ITC's house of brands

With close to 25 mother brands in six categories, Y C Deveshwar leaves behind a company that is moving closer to being more than just a tobacco major

Since the late 1960s, almost every ITC chairman has tried his hand at diversification. Not every attempt was successful or pushed through without acrimony; stories of bitter fights in the boardroom often spilt out into public view indicating the struggle within the tobacco giant as it sought a change of image. However when Y C Deveshwar addressed his last annual general meeting at Kolkata's Science City auditorium last month, the needle seemed to have moved several points. He said that the company was now no longer seen as a cigarette maker but as a biscuit company, hospitality major and an education and stationery company and whatnot. The share of cigarettes in the total revenue earned has steadily been coming down too; from 56 per cent in FY2013 it has dropped to 42 per cent in FY2016.

To be fair, Deveshwar is not the first ITC chairman to have taken the diversified route. Ajit Narain Haksar opened ITC's first hotel in Chennai, the ITC Welcomgroup Hotel Chola, in 1975, followed by paperboards. Jagdish Narain Sapru led the foray into financial services and took the iconic 'Bukhara' restaurant to New York, apart from setting up the edible oils business, ITC Agro Tech. Krishan Lal Chugh set up the trading company, ITC Global Holdings Pte, but his stint was more memorable for a public spat with British multinational, British American Tobacco (the single largest shareholder in ITC), over a foray into the power business, which the multinational blocked. By the time, ITC's current chairman and chief executive officer, Yogesh Chander Deveshwar, took charge in 1996, most of the diversifications had failed or were faltering; the only businesses with some scale were paperboards and hotels.

It was therefore natural for Deveshwar to take credit at his last annual general meeting (AGM) in the joint capacity of chairman and chief executive officer, for changing the underlying character of ITC. The ITC that people see today is far removed from its former self, he said.

Today's ITC is not just defined by its cigarette brands- India Kings, Classic and Goldflake; it is also identified by Sunfeast (cookies and biscuits), Bingo! (snacks) and Aashirvaad (staples and ready meals). The iconic Wills brand has undergone a metamorphosis in less than a decade, as ITC wanted to dissociate the label from the cigarettes business to promote the apparel retail venture, Wills Lifestyle, without any charge of surrogate advertising.

  Deveshwar told shareholders that it is the new FMCG businesses that hold the highest promise for value creation, both for the company and for the Indian economy. "The new FMCG businesses, nurtured over the last decade or so, have built a portfolio of around 25 mother brands (across foods, personal care, education and stationery, lifestyle retailing, safety matches and agarbattis) that are increasingly gaining market standing," a company spokesperson says.

Figures underscore the success of the non-cigarette brands. ITC's non-cigarettes businesses since 1996 have grown seventeen-fold and registered a net segment revenue of Rs 23,000 crore. This amounts to the size of five ITCs circa 1996. The 25 mother brands in the non-cigarettes FMCG space have recorded a consumer spend of more than Rs 12,000 crores. The Aashirvaad brand has crossed the Rs 3,000 crore mark, Sunfeast over Rs 2,500 crore while 'Bingo!' 'Classmate' exceeded Rs 1,000 crore each. The idea was to create brands and increase the topline. Analysts, however, may argue that it would pay to look at the bottomline as well.

"ITC has definitely managed to build some great brands like Sunfeast, Aashirvaad and Classmate. These are excellent products backed by effective and aggressive advertising. The company has always backed its businesses going beyond category quality though in personal care it is still not there yet," says someone who handled the ITC brands for its advertising agency.

There's a lot more to come, as ITC gears up to be the leader in the non-cigarettes FMCG space by 2030. The basket is expanding; dairy has been added, premium brands like Fabelle (chocolates) and Sunbean (coffee) are being nutured. "ITC's Fabelle Chocolates have been in the making for almost a decade with extensive research and innumerable trials. A congruence of international and national chefs, together with chocolatiers, collaborated to create the finest quality chocolates, using choicest ingredients from across the world," the company spokesperson says.

ITC has also forayed into luxury coffee with the launch of Sunbean Gourmet Coffee. The expertise and knowledge of coffee garnered over 25 years of global trading by ITC's agri-business and the skill of its master-blenders is being leveraged to co-create differentiated coffee offerings.

Both chocolates and coffee are being retailed through ITC Hotels. Coffee has been introduced for the first time at ITC Sonar in Kolkata and is expected to be rolled out to other ITC Hotels over the next few months. Fabelle chocolates, launched recently at ITC Gardenia in Bengaluru and in ITC Sonar in Kolkata, will be available at all ITC Hotels, before being extended more widely.

The brands built by Deveshwar, however, are not limited to non-cigarettes FMCG. ITC Hotels, which represents the luxury brand, was also built by Deveshwar. There are about eleven hotels that are part of the luxury collection as opposed to just 12 properties across categories two decades back. The B2B brands for ITC's paperboards and specialty papers business were also created under Deveshwar's leadership. That marks a sharp change in the company's identity and brings it closer to the dream of being a diversified multinational .