Fiama Di Wills

Cigarette and FMCG major, ITC has launched its first mass personal care offering, a high-end shampoo. After a year of speculation, ITC has launched its first mass market personal care product. ITC ‘s shampoo brand, Fiama di Wills is in the premium segment, that’s growing faster at 44%, compared to 21% for the overall market. Interestingly, ITC didn’t introduce a new brand name for its shampoo. Instead it has opted for a brand extension of its two year old, super premium range of personal care products, Essenza di Wills.

But unlike Essenza that was available at ITC hotels and Wills Lifestyle stores, Fiama di Wills shampoos will be stocked at retail stores across India. The product will be available at Rs 99 for a 200 ml bottle. On the pricing front, ITC is taking established players like HUL and P head on. Expanding its range of personal care products, and following the successful launch of Fiama Di Wills Shampoos, ITC presented yet another world class range of products for the Indian consumer through its new range of Fiama Di Wills Shower Gels.

Fiama Di Wills’ new premium range offers three transparent shower gels with suspended beads. Each variant provides a specific benefit to the consumer: Shampoo Variants: Silky Strong,Everyday Mild, Aqua Balance, and Volume Boost. Continuing with its tradition of offering a superior product and brand experience to the modern Indian consumer, ITC also launched today the Superia range of soaps and shampoos in select markets . Superia offers a range of four soap variants and two shampoo variants with a range benefit of Glowing skin and Shiny hair.

Each of the variants have been designed to deliver specific benefits to the various consumer needs. SOAPS: For Glowing Skin 1. Fragrant Flower with the fragrance of Rose & Lavender Oil 2. Soft Sandal with the fragrance of Sandal & Almond Oil 3. Natural Glow with Neem & Coconut Oils 4. Healthy Glow with Orange Oil SHAMPOOS: For Shiny Hair 1. Shiny Black with Triple Conditioners and the natural goodness of Hibiscus & Brahmi extracts 2. Vibrant Green with Triple Conditioners and the natural goodness of Amla & Arnica extracts

Superia soaps will be available in sizes ranging from 50g to 125g, and the shampoos in 125 ml and 55 ml. Posted by Prahlad(Peggy) Krishnamurthi at 9:02 AM Labels: fiama, fiama di wills, ITC, shampoo, wills Strengths Credibility of itc Distribution network Deepika Padukone: ITC vs HUL In a queer coincidence, the newest star on the block, Deepika Padukone, features in different commercials belonging to rival camps. She has been roped in by ITC to promote its Fiama Di Wills soap brand, and is also seen in a rather dated commercial of Close-Up which has been revived by rival HUL.

While the Fiama Di Wills print advertisement has been recently unveiled, the “Kya aap Close-Up karte hain…. ” commercial dates back a couple of years when Deepika was a budding model. Though Fiama Di Wills and Close-Up belong to different categories, and thus, do not compete, ITC is a fierce rival to HUL which has till date towered over meek and strong brands alike, in the highly competitive FMCG sector. ITC has already marked a foray into core FMCG categories-soaps and shampoos.

Industry observers say that it would eventually expand the basket to include more personal products. ITC’s good financial backing is expected to assist the company in competing against the might of HUL. On why ITC roped in Deepika, Sandeep Kaul, general manager, personal care business, ITC, said: “The Fiama Di Wills Brand personality is that of today’s modern, confident, intelligent and aware woman. Deepika is the perfect embodiment of this personality. ” Reasons for the revival of the old Close-Up commercial could not be ascertained.

HUL is said to be within its legal bounds to feature a commercial done years ago, which brings forth the question: Would Deepika’s Liril commercial done some years ago also be revived? There are no answers to this one, but if that happens, then the star would be seen promoting two rival brands from the same category. While ITC did not respond to a TOI query, all an HUL spokesman said was, “the right on any creatives which are generated shall be governed by the law of the land”. O&M was responsible for the creative three years ago and Lowe, which is handling the Close-Up brand for HUL now, refused to comment.

Advertising sources, however, said: “If the ad works for the company, they would use it. Ad agencies don’t change creative elements unless there is consumer boredom. ” BBDO’s Josy Paul said, “It is opportunistic thinking and increases the buzz in the market. ” Nearly a decade ago, Close-Up was caught in a similar wrangle with rival Colgate-Palmolive, when an old commercial featuring model Ruby Bhatia was revived ahead of a new Colgate product commercial which had the same model. The embarrassment was such that Colgate was forced to replace Bhatia.

Smoke it, giants ITC, the cigarette major, has an audacious plan—to build the country’s biggest consumer goods conglomerate Ashish Gupta , Ajitha Shashidhar PRINT SHARE COMMENTS Reason to smile: Yogi Deveshwar Even if the idea had originated from the overtly fertile mind of a 20-something maverick, it would still have been dubbed as far-fetched. But coming from a 60-year-old seasoned Chairman and Chief Executive Officer (CEO) of one of India’s most professionally run companies, you are left wondering what has gone wrong with the world.

Yet, for Yogesh Chander Deveshwar, a mechanical engineer from the Indian Institute of Technology, Delhi, and management graduate from Harvard University, the idea may sound “audacious” but doable. To transform the Rs 19,000-crore cigarette major into one of the biggest diversified conglomerates in the country, achieving pole position in its existing verticals, including confectionery, biscuits, snack foods, ready-to-eat foods, consumer staples, hotels, clothing, personal grooming and care business—certainly stretches one’s credibility. That’s not all.

He also wants to be India’s top buyer of agricultural commodities and rural marketer and biggest player in value-added commodities. That he is pitting ITC against some of the biggest multinationals—Unilever, Nestle, Perfetti Van Melle and Cargill—and homegrown brands—Britannia, Godrej, Nirma and Haldiram’s—does not faze him. As he sips his black tea explaining his strategy, you wonder whether it is just wishful thinking, foolhardiness or another gamble. But the man who resurrected ITC after the BAT affair, and began its diversification is ready for the next battle.

Besides making his managers think big, he has coined phrases that resonate at ITC’s corporate headquarters—Virginia House, Kolkata—and other offices in Hyderabad, Bangalore and Chennai. Phrases like seed-to-smoke, for its cigarette business, farm-to-plate, for the agribusiness, and trees-to-textbooks, for its paper and paperboards business are being drummed up to explain ITC’s linkages with the Indian farmer and the consumer. It is working to transform the rural economy and strengthen relationships with its suppliers (farmers) and India’s future consumers (rural folk).

Ask him about the impending battle and he retorts with tongue firmly in cheek: “We are helpless. All that we want to do is to secure the future of this great institution called ITC,” a future currently riding on the uncertain fortunes of its cash cow, cigarettes. He cites ITC’s competencies—deep understanding of the consumer psyche in creating better value-propositions in various verticals, excellent sourcing facilities, expertise in supply-chain management and marketing and an all-India distribution network—that could help it leapfrog to the top slot, though it might take time.

