ITC LimitedOne of India’s Most Valuable Corporations 1 HISTORY ITC was incorporated on August 24,1910 under the name of IMPERIAL TOBACCO COMPANY of India ltd’. In 1974 company’s name was changed to INDIAN TOBACCO COMPANY LTD. From September 18,2001, company’s name has effectively become ITC Ltd. 2 About ITC Founded Headquarters Chairman Industry August 24,1910 Virginia House, Kolkata Mr. Y.C.Deveshwar Tobacco, foods, hotels, stationery, greeting personal Rs 16200 crores 25,000 app. cards, care, IT etc. Net Sales Employees 3 Mr. Y.C.Deveshwar Chairman ITC Ltd. 4 ITC One of India’s most valuable corporations One of the 8 Indian Companies to feature in ‘Forbes A- list’ for 2004 Only Indian FMCG Company to feature in Forbes 2000 List Top in : Sustained value creation (BT-Stern Stewart survey) Operating profits Cash Profits Ranks No. 9 among Indian listed Private Sector Companies by market cap. (@ 31/03/08) No. 1 in FMCG Sector 5 Awards & Accolades ITC features on FORBES GLOBAL 2000 rankings for 2007 ‘ITC received the FICCI Outstanding Vision Corporate Triple Impact Award 2007 for invaluable contribution to the triple bottom line benchmarks of building economic, social and natural capital for the nation. Business Today Award for the Best Managed Company – Retail and Consumer Products, has been conferred on ITC in recognition of its outstanding initiatives in the consumer products segment. The Company’s watershed program also won the Asian CSR Award for Environmental Excellence from the Asian Institute of Management. released in India, makes a special mention of ITC’s e-Choupal initiative as “an innovative use of Information Technology to link farmers to markets in India”. The World Development Report 2008 of the World Bank, which was recently 6 Accolades & Awards e-Choupal initiative wins global recognition: Stockholm Challenge Award 2006 in the Economic Development category which recognizes initiatives that leverage Information Technology to improve living conditions and foster economic growth in all parts of the world. First Indian Company to win the Development Gateway Award 2005 for the most exemplary contribution in the field of Information & Communication Technologies (ICT) for development during the last 10 years World Business Award 2004: International Chamber of Commerce & the HRH Prince of Wales & International Business forum Harvard University case study Recognized in World Development Report 2008 published by World Bank Applauded by President of India Dr APJ Kalam in his “special address during the national symposium to commemorate 60th year of independence” 7 ITC - Business Portfolio ITC FMCG: Cigarettes Other FMCG Hotels Agri Business Leaf Tobacco Agri Commodities Paperboard Paper & Packaging 8 9 Strategy of Organisation to manage diversity of Portfolio Formal 3-tiered governance structure: Board of Directors : Comprising executive (4) and non-executive directors (11) Strategic supervision Corporate Management Committee : Comprising executive directors and senior managers Strategic management Divisional Chief Executive & Divisional Management Committee : 10 Executive management Corporate Strategies Sustain multiple drivers of growth, matching internal capabilities with emerging market opportunities World class competitiveness in businesses and across the entire value chain Internal Vitality Market Standing Profitability Pursue all Best-in-class in terms of : Blend core competencies and leverage ITC umbrella strengths to create new avenues of growth 11 12 FMCG Cigarettes ITC’s Cigarettes Business Market leadership in all segments - geographic & price Powerful brands across segments Extensive FMCG distribution network Direct servicing of 1,00,000 markets & 2 million retail outlets World-class state-of-the-art technology and products Investment - Rs.10 billion in six years Exciting long term growth potential 13 Cigarettes: Growth potential Cigarettes account for only 15% of tobacco consumed in India unlike world pattern of 85% due to prolonged punitive taxation Cigarettes (15% of tobacco consumption) contribute nearly 85% of Revenue to the Exchequer from tobacco sector Of the 58% of adult Indian males who consume tobacco, barely 15% can afford cigarettes Biri : Cigarettes ratio = 10 : 1 Annual per capita adult cigarette consumption in India is app.. one tenth of world average : 141 Future growth depends on relative rates of growth of per capita income and moderation in taxes 14 Per Capita A Source : Based on Cigarette consumption