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ITC follows the Aashirvaad trail 28 Dec 2015

Business Standard

The tobacco major is extending the brand into new products  and using the lessons learnt to build a sustainable framework for its food business


Way back in  2002, when ITC launched Aashirvaad packaged wheat flour, it was a latecomer to  the branded atta market. HUL, with Annapurna and General Mills, with Pilsbury  had beaten it by a clear couple of years. Soon however, within four years says  the company, the brand had edged past its peers to corner the maximum market  share. Today Aashirvaad, ITC says, has 75 per cent of the market - of course,  given that wheat in India still is a largely unorganised market, the branded  segment is a tiny fragment of the whole. Its main competitor is Shakti Bhog  atta followed by Annapurna and Pilsbury. ITC is hoping to follow the path that  Aashirvaad took to get to the top spot for the rest of its branded foods  business.

Following the flour dust

For wheat  flour, the organised segment in India is estimated at Rs 3,500 crore. This is  mere fraction of the Rs 30,000 crore atta business in the country. In most  parts of the country, flour is still a homegrown affair. Wheat grains are  bought in bulk and ground at the local millers; it took aggressive marketing,  deep pockets, an extensive rural network and a team of researchers working  closely with the product teams for ITC to break this mindset.

The  learning is being used to bring out a range of dairy products (ghee has been  launched in Karnataka) and to power new lines of fruit juices and drinks. It  has also been used to brand a range of extensions (wheat atta, atta with  multigrains, atta with methi, salt and fortified Atta), spices (pickle mirch  powder, chilli powder, coriander powder and turmeric powder), instant mixes  (gulab jamun, ravi idli, rice idli and rice dosa) and ready meals.

V L Rajesh,  divisional chief executive, foods division, ITC Ltd said, "The philosophy  of ITC has been building world class brands with focus on quality together with  sustained value creation for consumers."

Even though  the foods business is still small, compared to ITC's total turnover, the  company seems to be intent on spreading the brand's reach and significance  within its portfolio. Two key food brands in the ITC portfolio are Aashirvaad  and Sunfeast. Together they account for more than half the division's sales  revenues. The other brands in the portfolio are Bingo!, Yipee!, Kitchens of  India, minto-o, B Natural, Candyman and Gumon.

The  Aashirvaad route is being taken for the company's B-Natural brand of fruit  juices. An urban brand was sought to be built upon the company's rural edifice  and then expanded into small towns and rural markets. Aashirvaad leveraged the  multinational's deep linkages with the farmers and that has paved the way for  many more linkages and brand extensions. Rajesh said that ITC's peers do not  have this advantage; neither do they possess the massive distribution network  that it has built through its core businesses. ITC's distribution network  reaches more than two million outlets nationwide and more than 4.5 million  stores through wholesalers.

The Rs 1-lakh-crore dream

In March  this year when Y C Deveshwar, chairman of ITC said that in the next 15 years  the company would run a Rs 1,00,000-crore FMCG business, he set tongues  wagging. While many saw it as a way to step away from the company's highly  taxed and increasingly unglamorous tobacco business, others scoffed at the  numbers.

However  skepticism is the luxury of bystanders. Rajesh said that the foods business  will be a significant contributor towards this goal and Aashirvaad has a  significant role to play in this. The company has targeted close to a billion  dollars' worth of business in the next five years from its food brands. In  2014-15, the business posted revenues of Rs 6,411 crore.

According  to Rajesh, Aashirvaad has consistently innovated with taste, form and marketing  methods and has successfully straddled the premium and mass market. The secret  to this, he says, is research, research and more research. Rajesh believes that  the special blends and granulations that the team has crafted, since the  launch, for different markets have contributed to its success. "The  product is customised for different sets of consumers across regions. In the  North, atta is consumed daily, and the look and granulation required there  would be different," said Rajesh.

Harish  Bijoor, CEO of Harish Bijoor Consults said, "ITC is a corporate brand  whose mother brands are Sunfeast and Aashirvaad, which is all about staple  foods. As long as the brands can maintain quality and remain holistic,  wholesome and unadulterated, launching products under the mother brands will  not be an issue." He cites the example of Britannia Industries as another  company that has managed to do the same.

ITC is  looking to take the Aashirvaad-Sunfeast brand duo into chocolates and  value-added dairy products. Aashirvaad Svasti Ghee currently in Karnataka will  be expanded in the South and then pan-India. It is also setting up integrated  consumer goods manufacturing and logistics facilities in West Bengal, Tamil  Nadu, Punjab, Maharashtra and Telegana. Last year the company had invested  around Rs 3,000 crore, including Rs 1,400 crore in Punjab alone. The facilities  are expected to do away with supply chain inefficiencies and help take the  brands into distant corners of the country.

On paper,  the plan seems to be perfectly set out but the challenge, apart from managing  the vast portfolio of products, will be fending off competitors. Since  Aashirvaad and Sunfeast operate in a commodity category, Bijoor says, they will  always be operating under pricing pressure. Rajesh says the only way out is  innovation. The R&D facility, the ITC Life Sciences and Technology Centre  at Bengalaru, has filed over 351 patent applications in the area of  agri-business, forestry, food and consumables.

http://www.business-standard.com/article/management/itc-follows-the-aashirvaad-trail-115122700595_1.html

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