ITC’s packaged foods business is eyeing better margins across its branded portfolio. By creating premium variants, it is further segmenting categories such as atta, biscuits and noodles, to increase margins in its foods portfolio.
Chitranjan Dar, CEO, Foods Division, ITC, said, “We are going up the value chain by segmenting and creating premium variants, depending on the scope and need of consumers. Even in segments such as confectionary, we have introduced high margin products like jellies.”
Sunfeast biscuits has already introduced premium variants of chocolate cookies like Dark fantasy, while the company also launched a more expensive offering under its Chinese masala noodles. Its atta portfolio has also been segmented under premium variants Aashirvaad Select and multigrain. In snacks too, it might create more ‘healthy’ variants for its Bingo chips, which might have higher price points. Going forward, ITC would also explore variants in the wellness space. As Dar says, “We will look at products which are healthy using less oil and with multigrains.”
While the FMCG major has been holding on to prices in the past six months, there are chances of a hike to protect its margins in a volatile foreign exchange market. “Costs of imported wheat and oil are rising and we may have no option but to increase prices due to expensive imports,” added Dar.
ITC is not depending heavily on imports though, and has an edge as compared to multinationals (MNCs) in terms of its sourcing capabilities. Its agri-business division ensures it sources directly from farmers through its e-choupals.
“Right sourcing in terms of quality and reliability has helped the foods business, as we have the backend in place through e-choupals which cover nearly 60,000 villages,” says Dar.
Another big advantage is its cigarette distribution which has been used to peddle some of its FMCG products. “To some extent, there are similarities. The same distribution team muscle is used between cigarettes and FMCG,” said Dar. Currently, ITC reaches out to nearly 6 million outlets with its FMCG portfolio.
The next big challenge would be its entry into the dairy segment, which is also dominated by MNCs. ITC has already been engaging with farmers for milk in Bihar, as part of a CSR (corporate social responsibility) and would be extending it into a full-fledged dairy business.
“We have already started processing milk from our manufacturing base at Munger in Bihar and would be scaling up existing operations. The dairy launch should happen by the middle of next year,” added Dar.
Purvita@thehindu.co.in