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ITC — An Investor’s Dilemma (Part 2 - FMCG Portfolio)

Updated: May 7, 2020

As we reach part 2 of our 5 part series on ITC - let's look at the FMCG Business of ITC. If you haven't read Part 1 read that here.

The FMCG business is where things get messy, as it’s a constant struggle to comprehend where it stands in the expansion cycle.

The company’s ambitions are high — internal revenue targets of 65,000 crores from packaged foods, and 100,000 crores overall from the FMCG business. That’s tough to take in, so I won’t mind if you disregard it as fluff. I have and as promised, I’ll only work with the current facts and only reasonable projections for which I will give you my reasons to believe in.

As of FY19’s AR, spanning across 25 motherbrands and a wide portfolio mix (perhaps wider than it should be), ITC has managed to get a consumer spend of over 18,000 crores.


The foods segment is the forerunner for the FMCG business. As mentioned before, ITC expects food business to deliver upto 65000 crores by 2030. In FY19, it contributed to roughly 21 percent of total revenue of the company.

The foods sector is estimated to be a 550,000 crores market in India, with packaged and branded products accounting for just 6 percent due to the developing nature of the country. In a given developed country, 95 percent of the market is branded and packaged. ITC hopes to take a slice of that pie.

I’ve given some insights on ITC’s brands, but feel free to skip to a cheatsheet I’ve made that structures the same metadata in a tabular form.

Aashirvaad (consumer spend of 4500 crores) — In a press release in 2018, ITC noted that Aashirvaad held a market share of 28 percent in the branded wheat flour segment. That makes Aashirvaad the market leader. The brand has been growing at about 16% CAGR over past few years. Aashirvaad contributes 28 percent to the total revenue generated by the FMCG business.

  • Again, backward integration is at play, the company leverages its network of farmers from e-Choupal to source raw materials.

  • They have relied on product differentiation & quality to push products by customising blends for different regions.

  • They’re extending the brand by selling staple products such as salt, ghee, dairy products, spices & instant mix packages under the Aashirvaad brand.

Sunfeast (consumer spend of 3800 crores) — As per a research journal, Sunfeast holds 26 percent market share in the cream biscuits segment as of late 2017, mantaining it’s market leading position in that segment. Nielsen numbers from 2013 paint a similar picture, but a lot could have changed since with new brands such as Mondelez’s Oreo disrupting the premium range of the market. Sunfeast contributes 23 percent to the total revenue generated by the FMCG business.

  • Apart from cream biscuits, Sunfeast has sub-brands such as Dark fantasy (makes cream biscuits & ofcourse, choco fills), Mom’s magic &Bounce (makes confectionary packaged cakes).

  • They’re capitalising on brand extension by selling dairy beverages (milkshakes) under the mother-brand Sunfeast with the launch of ‘Sunfeast Wonderz’.

  • And again, they’ve relied on differentiating their product with the launch of Dark Fantasy’s Choco fills. Or with introducing Marie biscuits, but orange-flavored. Well, you get the idea.

Bingo! (consumer spend of roughly 2500 crores) — Bingo! is the market leader in the bridges (sticks like kurkure & triangles like doritos) segment of snacks with more than 30 percent market share as of March 2018. ITC’s share in overall snacks has gone up to 7.2% from 6.4% by value in 2018–19. This consists of sub-brands Mad Angles & Tedhe Medhe, which was the country’s most distributed brand in the bridgest segment. Bingo! contributes 15 percent to the total revenue generated by the FMCG business.

  • Alright, once more backward integration is exploited by capitalising on a subsidary called Technico Agri Sciences Limited for sourcing raw materials.

  • If you’ve early memories of Mad Angles, you would remember they were the first to do triangles in India. Product differentiation.

Yippee! Noodles (consumer spend of over 1100 crores) — As per a trust established by Dept of Commerce, Yippee holds a 23 percent market share in instant noodles (versus Nestle Maggi’s 60%), making it the #2 market leader in the segment. Yippee contributes 7 percent to the total revenue generated by the FMCG business. We’ve talked about this before, but I’ll risk being repititive to make the point. Yippee! has been able to differentiate itself from Nestle’s Maggi by -

  • launching a round-shaped cake that was able to be cooked in a traditional indian kitchen without being broken, which allows kids to sigh, slurp.

