Unlike multinationals, we've built brands from scratch: B Sumant

Says ITC's deep understanding of Indian consumer has lent significant competitive advantage in FMCG

What have been the lessons for ITC in consumer goods in the last decade, and how did the group base its understanding of Indian consumers derived from earlier?

ITC is an Indian company building a portfolio of world-class Indian brands from scratch. These brands unlike foreign brands create, capture and retain value in India. We have invested time, resources and money to create the brands for the Indian consumer.

It is a matter of immense satisfaction that a large number of brands have attained leadership positions in their segments. ITC has been able to leverage its enterprise strengths built over many years to deliver superior and differentiated offerings in the marketplace. We have robust agri-sourcing capabilities and we have developed a strong agri-back end through the e-Choupal network. The agri-value chain has made a meaningful contribution to the success of Aashirvaad atta and has enabled the differentiation of the product. Secondly, ITC has over the years established an extensive trade marketing and distribution infrastructure which reaches out to markets even with a population of 5,000 and in some regions even to a size of 2,000. We have 60+ distribution centres and over 1,700 wholesale distributors for our portfolio of FMCG offerings. The other enterprise strength which lends significant competitive advantage is our deep understanding of the Indian consumer. In fact, the culinary expertise of ITC’s hotel chefs lends invaluable strength to our foods business. Their understanding of the Indian consumer palate gained from continuous engagement with guests from across India provides valuable insights in shaping our superior and differentiated offerings. In addition, the packaging excellence of ITC enables our products to have a longer shelf life and a superior imagery.

What are the challenges for ITC in categories within FMCG, and what are the strategies have helped you gain leadership in a segment like stationery?

ITC spends enormous time and effort in developing back-end capabilities and knowledge which results in the development of high-quality and differentiated products. Let me give you the example of the ITC Master Chef spices that we have launched recently in New Delhi. Every variant of the basic and blended spices have undergone more than 470 tests for pesticide residues as per European standards. ITC has developed an Integrated Pest Management Programme where extensive work has been undertaken with farmers to produce crops that are compliant with not just Indian but also EU standards. There is deep engagement with the farmers right from the seed level to crop development to a package of best practices. We work extensively at the back end to produce high-quality ingredients.

The other example of a synergy of institutional strengths providing competitive advantage is ITC’s Classmate notebooks. Classmate is India’s leading stationery brand. We have been able to leverage the expertise of our paperboards and paper business. ITC has been a market leader in the paperboards and packaging segment. Our expertise and knowledge of paper technology has enabled us manufacture the brightest, whitest and strongest quality of paper with minimal strikethrough for our Classmate notebook.

We as an organisation are obsessed about quality. Unless we are completely confident that the product is better than the best, we do not launch the product in the market. For example, 10 years of R&D went into crafting Fabelle luxury chocolates in the company’s pursuit to craft the finest luxury chocolates in India. ITC faces competition from well-entrenched players in the FMCG market. The challenge is that unlike MNCs, an Indian company like ITC has built brands right from scratch and it takes enormous time, resources and investments to build these brands and ensure that we deliver the finest quality to the Indian consumer at the right price.

With the changes in terms of distribution with the growth of e-commerce and how critical is an omni-channel presence?

Sales is intrinsically linked to availability and hence as a large FMCG player with a wide portfolio of offerings, it is important for us to be present across all channels including brick-and-mortar and online platforms. Universal availability is the mantra. We work with all e-commerce channels including Big Basket, Grofers, Amazon and Snapdeal. We at have a dedicated channel for e-commerce and modern trade. Anyone who comes up with an innovative solution of reaching the consumer, we’re ready to partner with them.

Where do you see the next phase of growth coming for the FMCG industry? Could you identify specific categories that you see greater growth potential in?

The FMCG sector in India provides unlimited opportunities. It is expected to grow to Rs 600,000 crore by 2020 as disposable incomes will increase by 12x and the urban population will grow 40 per cent by 2030. We are creating alternative engines of growth. The mandate set by our chairman is to achieve a turnover of Rs 100,000 crore from the new FMCG businesses. While strengthening leadership in existing categories, we are also foraying into new categories. Our new FMCG businesses have been profitable since 2014 and sustained the position over the last three years despite large investments in new categories like juices, chocolates, coffee and deodorants. Today, the non-cigarette businesses account for 77 per cent of the operating capital employed and these non-cigarette businesses account for 88 per cent of ITC’s employee base.

More than 20 integrated consumer goods manufacturing facilities are under development in various parts of India. These facilities will ensure freshness of products and enhance cost efficiency.

Our four lakh sq ft ITC Life Sciences and Technology Centre is working on game changing products including functional foods that address consumer concerns including diabetes, obesity, cognition and age-related issues. We have expanded our portfolio in health and wellness.

Our objective is to continuously up our game and stay ahead of the curve. Our aspiration is to be a national champion that creates growing value for India through the creation of world-class Indian brands.