As he takes you on the journey to build India’s biggest consumer goods conglomerate, you begin to give him more than a chance of realising these dreams. Early Wins Bingo, Mint-O, Sunfeast and Aashirvaad atta, in a way, demonstrate ITC’s Spoilt for choice: ITC is taking retail to the hinterland capability to establish leading brands, unsettle competition and wean away market share from well-entrenched leaders. ITC, says Harish Bijoor, CEO of brand consultants Harish Bijoor Consults, has adopted a strategy of “shock and awe” to intimidate its rivals. Shock the market with your bluster. Shock the market with your range. Shock it with wide distribution. Shock it with a status that speaks not of new launch, but of an aggressive player with deep pockets, who can outdo the best player in the market. The market is shocked first, so is the market leader and the consumer is put into a state of awe. Every piece of advertising and market promotion makes the ITC product look larger than life. And it helps,” says Bijoor.

A 17% share wrested from leader PepsiCo’s Frito-Lay in the snack foods segment—largely flavoured potato wafers—along with 10% in branded biscuits from veterans Britannia and Parle and unseating leaders HUL (Annapoorna) and Perfetti (Chlormint) to emerge numero uno with market shares of 50% and 40%, respectively, has competition riled. Says Ravi Naware, Divisional Chief Executive of ITC Foods, “Our Sunfeast range of biscuits were launched in 2003. So, in just four years, we’ve managed to garner 10% market share and acquire the No 3 spot in biscuits.

In the ready-to-eat foods, a market worth $30 million (about Rs 120 crore) and growing at a stupendous 150% year-on-year, we’re close to No. 2 behind MTR Foods. ” The Big Picture And these bits and pieces are adding up. In just five years, ITC has emerged as the No. 5 player among listed companies in the consumer goods business, ahead of Colgate-Palmolive, Cadbury and Reckitt Benckiser, with non-cigarette consumer goods revenues of Rs 1,704 crore last fiscal (See FMCG League Table).

Given the heady growth of 68% in the six months to September 2007, the business could well grow to beyond Rs 2,500 crore in the current fiscal—despite capacity constraints in certain segments keeping it meeting the swelling demand—and push it a few notches up the FMCG ranks. “In just four years, we have managed to garner 10% market share in biscuits and become the No 3 player”- Ravi Naware, Chief executive, ITC Foods While this has spurred it to open new fronts in personal care—shampoos and soaps—in direct confrontation with consumer goods bigwigs, these are early days.

Says Arvind Sahay, Professor of Marketing at Indian Institute of Management (IIM), Ahmedabad: “What helped ITC’s cause was that during the same period (2000-04), Unilever was focusing more on “rationalising” brands and Britannia had management issues before the current CEO came in. These provided a window of opportunity and ITC has taken full advantage, whether deliberately or inadvertently. ” Battle Lines In the past five years, ITC has moved into Hindustan Unilever’s core FMCG businesses—food products and personal care.

For years, HUL has been India’s most revered consumer products company, defining what competitive marketing was all about. But between 2001 and 2005, it slipped from the high pedestal. It seemed like staging a comeback only to slip back to single digit growth in the previous three quarters (December 2006, March 2007 and June 2007). Worse, it has not made a big brand launch or entered into any new category for the past eight years other than a water purifier brand called Pure It, unlike ITC which has flooded the market with organic spices, Mint-O, Bingo, Fit Kit, Aashirvaad atta and Sunfeast range of biscuits.

But that could change with HUL now having put its house in order. Deveshwar realises it won’t be easy from here on. Yet, that has not stopped ITC from jumping into the personal care and fragrance business—the Essenza range—by launching a range of shampoos and soaps. While Fiama Di Wills is positioned as a top-end shampoo brand to take on Pantene and Dove, Superia is pitted in the value-for-money segment and priced 50% lower than Clinic Plus, which has a 22% share of the market.

ITC has engaged the services of independent product development outfits in France and the US to develop its personal care range of eau de toilettes, after-shave lotions, creams and shampoos—the process for which was kicked-off five years ago. Prising open the personal care business will be a lot more difficult than the biscuit business, feels Sunil Alagh, former CEO of Britannia Industries. “While the biscuit companies did not have a strategy to counter ITC, HUL, Colgate-Palmolive and Procter & Gamble will put up far greater resistance. He fears ITC may be spreading itself thin by entering into too many segments through its distribution-led strategy. “While the going has been good till now, my fear is that ITC may soon be present in too many verticals without actually dominating any one segment,” says Alagh. Others say ITC has some way to go before it can achieve HUL’s distribution strength. “ITC will gain in the bigger cities for sure, but it is the smaller towns that will be its weakness,” contends an analyst.

Even Britannia’s brands and distribution system are far stronger than ITC’s. Nestle’s strategy of building high-value brands remains unmatched and it would be difficult for a new player to cause a big dent. Says Harish Bijoor: “ITC needs to clone HUL’s process before it can really dominate the market. ” ITC’s strength lies in its distribution network of two million tobacco retailers, larger than HUL’s distribution chain of over one million. But the nature of the channel is different—a panwala would not be the ideal retailer to stock shampoos.

However, today about half the tobacco retailers carry confectionery items, three lakh stock biscuits and almost 40% stock FMCG products. But a realisation of the difference between the cigarette vendor and consumer products retailer has seen ITC leverage its fast-moving Aashirvaad atta to create a separate distribution system for FMCG products through kirana stores and modern retail formats. Strategic Levers Rural touch: ITC’s e-Choupals are a channel for two-way trade ITC is counting on extracting value through its e-Choupal network for its foods business.

While analysts doubt whether it makes any money, the bespectacled Chief Executive of ITC’s International Business Division (Agri Businesses), S Sivakumar, is convinced the e-Choupal strategy is bringing a lot of synergies. “By sourcing commodities directly from the farmers and eliminating all inefficiencies in the system, the company can save Rs 400 on every tonne of wheat,” he says. It helps source ‘identity preserved raw materials’—commodities that can be sourced from a particular region and therefore, provides quality assurance for its atta, chilli powder, spices, biscuits and pasta.

It is also looking at sourcing tomatoes and onions for its juices and other products in the pipeline, that the company is unwilling to discuss. A foray into the wholesale of fruit and vegetables and strategic supply arrangements with the likes of Kishore Biyani’s Future Group for their Food Bazaar will further strengthen the company’s ties with the farm folk. Direct contact with farmers through the e-Choupals and Choupal Sagars (rural hypermarkets) has meant a two-way business that has helped ITC in sourcing and gaining a foothold in rural distribution.

