ITC Limited

One of India’s Most Valuable

Corporations
1
 HISTORY

ITC was incorporated on August 24,1910 under the name of IMPERIAL

TOBACCO COMPANY of India ltd’.
In 1974 company’s name was changed to INDIAN TOBACCO COMPANY LTD.
From September 18,2001, company’s name has effectively become ITC Ltd.

2
 About ITC
Founded August 24,1910

Headquarters Virginia House, Kolkata

Chairman Mr. Y.C.Deveshwar
Industry Tobacco, foods, hotels,
stationery, greeting
cards, personal
care, IT etc.
Net Sales Rs 16200 crores
Employees 25,000 app.
3
 Mr. Y.C.Deveshwar
Chairman ITC Ltd.
4
ITC
One of India’s most valuable
corporations
 One of the 8 Indian Companies to feature in ‘Forbes A-
list’ for 2004
 Only Indian FMCG Company to feature in Forbes 2000
List
 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. (@ 31/03/08)
 No. 1 in FMCG Sector
5
Awards & Accolades
 ITC features on FORBES GLOBAL 2000 rankings for 2007
 ‘ITC received the FICCI Outstanding Vision Corporate Triple Impact Award 2007
for invaluable contribution to the triple bottom line benchmarks of building
economic, social and natural capital for the nation.
 Business Today Award for the Best Managed Company – Retail and Consumer
Products, has been conferred on ITC in recognition of its outstanding initiatives in the
consumer products segment.
 The Company’s watershed program also won the Asian CSR Award for
Environmental Excellence from the Asian Institute of Management.
 The World Development Report 2008 of the World Bank, which was recently
released in India, makes a special mention of ITC’s e-Choupal initiative as “an
innovative use of Information Technology to link farmers to markets in India”.

6
 Accolades & Awards
 e-Choupal initiative wins global recognition:
 Stockholm Challenge Award 2006 in the Economic Development category which
recognizes initiatives that leverage Information Technology to improve living conditions
and foster economic growth in all parts of the world.
 First Indian Company to win the Development Gateway Award 2005 for the most
exemplary contribution in the field of Information & Communication Technologies (ICT)
for development during the last 10 years
 World Business Award 2004: International Chamber of Commerce & the HRH Prince of
Wales & International Business forum
 Harvard University case study

 Recognized in World Development Report 2008 published by World Bank

 Applauded by President of India Dr APJ Kalam in his “special address during

the national symposium to commemorate 60th year of independence”

7
 ITC - Business Portfolio

ITC

FMCG: Agri Business Paperboard

Cigarettes Hotels Leaf Tobacco Paper &
Other FMCG Agri Packaging
Commodities

8
9
 Strategy of Organisation to manage diversity of
Portfolio

Formal 3-tiered governance structure:

 Board of Directors :
 Comprising executive (4) and non-executive directors (11)
 Strategic supervision

 Corporate Management Committee :

 Comprising executive directors and senior managers
 Strategic management

 Divisional Chief Executive & Divisional Management Committee :

 Executive management
10
 Corporate Strategies
 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
 Blend core competencies and leverage ITC
umbrella strengths to create new avenues of
growth
11
 FMCG -
12
Cigarettes
 ITC’s Cigarettes Business

 Market leadership in all segments - geographic &

price
 Powerful brands across segments
 Extensive FMCG distribution network
 Direct servicing of 1,00,000 markets & 2 million retail
outlets
 World-class state-of-the-art technology and
products
 Investment - Rs.10 billion in six years
 Exciting long term growth potential

13
Cigarettes: Growth potential
 Cigarettes account for only 15% of tobacco consumed in
India unlike world pattern of 85% due to prolonged
punitive taxation
 Cigarettes (15% of tobacco consumption) contribute nearly
85% of Revenue to the Exchequer from tobacco sector
 Of the 58% of adult Indian males who consume tobacco,
barely 15% can afford cigarettes
 Biri : Cigarettes ratio = 10 : 1

 Annual per capita adult cigarette consumption in India

is app.. one tenth of world average : 141
 Future growth depends on relative rates of growth of
per capita income and moderation in taxes

14
 Per Capita A

1753
1662
Source : Based on Cigarette consumption data(2003) from
“World Cigarettes”,ERC Group plc.
15
 Hotels & Tourism
16
 ITC’s Hotel Business
 ITC-Welcomgroup : a leading hotel chain in India

