Nearly 12 years after entering the fast moving consumer goods (FMCG) sector,
ITC Ltd has finally posted its first-ever profit in the segment in the
fourth quarter of financial year 2012/13. The non-cigarette FMCG basket, which includes branded packaged foods, personal care, stationery and lifestyle retailing, recorded its maiden EBIT profit (earnings before interest and taxes) of Rs 11.87 crore on the back of robust net sales growth of 26 per cent (in the segment) in the quarter ending March 2013.
In 2001, ITC entered the non-cigarette FMCG space with the launch of branded food products. Gradually, the company moved into noodles, biscuits, soaps, skin care, deodorants and other product categories. Within a few years, some of these products became market leaders. For instance, Aashirvaad Atta (flour), a Rs 2,000 crore brand, dominates the branded atta market.
Sunfeast cream
biscuits also rule the roost.
Despite this strong growth (in non-cigarette FMCG business) in the recent years, the company was continuously posting losses. In the last financial year, losses from the non-cigarette FMCG business stood at Rs 215.08 crore. Typically, FMCG is a long gestation business which involves high levels of investment in brand building and distribution during the initial years.
A statement issued by ITC says: "During the year, the branded
packaged foods businesses had to contend with high levels of input costs. Global demand-supply dynamics, policy uncertainties and adverse currency movement led to steep hike in prices of key commodities such as wheat, maida (refined flour), edible oils, packaging material and industrial fuels particularly during the first half of the year. These cost pressures were however mitigated through a combination of improvements in product and process efficiencies, smart sourcing and supply chain initiatives."
For years now, ITC management has been trying to change the image of the company - from a cigarette manufacturer to a
FMCG player. In a recent interaction with
Business Today, a senior ITC official said that "it's [getting into FMCG] more an opportunity-driven decision. As a consequence of that opportunity, if there's a change in the face of ITC, we are okay with it." For the full financial year, the cigarette segment contributed 47 per cent of net sales, down from 49.5 per cent in the previous financial year.
Last year, the Confederation of Indian Industry (CII) estimated the size of domestic FMCG sector in excess of $13.1 billion.
Overall, ITC's fourth quarter results have been impressive. For the financial year 2012/13, it posted net sales of Rs 31,323.45 crore, up 19.6 per cent from a year ago. Net profits increased by 21.7 per cent (year-on-year) to Rs 7,693.58 crore.
Special 