Buying from farmers is something that HUL’s Project Shakti has not done. Says Deveshwar: “You can integrate with the rural economy only if you buy from the farmers. ” Today the company is buying Rs 3,691 crore worth of agri-products from four million farmers using its network of 6,500 Choupals across nine states. In comparison, HUL’s Project Shakti (using women self-help groups) covers 1 lakh villages across 15 states, contributing just over Rs 100 crore to its revenues, though it provides livelihood to nearly 30,800 Shakti entreprenuers. By 2010, ITC plans to cover 1. crore farmers across one lakh villages in 15 states at an investment of Rs 5,000 crore. It also plans to increase the number of Choupal Sagars to 100 from 19 today. That would give it a strong rural chain to draw and push products through. The selling opportunity is large in the hinterland, far larger than what ITC’s own managers had initially imagined. That’s why ITC is scaling up its distribution business by letting other companies like Phillips (bulbs) Marico (hair oil), Duncan (tea), Iffco-Tokio (weather insurance), Life Insurance Corporation (insurance products) and Kribhco (fertilisers) ride its network.

Game of Synergies Synergies in the food and consumer goods portfolio with ITC’s other businesses are also significant. The knowledge of blending in tobacco and the palate-sense of ITC’s chefs have been used to develop a right wheat-mix for Aashirvaad atta. Interestingly, the food and hotel divisions both report to SH Rehman, Executive Director, helping make the process of synergising easier. The consumer business also ties up nicely with the cigarettes and paper “By sourcing commodities directly from farmers, we save Rs 400 per tonne of wheat”- S Sivakumar, CEO, International Business Division usinesses. “Because of our access to ITC’s printing and cigarette factories we were able to develop our products much faster. If you are a normal paper company, you will not be allowed to do experimentation on your customer machines because cigarettes are made on very sophisticated machines and at very high speeds of 400 packets per minute,” says Pradeep Dhobale, Divisional Chief Executive of Paperboards and Specialty Paper Division, a chemical engineer from IIT, Mumbai, who like Deveshwar, joined the company as a management trainee.

It is the strategy of entering the paper-based FMCG retail business with paper cups (a success with Pepsi and Coke), paper trays, gifting stationery, puzzles and games for children that will add to its product portfolio and raise the engagement with distributors. “Our specialisation in producing value-added paperboards has made us realise the huge potential for creating gifts and toys (dartboards) for 200 million children, from newborns to 15 years of age,” adds Dhobale. That could be his next big market. Unique Propositions Innovation for differentiation is another marketing principle that ITC is putting to good use.

In the overcrowded biscuit category, for instance, it has introduced Marie biscuits in an orange flavour. Again, customers used to the salty crackers of Parle’s Monaco are being offered an alternative, flavoured with chilli flakes. It has also introduced a six-unit pack (instead of 12) priced at Rs 2, which finds takers at cigarette outlets across the country. In confectionary, too, ITC changed the rules of the game by introducing flavoured mints of orange and lemon for Mint-O and as much as 50% of mint volumes now come from this category.

In the ready-to-eat food market, it has created two segments—the upper-end catered through the Kitchens of India brand (based on its recipes from its restaurants in ITC Welcom Hotels) and the mid-market, through the Aashirvaad range. While ITC officials say they want to straddle the entire value chain in whatever sector they enter, experts maintain it will be a segmental player for now in most categories. Also, to enter the next frontier, it will need to get people to shift from the current snacking habits (samosas and pakoras) to formal manufactured products, or co-opt the existing products, says Sahay.

Growth Sustainability “Our specialisation in producing paperboards has shown us the potential for creating gifts for children”- Pradeep Dhobale CEO, Paperboards & Specialty Boards Division The start has been good—the consumer products segment has notched up nearly 70% growth last fiscal—but the business is bleeding, with the cost of new product launches and marketing and advertising expenses pushing up losses before interest and tax to Rs 202 crore last fiscal. Production is largely outsourced.

Since the initial development and promotion expenses will yield benefits over time, ITC’s cash generating cigarettes business is a boon. Says Anand Shah, FMCG analyst at ICICI Securities: “ITC is leveraging the strength of its cigarette business and does not face the immediate pressure of returns, which is not the case with multinational food companies. So it can build scale and wait for two to three years to build a viable business. ” As for resources, a near debt-free status and healthy operating cash flows—over Rs 2,000 crore, and greater than HUL’s—puts it in a strong position.

And while Deveshwar expects some of the surplus cash of about Rs 4,000 crore to be invested in projects and a possible moderation in the return on capital in the near term, he is hopeful of keeping that number well above the 20% mark. ITC isn’t taking the low-price route to build its consumer business. A majority of its products are positioned as superior value propositions. Therefore, margins are expected to be healthy. But resource is just one side of the story. “Brand break-even cycles will be very elongated. But short-term consumer interest will be high.

Converting these early customers and early brand adopters into loyal customers will be the real challenge,” contends Bijoor. Whether ITC will emerge among the top two in each of its consumer goods segments only time will tell; we should get a feel by 2010 when it turns 100. For now, one thing is certain—Deveshwar with his commitment to audacious goals for ITC—is set to shake up the consumer goods market. Expounds Bijoor: “ITC has brought irrational competition into a rational business space by making huge investments in launches.

ITC has the clout, which will need to be matched by the existing players in the market. ” Cigarette and FMCG major, ITC has launched its first mass personal care offering, a high-end shampoo. After a year of speculation, ITC has launched its first mass market personal care product. ITC ‘s shampoo brand, Fiama di Wills is in the premium segment, that’s growing faster at 44%, compared to 21% for the overall market. Interestingly, ITC didn’t introduce a new brand name for its shampoo. Instead it has opted for a brand extension of its two year old, super premium range of personal care products, Essenza di Wills.

But unlike Essenza that was available at ITC hotels and Wills Lifestyle stores, Fiama di Wills shampoos will be stocked at retail stores across India. The product will be available at Rs 99 for a 200 ml bottle. On the pricing front, ITC is taking established players like HUL and P head on. Expanding its range of personal care products, and following the successful launch of Fiama Di Wills Shampoos, ITC presented yet another world class range of products for the Indian consumer through its new range of Fiama Di Wills Shower Gels.

Fiama Di Wills’ new premium range offers three transparent shower gels with suspended beads. Each variant provides a specific benefit to the consumer: Shampoo Variants: Silky Strong,Everyday Mild, Aqua Balance, and Volume Boost. Continuing with its tradition of offering a superior product and brand experience to the modern Indian consumer, ITC also launched today the Superia range of soaps and shampoos in select markets . Superia offers a range of four soap variants and two shampoo variants with a range benefit of Glowing skin and Shiny hair.

Each of the variants have been designed to deliver specific benefits to the various consumer needs. SOAPS: For Glowing Skin 1. Fragrant Flower with the fragrance of Rose & Lavender Oil 2. Soft Sandal with the fragrance of Sandal & Almond Oil 3. Natural Glow with Neem & Coconut Oils 4. Healthy Glow with Orange Oil SHAMPOOS: For Shiny Hair 1. Shiny Black with Triple Conditioners and the natural goodness of Hibiscus & Brahmi extracts 2. Vibrant Green with Triple Conditioners and the natural goodness of Amla & Arnica extracts

Superia soaps will be available in sizes ranging from 50g to 125g, and the shampoos in 125 ml and 55 ml. Posted by Prahlad(Peggy) Krishnamurthi at 9:02 AM Labels: fiama, fiama di wills, ITC, shampoo, wills Strengths Credibility of itc Distribution network Deepika Padukone: ITC vs HUL In a queer coincidence, the newest star on the block, Deepika Padukone, features in different commercials belonging to rival camps. She has been roped in by ITC to promote its Fiama Di Wills soap brand, and is also seen in a rather dated commercial of Close-Up which has been revived by rival HUL.