• Established presence in key business locations

• Over 6000 rooms under 4 distinct brands

Category Brand Positioning

Luxury ITC Hotel: Luxury Collection "Mansions of Luxury"
Upper upscale WelcomHotel: Sheraton "Passion for Quality"
Upscale - mid-scale Fortune Hotels "Promise of True Value"
Heritage WelcomHeritage "Unique Experiences"

 Capacity expansion underway at Bangalore and Chennai; plans for

other locations also being progressed

 Fastest growing hotel chain with highest operating efficiency

(PBDIT/Net Income @ 45%) amongst the 3 leading chains

 Leverages unique service proposition and international
alliance with Starwood Hotels & Resorts
• ‘Luxury Collection’ / ‘Sheraton’
17
 Paperboards, Paper
&
18
Packaging
 ITC’s Paperboards Business
 Market leader in growth segment - value added coated boards

 World-class contemporary technology

• Ozone bleached Pulp Mill operations commenced – only one of its kind in India
meeting world-class environmental standards
 Internationally competitive quality and cost

 Social farm forestry in mill command area to improve access to cost

effective fibre & to attain self-sufficiency
• Biotech research based high yielding Clones – effectiveness tested in nearly
80,000 hectares
 Fully integrated operations with in-house pulping capacity at appx.
2.20 lac MT
• Expansion completed; source of sustainable competitive advantage

19
 ITC’s Paperboards & Packaging
businesses
 Capacity expansion projects underway

• 120000 TPA Pulp Mill – commissioning commenced; being

stabilised
• 100000 TPA paper machine (to support Stationery business
growth plans) – trial commissioning commenced

 ITC’s packaging SBU -India’s largest converter of paperboard

into high quality printed packaging

• Leading supplier to Indian FMCG segment

• Provides superior packaging solutions to the cigarettes and new

FMCG businesses
20
 Agri Businesses
- Leaf Tobacco
- Agri Commodities
21
 Indian Leaf Tobacco industry
 India – the third largest producer of tobacco

 However, India’s share is only 7% in world tobacco trade

 Upgradation of tobacco consumption from other formats to

cigarettes will enable:

• growing domestic base
• larger opportunities for value added exports

 ITC – India’s largest buyer, processor, consumer & exporter

of cigarette tobaccos
 Pioneering cultivation of flavourful Flue-cured, superior

Burley and Oriental tobaccos in India

22
 ITC’s Agri Commodity
Business
 Farm linkages in 14 states covering Soya, Wheat, Rice, Marine
products, Coffee etc.
 Unique CRM programme in commodity exports

 Leveraging IT for the transformational ‘e-Choupal’ initiative

 Rural India’s largest Internet-based intervention
 Over 38000 villages linked through around 6400 e-Choupals
servicing over 3.5 million farmers
 Distinctive sourcing capability for ITC’s Foods business

23
24
25
 The eChoupal Services
 Relevant & Real-time Information
 Commodity prices, Local Weather, News

 Customised Knowledge
 Farm Management, Risk Management

 Supply Chain for Farm Inputs

 Screened for Quality, Demand Aggregation for
Competitive Prices & Efficient Logistics

 Direct Marketing Channel for Farm

Produce
 Lower Transaction Costs, Better Value through
Traceability

26
Other Services through e-Choupal
 Distribution of Products and Services to Rural
Markets

 Micro marketing
 Product/Services Demos
 Marketing and Brand Building activities

 Pilots
 Bhoomi
 eHealth with Private Health Service Providers
 eEducation
 Rural BPO

27
 Reasons For Diversification

 Tobacco Business is facing an increasingly stringent tax &

regulation regime.

• In 2001 taxes were raised by 15%; Revenue collection sub

optimized
( cigarette sales fell disproportionately as forcing consumers to
shift to cheaper alternatives, but overall tobacco consumption
increased )

• Last year 5% increase in excise + 12.5 %VAT leading to

unprecedented 30% increase in tax (volume of illegal
cigarettes has doubled )

• This year excise on non-filter cigarettes was increased (20 % of its

portfolio for ITC) as a result ITC has discontinued production of non
28 filter cigarettes.
 Strategic Rationale
 Blend multiple competencies residing within the ITC Group to

create new avenues of growth

 Best fit between internal capabilities and emerging market

opportunities
 Each segment enhances the depth and width of ITC’s FMCG

distribution capability
 Business model retains critical elements of value chains
within ITC with other elements outsourced
• Contributing to the competitiveness of SMEs

