ITC : Brand Diversification Strategy

Presented by: Navin Nilesh Pratap Ekka

FMS – 1, Roll – 22, NIFT, Kolkata

Mentor: Mr. Dibyendu B Dutta

ITC emergence
• ITC was incorporated on August 24,
1910 under the name of 'Imperial
Tobacco Company of India Limited'.
• Leased office on Radha Bazar Lane,
Kolkata, was the centre of the
Company's existence.
• Company's ownership progressively
Indianised, and the name of the
Company was changed to I.T.C. Limited
in 1974.
• The full stops (.) in the Company's
name were removed effectively on
September 18, 2001. The Company
now stands rechristened 'ITC Limited'.
FACTS ABOUT ITC
 One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004

Featuring 400 of the World’s ‘best big companies’ with M-cap. > USD 5 bln. & are rated
as the ‘most attractive companies for investors’
 Only Indian FMCG Company to feature in Forbes 2000 List

A comprehensive ranking of world’s biggest companies measured by a composite of
sales, profits, assets & market value
 Among top in :

Sustained value creation (BT-Stern Stewart survey)

Operating profits

Cash Profits
 Ranks No. 9 among Indian listed Private Sector Companies by market cap.

No. 1 in FMCG Sector
 Rated as one of India’s Most Respected Companies (IMRB-Businessworld Survey 2006)

Source: ITC website 3

ITC Corporate Strategy
 Sustain multiple drivers of growth, matching internal capabilities with
emerging market opportunities
 Pursue World class competitiveness in all businesses and across the entire
value chain
 Best-in-class in terms of:
 Internal Vitality
 Market Standing
 Profitability
 Strategy of Organisation and Governance processes geared to manage multiple
businesses
 Blend core competencies and leverage ITC umbrella strengths to create new
avenues of growth

Source: ITC website 4

ITC timeline
August 24, 1926
August 24, 1910 Expansion by purchasing
ITC was incorporated the plot of land situated
under the name of at 37, Chowringhee, (now
'Imperial Tobacco renamed J.L. Nehru Road)
Company of India Limited' Kolkata

1925
ITC's Packaging & Printing
Business was set up as a
strategic backward
integration for ITC's
Cigarettes business

Source: ITC website

ITC timeline
1985
1975 ITC set up Surya Tobacco Co. in
ITC launched Hotels Nepal as an Indo-Nepal and
business with the British joint venture. Since
acquisition of a hotel inception, its shares have been
in Chennai which held by ITC, British American
was rechristened Tobacco and various
'ITC-Welcomgroup independent shareholders in
Hotel Chola'. Nepal.

1979
ITC entered the
Paperboards business by
promoting ITC
Bhadrachalam Paperboards
Limited, which today has
become the market leader
in India. Source: ITC website
ITC timeline
1990
ITC acquired Tribeni Tissues
Limited, a Specialty paper
manufacturing company and a
major supplier of tissue paper to 2000
the cigarette industry. The ITC launched a line of high
merged entity was named the quality greeting cards under the
Tribeni Tissues Division (TTD). brand name 'Expressions'.

1990,
ITC leveraging its agri-sourcing
competency, ITC set up the Agri
Business Division for export of
agri-commodities. The Division is
today one of India's largest
exporters.

Source: ITC website

ITC timeline
2000
ITC also entered the
Lifestyle Retailing August 2001
business with the Wills ITC's foray into the Foods
Sport range of business began with the
international quality introduction of 'Kitchens
relaxed wear for men and of India' ready-to-eat
women. Indian gourmet dishes.

2000
ITC spun off its
information technology
business into a wholly
owned subsidiary, ITC
Infotech India Limited, to
more aggressively pursue
emerging opportunities in
this area.
Source: ITC website
ITC timeline
2002
ITC's philosophy of July 2005
contributing to enhancing ITC introduced Essenza
the competitiveness of Di Wills, an exclusive
the entire value chain range of fine
found yet another fragrances and bath &
expression in the Safety body care products for
Matches initiative. men and women

2003
ITC's foray into the marketing
of Agarbattis (incense sticks)
in marked the manifestation
of its partnership with the
cottage sector.

Source: ITC website

ITC PRODUCT PROFILE
•Cigarettes: W. D. & H. O. Wills, Insignia, India Kings, Classic, Gold Flake,
Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake
•Hotels: ITC Welcomgroup chain of Hotels
•Paperboards & Specialty Papers:ITC Bhadrachalam
Paperboards Limited"ITC Tribeni Tissues Division" Now there are four units
under one name --> Paper Boards and Specialty Papers Division, Unit -
Bhadrachalam, Tribeni, Bollarum and Kovai.
•Agricultural Industry: Agri-Business, Leaf Tobacco, Gold Ribbon,
Blue Ribbon, Aqua Kings, Aqua Bay, Aqua Feast and Peninsular, e-choupal.
•Packaged Foods & Confectionery: Kitchens of India,
Aashirvaad, Sunfeast, Mint-O, Candyman, Bingo Snacks

