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  • Writer's pictureGalactic Advisors

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 #2 in deoderants segment (#1 in women’s segment) with a market share of 11 percent against Fogg’s 18 percent in a market size of over 3000 crore. The brand has been growing at a very respectable 17% each year. The brand contributes 2% to total revenue generated by ITC’s FMCG business. Engage first disrupted the market in 2017 with the introduction of pocket deos in the country. Product differentiation here again.

Savlon (consumer spend of 200 crores) — Savlon makes anti-septic liquid, hand-wash, soaps and hand sanitizers. That adds up to be about a 1300 cr market size (antiseptic market at 650 crore hand wash at 600 crore and sanitizer category at 70–80 crore). Savlon has #2 position in anti-septic segment. Update: They’ve started selling surface disinfectant sprays in light of the coronavirus pandemic.

Essenza Di Wills — Super-premium range of personal care products like shampoos, bath soap bars, perfumes, and after-shave lotion.

Dermafique: In collaboration with dermatologists and biologists, ITC has ventured into skincare segment selling solutions such as anti-ageing creams, specialised hydrating creams & skin toners.

Then there is Superia which makes mass-market soaps and shampoos (mass-market means low-costing segment), Shower-to-Shower that makes talc (a former J&J co like Savlon), Charmis that makes cold cream, and a home-care company called Nimyle that makes floor cleaners. I haven’t made the efforts to study these. As far as I’m concerned, they’re irrelevant just like Sunbean


ITC has two brands in the stationary and office supplies segment — Classmate, and Paperkraft. I already talked about how the stationary business is able to keep costs low and therefore margins stable through backward integration. I also talked about how ITC capitalised on Paperkraft’s brand and through their top-down approach Classmate came to be. I won’t bore you with talking about that again. While Classmate caters to students, Paperkraft is a top-premium range brand targeted towards professionals.

Classmate is the market leader in notebooks segment since 2007 with a market share of 25% in a market that’s sized at 6500 crores. & has a consumer spend of over 1500 cr. It’s responsible for contributing about 6 percent to the total revenue generated by the FMCG business.

Lifestyle & Retail

Lifestyle & Retail contributes 4% to total revenue generated by ITC’s FMCG business. As per an interview by MD Sanjiv Puri, ITC has sold John Players to Reliance Retail and have restructured Wills Lifestyle in order to consolidate the business.

We will take a decision in due course on what we will do with the business but we are very clear that the model we had adopted earlier was not giving us the desired results.

Aggarbatis & Matchsticks

Mangaldeep is India’s #1 brand in dhoop and #2 brand in aggarbatis with a consumer spend of over 800 crores. Mangaldeep agarbattis are manufactured by small scale and cottage units, providing livelihood opportunities for more than 7,000 people.

Mangaldeep has an app that caters to the everyday devotional needs of people. The content on the app covers information and steps to perform various pujas, popular devotional songs, chant counter and temple locator amongst others. This could strengthen the brand name in light of the national lockdown imposed due to COVID-19. The app has garnered over five lakh downloads and enjoys a healthy rating of 4.6/5, highest in the devotional space amongst apps of comparable dimensions.

Mangaldeep contributes 3% to total revenue generated by ITC’s FMCG business.

ITC has two brands in matchsticks business — AIM and Homelites. Aim is India’s largest safety match sticks brand whereas Homelites are engaged in a slightly more premium range. The matchstick business contributes 2% to total revenue generated by ITC’s FMCG business.

Here’s a cheatsheet of brands and the metadata relating to them.

Disclaimer: This post originally appeared on the Medium account of Divyansh Agnani and has been reproduced here (with certain minor edits) with his kind permission. Do follow Divyansh's medium profile to see the excellent coverage of ITC


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