By Aditya Gupta
ITC has shifted its primary focus from cigarettes to the fast-moving consumer goods (FMCG) sector with an investment of 10,000 crores in this quarter. This is part of a master plan to invest 25,000 crores across 65 projects with 20 integrated factories that produce consumer good across the country. According to Sanjiv Puri, “The biggest headroom to grow is in the FMCG space where our internal capabilities can be leveraged.” ITC has decided on this shift in light of a slowdown in the cigarette business and the beginning of comprehensive taxation on cigarettes.
ITC’s tobacco sales are in decline
With the stricter imposition of taxes, the consumption of illicit cigarettes has gone up, which means that the product now only accounts for about 23 per cent of sales. There has been a loss of nearly 9,000 crores due to this change. Although ITC lost some market share after the 5-7 per cent hike in prices, the sales are bound to recover.
Yet it is necessary that ITC move out of this business and shift its primary focus elsewhere. These figures for the company’s non-tobacco related business show how much potential there is for the company: 58 per cent of revenue comes from non-tobacco products, 80 per cent of capital is in non-tobacco sectors and 90% of employees work in non-tobacco areas.
The future is in food
With a population of 1.3 billion, India’s food market is expected to triple to $4 trillion by 2025. It would be a smart move on ITC’s part to shift its focus to this sector. ITC originally had a strong legacy of working closely with farmers, which puts it in a positive position to compete in this market. Indeed, ITC has already branched out from grains to processed foods and most recently into fresh farm produce. Its knowledge of the Indian market gives it an edge over foreign brands.
A shift towards food production would also be a turn towards the spirit of the Make in India scheme for agricultural production. It is estimated that, through close monitoring and growth efforts, ITC could empower over 10 million farmers by the year 2030. Currently, ITC is the third largest player in the packaged food industry and claims that it will reach a revenue of 1, 00,000 crores by 2030. This would make it the largest player in the industry. This would also be in line with its 25,000 crore investment plan, named the India First strategy.
ITC owns brands from Aashirvaad to Sunfeast. It has a presence in the production of all the packaged food available in the market. The company’s shift towards the FMCG sector, with the aim of becoming the largest food purveyor by 2030, can benefit the whole economy. If ITC successfully makes this shift, farmers will finally receive the empowerment they deserve and consumers will get the quality goods they desire.
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