While the Fiama Di Wills print advertisement has been recently unveiled, the “Kya aap Close-Up karte hain…. ” commercial dates back a couple of years when Deepika was a budding model. Though Fiama Di Wills and Close-Up belong to different categories, and thus, do not compete, ITC is a fierce rival to HUL which has till date towered over meek and strong brands alike, in the highly competitive FMCG sector. ITC has already marked a foray into core FMCG categories-soaps and shampoos.

Industry observers say that it would eventually expand the basket to include more personal products. ITC’s good financial backing is expected to assist the company in competing against the might of HUL. On why ITC roped in Deepika, Sandeep Kaul, general manager, personal care business, ITC, said: “The Fiama Di Wills Brand personality is that of today’s modern, confident, intelligent and aware woman. Deepika is the perfect embodiment of this personality. ” Reasons for the revival of the old Close-Up commercial could not be ascertained.

HUL is said to be within its legal bounds to feature a commercial done years ago, which brings forth the question: Would Deepika’s Liril commercial done some years ago also be revived? There are no answers to this one, but if that happens, then the star would be seen promoting two rival brands from the same category. While ITC did not respond to a TOI query, all an HUL spokesman said was, “the right on any creatives which are generated shall be governed by the law of the land”. O&M was responsible for the creative three years ago and Lowe, which is handling the Close-Up brand for HUL now, refused to comment.

Advertising sources, however, said: “If the ad works for the company, they would use it. Ad agencies don’t change creative elements unless there is consumer boredom. ” BBDO’s Josy Paul said, “It is opportunistic thinking and increases the buzz in the market. ” Nearly a decade ago, Close-Up was caught in a similar wrangle with rival Colgate-Palmolive, when an old commercial featuring model Ruby Bhatia was revived ahead of a new Colgate product commercial which had the same model. The embarrassment was such that Colgate was forced to replace Bhatia.

Smoke it, giants ITC, the cigarette major, has an audacious plan—to build the country’s biggest consumer goods conglomerate Ashish Gupta , Ajitha Shashidhar PRINT SHARE COMMENTS Reason to smile: Yogi Deveshwar Even if the idea had originated from the overtly fertile mind of a 20-something maverick, it would still have been dubbed as far-fetched. But coming from a 60-year-old seasoned Chairman and Chief Executive Officer (CEO) of one of India’s most professionally run companies, you are left wondering what has gone wrong with the world.

Yet, for Yogesh Chander Deveshwar, a mechanical engineer from the Indian Institute of Technology, Delhi, and management graduate from Harvard University, the idea may sound “audacious” but doable. To transform the Rs 19,000-crore cigarette major into one of the biggest diversified conglomerates in the country, achieving pole position in its existing verticals, including confectionery, biscuits, snack foods, ready-to-eat foods, consumer staples, hotels, clothing, personal grooming and care business—certainly stretches one’s credibility. That’s not all.

He also wants to be India’s top buyer of agricultural commodities and rural marketer and biggest player in value-added commodities. That he is pitting ITC against some of the biggest multinationals—Unilever, Nestle, Perfetti Van Melle and Cargill—and homegrown brands—Britannia, Godrej, Nirma and Haldiram’s—does not faze him. As he sips his black tea explaining his strategy, you wonder whether it is just wishful thinking, foolhardiness or another gamble. But the man who resurrected ITC after the BAT affair, and began its diversification is ready for the next battle.

Besides making his managers think big, he has coined phrases that resonate at ITC’s corporate headquarters—Virginia House, Kolkata—and other offices in Hyderabad, Bangalore and Chennai. Phrases like seed-to-smoke, for its cigarette business, farm-to-plate, for the agribusiness, and trees-to-textbooks, for its paper and paperboards business are being drummed up to explain ITC’s linkages with the Indian farmer and the consumer. It is working to transform the rural economy and strengthen relationships with its suppliers (farmers) and India’s future consumers (rural folk).

Ask him about the impending battle and he retorts with tongue firmly in cheek: “We are helpless. All that we want to do is to secure the future of this great institution called ITC,” a future currently riding on the uncertain fortunes of its cash cow, cigarettes. He cites ITC’s competencies—deep understanding of the consumer psyche in creating better value-propositions in various verticals, excellent sourcing facilities, expertise in supply-chain management and marketing and an all-India distribution network—that could help it leapfrog to the top slot, though it might take time.

As he takes you on the journey to build India’s biggest consumer goods conglomerate, you begin to give him more than a chance of realising these dreams. Early Wins Bingo, Mint-O, Sunfeast and Aashirvaad atta, in a way, demonstrate ITC’s Spoilt for choice: ITC is taking retail to the hinterland capability to establish leading brands, unsettle competition and wean away market share from well-entrenched leaders. ITC, says Harish Bijoor, CEO of brand consultants Harish Bijoor Consults, has adopted a strategy of “shock and awe” to intimidate its rivals. Shock the market with your bluster. Shock the market with your range. Shock it with wide distribution. Shock it with a status that speaks not of new launch, but of an aggressive player with deep pockets, who can outdo the best player in the market. The market is shocked first, so is the market leader and the consumer is put into a state of awe. Every piece of advertising and market promotion makes the ITC product look larger than life. And it helps,” says Bijoor. A 17% share wrested from leader PepsiCo’s Frito-Lay in the nack foods segment—largely flavoured potato wafers—along with 10% in branded biscuits from veterans Britannia and Parle and unseating leaders HUL (Annapoorna) and Perfetti (Chlormint) to emerge numero uno with market shares of 50% and 40%, respectively, has competition riled. Says Ravi Naware, Divisional Chief Executive of ITC Foods, “Our Sunfeast range of biscuits were launched in 2003. So, in just four years, we’ve managed to garner 10% market share and acquire the No 3 spot in biscuits. In the ready-to-eat foods, a market worth $30 million (about Rs 120 crore) and growing at a stupendous 150% year-on-year, we’re close to No. behind MTR Foods. ” The Big Picture And these bits and pieces are adding up. In just five years, ITC has emerged as the No. 5 player among listed companies in the consumer goods business, ahead of Colgate-Palmolive, Cadbury and Reckitt Benckiser, with non-cigarette consumer goods revenues of Rs 1,704 crore last fiscal (See FMCG League Table). Given the heady growth of 68% in the six months to September 2007, the business could well grow to beyond Rs 2,500 crore in the current fiscal—despite capacity constraints in certain segments keeping it meeting the swelling demand—and push it a few notches up the FMCG ranks. In just four years, we have managed to garner 10% market share in biscuits and become the No 3 player”- Ravi Naware, Chief executive, ITC Foods While this has spurred it to open new fronts in personal care—shampoos and soaps—in direct confrontation with consumer goods bigwigs, these are early days. Says Arvind Sahay, Professor of Marketing at Indian Institute of Management (IIM), Ahmedabad: “What helped ITC’s cause was that during the same period (2000-04), Unilever was focusing more on “rationalising” brands and Britannia had management issues before the current CEO came in.