  • providing it’s customers with a choice to cook the noodle in two different types of curries found natively in Indian kitchens. With maggi, you had only one option, the yellow curry. This was before different flavors were introduced.

Okay, it’s annoying having to point these out again and again and I’m sure you share my sentiments when you’re reading this. Just know that these strategies have a place deep in ITC’s brand philosophy. There, let’s save ourselves some time. I’ll go through other products as quickly as I can. Also know that market share data of some products going forward is tough to get. I will, however, give you consumer spend and market position these brands hold.

Candyman (consumer spend of 500 crores) — Candyman holds top 5 market position in the confectionary segment. Confectionaries contribute ~4% to total revenue generated by the FMCG business.

Fabelle Chocolates — ITC is embarking on the premium mass-market chocolates segment to take on Mondelez’s Dairy Milk, Ferrero & Nestle under the brand name ‘Fabelle’. Later, they plan to enter lower-costing categories. Chocolates have a market size of 11,000 crore in India that grows 13% every year and is expected to grow at 10% YOY till FY23.

  • They’re planning to set up kiosks in malls (at first )— to increase outreach to their chocolates, and later at other high foot-fall places such as airports. This seems like a bad idea to me, considering the cost of setting up kiosks is significant. I’ll talk about kiosks in a minute.

  • They’ve consulted their Hotel business’s chefs to differentiate their products by offering new flavors, such as their ruby-flavored chocolates.

ITC Master Chefs — With this label, ITC set foot in the frozen food business against McCain and Venky, catering to both retail and food services consumers. Frozen foods in India have a market size of 7400 crores that grows 17% in a good year. They’re aiming for 20 percent share of that market in 3 years. ITC is banking on products that are traditionally not available in Indian frozen food market, such as prawns &middle-eastern cuisine etc.

B-natural Juices (consumer spend of 480 crores) — B-natural juices hold a 9% market share in the fruit beverages segment in a market sized 2000 crores.

And then there are brands that I don’t see doing well as they’re up against very tough competitors. They are Sunbean coffee & Mint-O. For now, I will write them off as irrelevant.

It appears that ITC’s kiosk aspirations don’t stop with Fabelle. Under the Sunfeast brand, they’ve opened up a ‘cafe’ kiosk in Bangalore Railway Station. They’ve also acquired 11% stake in Delectable Technologies (a company that makes vending machines) in first of total four tranches that will net ITC with a 33 percent stake in the company. I haven’t studied where they are going with this, but it’s not rocket science. ITC will probably place their products in Delectable’s vending machines installed in corporate offices to expand their reach. Vending machines and kiosks are expensive, as I mentioned.

Update: ITC is rumored to be the top contender for acquiring Sunrise Foods, a spice maker, in a deal valued at 2000–2500 crores. Indian spices market is worth around 40,000 crores annually, with roughly 15–20 per cent of the market contributed by the branded segment. The rate of conversion from unorganised to organised has been growing as sub-standard products have been infilterating the unorganised market. Sunrise Foods counts brands such as Everest and MDH Masala as rivals. The packaged spices market is dominated by MTR in the south, Ashok and Goldiee in the north, and Sunrise and Cookme in the east. Everest and MDH Masala are national-level players, with a presence across markets.

Personal & Home Care

Vivel (consumer spend of over 500 crores) — Vivel sells bathing products such as soap bars and body wash in the mid-segment. While Vivel doesn’t hold any leadership position and has insignicant market share, it still has a significant consumer spend. Hindustan Unilever’s brands such as Lux, Dove, Lifebuoy & Pears dominate this category. The brand contributes 3% to total revenue generated by the FMCG business.

Fiama Di Wills (consuer spend of 360 crores) — Fiama sells shampoos, conditioners, bathing bars and primarly shower gels in the premium segment and holds #2 position in the segment with a market share of 17% (as of 2017) against Nivea’s 20% in a market size of 2000 crores. Fiama contributes 2% to total revenue generated by the FMCG business.

Engage (consumer spend of 330 crores) — Engage is