ITC to foray into beverages, dairy business

Diversified business house known for its cigarettes and fast moving consumer goods (FMCG) products ITC Ltd is looking foray into new segments such as dairy and beverages, which will include fruit juices, coffee and chocolates and dairy products, to further augment its portfolio, chairman Y C Deveshwar said at the company’s Annual General Meeting.

The move would put further competition in the FMCG sector. While beverages market is dominated by the likes of Coca-Cola, Dabur, PepsiCo, Tata Beverages, and Hindustan Unilever among others, the dairy market is led by co-operatives such as Amul and Mother Dairy with private players such as Hatsun Agro, Tirumala Milk Products, among others.

ITC’s cigarettes business has for long been a tax well for the government, which had been slowly raising taxation on the tobacco product as a move to discourage its consumption due to ill health effects. Notably, in the Union Budget 2014-15, the new government imposed a steep 11-72 per cent excise hike on cigarettes.

The firm, which is into hotels, cigarettes, paper packaging, rural retail and various consumer products, has been slowly pushing its non-cigarettes business portfolio. Although cigarettes still bring bulk of its profits, its other businesses especially FMCG has grown to become a large revenue contributor.

Speaking to shareholders in the annual meeting, ITC chief observed how the firm has been able to build popular consumer brands.

“Some of them are already clear market leaders in their segments. In aggregate, these new consumer brands currently represent an annualised consumer spend of over Rs 10,000 crore,” according to Deveshwar. He added that the company’s foray into the dairy and beverages segments will further enrich this portfolio.

Deveshwar said the cash rich company is planning or implementing 65 projects involving a built-up area of 28 million sq. ft with an outlay of over Rs 25,000 crore.

“Therefore, it is my belief that your company can aim for a revenue of Rs 1,00,000 crore from the new FMCG businesses alone by the year 2030 and realise its vision of being the No. 1 FMCG player in India,” Deveshwar said.

In the fiscal ended March 31, 2014, ITC registered net sales of Rs 35,317 crore, up 11.6 per cent over FY13 with net profit rising 16.8 per cent to Rs 8,891.3 crore.

On Thursday, shares of ITC closed the day at Rs 356.20, down 0.70 per cent from their previous close on the BSE in a weak Mumbai market.

(Edited by Joby Puthuparampil Johnson)

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