ITC banks on product innovation to beat cost inflation

ITC, the fast-growing FMCG company, is testing new means to reach consumers, launch new products and improve production efficiency to beat the rising input and operational cost.

The company had launched 120 new products developed in-house ever since the Covid wave first struck the country in 2020.

Referring to the unprecedented inflation in commodity prices, increase in energy costs and persistent global supply chain disruptions in the last few months, the company’s top management said, it responded these developments by focusing on product innovation, forging unique partnerships to serve consumers at their doorstep and improve efficiency through digitalisation.

Sanjiv Puri, Chairman and Managing Director, ITC, in an investors' call, said over the last two decades, the company's top line in the non-cigarette business have grown 20 times. However, the bottom line lagged 18 times as a large part of the growth was from newer FMCG businesses built.

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Over the years, he said ITC has built 25 mother brands and has emerged as the largest incubator of world-class Indian brands.

The new products attracted business worth Rs 22,000 crore as of last year. Interestingly, these brands have been created by spending just 1.7 times of the top-line as against the inorganic route that would have cost 4 to 5 times the top-line, he said.

ITC Next

The main pillar of growth from here on would be ITC Next which would build on the success achieved so far and dealt with certain challenges faced across all businesses besides exploring opportunities in the neighbouring countries, said Puri.

Given the disruptions and transformations in the distribution channels, ITC is developing new routes to market while collaborating with the entire ecosystem and partners.

He said that proactive supply chain management ensured on-time execution despite significant operational challenges posed by container shortages, port congestions and elevated ocean freight costs.

ITC e-store, the company’s exclusive D2C (direct to consumers) platform, offers consumers on-demand access to over 700 FMCG products across 45 categories under one roof and continues to garner increasing consumer franchise.

The B2B (business to business) app Unnati has attracted over 2.2 lakh retailers within eight months of the national launch, further empowering retailer engagement capabilities, he said.

Manoj Menon, a Research Analyst, ICICI Securities, said good performance in the FMCG business and focus on premium products and augmenting distribution channels will lead to gain in market share.

The cost-saving through the recast of supply chain and improvement in product mix should lead to higher profit.

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