These provided a window of opportunity and ITC has taken full advantage, whether deliberately or inadvertently. ” Battle Lines In the past five years, ITC has moved into Hindustan Unilever’s core FMCG businesses—food products and personal care. For years, HUL has been India’s most revered consumer products company, defining what competitive marketing was all about. But between 2001 and 2005, it slipped from the high pedestal. It seemed like staging a comeback only to slip back to single digit growth in the previous three quarters (December 2006, March 2007 and June 2007).

Worse, it has not made a big brand launch or entered into any new category for the past eight years other than a water purifier brand called Pure It, unlike ITC which has flooded the market with organic spices, Mint-O, Bingo, Fit Kit, Aashirvaad atta and Sunfeast range of biscuits. But that could change with HUL now having put its house in order. Deveshwar realises it won’t be easy from here on. Yet, that has not stopped ITC from jumping into the personal care and fragrance business—the Essenza range—by launching a range of shampoos and soaps.

While Fiama Di Wills is positioned as a top-end shampoo brand to take on Pantene and Dove, Superia is pitted in the value-for-money segment and priced 50% lower than Clinic Plus, which has a 22% share of the market. ITC has engaged the services of independent product development outfits in France and the US to develop its personal care range of eau de toilettes, after-shave lotions, creams and shampoos—the process for which was kicked-off five years ago. Prising open the personal care business will be a lot more difficult than the biscuit business, feels Sunil Alagh, former CEO of Britannia Industries. While the biscuit companies did not have a strategy to counter ITC, HUL, Colgate-Palmolive and Procter & Gamble will put up far greater resistance. ” He fears ITC may be spreading itself thin by entering into too many segments through its distribution-led strategy. “While the going has been good till now, my fear is that ITC may soon be present in too many verticals without actually dominating any one segment,” says Alagh. Others say ITC has some way to go before it can achieve HUL’s distribution strength. “ITC will gain in the bigger cities for sure, but it is the smaller towns that will be its weakness,” contends an analyst.

Even Britannia’s brands and distribution system are far stronger than ITC’s. Nestle’s strategy of building high-value brands remains unmatched and it would be difficult for a new player to cause a big dent. Says Harish Bijoor: “ITC needs to clone HUL’s process before it can really dominate the market. ” ITC’s strength lies in its distribution network of two million tobacco retailers, larger than HUL’s distribution chain of over one million. But the nature of the channel is different—a panwala would not be the ideal retailer to stock shampoos.

However, today about half the tobacco retailers carry confectionery items, three lakh stock biscuits and almost 40% stock FMCG products. But a realisation of the difference between the cigarette vendor and consumer products retailer has seen ITC leverage its fast-moving Aashirvaad atta to create a separate distribution system for FMCG products through kirana stores and modern retail formats. Strategic Levers Rural touch: ITC’s e-Choupals are a channel for two-way trade ITC is counting on extracting value through its e-Choupal network for its foods business.

While analysts doubt whether it makes any money, the bespectacled Chief Executive of ITC’s International Business Division (Agri Businesses), S Sivakumar, is convinced the e-Choupal strategy is bringing a lot of synergies. “By sourcing commodities directly from the farmers and eliminating all inefficiencies in the system, the company can save Rs 400 on every tonne of wheat,” he says. It helps source ‘identity preserved raw materials’—commodities that can be sourced from a particular region and therefore, provides quality assurance for its atta, chilli powder, spices, biscuits and pasta.

It is also looking at sourcing tomatoes and onions for its juices and other products in the pipeline, that the company is unwilling to discuss. A foray into the wholesale of fruit and vegetables and strategic supply arrangements with the likes of Kishore Biyani’s Future Group for their Food Bazaar will further strengthen the company’s ties with the farm folk. Direct contact with farmers through the e-Choupals and Choupal Sagars (rural hypermarkets) has meant a two-way business that has helped ITC in sourcing and gaining a foothold in rural distribution.

Buying from farmers is something that HUL’s Project Shakti has not done. Says Deveshwar: “You can integrate with the rural economy only if you buy from the farmers. ” Today the company is buying Rs 3,691 crore worth of agri-products from four million farmers using its network of 6,500 Choupals across nine states. In comparison, HUL’s Project Shakti (using women self-help groups) covers 1 lakh villages across 15 states, contributing just over Rs 100 crore to its revenues, though it provides livelihood to nearly 30,800 Shakti entreprenuers. By 2010, ITC plans to cover 1. crore farmers across one lakh villages in 15 states at an investment of Rs 5,000 crore. It also plans to increase the number of Choupal Sagars to 100 from 19 today. That would give it a strong rural chain to draw and push products through. The selling opportunity is large in the hinterland, far larger than what ITC’s own managers had initially imagined. That’s why ITC is scaling up its distribution business by letting other companies like Phillips (bulbs) Marico (hair oil), Duncan (tea), Iffco-Tokio (weather insurance), Life Insurance Corporation (insurance products) and Kribhco (fertilisers) ride its network.

Game of Synergies Synergies in the food and consumer goods portfolio with ITC’s other businesses are also significant. The knowledge of blending in tobacco and the palate-sense of ITC’s chefs have been used to develop a right wheat-mix for Aashirvaad atta. Interestingly, the food and hotel divisions both report to SH Rehman, Executive Director, helping make the process of synergising easier. The consumer business also ties up nicely with the cigarettes and paper “By sourcing commodities directly from farmers, we save Rs 400 per tonne of wheat”- S Sivakumar, CEO, International Business Division usinesses. “Because of our access to ITC’s printing and cigarette factories we were able to develop our products much faster. If you are a normal paper company, you will not be allowed to do experimentation on your customer machines because cigarettes are made on very sophisticated machines and at very high speeds of 400 packets per minute,” says Pradeep Dhobale, Divisional Chief Executive of Paperboards and Specialty Paper Division, a chemical engineer from IIT, Mumbai, who like Deveshwar, joined the company as a management trainee.

It is the strategy of entering the paper-based FMCG retail business with paper cups (a success with Pepsi and Coke), paper trays, gifting stationery, puzzles and games for children that will add to its product portfolio and raise the engagement with distributors. “Our specialisation in producing value-added paperboards has made us realise the huge potential for creating gifts and toys (dartboards) for 200 million children, from newborns to 15 years of age,” adds Dhobale. That could be his next big market. Unique Propositions Innovation for differentiation is another marketing principle that ITC is putting to good use.

