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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Please note:

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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Background Note

ITC was established on August 24, 1910 as the Imperial Tobacco Company of India Limited in Kolkata. Initially, the company was involved in the trading of imported cigarettes. In 1925, in a backward integration move, the company started a packaging and printing business. The name of the company was changed to India Tobacco Company Limited (I.T.C. Ltd.) in 1974. In 1975, I.T.C. Ltd., through ITC-Welcomgroup, tied up with the US-based Sheraton Corporation⁶ to enter the hospitality industry. It acquired its first hotel in Madras (later renamed Chennai) in Tamil Nadu and called it the Welcomgroup Chola Sheraton.

I.T.C. Ltd established ITC Bhadrachalam Paperboards Ltd. (IBPL) in 1975. The company started production at its integrated pulp and paper/board manufacturing facility at Bhadrachalam, Andhra Pradesh, in 1979.⁷

In 1990, I.T.C. Ltd. set up an International Business Division (IBD) for export of agri-commodities. I.T.C. started a greeting cards business under the brand name Expressions in the year 2000. In the same year, I.T.C. also entered the fashion retailing business by extending its well known cigarette brand Wills. The retail outlets were called Wills Lifestyle and offered premium leisure wear for men and women under the Wills Sport brand.

In September 2001, the company was renamed ITC Ltd (without full stops, and with no meaning attributed to the alphabets). In 2001, ITC made an entry into the foods business, and entered the business of safety matches, where it could use the same distribution network as that of its cigarette brands, in 2002. In 2002, IBPL was amalgamated with ITC to form the Paperboards & Specialty Papers Division of ITC. This was done to "harness strategic and operational synergies." In 2002, the company launched another clothing brand, John Players, which targeted the urban youth.

In 2003, ITC started marketing incense sticks manufactured by small scale and cottage units. In 2004, ITC was one of eight Indian companies to make it to the "Forbes 'A' List"⁸ which featured 400 of "the world's best big companies". In March 2005, the board of directors of ITC approved the company's five-year business plan (2005-06 to 2009-10) which involved an investment of Rs. 140 billion. The plan included setting up of new plants and upgrading existing ones in its tobacco, foods, apparel, paperboards, packaging, and hotels businesses.

As of early 2006, ITC was one of India's most valued and respected private sector companies with a market capitalization of over US$ 7 billion (Refer Exhibit I for ITC's financials and Exhibit II for more details on ITC's businesses)...

Excerpts >>

6] Sheraton was established in 1937 in Massachusetts. It was acquired by Starwood Hotels and Resorts Worldwide, Inc., one of the world's largest hotel and leisure companies, in 1998. The other brands of Starwood include St. Regis, The Luxury Collection, Westin, and W.

7] www.hdfcsec.com.

8] The other Indian Companies in the Forbes A list in 2004 were Reliance Industries, Bharti Tele Ventures, Infosys, Wipro, Bharat Petroleum, ONGC, and SBI.