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Business News/ Companies / ITC goes hyperlocal to boost its food portfolio

ITC goes hyperlocal to boost its food portfolio

The company plans to launch products specific to a region and expand nationwide over time once it gains popularity

Photo: ReutersPremium
Photo: Reuters

ITC Ltd, using its wide distribution network, is working on two sales strategies with an aim to expand its packaged food business.

In a bid to widen its product offerings in the mass-market segment, the tobacco-to-hotels conglomerate is launching products that are relevant to a particular town, state or community with a potential to grow it nationwide over time.

Last month, ITC’s food division launched Punjab da Kinnow, a fruit juice under its BNatural brand. The kinnow is a variant of orange grown in Punjab. The target market is Punjab and parts of north India, including Delhi, where BNatural has a very limited presence.

In the past few months, ITC has also launched locally popular spices under the ITC MasterChef brand in Andhra Pradesh and Telangana. “The idea is simple. Identify popular mass-segment products that are only available in a particular market. Develop those into a packaged product under the ITC brand to be sold in that particular market," said V.L. Rajesh, divisional chief executive (foods division).

Once the product is well accepted in a particular market, the firm will try to expand it nationally. “Some would work, some may not. But over a period we’ll have a larger kitty," Rajesh added.

According to Rajesh, ITC is looking at every state town for such products. “We are working on a few. Over a period, we’ll have specific products for each state. We may even look at products that would only be relevant for a market covering an area of just a couple of hundreds kilometres. Some of these will become large revenue contributors in the longer term."

Picking up products that are doing well in a particular market and then enhancing quality and safety standards makes more business sense than developing a product from scratch that consumers may not like, said Rajesh, declining to put a number on how many such products ITC is planning to launch over the next couple of years.

ITC’s second sales strategy involves launching more premium food products that adhere to European Union (EU) standards in the health and wellness category to boost its profits.

On 7 June, the company launched the Sunfeast Farmlite Digestive—a biscuit that has “no maida and added sugar". The company has replaced maida (refined flour) with atta (whole-wheat flour).

“Indian consumers are increasingly becoming health conscious and digestive biscuits are being consumed for healthy digestion and a balanced lifestyle. Consumers genuinely believe digestive biscuits are made from healthy ingredients," the company had said in a statement after the launch.

In May, it launched premium chocolate Fabelle to be sold at boutique stores in the company’s luxury hotels, starting with ITC Gardenia in Bengaluru. Earlier this year, ITC launched a sugar release control variant of Aashirvaad atta with low glycaemic index, which helps in managing blood sugar levels.

Kolkata-based ITC has also formed a special team to enter into the fruits and vegetables segment. The products will be developed using expertise from Technico Agri Sciences Ltd India, the Indian unit of Australia-based agri-biotech firm Technico Pty Ltd and a seed potato producer, which it acquired in March 2016.

According to Rajesh, ITC MasterChef, the new range of spices, which are screened for more than 450 chemicals, toxins, microorganisms and other contaminants in compliance with EU food safety norms (Indian norms require testing of just 10 parameters), will be rolled out nationwide soon.

ITC Life Sciences and Technology Centre, the firm’s R&D facility in Bengaluru, with more than 350 scientists and 400 patent applications, is working with the food division for development of these products.

ITC’s robust distribution network helps it reach up to 4.3 million of the estimated 9 million retail stores in India.

ITC has been focusing on the packaged foods and consumer goods segment to cut its dependence on cigarettes. In the year ended 31 March 2015, revenue from packaged food products stood at 6,411.27 crore, higher than rival Hindustan Unilever Ltd’s revenue from the food business ( 5,522 crore). For the year ended 31 March 2016, the firm did not disclose revenue from foods business. Revenue from non-cigarette packaged goods business (including food, personal care, lifestyle and stationery) stood at 9,704.40 crore and revenue from cigarettes stood at 17,485.82 crore.

The company aims to reach 1 trillion in revenue from its cigarettes and packaged goods business by 2030.

Analysts feel ITC’s hyperlocal strategy may not augment its revenue. “It could be an attempt to test markets. But the scale is so small that this strategy may not be very helpful for ITC to boost revenue. On the other hand, looking at health and wellness for premium segment seems like a good move considering its higher margins. The volume will not be high though," said Sachin Bobade, an analyst at brokerage firm HDFC Securities Ltd.

Abneesh Roy of Edelweiss Securities Ltd, another brokerage, said in a note on 6 May that ITC’s strategy to sell Fabelle only at its luxury hotels will help the brand image in this category and get customer feedback before a national roll-out. “We expect ITC to gradually enter mid-end of chocolates also and sell eventually through the traditional mom-and-pop shops, modern trade and online also," he added.

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Published: 17 Jun 2016, 12:44 AM IST
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