“We’ll launch the first product in the second or third quarter of next fiscal year," Sanjiv Puri, chief executive officer of ITC, said at the inauguration of the company’s new plant at Jhalthikriwal village, in Punjab’s Kapurthala district. The plant was inaugurated by Amarinder Singh, chief minister of Punjab, on Thursday.
Spread over 30 hectares, the unit will be the largest integrated food and manufacturing facility owned by ITC. The company has committed an investment of Rs1,500 crore for building the facility.
According to Puri, ITC will produce milk-based ready-to-drink beverages at the Kapurthala unit that will also make atta, noodles, wafers, biscuits, fruit juices and other fruit-based beverages.
“We are yet to finalize the brand for milk-based beverages," said Puri.
ITC’s plan to expand in dairy is part of its efforts to generate about Rs65,000 crore from packaged foods by 2030 to reach its goal of Rs1 trillion in revenue from non-cigarette packaged goods by that time, according to a Mint report on 21 September.
The company’s branded packaged food business crossed Rs8,000 crore in the fiscal year ended 31 March 2017, while its total revenue stood at Rs55,001.69 crore.
The Kapurthala factory enjoys the logistical advantage of Punjab’s dairy supply chain, said Puri. Swiss packaged food company Nestlé SA’s Indian entity Nestlé India Ltd, one of the top contenders in the dairy market, also has a milk plant in the state.
ITC’s dairy bet took shape in 2015-end with Aashirvaad ghee. It later expanded the business with Sunfresh whitener in 2016. The company sells dairy products mainly in the southern states.
While most of the estimated Rs90,000 crore dairy market in India is unorganized, milk-based beverages are a fast growing segment. According to a study by market intelligence agency Mintel, during the first six months of 2017, more than 39% of fresh launches in the ready-to-drink segment were flavoured milk offerings. However, the market size of the flavoured milk segment in India is still small and was pegged at around Rs800 crore in 2015.
The local entities of PepsiCo Inc. and Coca-Cola Co., home-grown biscuit maker Britannia Industries Ltd and Gujarat Cooperative Milk Marketing Federation Ltd that owns the Amul brand, are the top firms in the flavoured milk market.
The Kapurthala unit is one of ITC’s 20 integrated factories for consumer packaged goods with logistics facilities which will together cover an area of 28 million sq. ft across the country. The company has lined up an investment of Rs25,000 crore in 65 projects. “One or two facilities will be operational every year," said Puri.
For the first time, said Puri, ITC will have a mandi for wheat procurement within the Kapurthala factory premises. “We’ll procure wheat from local farmers. Over a period, when the facility is fully operational, about 50,000 farmers will benefit," he added.
According to ITC, the Kapurthala factory will directly employ around 2,000 people once fully operational.
Equity analysts see ITC’s non-cigarette packaged goods as a growth driver. In a note on 6 September, research firm Jefferies India Pvt. Ltd said: “Other FMCG (fast-moving consumer goods) businesses have seen healthy performance from packaged foods brands such as Sunfeast, Aashirvaad, Bingo and Yippee, while personal care categories have been subdued. We remain positive on the foods and stationery part of the portfolio. However, a slew of new launches like juices, dairy, chocolates, etc., and personal care losses would limit segment margin expansion potential."