In the overcrowded biscuit category, for instance, it has introduced Marie biscuits in an orange flavour. Again, customers used to the salty crackers of Parle’s Monaco are being offered an alternative, flavoured with chilli flakes. It has also introduced a six-unit pack (instead of 12) priced at Rs 2, which finds takers at cigarette outlets across the country. In confectionary, too, ITC changed the rules of the game by introducing flavoured mints of orange and lemon for Mint-O and as much as 50% of mint volumes now come from this category.

In the ready-to-eat food market, it has created two segments—the upper-end catered through the Kitchens of India brand (based on its recipes from its restaurants in ITC Welcom Hotels) and the mid-market, through the Aashirvaad range. While ITC officials say they want to straddle the entire value chain in whatever sector they enter, experts maintain it will be a segmental player for now in most categories. Also, to enter the next frontier, it will need to get people to shift from the current snacking habits (samosas and pakoras) to formal manufactured products, or co-opt the existing products, says Sahay.

Growth Sustainability “Our specialisation in producing paperboards has shown us the potential for creating gifts for children”- Pradeep Dhobale CEO, Paperboards & Specialty Boards Division The start has been good—the consumer products segment has notched up nearly 70% growth last fiscal—but the business is bleeding, with the cost of new product launches and marketing and advertising expenses pushing up losses before interest and tax to Rs 202 crore last fiscal. Production is largely outsourced.

Since the initial development and promotion expenses will yield benefits over time, ITC’s cash generating cigarettes business is a boon. Says Anand Shah, FMCG analyst at ICICI Securities: “ITC is leveraging the strength of its cigarette business and does not face the immediate pressure of returns, which is not the case with multinational food companies. So it can build scale and wait for two to three years to build a viable business. ” As for resources, a near debt-free status and healthy operating cash flows—over Rs 2,000 crore, and greater than HUL’s—puts it in a strong position.

And while Deveshwar expects some of the surplus cash of about Rs 4,000 crore to be invested in projects and a possible moderation in the return on capital in the near term, he is hopeful of keeping that number well above the 20% mark. ITC isn’t taking the low-price route to build its consumer business. A majority of its products are positioned as superior value propositions. Therefore, margins are expected to be healthy. But resource is just one side of the story. “Brand break-even cycles will be very elongated. But short-term consumer interest will be high.

Converting these early customers and early brand adopters into loyal customers will be the real challenge,” contends Bijoor. Whether ITC will emerge among the top two in each of its consumer goods segments only time will tell; we should get a feel by 2010 when it turns 100. For now, one thing is certain—Deveshwar with his commitment to audacious goals for ITC—is set to shake up the consumer goods market. Expounds Bijoor: “ITC has brought irrational competition into a rational business space by making huge investments in launches.

ITC has the clout, which will need to be matched by the existing players in the market. ” Cigarette and FMCG major, ITC has launched its first mass personal care offering, a high-end shampoo. After a year of speculation, ITC has launched its first mass market personal care product. ITC ‘s shampoo brand, Fiama di Wills is in the premium segment, that’s growing faster at 44%, compared to 21% for the overall market. Interestingly, ITC didn’t introduce a new brand name for its shampoo. Instead it has opted for a brand extension of its two year old, super premium range of personal care products, Essenza di Wills.

But unlike Essenza that was available at ITC hotels and Wills Lifestyle stores, Fiama di Wills shampoos will be stocked at retail stores across India. The product will be available at Rs 99 for a 200 ml bottle. On the pricing front, ITC is taking established players like HUL and P&G head on. Expanding its range of personal care products, and following the successful launch of Fiama Di Wills Shampoos, ITC presented yet another world class range of products for the Indian consumer through its new range of Fiama Di Wills Shower Gels.

Fiama Di Wills’ new premium range offers three transparent shower gels with suspended beads. Each variant provides a specific benefit to the consumer: Shampoo Variants: Silky Strong,Everyday Mild, Aqua Balance, and Volume Boost. Continuing with its tradition of offering a superior product and brand experience to the modern Indian consumer, ITC also launched today the Superia range of soaps and shampoos in select markets . Superia offers a range of four soap variants and two shampoo variants with a range benefit of Glowing skin and Shiny hair.

Each of the variants have been designed to deliver specific benefits to the various consumer needs. SOAPS: For Glowing Skin 1. Fragrant Flower with the fragrance of Rose & Lavender Oil 2. Soft Sandal with the fragrance of Sandal & Almond Oil 3. Natural Glow with Neem & Coconut Oils 4. Healthy Glow with Orange Oil SHAMPOOS: For Shiny Hair 1. Shiny Black with Triple Conditioners and the natural goodness of Hibiscus & Brahmi extracts 2. Vibrant Green with Triple Conditioners and the natural goodness of Amla & Arnica extracts

Superia soaps will be available in sizes ranging from 50g to 125g, and the shampoos in 125 ml and 55 ml. Posted by Prahlad(Peggy) Krishnamurthi at 9:02 AM Labels: fiama, fiama di wills, ITC, shampoo, wills Strengths Credibility of itc Distribution network Deepika Padukone: ITC vs HUL In a queer coincidence, the newest star on the block, Deepika Padukone, features in different commercials belonging to rival camps. She has been roped in by ITC to promote its Fiama Di Wills soap brand, and is also seen in a rather dated commercial of Close-Up which has been revived by rival HUL.

While the Fiama Di Wills print advertisement has been recently unveiled, the “Kya aap Close-Up karte hain…. ” commercial dates back a couple of years when Deepika was a budding model. Though Fiama Di Wills and Close-Up belong to different categories, and thus, do not compete, ITC is a fierce rival to HUL which has till date towered over meek and strong brands alike, in the highly competitive FMCG sector. ITC has already marked a foray into core FMCG categories-soaps and shampoos.

Industry observers say that it would eventually expand the basket to include more personal products. ITC’s good financial backing is expected to assist the company in competing against the might of HUL. On why ITC roped in Deepika, Sandeep Kaul, general manager, personal care business, ITC, said: “The Fiama Di Wills Brand personality is that of today’s modern, confident, intelligent and aware woman. Deepika is the perfect embodiment of this personality. ” Reasons for the revival of the old Close-Up commercial could not be ascertained.

HUL is said to be within its legal bounds to feature a commercial done years ago, which brings forth the question: Would Deepika’s Liril commercial done some years ago also be revived? There are no answers to this one, but if that happens, then the star would be seen promoting two rival brands from the same category. While ITC did not respond to a TOI query, all an HUL spokesman said was, “the right on any creatives which are generated shall be governed by the law of the land”. O was responsible for the creative three years ago and Lowe, which is handling the Close-Up brand for HUL now, refused to comment.

Advertising sources, however, said: “If the ad works for the company, they would use it. Ad agencies don’t change creative elements unless there is consumer boredom. ” BBDO’s Josy Paul said, “It is opportunistic thinking and increases the buzz in the market. ” Nearly a decade ago, Close-Up was caught in a similar wrangle with rival Colgate-Palmolive, when an old commercial featuring model Ruby Bhatia was revived ahead of a new Colgate product commercial which had the same model. The embarrassment was such that Colgate was forced to replace Bhatia.