data(2003) from “World Cigarettes”,ERC Group plc. 15 1662 1753 Hotels & Tourism 16 ITC’s Hotel Business ITC-Welcomgroup : a leading hotel chain in India • Established presence in key business locations • Over 6000 rooms under 4 distinct brands Category Luxury Upper upscale Upscale - mid-scale Heritage Brand ITC Hotel: Luxury Collection WelcomHotel: Sheraton Fortune Hotels WelcomHeritage Positioning "Mansions of Luxury" "Passion for Quality" "Promise of True Value" "Unique Experiences" Capacity expansion underway at Bangalore and Chennai; plans for other locations also being progressed Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income @ 45%) amongst the 3 leading chains Leverages unique service proposition and international alliance with Starwood Hotels & Resorts 17 • ‘Luxury Collection’ / ‘Sheraton’ 18 Paperboards, Paper & Packaging ITC’s Paperboards Business Market leader in growth segment - value added coated boards World-class contemporary technology • Ozone bleached Pulp Mill operations commenced – only one of its kind in India meeting world-class environmental standards Internationally competitive quality and cost Social farm forestry in mill command area to improve access to cost effective fibre & to attain self-sufficiency • Biotech research based high yielding Clones – effectiveness tested in nearly 80,000 hectares Fully integrated operations with in-house pulping capacity at appx. 2.20 lac MT • Expansion completed; source of sustainable competitive advantage 19 ITC’s Paperboards & Packaging businesses Capacity expansion projects underway • 120000 TPA Pulp Mill – commissioning commenced; being stabilised • 100000 TPA paper machine (to support Stationery business growth plans) – trial commissioning commenced ITC’s packaging SBU -India’s largest converter of paperboard into high quality printed packaging • Leading supplier to Indian FMCG segment • Provides superior packaging solutions to the cigarettes and new 20 FMCG businesses Agri Businesses - Leaf Tobacco - Agri Commodities 21 Indian Leaf Tobacco industry India – the third largest producer of tobacco However, India’s share is only 7% in world tobacco trade Upgradation of tobacco consumption from other formats to cigarettes will enable: • growing domestic base • larger opportunities for value added exports ITC – India’s largest buyer, processor, consumer & exporter of cigarette tobaccos Pioneering cultivation of flavourful Flue-cured, superior Burley and Oriental tobaccos in India 22 ITC’s Agri Commodity Business Farm linkages in 14 states covering Soya, Wheat, Rice, Marine products, Coffee etc. Unique CRM programme in commodity exports Leveraging IT for the transformational ‘e-Choupal’ initiative Rural India’s largest Internet-based intervention Over 38000 villages linked through around 6400 e-Choupals servicing over 3.5 million farmers Distinctive sourcing capability for ITC’s Foods business 23 24 25 The eChoupal Services Relevant & Real-time Information Commodity prices, Local Weather, News Customised Knowledge Farm Management, Risk Management Supply Chain for Farm Inputs Screened for Quality, Demand Aggregation for Competitive Prices & Efficient Logistics Direct Marketing Channel for Farm Produce Lower Transaction Costs, Better Value through Traceability 26 Other Services through e-Choupal Distribution of Products and Services to Rural Markets Micro marketing Product/Services Demos Marketing and Brand Building activities Pilots Bhoomi eHealth with Private Health Service Providers eEducation Rural BPO 27 Reasons For Diversification Tobacco Business is facing an increasingly stringent tax & regulation regime. • In 2001 taxes were raised by 15%; Revenue collection sub optimized ( cigarette sales fell disproportionately as forcing consumers to shift to cheaper alternatives, but overall tobacco consumption increased ) • Last year 5% increase in excise + 12.5 %VAT leading to unprecedented 30% increase in tax (volume of illegal cigarettes has doubled ) • This year excise on non-filter cigarettes was increased (20 % of its 28 portfolio for ITC) as a result ITC has discontinued production of non filter cigarettes. Strategic Rationale Blend multiple competencies residing within the ITC Group to create new avenues of growth Best fit between internal capabilities and emerging market opportunities Each segment enhances the depth and width of ITC’s FMCG distribution capability Business model retains critical elements of value chains within ITC with other elements outsourced • Contributing to the competitiveness of SMEs 29 Future Growth & Value Capture New FMCG Initiatives 30 FMCG Business Initiatives Branded Packaged Foods Leverages: Unique Agri sourcing skills ITC Welcomgroup’s specialist cuisine & bakery knowledge FMCG distribution synergies ITC R&D Centre, Bangalore 5 chosen categories: Staples – Aashirvaad Atta, Salt, Spices Biscuits – Sunfeast Salty Snacks – Potato chips, Bridge products : Bingo! Confectionery – Candyman, Mint-o Ready to Eat – Kitchens 31 of India, Aashirvaad ReadyMeals, Aashirvaad Instant Mix, Sunfeast Pasta FMCG Business Initiatives Branded Packaged Foods Aashirvaad Atta: Current market leader amongst national branded players; leverages the e-choupal network for cost-quality optimisation and region specific offerings Sunfeast Biscuits: Differentiated & innovative products; continues to build consumer franchise; distributed & outsourced supply chain being ramped up Number of innovative products in the pipeline leveraging the capabilities of the ITC R&D Centre 32 35 37 FMCG Business Initiatives Lifestyle Retailing 38 FMCG Business Initiatives Lifestyle Retailing Leverages trade mark and services expertise of hotels Relaxed wear market growth > 25% p.a Upmarket product range available in exclusive Wills Lifestyle stores (> 50) and multi-branded outlets/ large format retail stores across the country State-of-the-art Master Facility aids speed of execution Product and brand range being expanded • Premium segment comprising the ‘Classic’ range of formal wear, ‘Wills Sport’ relaxed wear and ‘Wills Clublife’ evening wear Strong distribution network in place for the mid-market brand ‘John Players’ • 39 40 FMCG Business Initiatives Personal Care Products Current industry consumer spend estimated at over Rs. 21000 crores p.a. (growing at 12%) Brand wise Highlights Essenza Di Wills (Super Premium) – Portfolio’s premium imagery augmented with launch of ‘Aqua’ for men in fine fragrances and grooming range Di Wills (Premium) – Launched Shampoos/Soaps/Shower Gels/Conditioners Fiama with Vivel Di Wills and Vivel (Mid) – Soaps and Shampoos Superia (Popular) – Soaps and Shampoos Products well received in the market, rapidly gaining customer acceptance by endorsements Supported 41 investments in brands – celebrity 43 FMCG Business Initiatives Education & Stationery Products Business Leverages print and paper know-how. Forward linkages with new paper capacity. An emerging market in India - growth driven by increasing cross-cultural exposure Robust distribution network in place to scale up the Stationery business significantly • • ‘Classmate’ brand already the most widely distributed brand in India Scholastic products launched Serves to expand the width of ITC’s FMCG distribution capability with negligible incremental investment 44 45 Current industry consumer spend estimated at Rs. 1250 FMCG Business Initiatives Safety Matches crores p.a. for 24 billion match boxes Fragmented supply base arising from policy of reservation for small scale industry ITC markets its brands with value added products across each price point • Support SMEs with complementary marketing strengths ‘AIM’ – India’s largest selling Safety Matches brand Successful acquisition of WIMCO Ltd. by Russell Credit (shareholding as at 31/03/08: 96.82%) • Key brands: Homelite, • Ship, • Cheetah Fight etc. 46 FMCG Business Initiatives Incense sticks (Agarbattis) Current industry consumer spend estimated at over Rs. 900 crores p.a. Fragmented supply base arising from policy of reservation for small scale industry ITC markets its brands with value added products across each price point Support cottage sector with complementary marketing strengths ‘Mangaldeep’ : the only National brand in the country 47 FMCG business initiatives……. Concurrently, ITC’s IT subsidiary assists in web- enabling business processes CRM initiatives ERP transaction processing systems SCM including the e-choupal capability … hosted on ITC’s Virtual Private Network ITC awarded the best IT user in FMCG category by Nasscom 48 Positioning of ITC A leading FMCG player in India F e-choupal rural two-way A fulfillment capability R M Cigarette Trade Marketing capability E RExpanded FMCG distribution capability S Brande d Foods Lifestyl e retailin g Educatio n Stationer y Matches & Agarbat ti Personal Care Product s VPN providing SCM, ERP & CRM capability M A R K E T S 49 A basis for strategic partnerships with other FMCG brand owners THANK YOU Parul Agarwal Saloni Jain Vibha Porwal 50