ITC eyes small FMCG firms

In order to scale up its packaged food business, fast-moving consumer goods major ITC is looking at acquiring smaller companies in the sector to complement its product portfolio with a war chest of Rs 150-200 crore.

"I have an open mandate for acquisitions, and for a company like ITC, money to buy companies is not an issue," Ravi Naware, divisional chief executive (foods), ITC, told Business Standard.

Naware indicated the acquisitions would serve as a launch pad for the company to get into new product categories in the food business rather than for scaling up its existing product lines.

"The FMCG business being a low technology business, it is always easy to scale up our existing product categories. The acquisitions should enable us to get a considerable size in a new segment," he said. ITC Foods last acquired Mint-O from Candico.

ITC is eyeing a turnover of Rs 500 crore by 2007 from its food business. "In the next two years, we should also break even. Becoming profitable, with the kind of volumes we have within five years of starting a business, would be quite an achievement in the FMCG business," he added.

The company is also planning to get into newer product categories like spices and packaged juices to compete with the likes of Dabur and PepsiCo, leveraging its vast farmer network.

"Our margins in the staple food business like atta have been better than the industry average because we procure directly from farmers. And we have plans to extend the procurement to spices, fruits and vegetables," said Naware.

In the last six months, ITC has given a major thrust to its biscuit brand Sunfeast, by taking up the total number of SKUs under the brand to 12, and almost doubling the advertising support for the brand.

According to ITC, with sales of nearly Rs 100 crore, Sunfeast now has 6.5 per cent of the biscuit market, making it the biggest brand in its portfolio.

ITC Foods claimed to spend almost 50 per cent of its estimated sales of around Rs 350 crore, compared with the FMCG industry's average of 12 per cent. Last month, the company had launched premium biscuit brand Dark Fantasy to take on Britannia's Pure Magic range.