Smoke it, giants ITC, the cigarette major, has an audacious plan—to build the country’s biggest consumer goods conglomerate Ashish Gupta , Ajitha Shashidhar PRINT SHARE COMMENTS Reason to smile: Yogi Deveshwar Even if the idea had originated from the overtly fertile mind of a 20-something maverick, it would still have been dubbed as far-fetched. But coming from a 60-year-old seasoned Chairman and Chief Executive Officer (CEO) of one of India’s most professionally run companies, you are left wondering what has gone wrong with the world.

Yet, for Yogesh Chander Deveshwar, a mechanical engineer from the Indian Institute of Technology, Delhi, and management graduate from Harvard University, the idea may sound “audacious” but doable. To transform the Rs 19,000-crore cigarette major into one of the biggest diversified conglomerates in the country, achieving pole position in its existing verticals, including confectionery, biscuits, snack foods, ready-to-eat foods, consumer staples, hotels, clothing, personal grooming and care business—certainly stretches one’s credibility. That’s not all.

He also wants to be India’s top buyer of agricultural commodities and rural marketer and biggest player in value-added commodities. That he is pitting ITC against some of the biggest multinationals—Unilever, Nestle, Perfetti Van Melle and Cargill—and homegrown brands—Britannia, Godrej, Nirma and Haldiram’s—does not faze him. As he sips his black tea explaining his strategy, you wonder whether it is just wishful thinking, foolhardiness or another gamble. But the man who resurrected ITC after the BAT affair, and began its diversification is ready for the next battle.

Besides making his managers think big, he has coined phrases that resonate at ITC’s corporate headquarters—Virginia House, Kolkata—and other offices in Hyderabad, Bangalore and Chennai. Phrases like seed-to-smoke, for its cigarette business, farm-to-plate, for the agribusiness, and trees-to-textbooks, for its paper and paperboards business are being drummed up to explain ITC’s linkages with the Indian farmer and the consumer. It is working to transform the rural economy and strengthen relationships with its suppliers (farmers) and India’s future consumers (rural folk).

Ask him about the impending battle and he retorts with tongue firmly in cheek: “We are helpless. All that we want to do is to secure the future of this great institution called ITC,” a future currently riding on the uncertain fortunes of its cash cow, cigarettes. He cites ITC’s competencies—deep understanding of the consumer psyche in creating better value-propositions in various verticals, excellent sourcing facilities, expertise in supply-chain management and marketing and an all-India distribution network—that could help it leapfrog to the top slot, though it might take time.

As he takes you on the journey to build India’s biggest consumer goods conglomerate, you begin to give him more than a chance of realising these dreams. Early Wins Bingo, Mint-O, Sunfeast and Aashirvaad atta, in a way, demonstrate ITC’s Spoilt for choice: ITC is taking retail to the hinterland capability to establish leading brands, unsettle competition and wean away market share from well-entrenched leaders. ITC, says Harish Bijoor, CEO of brand consultants Harish Bijoor Consults, has adopted a strategy of “shock and awe” to intimidate its rivals. Shock the market with your bluster. Shock the market with your range. Shock it with wide distribution. Shock it with a status that speaks not of new launch, but of an aggressive player with deep pockets, who can outdo the best player in the market. The market is shocked first, so is the market leader and the consumer is put into a state of awe. Every piece of advertising and market promotion makes the ITC product look larger than life. And it helps,” says Bijoor.

A 17% share wrested from leader PepsiCo’s Frito-Lay in the snack foods segment—largely flavoured potato wafers—along with 10% in branded biscuits from veterans Britannia and Parle and unseating leaders HUL (Annapoorna) and Perfetti (Chlormint) to emerge numero uno with market shares of 50% and 40%, respectively, has competition riled. Says Ravi Naware, Divisional Chief Executive of ITC Foods, “Our Sunfeast range of biscuits were launched in 2003. So, in just four years, we’ve managed to garner 10% market share and acquire the No 3 spot in biscuits.

In the ready-to-eat foods, a market worth $30 million (about Rs 120 crore) and growing at a stupendous 150% year-on-year, we’re close to No. 2 behind MTR Foods. ” The Big Picture And these bits and pieces are adding up. In just five years, ITC has emerged as the No. 5 player among listed companies in the consumer goods business, ahead of Colgate-Palmolive, Cadbury and Reckitt Benckiser, with non-cigarette consumer goods revenues of Rs 1,704 crore last fiscal (See FMCG League Table).

Given the heady growth of 68% in the six months to September 2007, the business could well grow to beyond Rs 2,500 crore in the current fiscal—despite capacity constraints in certain segments keeping it meeting the swelling demand—and push it a few notches up the FMCG ranks. “In just four years, we have managed to garner 10% market share in biscuits and become the No 3 player”- Ravi Naware, Chief executive, ITC Foods While this has spurred it to open new fronts in personal care—shampoos and soaps—in direct confrontation with consumer goods bigwigs, these are early days.

Says Arvind Sahay, Professor of Marketing at Indian Institute of Management (IIM), Ahmedabad: “What helped ITC’s cause was that during the same period (2000-04), Unilever was focusing more on “rationalising” brands and Britannia had management issues before the current CEO came in. These provided a window of opportunity and ITC has taken full advantage, whether deliberately or inadvertently. ” Battle Lines In the past five years, ITC has moved into Hindustan Unilever’s core FMCG businesses—food products and personal care.

For years, HUL has been India’s most revered consumer products company, defining what competitive marketing was all about. But between 2001 and 2005, it slipped from the high pedestal. It seemed like staging a comeback only to slip back to single digit growth in the previous three quarters (December 2006, March 2007 and June 2007). Worse, it has not made a big brand launch or entered into any new category for the past eight years other than a water purifier brand called Pure It, unlike ITC which has flooded the market with organic spices, Mint-O, Bingo, Fit Kit, Aashirvaad atta and Sunfeast range of biscuits.

But that could change with HUL now having put its house in order. Deveshwar realises it won’t be easy from here on. Yet, that has not stopped ITC from jumping into the personal care and fragrance business—the Essenza range—by launching a range of shampoos and soaps. While Fiama Di Wills is positioned as a top-end shampoo brand to take on Pantene and Dove, Superia is pitted in the value-for-money segment and priced 50% lower than Clinic Plus, which has a 22% share of the market.

ITC has engaged the services of independent product development outfits in France and the US to develop its personal care range of eau de toilettes, after-shave lotions, creams and shampoos—the process for which was kicked-off five years ago. Prising open the personal care business will be a lot more difficult than the biscuit business, feels Sunil Alagh, former CEO of Britannia Industries. “While the biscuit companies did not have a strategy to counter ITC, HUL, Colgate-Palmolive and Procter & Gamble will put up far greater resistance. He fears ITC may be spreading itself thin by entering into too many segments through its distribution-led strategy. “While the going has been good till now, my fear is that ITC may soon be present in too many verticals without actually dominating any one segment,” says Alagh. Others say ITC has some way to go before it can achieve HUL’s distribution strength. “ITC will gain in the bigger cities for sure, but it is the smaller towns that will be its weakness,” contends an analyst.