Source: ITC website

ITC PRODUCT PROFILE
•Branded Apparel: Wills Lifestyle, John Players, Miss Players
•Personal Care: Essenza Di Wills, Fiama Di Wills, Superia, Vivel Di
Wills, Vivel
•Greeting Card: Expressions
•Information Technology: ITC Infotech
•Safety Matches: iKno, Mangal Deep(Discontinued),
VaxLit(Discontinued), Delite(Discontinued) and Aim Brands
acquired from Wimco (Swedish Matches)
•Incense Sticks: Mangaldeep, Spriha
•Stationery: Classmate, Paperkraft, Saathi
Source: ITC website
Some sub-brands of ITC
ITC SWOT Analysis : Strengths
 ITC leveraged it traditional businesses to develop new brands for new
segments. For example, ITC used its experience of transporting and
distributing tobacco products to remote and distant parts of India to
the advantage of its FMCG products. ITC master chefs from its hotel
chain are often asked to develop new food concepts for its FMCG
business.

 ITC is a diversified company trading in a number of business sectors

including cigarettes, hotels, paper, agriculture, packaged foods and
confectionary, branded apparel, personal care, greetings cards,
Information Technology, safety matches, incense sticks and stationery.
ITC SWOT Analysis : Weaknesses
 The company's original business was traded in tobacco. ITC stands for
Imperial Tobacco Company of India Limited. It is interesting that a
business that is now so involved in branding continues to use its
original name, despite the negative connection of tobacco with poor
health and premature death.

 To fund its cash guzzling FMCG start-up, the company is still

dependant upon its tobacco revenues. Cigarettes account for 47 per
cent of the company's turnover, and that in itself is responsible for
80% of its profits. So there is an argument that ITC's move into FMCG
(Fast Moving Consumer Goods) is being subsidized by its tobacco
operations. Its Gold Flake tobacco brand is the largest FMCG brand in
India - and this single brand alone holds 70% of the tobacco market.
ITC SWOT Analysis : Opportunities
• Core brands such as Aashirvaad, Mint-o, Bingo! And Sun Feast (and others) can be developed using
strategies of market development, product development and marketing penetration.

• ITC is moving into new and emerging sectors including Information Technology, supporting business
solutions.

• e-Choupal is a community of practice that links rural Indian farmers using the Internet. This is an original
and well thought of initiative that could be used in other sectors in many other parts of the world. It is also
an ambitious project that has a goal of reaching 10 million farmers in 100,000 villages.

• ITC leverages e-Choupal in a novel way. The company researched the tastes of consumers in the North,
West and East of India of atta (a popular type of wheat flour), then used the network to source and create
the raw materials from farmers and then blend them for consumers under purposeful brand names such
as Aashirvaad Select in the Northern market, Aashirvaad MP Chakki in the Western market and Aashirvaad
in the Eastern market. This concept is tremendously difficult for competitors to emulate.

• Chairman Yogi Deveshwar's strategic vision is to turn his Indian conglomerate into the country's premier
FMCG business.

• Per capita consumption of personal care products in India is the lowest in the world offering an
opportunity for ITC's soaps, shampoos and fragrances under their Wills brand.
ITC SWOT Analysis : Threats
 The obvious threat is from competition, both
domestic and international. The laws of
economics dictate that if competitors see that
there is a solid profit to be made in an
emerging consumer society that ultimately
new products and services will be made
available. Western companies will see India as
an exciting opportunity for themselves to find
new market segments for their own offerings.
BRAND DIVERSIFICATION STRATEGY

ITC CASE STUDY

 ITC Financial analysis
• In the quarter ended June, 07, ITC’s net profit grew 20% to
Rs.782.87 million and net sales rose up 17% to Rs.3325.23
million.
• Profit growth driven by its cigarette business because of high
margin and agribusiness,
• Top line growth mainly comes from non tobacco business and
agro business.
• Decline in the profitability of FMCG business r paper and
paper board business.
• Higher advertising expanses, which grew 35% in FY07 and
freight cost, which were up 31% last year
COMPARISON OF THE COMPANY IN
FINANCIAL YEAR-05 AND FINANCIAL YEAR-07

ITC FINANCIALS

40
35
30
25 FY05
YEAR

20
15 FY07
10
5
0
Comparision with two other companies

ITC HUL GODFREY PHILLIPS

NET SALES GROWTH 23.3 4.7 7.7
RAW MATERIAL COST GROWTH 28.8 4.6 8.4
OPERATING COST GROWTH 19.5 -8.8 30.3
PAT GROWTH 19.2 1.6 19.1
INTREST COVER RATIO 151.1 89.8 29.9
DEBT-TO-EQUITY RATIO 0 0.4 0.2
ROCE 38.4 56.8 25.8
Shareholder Information

Source: ITC Annual Report 2008

Thank you