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Y C Deveshwar, the chairman of cigarettes-to-hotels major ITC, laid out an ambitious road map last month of turning the company's Rs 8,100-crore non-cigarette FMCG business into a Rs 1-lakh-crore portfolio in 15 years. The 68-year-old veteran, whose current term ends in two years, said that a number of categories from foods and beverages to personal care would help the firm become a key player in FMCG.
ITC appears to have taken a step in that direction with the acquisition of Savlon and Shower to Shower personal care brands from babycare major J&J last week, for an estimated Rs 180-200 crore. This is the second acquisition by ITC in 10 months after the Rs 100-crore B Natural juice buy last May. That acquisition gave ITC access to the growing natural juice market, dominated by players such as Dabur (with Real) and PepsiCo (with Tropicana).
The latest acquisition, notably of antiseptic liquid Savlon, will help the Kolkata-based major ramp up its play in health care - a market that will only grow.
The organised hygiene market, according to industry estimates, is pegged at Rs 3,000-4,000 crore. This market, analysts say, has the potential to double, provided branded products are used even more in both urban and rural households. At the moment, it is not the case, with many households counting on plain water for cleanliness.
Savlon's arch-rival RB's Dettol has taken the lead by moving beyond antiseptic liquids into soaps, handwash, hand sanitisers and allied personal care products on the '100-per-cent germ protection' platform. There is also Hindustan Unilever's Lifebuoy, the country's largest soap brand, which is positioned on the health care platform. Both RB and HUL have spent regularly on these brands, unlike J&J, Savlon's erstwhile parent.
While J&J did take baby steps in extending its presence in health care, by taking Savlon into liquid soaps and handwash, ITC is likely to push even further, as it eyes a strong foothold in the market.
The same goes for Shower to Shower. While it is restricted to talcum powder (both regular and prickly heat), it could be extended to areas such as anti-dandruff shampoos by ITC, say industry sources tracking developments closely. "These acquisitions, while being small, have potential," says Abneesh Roy, associate director, institutional equities, research, Edelweiss.
Savlon's FY-14 sales were estimated to be Rs 65 crore, while Shower to Shower's FY-14 sales were roughly Rs 25 crore. Together these brands will add around Rs 90-100 crore to the topline of ITC's personal care portfolio, pegged at around Rs 900 crore, by analysts. After foods, which is estimated by the industry to be around Rs 5,700 crore, personal care is the second largest segment within ITC's non-cigarette FMCG portfolio.
Brand experts remind that ITC is no stranger to competing with well-entrenched players. At the same time, analysts call both the categories that the two acquired brands play in "almost virgin", and say that ITC has the opportunity of becoming the largest player in these. Partha Sinha, director, Publicis South Asia, cites the example of Yippee!, ITC's instant noodles (in foods): "ITC has been successful in carving out a space in a market that only knew (Nestle's) Maggi".
Though, Roy warns that gaining share in personal care is not easy. "While it (ITC) has done well in foods, the multinationals have fared better in personal care," he says.
Sources say that ITC's ability to out-spend rivals and its strong distribution network could help it expand the two brands. "Dettol has been a major player in antiseptic liquids and the larger personal care and health care market because of its strong brand equity. But now with ITC stepping in, the category will see huge movement in pricing and new launches. ITC, with its deep pockets, will always have the comfort of dictating prices," says an analyst with the brokerage firm, Sharekhan.
Consider what ITC did in the larger soaps and shampoos market in the last few years. Despite being a late entrant, ITC managed to create a presence across price-points, bombarding the market with frequent launches. In the super-premium segment, it has Essenza Di Wills, in premium, Fiama Di Wills, in the mid-range, Vivel, and in the popular segment, Superia.
While ITC has been stuck with 2-3 per cent market share in shampoos, in soaps, it is estimated to have a share of 4 per cent, according to analysts. In newer segments such as deodorants, ITC is estimated to have notched up a share of about 9-10 per cent with Engage, beating some older rivals.
Besides Engage, ITC's Vivel, launched in 2008, is said to be its strongest personal care brand, according to analysts. With trademarks such as Savlon and Shower to Shower, analysts say, ITC has added more depth to its portfolio.
