Near-term outlook is uncertain: ITC’s Puri2 min read . Updated: 04 Sep 2020, 10:44 PM IST
He said the firm will focus on cost reduction measures amid weak demand
ITC Ltd on Friday said the near-term demand outlook remains uncertain amid surging covid-19 cases and a weak economy, even as the hotels-to-packaged goods conglomerate boosts digital capabilities and launches new products.
ITC chairman Sanjiv Puri said localized lockdowns were impacting recovery, and called for a strategic response to mitigate the impact on livelihood. ITC will focus on value-accretive opportunities and drive thrift, cost optimization and conservation of cash, he said.
“The near-term outlook remains uncertain as consumer trends and industry dynamics constantly evolve in the backdrop of the yet unfolding impact of the pandemic and shape of economic recovery. Your company shall continue to closely monitor the situation and respond with agility to strengthen its market standing while sharply focusing on cost reduction measures," Puri said at ITC’s annual shareholders’ meeting.
The pandemic has weakened households’ ability to spend on discretionary items and consumer behaviour is more “value-seeking", Puri said. “There is a shift to larger basket purchases, large value packs with infrequent shopping frequency."
Wide-ranging reforms, faster infrastructure development and policy interventions are expected to spur growth over time, he said.
ITC, which operates in hospitality, packed consumer goods, cigarettes, agriculture infrastructure, and paper and packaging, reported a 26% drop in June quarter net profit. Revenues were down 17.4% to ₹9,501 crore.However, its FMCG-others segment (excluding cigarettes) including wheat flour, health and hygiene products, packaged noodles and cookies, reported a 19% comparable growth during the first quarter.
In FY20, non-cigarette segment revenue rose to ₹31,000 crore, and now accounts for nearly 60% of ITC’s total segment revenue, it said.
Other than hotels and education and stationery products, ITC saw “progressive normalization" in the latter part of the first quarter across segments.
During the peak of the lockdown, ITC launched products such as surface disinfectants under its Savlon brand. The manufacturing capacity of Savlon sanitizers was raised 275 times to cater to higher demand. In all, ITC launched 40 first-to-market products and variants during the pandemic to meet emerging consumer demand.
Puri said consumers continue to prefer trusted brands and organic products due to health and safety concerns, in a shift of consumer behaviour. “There is a growing preference for organic, naturals and fresh products though consumers also seek indulgence, comfort eating and even resort to “revenge‟ consumption. Frozen food, ready-to-eat or cook meals score high on convenience, during these trying times," he said.
Moreover, the company also launched an online ordering system for retailers to address the surge in demand for FMCG products during the lockdown. ITC also enhanced presence across e-commerce platforms that led to accelerated growth in sales and marketing of its FMCG products.
More digital initiatives are underway. “Accelerated digital transformation is integral to your company’s future-ready strategy and is increasingly being harnessed to enhance competitive advantage. New technologies such as industry 4.0, Artificial Intelligence, big data, industrial Internet of Things (IoT) and machine learning are being deployed by all businesses, including your company’s supply chain and logistics to enhance operational effectiveness," Puri said in his speech.
Moreover, the company’s marketing command centre has developed into a real-time repository on market trends, helping it roll out several digital campaigns during the lockdown.