Even Britannia’s brands and distribution system are far stronger than ITC’s. Nestle’s strategy of building high-value brands remains unmatched and it would be difficult for a new player to cause a big dent. Says Harish Bijoor: “ITC needs to clone HUL’s process before it can really dominate the market. ” ITC’s strength lies in its distribution network of two million tobacco retailers, larger than HUL’s distribution chain of over one million. But the nature of the channel is different—a panwala would not be the ideal retailer to stock shampoos.

However, today about half the tobacco retailers carry confectionery items, three lakh stock biscuits and almost 40% stock FMCG products. But a realisation of the difference between the cigarette vendor and consumer products retailer has seen ITC leverage its fast-moving Aashirvaad atta to create a separate distribution system for FMCG products through kirana stores and modern retail formats. Strategic Levers Rural touch: ITC’s e-Choupals are a channel for two-way trade ITC is counting on extracting value through its e-Choupal network for its foods business.

While analysts doubt whether it makes any money, the bespectacled Chief Executive of ITC’s International Business Division (Agri Businesses), S Sivakumar, is convinced the e-Choupal strategy is bringing a lot of synergies. “By sourcing commodities directly from the farmers and eliminating all inefficiencies in the system, the company can save Rs 400 on every tonne of wheat,” he says. It helps source ‘identity preserved raw materials’—commodities that can be sourced from a particular region and therefore, provides quality assurance for its atta, chilli powder, spices, biscuits and pasta.

It is also looking at sourcing tomatoes and onions for its juices and other products in the pipeline, that the company is unwilling to discuss. A foray into the wholesale of fruit and vegetables and strategic supply arrangements with the likes of Kishore Biyani’s Future Group for their Food Bazaar will further strengthen the company’s ties with the farm folk. Direct contact with farmers through the e-Choupals and Choupal Sagars (rural hypermarkets) has meant a two-way business that has helped ITC in sourcing and gaining a foothold in rural distribution.

Buying from farmers is something that HUL’s Project Shakti has not done. Says Deveshwar: “You can integrate with the rural economy only if you buy from the farmers. ” Today the company is buying Rs 3,691 crore worth of agri-products from four million farmers using its network of 6,500 Choupals across nine states. In comparison, HUL’s Project Shakti (using women self-help groups) covers 1 lakh villages across 15 states, contributing just over Rs 100 crore to its revenues, though it provides livelihood to nearly 30,800 Shakti entreprenuers. By 2010, ITC plans to cover 1. crore farmers across one lakh villages in 15 states at an investment of Rs 5,000 crore. It also plans to increase the number of Choupal Sagars to 100 from 19 today. That would give it a strong rural chain to draw and push products through. The selling opportunity is large in the hinterland, far larger than what ITC’s own managers had initially imagined. That’s why ITC is scaling up its distribution business by letting other companies like Phillips (bulbs) Marico (hair oil), Duncan (tea), Iffco-Tokio (weather insurance), Life Insurance Corporation (insurance products) and Kribhco (fertilisers) ride its network.

Game of Synergies Synergies in the food and consumer goods portfolio with ITC’s other businesses are also significant. The knowledge of blending in tobacco and the palate-sense of ITC’s chefs have been used to develop a right wheat-mix for Aashirvaad atta. Interestingly, the food and hotel divisions both report to SH Rehman, Executive Director, helping make the process of synergising easier. The consumer business also ties up nicely with the cigarettes and paper “By sourcing commodities directly from farmers, we save Rs 400 per tonne of wheat”- S Sivakumar, CEO, International Business Division usinesses. “Because of our access to ITC’s printing and cigarette factories we were able to develop our products much faster. If you are a normal paper company, you will not be allowed to do experimentation on your customer machines because cigarettes are made on very sophisticated machines and at very high speeds of 400 packets per minute,” says Pradeep Dhobale, Divisional Chief Executive of Paperboards and Specialty Paper Division, a chemical engineer from IIT, Mumbai, who like Deveshwar, joined the company as a management trainee.

It is the strategy of entering the paper-based FMCG retail business with paper cups (a success with Pepsi and Coke), paper trays, gifting stationery, puzzles and games for children that will add to its product portfolio and raise the engagement with distributors. “Our specialisation in producing value-added paperboards has made us realise the huge potential for creating gifts and toys (dartboards) for 200 million children, from newborns to 15 years of age,” adds Dhobale. That could be his next big market. Unique Propositions Innovation for differentiation is another marketing principle that ITC is putting to good use.

In the overcrowded biscuit category, for instance, it has introduced Marie biscuits in an orange flavour. Again, customers used to the salty crackers of Parle’s Monaco are being offered an alternative, flavoured with chilli flakes. It has also introduced a six-unit pack (instead of 12) priced at Rs 2, which finds takers at cigarette outlets across the country. In confectionary, too, ITC changed the rules of the game by introducing flavoured mints of orange and lemon for Mint-O and as much as 50% of mint volumes now come from this category.

In the ready-to-eat food market, it has created two segments—the upper-end catered through the Kitchens of India brand (based on its recipes from its restaurants in ITC Welcom Hotels) and the mid-market, through the Aashirvaad range. While ITC officials say they want to straddle the entire value chain in whatever sector they enter, experts maintain it will be a segmental player for now in most categories. Also, to enter the next frontier, it will need to get people to shift from the current snacking habits (samosas and pakoras) to formal manufactured products, or co-opt the existing products, says Sahay.

Growth Sustainability “Our specialisation in producing paperboards has shown us the potential for creating gifts for children”- Pradeep Dhobale CEO, Paperboards & Specialty Boards Division The start has been good—the consumer products segment has notched up nearly 70% growth last fiscal—but the business is bleeding, with the cost of new product launches and marketing and advertising expenses pushing up losses before interest and tax to Rs 202 crore last fiscal. Production is largely outsourced.

Since the initial development and promotion expenses will yield benefits over time, ITC’s cash generating cigarettes business is a boon. Says Anand Shah, FMCG analyst at ICICI Securities: “ITC is leveraging the strength of its cigarette business and does not face the immediate pressure of returns, which is not the case with multinational food companies. So it can build scale and wait for two to three years to build a viable business. ” As for resources, a near debt-free status and healthy operating cash flows—over Rs 2,000 crore, and greater than HUL’s—puts it in a strong position.

And while Deveshwar expects some of the surplus cash of about Rs 4,000 crore to be invested in projects and a possible moderation in the return on capital in the near term, he is hopeful of keeping that number well above the 20% mark. ITC isn’t taking the low-price route to build its consumer business. A majority of its products are positioned as superior value propositions. Therefore, margins are expected to be healthy. But resource is just one side of the story. “Brand break-even cycles will be very elon

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