ITC Foods targets growth in north and west India amid shift to branded products
ITC Foods, a Kolkata-based fast-moving consumer goods (FMCG) company, is focusing on expanding its presence in the northern and western regions of India. This strategic move is part of the company’s efforts to capitalize on the growing demand for branded food products. The company operates across various categories including staples, snacks, health foods, dairy, and beverages.
To drive this expansion, ITC Foods is not only enhancing its existing product portfolio but also considering potential acquisitions to strengthen its market position. The focus on acquisitions aligns with the company’s strategy to bolster its branded product offerings and accelerate growth in key markets. In a recent statement, the company emphasized its openness to such acquisitions, indicating plans for potential deals in the near future.
Furthermore, ITC Foods’ growth strategy includes leveraging the stabilization of commodity prices to adopt a volume-led growth approach for the fiscal year 2025
ITC Foods targets growth in north and west India amid shift to branded product
Summary
The Kolkata-based fast-moving consumer goods (FMCG) company, which operates in categories such as staples, snacks, health foods, dairy and beverages, is also open to acquisitions to bolster its brand portfolio and drive growth, hinting at a couple of deals shortly.
ITC Ltd will continue to scale its existing food brands and look for opportunities in the premium segment, as multitudes in India’s relatively poorer parts, such as Bihar, Uttar Pradesh, and Rajasthan, are entering the consuming class, potentially boosting demand for branded food products, a senior company official said.
The Kolkata-based fast-moving consumer goods (FMCG) company, which operates in categories such as staples, snacks, health foods, dairy and beverages, is also open to acquisitions to bolster its brand portfolio and drive growth, hinting at a couple of deals shortly.
Acquisitions and food portfolio
ITC has stepped up launches within its foods portfolio over the past few years, entering more categories within dairy, spices and adult nutrition as it expands its over ₹17,000-crore foods portfolio.
More consumers turning to branded from unbranded foods will help drive growth for the company, Hemant Malik, executive director, ITC Ltd, and head of the company’s food business, said.
“The packaged food category is only 18% of overall foods. With our experience in the staples business, we have understood the drivers to affect this shift across multiple categories. This is a prime vector to drive business growth. We have added many adjacencies to our Aashirvaad staples portfolio including rava, besan, vermicelli, organic etc,” he told Mint.
Malik said that large swathes of population in north and west India are entering the consuming class—such markets offer potential for increasing the penetration of branded products.
“The second vector is capturing growth from what we call the emerging markets, particularly states like Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh, and Rajasthan. Till a few years ago, growth was mostly driven from the southern region due to higher per capita, spending power, higher levels of industrialization etc. However, South is now reaching a level of saturation on penetration, it now primarily presents opportunities for further premiumization,” he added.
The hotels to packaged goods company had in 2022 said that its range of fast-moving consumer goods spanning packaged flour, chips, biscuits and soaps had a substantial headroom to grow—with an estimated total addressable market potential of ₹5,00,000 crore by 2030.
This means that ITC will tap categories and markets across personal care, home care and packaged foods that can help it expand its business.
The company’s FMCG business reported revenues of ₹20,967 crore in FY24, up 9.6% over the previous year, according to the company’s annual report.
ITC has outlined plans to “fortify and scale” its mega food brands like Aashirvaad (staples), Sunfeast (biscuits), Bingo (salty snacks), and Yippee (noodles), exploring adjacent categories and future-focused investments.
Recent launches include Aashirvaad soya chunks, Sunfeast egg and milk biscuits, Yippee Korean noodles, and the Right Shift portfolio for adult nutrition (oats, cookies, flour, etc.).
The company annually introduces 60-70 new food products.
Strategy for growth
Malik said the company is also open to acquiring brands, apart from launching more premium products.
In 2020, the company spent ₹2,150 crore to acquire spice maker Sunrise Foods Private Ltd. In 2023, the company also acquired health foods company Sproutlife Foods Private Ltd that sells products under the Yoga Bar brand. “Acquisition opportunities remain a key part of our growth strategy; after Sunrise and Yoga Bar, there are few other opportunities under evaluation,” he said.
On premiumization (strategy of selling costlier, better-quality products), the company will continue to create more “niches”, tapping into the needs of the top end of the population. “Their FMCG spends are almost 2.5 times the average household. This is where you have to create more products and more value proposition,” he added. Premium products accounted for 22% of the company’s foods business as of the September quarter.
The move comes as more FMCG companies are getting aggressive with launching new products, particularly at the premium end of the market.
India’s market for packaged consumer goods is expected to grow to $192 billion by the end of 2024, and further to $220 billion in 2025, up from the $167 billion in 2023, according to a report by TeamLease Services released earlier this year.
Additionally, post-covid, consumer goods makers such as ITC Ltd, Dabur India, Hindustan Unilever Ltd and Tata Consumer Products have been spending money to buy spice makers, wellness brands as well as organic food companies to expand into new areas.
ITC, which competes with Hindustan Unilever, Nestle India and Tata Consumer Products in India, aims to take the inorganic route to build capabilities otherwise missing within the company.
“While evaluating acquisition opportunities, on one hand we focus on categories where we currently operate; we are also evaluating white spaces emerging/developing in the market. We remain open to various structuring mechanisms to ensure flexibility,” Malik said. “Our priority is value-accretive acquisitions, and we assess opportunities based on the size and strategic fit of the business. We typically avoid companies that are too small, focusing instead on those that meet a certain scale. Acquisitions are pursued when they add value to our business or bring expertise that we do not possess,” he added.
Disclaimer
The insights and information provided by Estabizz Fintech Private Limited are for general informational purposes only and should not be interpreted as financial, investment, or legal advice. While we strive for accuracy and relevance, we recommend consulting with our qualified professionals for advice tailored to your specific circumstances. Estabizz Fintech disclaims any liability for actions taken based on this content. For further guidance, please contact our team of experts.
Empowering your financial success with global expertise and unwavering dedication.
