ITC mitigates input cost impact on packaged foods; emerges leader in potato chips in South


ITC Ltd said it is has implemented several initiatives for the packaged food business encompassing cost management, supply chain optimisation, smart procurement and recipe optimisation which helped in mitigating the escalation in input costs and enhancing profitability.

The Kolkata-based conglomerate with interests in cigarette, FMCG, hospitality and agri-business, said it is one the fastest growing branded packaged foods player in the country. The company’s potato chips portfolio emerged as the leader in the South markets leveraging an optimised portfolio, revamped pack and fresh communication, it said in the fourth quarter earnings release.

ITC said it posted healthy growth and fortified its leadership position in packaged atta market with Aashirvaad atta during 2017-18 despite increasing competitive pressure triggered by the imposition of 5% goods and services tax (GST) on branded atta as compared to nil value added tax (VAT) earlier in most states while non-branded atta remained at nil duty.

The company said it also had to contend with a concerted attack on social media with rumour mongers circulating malicious videos and falsely alleging that Aashirvaad atta contains plastic. ITC had launched a 360-degree campaign to reassure consumers and dispel the baseless rumours surrounding Aashirvaad atta.

It had also filed complaints with the police and injunction orders restraining circulation of such videos on social media were also obtained from the civil court. These interventions helped in effectively mitigating the short-term impact of the malicious videos on sales momentum, with the brand staging progressive recovery subsequently.

A research report by Edelweiss, however, said ITC’s FMCG business sales grew by 10% in last fiscal which was relatively soft owing to the Aashirvaad atta controversy. The business touched Rs 11,329 crore in 2017-18 while profit for the year improved to Rs 164 crore from Rs 28 crore in 2016-17.

ITC said it has achieved market leadership on an all-India basis in the bridges segment driven by a robust portfolio of products under the Tedhe Medhe, Mad Angles and Tangles sub-brands.

In the nascent dairy business, ITC said it has launched its ghee to the Delhi-NCR markets and also forayed into the pouch milk segment in select markets in Bihar in the vicinity of its Munger dairy plant.

ITC said the FMCG industry faced another challenging year in 2017-18 with demand conditions remaining sluggish for the fifth year in a row.

The slowdown in the broader economy – as reflected by the marked deceleration in nominal GDP and private consumption expenditure growth – headwinds in rural demand and supply chain disruptions during the transition to the GST regime were manifest in the company’s operating segments in the FMCG space. The year also witnessed commodity prices settling at an elevated level, exerting pressure on margins, it said.

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