ITC seeks to get FMCG business to go faster

ITC said it is seeking to expand its fast-moving consumer goods (FMCG) business in double digits next fiscal by quickening the pace of product launches, deepening distribution into the rural hinterland, and building integrated hubs for output, stocking and delivery of items such as cookies, packaged flour and soaps.

Three of the integrated consumer goods manufacturing and logistics (ICML) hubs, which the conglomerate expects would lower operating costs and boost bottom-lines at the FMCG business, should come up in FY20, the Kolkata-based company said. ITC has launched more than 60 new products in FY19 and wants to continue this pace of product introductions next fiscal as well to drive business growth and expand distribution reach to population centres of up to 5,000 people.

ITC’s executive director B Sumant said that the company has already operationalised five ICMLs. These hubs make FMCG products, such as packaged foods and personal-care items, and have warehousing and outbound logistics integrated with the respective output facilities.

ITC said it is in the process of setting up 20 ICMLs across the country as part of its planned investment of Rs 25,000 crore over the next couple of years.

"The ICMLs will ensure cost efficiencies and freshness of products as they will be closer to end-consumers,” said Sumant. “We also want to drive distribution in rural (areas), considering there is growth in those markets - both (by way of) same store sales and new store additions.”

Tracker Nielsen’s data, as of December, showed that ITC’s FMCG sales expanded 20% in rural markets, compared with 16% for the broader industry. In the nine months ending December, ITC had added 2.3 lakh outlets, taking its reach to 61 lakh. Out of this, ITC directly reaches to more than 20 lakh outlets.

ITC recently ventured into low-unit price packs for premium products, such as shower gel, body wash, hand wash and cookies, to initiate trials and drive adoption of these items in more price-sensitive sections of the consumer market.

For instance, it recently halved the entry prices of body-wash and hand-wash products to Rs 20 and Rs 10, respectively. ITC has launched a Rs 40-pack for Charmis skin cream, compared with Rs 180 earlier. Similarly, there is now a Rs 10 pack for Dark Fantasy Choco Fills cookies, compared with Rs 30 before.

In the dairy business, Sumant said ITC would seek to scale up the geographic and distribution reach of the products it has already launched. It has introduced milk, ghee, curd, and paneer in Bihar and West Bengal, and milk shakes in the South.

ITC has said that it wants to become India’s largest pure-play FMCG firm by 2030 across products such as packaged food, personal care and stationery, with these categories accounting for Rs one lakh crore in revenue. In 2017-18, the non-cigarette FMCG business revenue was Rs 11,328 crore, while gross profit from this business climbed almost five fold to Rs 164 crore.

The company is the local market leader in branded flour, premium cream biscuit, bridges snack, notebooks and safety matches, while it is the second largest in instant noodles, shower gels, deodorants and incense fragrances.