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When ITC forayed into lifestyle retailing and the stationery segments a decade ago, it did so with premium brands 'Paperkraft' notebooks and 'Wills Sport' apparel range and then launched massappeal brands 'Classmate' notebooks and 'John Players' menswear. The strategy paid off. Today, ITC tops the notebook market in the country and is a major player in apparel.

Now, the tobacco-to-hotel conglomerate wants to replicate this top-down strategy-of entering a segment with a top-end brand and then launching one or more mass products-to grow its personal care and food businesses."Indian consumers love premium and imported products. If we had started from the bottom-end of the market, consumers would have never accepted us when we entered the premium segment," says ITC Executive Director Kurush N Grant. Talking to ET in ITC's 85-yearold headquarters Virginia House in Kolkata, Grant says ITC has always invested in the premium end and the strategy has been successful in the cigarette business.

"Now we want to replicate it in our non-cigarette FMCG foray," says the 53-years old suave gentleman, who joined ITC back in 1980 and has been involved in the incubation of all its new consumer initiatives.

ITC plans to invest . 8,000 crore in non-cigarette FMCG segment in 7-8 years. "We have plans to enter several categories and also expand the existing ones," Grant says, trying to ignore the constant invasion of charged-up politicians yelling for votes on loudspeakers from the street notorious for political rallies.
So, is this the way to go?

Brand strategist Harish Bijoor is not convinced. "Most of the FMCG companies that have taken a top-down approach have failed because they take the same premium brand into the mass market with little difference in business plans," says the founder CEO of Harish Bijoor Consults. "ITC needs to segregate its product strategy, pricing mechanism, advertising and branding, distribution and even packaging to garner faster market share."

Again in 2005, it entered the personal care market with super-premium brand 'Essenza Di Wills' in perfumes, bath and body care. This was followed by premium brand 'Fiama Di Wills', mid-market segment 'Vivel' and 'Vivel Di Wills' and eventually mass-market 'Superia' range of soaps and shampoos in 2007. ITC's non-cigarette FMCG business grew almost 25% during April-December 2010 to . 3,168 crore. It has yet to release its fullyear results.

A recent report by HDFC Securities estimates that ITC has around 6% market share in soaps and 3% in shampoo. According to Euromonitor International estimates, provided by Angel Broking, Godrej, Wipro and Reckitt Benckiser have around 8-10% share each in the shower and bath segment dominated by Hindustan Unilever with more than half the market share. ITC's progress is impressive because it has been in the business only for the last 3-4 years. "The personal care business may be pulling down overall profitability of ITC, but it is actually not doing too badly either," says Chitrangda Kapur of Angel Broking. Both Angel Broking and HDFC Securities expect ITC's non-cigarette consumer business to break even by FY2013. Grant says the food business has just become profitable, but declines to comment on the profitability of the personal care business. He also wouldn't name any category ITC plans to enter. Whatever segment, he is clear that ITC will address the top-end and the value segment.

"There are indications that in long run prospects of the Indian FMCG market are clearly in the top and bottom-end of the market," says Grant, matter of fact, his shirt sleeves rolled up. "As the market matures, middle segment will slowly get squeezed. This is happening in the West and China, and some early signs are visible in India as well."

According to a study by McKinsey, India's middle-class will increase ten times to around 583 million people and income levels will triple by 2025 when the country will be the fifth largest consumer market in the world.

The head of a top domestic personal care company says that a cash-rich company like ITC can gain share in the food segment with some "strong-arm tactics". "They can bombard the market with advertisements and create mindset of the consumers with trials so that they can develop a taste. But in soaps and shampoos, the same analogy does not work." And competition is much tougher in the . 30,000-crore personal care segment.

Grant is aware of it. "It's true we have been a late starter in the personal care business. But we are here to stay and need to give that much time to grow the business." He says ITC's R&D strength and product quality will help it break the clutter in the market.

A senior analyst in a broking house says newer entrants such as ITC need to focus on the mass segment to gain volume as a niche segment never becomes big. "Only when volumes come, would ITC have the economies of scale in personal care, which could then improve profit margins," he says.
When told, Grant says, "That is precisely our game plan."

In distribution too, ITC has a topand-bottom strategy. It will tap retail chains as well as some 30-lakh paan shops. It has a dedicated team for modern retail and partners with leading chains such as Future Group for in-store display and joint promotions.

Future Group Head (Private Brands and Food) Devendra Chawla says, "A new and challenger brand like ITC will benefit a lot by partnering with big retailers. After all, value-added products and brands today are largely built in modern milieu."

Retail insiders say ITC also offers better retail margins than its competitors in personal care. It offers 15-18% margins to the trade as compared to 14-15% offered by most other FMCG companies, according to senior officials of two national retail chains and a dozen paan and kirana shop owners.

ITC is also open to acquisitions to grow the business. "Since a lot of the categories are dominated by multinationals, the scope for acquisition is much less. But we are open to the idea and would look at acquiring newer product development technology, R&D or brands," Grant says.