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ITC more an FMCG company than cigarette firm: Navare

ITC more an FMCG company than cigarette firm: Navare

Author | Shubha Kumble | Thursday, Feb 26,2004 8:07 AM

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ITC more an FMCG company than cigarette firm: Navare

Riding high on the diversifying wave, ITC Ltd's Foods division forayed into the highly competitive biscuit industry last year with its Sunfeast brand. In a brave bid to establish its presence, the division currently has ad spends well over its revenues. Hoping to break even by 2007, the division is seen as one of the factors that is slowly changing ITC's image from a tobacco biggie to an FMCG major.

Smelling the potential in the country's biscuit industry, ITC's Foods division made its foray into the sector last year with the launch of its Sunfeast brand of biscuits. Yet to break even, heavy competition in the sector has left the brand with a higher ad spend than its revenues. Besides creatives, the company has been forced to shell out on fresh slogans, packaging designs and displays. "Due to heavy competition ad spends have more than doubled in the last one-year itself. A new player who gets in has to make an even greater effort. Even without any market share the player is compelled to spend a huge amount of money just to be heard and seen. We spend more on advertising and marketing than what we earn. This is clearly in the hope that in time to come, on the strength of a combination of good advertising, marketing and product line up, we can establish a significant market share and volume," says Ravi Navare, Divisional Chief Executive, ITC Foods Division.

According to Navare, the heavy activity in the biscuits segment has led to three main developments: new brands and existing players are renewing their marketing strategies and trying to gain space in the consumer's mind and shop shelves. This competition has also resulted in a greater number of offers being available in the market today than there were five years ago. Apart from these factors, with the induction of technology in the sector, a wider range of product variety and options have emerged.

The biscuit industry has one of the highest degrees of market penetration with 55% of its sales coming from the urban and 45% coming from rural areas. In a bid to boost its now negligible market share, ITC Foods has fallen back on its age-old distribution chain. "ITC has an established distribution infrastructure that we had put in place for cigarettes and we are certainly making use of it to push our biscuits," said Navare.

With a tested distribution network in place, ITC will also reach out to its main audience, school children, through a variety of direct contact programs. Initiated across the country, these programs intend to present the Sunfeast brand along with an event like a magic show or a painting program. "We will definitely put in more effort to reach out to our target audience than our competitors," promised Navare. Through this and similar programs, the division is hoping to create higher brand recall, salience and retention amongst its target audience. Navare added that the FCB Ulka created campaigns are proving to be a big hit with kids and mothers alike where an emotional bond is building.

Confirming that people are steadily moving away from associating ITC only with cigarettes, Navare said that the company with its wide category portfolio including products like foods, agarbatti, matchboxes, stationary, greeting cards and fashion garments is evolving into an FMCG major. "Cigarettes are an important part of our business but with the other products we are interacting with different segments of consumers, which are a new territory for ITC. In the next couple of years ITC should be able to establish itself as a strong FMCG major," said Navare.

When asked why the different product offerings are not prominently advertised under the ITC mother brand, Navare said, "I think in the FMCG world certain categories often get associated with certain brands and consumers tend to remember the brands. ITC is into so many FMCG categories that each category needs to have its own brand name for a quick association".

The Indian biscuit industry is estimated at Rs 5,000 crore out of which close to Rs 3,000 crore is formed by the organised sector. Under the organised segment, Britannia holds a volume share of close to 38% while Parle has retained a 45% share. According to Navare, ITC Foods plans to break even by 2007 and is looking for a market share of close to 12% to start with. "The industry is growing at close to 6-8% and there is immense potential," he said.

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