitality, how do we remain competitive and relevant and we have a robust process to review strategy, realign, optimise portfolio and also of course the process to completely drive efficiency to the next order and there have been examples -- for example we exited the greeting card business, because we found that the headroom to grow was not there.

Q: Anything on the cards at this point in time in terms of possible exit?

A: Nothing specifically that we are looking at this point of time. Yes, there are pieces of our portfolio maybe stock keeping units (SKUs), certain variants, certain sub segments which we may have looked at and decided to stop in those, because we were not neither making progress nor did we see the opportunity to grow in those segments -- it is an ongoing process, but yes we have invested in segments that we believe that we have a lot of headroom in the future. We are going to be quite perseverant we will not gives up easily.

Q: I think that I have known about ITC you don’t give up that easy, but you got some pretty big shoes to fill, Mr Deveshwar has sort of larger than life influence on ITC. Through this process of him mentoring you, what has been the biggest takeaway, what has been the biggest lesson for you personally?

A: The biggest learning that I have of working with him and learning from him over the years is the art of enabling and empowering the team and at the same time being able to give them the right kind of inputs so that each one of them can succeed that what I have learnt from him.

Q: How are you different form him?

A: As far as ITC is concerned we should look at it from the perspective that ITC is an institution and ITC works with certain processes and a DNA that has evolved over the years. The DNA of the organisation is one off distributed leadership where we have each business, which has a management committee and has a chief executive and we have a centre that in a way is place the role of venture capitalist and a mentor and we have very clearly a DNA which says that we will do things that will make us perform in 3 dimensions – financials, environmental and social.

Now this process actually drives the whole management process in the organisation. Now what I would like to certainly continue doing is to continue what I have learned and what has worked well is to enable and empower, at the same time provide sufficient input and guidance so that each of the businesses can succeed. I am a hands on person, so I have to remain hands on, but at the same time not get into the day to day operations or any backseat driving. The trick really is to be able to remain hands on, give input, give guidance but in a whole ethos of enabling and empowerment so that each business can takes it own decision and succeed in it on right.

Q: Let me end by asking you if you were to look at your dashboard today what is the number one challenge that you see and what is the number one opportunity that you see as well?

A: The number opportunity as we have said is in the FMCG space. It got the maximum headroom to grow and that why we have this bold ambition of getting to Rs 100,000 crore.

Q: That requires an 18 percent CAGR growth from where you are currently and you still believe that you will be able to get to that number?

A: Yes absolutely. It is like this that if I look at my CAGR over the last recent past, if I look at it about 3 years or so I am in double digits, but not quite there. With the additional areas that we are getting in and what we are doing to strengthen our existing portfolio and then with the economy also expected to pick-up -- the growth rate will significantly increase. We want to get to a growth rate of between 15-20 percent from where we are and that is what has going to get there. I do understand that there is a linkage with the economy picking up, but our view is that sooner or later it is going to pick-up and as far as the challenge is concerned the number one challenge for us is the regulatory environment as far as the cigarette business is concerned. Fundamentally because it also pains us that all these business is going to the illicit industry and the government loses revenue, the farmers lose and legitimate manufacturers and brand owners like us lose.
First Published on Dec 13, 2016 03:19 pm
Sections