ITC's Foray into Dairy and Beverages
Synopsis
The India Tobacco Company or ITC Limited (ITC) was established in 1910. For a very long time it had been associated with tobacco business. However, in January 1964, a committee of selected doctors in US released a report Smoking and Health: Report of the Advisory Committee to the Surgeon General that highlighted the ill-effects of tobacco usage. Since then there was a sharp decline in the official support to the tobacco industry in India despite its enormous contribution to the agricultural, fiscal, manufacturing and exporting sectors of the economy. Therefore, from 1970s, the company began foraying into the non-tobacco industries like hotel industry/hospitality business (1975), paperboard industry (1979), International Business division for export of agri-commodities (1992) by leveraging on its agri-sourcing competencies, FMCG (2000), ITC Infotech (2000) and lifestyle apparels (2001). The company had established its mark in all the industries that it forayed into and during the last decade, ITC has also been making strides in the Indian FMCG sector as well. The company had built popular brands across all the segments within the FMCG industry. In 2014, ITC intends to foray into non-carbonated beverages and dairy categories. The case flyer tries to critically analyze ITC’s foray in these categories and would it be able to carve a niche for itself.
Before the Classroom Discussion/Prerequisite Conceptual Understanding (PCUs)
This case flyer presupposes a conceptual understanding of the following. A working knowledge along with the business implications of the following concepts/information would enable an effective discussion leading to more practical solutions than a mere intellectual exercise. The participants were asked to come prepared about the following concepts/information:
- a) Igor Ansoff ’s Product-Market matrix
- b) ITC’s business portfolio and its competitor analysis especially in food and beverages segment
Expected Learning Outcomes
- • Overview of ITC’s business landscape and understand its business segments, the brands and their contributions to the Indian conglomerate
- • Competitive landscape of the Indian food and beverage business segment and analysis of ITC’s relative strengths and weaknesses
- • Using the Ansoff’s Product-Market matrix to critically examine ITC’s foray into dairy and beverages segments of the food business
Suggested Orchestration
During the Case Flyer Discussion in the Classroom
The classroom discussion and analysis for this case flyer was facilitated under three broad sections as explained below..........
Case Flyer Analysis
I. ITC’s House of Brands
• The FMCG industry in India comprises of three major segments [Exhibit (TN)-I]...........
• ITC, as of early 2014, has its presence only in two segments of the FMCG sector – personal care and food and beverages. The following table presents an overview of ITC’s product range across these two segments, though it does not represent an exhaustive list of the company’s product range [Exhibit (TN)-II]............
• ITC since its establishment in 1910 is associated with tobacco business. But since 1964, due to the rising awareness of the ill-effects of tobacco products in India and government’s drive to discourage cigarette consumption and increased campaigns against cigarette consumption, ITC had to rethink augmenting its business portfolio. Mandate statutory warning and continuous increase of taxes too were hurting its business prospects. ITC introduced a nicotine chewing gum, Kwiknic (in October 2013), which was set to compete with J&J’s Nicorette.
• It is because of the above reasons that ITC began concentrating on the FMCG industry since 2000 and grew to be among the top companies of the sector. However, the growth of ITC could be considered as accidental because the changing business environment forced the company to enter into the FMCG sector. However, thereafter, the company strategically grew to be one among the top players in the country.
• With the low-margin products like safety matches and incense sticks, the company had been able to get a strong foothold in the Indian market through its sales and distribution efficiencies which made it easier for its other product lines to reach the consumers thereby achieving Economies of Scale and Economies of Scope.
• The reason for the success of the company’s FMCG products was the differentiated proposition the company offered through its products and the customer marketing skills.
• While ITC entered the FMCG sector, many were sceptical of its success because of its image of a cigarette company. But ITC branded its FMCG product categories in such a way that the image of being a cigarette company never rubbed on its FMCG products and created a different image altogether. Though some of its products like Fiama Di Wills and Wills Lifestyle uses the brand name of a cigarette it is considered secondary and the complete brand name gives a different brand image (that of a personal care and a fashion brand) altogether and not influenced by the cigarette brand.
This analysis gave students an overview of ITC’s business portfolio and its foray into FMCG industry.
................................
Exhibits
Exhibit (TN)-I: FMCG: Segments
Exhibit I: ITC’s Brands and Product Lines
Exhibit (TN)-III: ITC’s Food and Beverage Categories
Exhibit (TN)-IV: ITC’s Unique Strategies
Exhibit (TN)-V: Ansoff ’s Product-Market Matrix
