ITC Food's Growth and Future Prospects

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Case Details:

Case Code : MKTG135
Case Length : 20 Pages
Period : 2001-2006
Organization : ITC Ltd.
Pub Date : 2006
Teaching Note :Not Available
Countries : India
Industry : FMCG

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Challenges

Traditionally, the foods business has been a low-margin business in India, while building brands required huge amount of money. As a result it often took several years to earn returns on investments made in the foods business. However, ITC expected to break even in 2007.

The unorganized sector was a formidable force in the foods business. Unorganized players incurred very low marketing and selling costs owing to their limited area coverage. Also, more often than not, they used low quality ingredients and didn't always follow regulations, which helped them to keep their operational costs low...

The Road Ahead

The foods industry was considered the next "sunrise industry" in India. In terms of total output addition (value), foods industry surpassed IT and pharmaceuticals in the period 1993-2000 . The government's high priority on commercialization and value addition to agricultural produce led to liberal reforms and tax benefits in the late 1990s which had a positive impact on the growth of the industry. At the end of 2005, the overall growth rate of the foods industry was estimated to be between 10 and 15%...

ITC's Prospects

ITC was planning to expand its reach over the rural market with the planned opening of over 30 Chaupal Sagars, its rural hypermarket. Fifteen Chaupal Sagars were to be set up by the end of 2006. This was expected to generate revenues of around Rs. 200-300 million annually. Within a span of 10 years, ITC planned to set up 700 Chaupal Sagars. It also intended to extend its e-choupal network to 5,200 installations which would eventually serve 31,000 villages and 3 million farmers. These initiatives were expected to strengthen ITC's distribution and procurement networks and cost-competitiveness...

Exhibit

Exhibit I: ITC Balance Sheet
Exhibit II: The ITC Group
Exhibit III: Products under 'Kitchens of India'
Exhibit IV: Kitchens of India Desserts
Exhibit V: Products under Aashirvaad
Exhibit VI: Market Shares in the Indian Organized Biscuits Market
Exhibit VII: ITC's Competitors in the Ready-to-Eat Segment
Exhibit VIII: ITC's Competitors in the Confectionery Market


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