29
 Future Growth & Value
Capture

New FMCG Initiatives

30
 FMCG Business Initiatives
Branded Packaged Foods
 Leverages:
 Unique Agri sourcing skills
 ITC Welcomgroup’s specialist cuisine & bakery knowledge
 FMCG distribution synergies
 ITC R&D Centre, Bangalore
 5 chosen categories:
 Staples
– Aashirvaad Atta, Salt, Spices
 Biscuits
– Sunfeast
 Salty Snacks
– Potato chips, Bridge products : Bingo!
 Confectionery
– Candyman, Mint-o
 Ready to Eat
– Kitchens of India, Aashirvaad ReadyMeals, Aashirvaad
Instant Mix, Sunfeast Pasta
31
 FMCG Business Initiatives
Branded Packaged Foods
 Aashirvaad Atta:

 Current market leader amongst national branded players;

leverages the e-choupal network for cost-quality optimisation and
region specific offerings
 Sunfeast Biscuits:

 Differentiated & innovative products; continues to build consumer

franchise; distributed & outsourced supply chain being ramped up
 Number of innovative products in the pipeline leveraging the
capabilities of the ITC R&D Centre

32
35
37
 FMCG Business Initiatives
Lifestyle Retailing

38
 FMCG Business Initiatives
Lifestyle Retailing
 Leverages trade mark and services expertise of hotels

 Relaxed wear market growth > 25% p.a

 Upmarket product range available in exclusive Wills Lifestyle stores

(> 50) and multi-branded outlets/ large format retail stores across
the country
 State-of-the-art Master Facility aids speed of execution

 Product and brand range being expanded

• Premium segment comprising the ‘Classic’ range of formal wear, ‘Wills Sport’ relaxed wear
and ‘Wills Clublife’ evening wear
• Strong distribution network in place for the mid-market brand ‘John Players’

39
40
 FMCG Business Initiatives
Personal Care Products
 Current industry consumer spend estimated at over Rs.
21000 crores p.a. (growing at 12%)
 Brand wise Highlights

 Essenza Di Wills (Super Premium) – Portfolio’s premium

imagery augmented with launch of ‘Aqua’ for men in fine
fragrances and grooming range
 Fiama Di Wills (Premium) – Launched with
Shampoos/Soaps/Shower Gels/Conditioners
 Vivel Di Wills and Vivel (Mid) – Soaps and Shampoos
 Superia (Popular) – Soaps and Shampoos
 Products well received in the market, rapidly gaining
customer acceptance
 Supported by investments in brands – celebrity
41 endorsements
43
 FMCG Business Initiatives
Education & Stationery Products
Business
 Leverages print and paper know-how. Forward linkages
with new paper capacity.
 An emerging market in India - growth driven by increasing
cross-cultural exposure
 Robust distribution network in place to scale up the
Stationery business significantly
• ‘Classmate’ brand already the most widely distributed brand in India
• Scholastic products launched

 Serves to expand the width of ITC’s FMCG distribution

capability with negligible incremental investment

44
45
 FMCG Business Initiatives
Safety Matches
 Current industry consumer spend estimated at Rs. 1250
crores p.a. for 24 billion match boxes
 Fragmented supply base arising from policy of reservation
for small scale industry
 ITC markets its brands with value added products across
each price point
• Support SMEs with complementary marketing strengths

 ‘AIM’ – India’s largest selling Safety Matches brand

 Successful acquisition of WIMCO Ltd. by Russell Credit

(shareholding as at 31/03/08: 96.82%)
• Key brands: Homelite,

• Ship,
• Cheetah Fight etc.
46
 FMCG Business Initiatives
Incense sticks (Agarbattis)
 Current industry consumer spend estimated at over Rs. 900 crores p.a.

 Fragmented supply base arising from policy of reservation for small scale
industry
 ITC markets its brands with value added products across each price point

 Support cottage sector with complementary marketing strengths

 ‘Mangaldeep’ : the only National brand in the country

47
 FMCG business initiatives…….

 Concurrently, ITC’s IT subsidiary assists in web-

enabling business processes
 CRM initiatives
 ERP transaction processing systems
 SCM including the e-choupal capability
 … hosted on ITC’s Virtual Private Network

 ITC awarded the best IT user in FMCG category by

Nasscom

48
 Positioning of ITC
A leading FMCG player in India

VPN providing SCM, ERP & CRM

F capability M
A e-choupal rural two-way A
R fulfillment capability R
M K
Cigarette Trade Marketing capability E
E
RExpanded FMCG distribution capability T
S S

Lifestyl Educatio Matches

Brande & Personal
d e n Care
retailin Stationer Agarbat
Foods ti Product
g y s

A basis for strategic partnerships with other

49
FMCG brand owners
 THANK YOU

Parul Agarwal
Saloni Jain
Vibha Porwal
50