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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"There is no other country in the world than India, which has such a wide variety of food. All over the world people are getting health conscious and India offers them a great choice. Thus, we do not want to export the brand 'Kitchens of India' but want to establish the brand as the brand of the mainstream consumer in the global market." ¹

- Ravi Naware, Chief Executive, Foods Division, ITC Ltd., on April 24, 2006.

"I'm very bullish. Over the next couple of years, we expect it (ITC Foods) to turn profitable." ²

- Nikhil Vora, Vice President (Research), SSKI Securities, on February 03, 2006.

"Unlike in the ready-to-eat segment which is still small and the onus is more on growing the category than getting share, in the other categories ITC has to contend with entrenched competition. Success will depend on how much patience it has to drive growth over a period of time." ³

- Ravi Nigam, President, Tasty Bite Eatables Ltd., in 2004.

Introduction

On May 3, 2006, ITC Foods, the foods division of ITC Ltd, a major Indian conglomerate, announced its plan to set up a biscuit manufacturing unit at Haridwar in Uttaranchal with an investment of over Rs.700 million. The proposed plant with a manufacturing capacity of 2,000 tons per month was to become operational by March 2007.In early 2006, ITC Foods, with a market share of 5.3%, trailed behind Parle Products Ltd. (Parle) and Britannia Industries Ltd. (Britannia), the market leaders in the Indian biscuits market (organized sector).⁴

However, the company was expanding its distribution network aggressively and was set to introduce new biscuit variants to improve its market share.

The ITC Group had entered the branded and packaged food business in August 2001 with the launch of ready-to-cook products under the Kitchens of India (KoI) brand. This was followed up by product launches in the confectionery, staples, and snack food segments within a year.

As of early 2006, it had emerged as a major player in the foods business. Analysts observed that its heavy investment in manufacturing and infrastructure indicated that ITC was bullish on the prospects of its foods business.

ITC developed new product lines in its foods business drawing on its competencies in brand-building, R&D, packaging, and distribution. However, market analysts were not sure whether ITC would achieve success in all the food categories that it had entered. According to a consultant at Quadra Advisory,⁵ apart from the ready-to-eat category, ITC Foods was likely to face hurdles in every other food category, and especially so in the biscuits and confectionery category, due to intense competition. However, more recent reports suggested that even in the ready-to-eat category, the competition was heating up.

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1] Pritie S. Jadhav "ISA Seminar Day 2: There is more to India than IT," www.exchange4media.com.

2] Venkatesh Babu, "Hungry for more," www.business-today.com, February 03, 2006.

3] Purvita Chatterjee, "ITC's thought for foods," www.blonnet.com, September 09, 2004.

4] The organized sector refers to companies in the public and private sectors, and cooperatives. In manufacturing, registered factories covered under Factory Act are considered as part of the organized sector.

5] Quadra Advisory is a strategic marketing consultancy owned by WPP, the world's leading communications services group.


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