Bangalore: ITC Foods, the fastest growing business of cigarette maker ITC Ltd , is aggressively expanding distribution in small towns and villages, where it trails rivals such as Britannia Industries Ltd and Parle Products Ltd .
ITC Foods, which makes Sunfeast biscuits and Bingo chips, expects increased distribution in rural areas and new product launches in biscuits and snacks to help it grow sales by 28-30% this year, chief executive Chitaranjan Dar said in an interview.
“We’re going to make products available in small towns and rural areas, which were earlier confined only to cities. For example, if we had 1,000 stocking points in a region, we’ll now have 3,000 stocking points,” Dar said. “We’re appointing new wholesalers, stockists. Our strategy is to intensely market our products in rural areas.”
ITC Foods gets about 30-35% of its business from the villages. Dar said that number would increase to 35-40% in two years. “It’s not that growth in urban is saturated,” he said. “It’s just that the opportunity in rural areas is immense and consumers there are premiumizing (trading up).”
Increasing distribution in rural areas is important for ITC Foods, which likely accounted for over 11% of ITC’s sales last year, to keep up its strong growth rate as Parle and Good Day maker Britannia are aggressively promoting their brands. ITC is India’s third-largest biscuits maker after Parle and Britannia.
For distribution clout, ITC Foods can also tap into its parent company’s e-Choupal network, which involves working directly with farmers on obtaining materials and delivering products.
“It’s extremely important for them to expand distribution in rural areas. Until now, the focus was to scale up the business in urban India, build up the brands and achieve break-even,” said Anand Mour, analyst at ICICI Securities, a brokerage. “Now that they’ve achieved break-even or are close to it, they need to be competitive enough in terms of availability and distribution in rural areas where they lag most FMCG (fast-moving consumer goods) companies. To get growth across markets, they need to be in rural areas in a big way.”
Apart from Sunfeast and Bingo, ITC Foods’ brands include Kitchens of India packaged food, Aashirvaad flour, minto and candyman sweets and Sunfeast Noodles. These brands likely brought in sales of over Rs.4,700 crore in the year ended March, analysts said.
Dar said the unit will launch this year new brand variants under Sunfeast biscuits, its largest business. It will also launch new products in chips and confectionary.
“The whole idea behind launching new products in biscuits is to strengthen the Sunfeast brand at the premium level,” Dar said. “We’re also looking at getting into the dairy business, which will be launched in a year from now.”
He said this financial year the company’s snacks and noodles would grow fastest within its portfolio, followed by biscuits, Aashirvaad flour and confectionary.
“Growth in confectionary has been moderate just like the rest of the industry. The current level of supply is satiating the supply,” Dar said. “This industry is waiting for some kind of innovation to happen.”