ITC's FMCG sector gains ₹29,000 crore due to rising customer expenditure

ITC has been one of the top performing stocks this year and that has reflected in the stock price too. It has been one of the best performers on the Nifty since the start of the current calendar year. But that is not the real story. According to a note issued by the company to investors, customers spent ₹29,000 crore on ITC FMCG products in the year FY23 alone. That is up from ₹24,000 crore in the previous year FY22. What has contributed to this rapid growth in FMCG revenues and consumers spending on ITC products?

What contributed to the surge in ITC FMCG revenues?

There were several factors that went into the surge in ITC FMCG revenues in the fiscal year FY23. Here is a quick encapsulation of some of the key highlights of the non-cigarette FMCG business of ITC which generated consumer spending of ₹29,000 crore in FY23.

1. It was a return to normalcy after 2 years of pandemic-led disruptions,. Of course, it must be said that geopolitical tensions, and supply chain bottlenecks continued to impact the FMCG business, but despite that it has done well.
    
2. Consumer demand is largely a function of GDP growth and the real GDP growth for the year for the Indian economy stood at 7.2%. However, the growth was despite steep inflation eating into household budgets and impacting discretionary consumption.
    
3. ITC non-cigarette FMCG business saw strong growth across all major categories of Branded Packaged Foods viz. Staples, Biscuits, Snacks, Noodles, Beverages. Even the personal care segment saw growth in Personal Wash products and Engage Fragrances. However, the hygiene portfolio witnessed moderation in demand.
    
4. Overall, the revenues of the non-cigarette FMCG business grew by 19.6% to ₹29,000 crore at a gross level while the segment EBITDA grew at a much faster pace of 34.9% to ₹1,954 crores. Segment EBITDA margins expanded by 115 basis points in FY23. This was on the back of premiumisation, supply chain agility, pricing actions and digital initiatives.
    
5. During the year FY23, ITC launched over 90 new products on the vectors of Health & Nutrition, Hygiene, Protection & Care, Convenience, Indulgence etc. The company has also adopted a multi-channel marketing strategy. To expand its footprint in the rural markets, direct reach enhancement was supported. E-Commerce sales grew 4.7x.
    
6. The direct to consumer (D2C) ITC e-store platform for exclusive ITC products is now operational across over 10,000 pin codes. It is also going into more granular product classifications for better customer insights and better product positioning. It has also expanded its B2B platform (UNNATI) covering over 5.4 lakh outlets.
    
7. The non-cigarette FMCG Businesses also sustained its export footprint expansion. It now has a reach spanning over 60 countries. The PLI scheme has offered an additional boost to the exports across Biscuits & Cakes, Snacks, Dairy and Ready-to-Eat categories. The company saw growth in the domestic and the export markets.
    
8. In the year, ITC spearheaded “ITC Mission Millets.” The idea was to leverage its enterprise strengths in agriculture, food, and hospitality to implement the health project across India. ITC also implemented a focused strategy to craft a millet products portfolio under its Indian brands for every occasion, age, and formats. In sync with the mission, the company has launched a range of millet-based products including Ragi Flour, Gluten Free Flour, Multi-Millet Mix, Sunfeast Farmlite Super Millets, Chocochip Millet and Multi Millet cookies.
    
1. During the year FY23, ITC saw traction across its various branded packaged foods like Multigrain Atta, Aashirvaad Ragi Vermicelli, Aashirvaad Bansi Rava, Aashirvaad Samba Broken Wheat, and Aashirvaad Besan. ITC also launched Frozen Indian Flat Breads (Paratha, Naan and Chapati), hitherto offered only in international markets, in certain domestic markets too. Even Aashirvaad Salt is gaining traction.
    
10. The company also saw good traction in the snacks business. Bingo! continues to be the market leader in the Bridges segment and in the potato chips segment in South India. In addition, the company launched Bingo Hashtags and Bingo Street Bites to keep the customers excited. More on the youth products, the YIPPEE noodles category also saw strong growth in the year with focused brand investments.
     
11. ITC also made a splash in the Dairy & Beverages Business with fresh pouch milk, curd, lassi and paneer; all gaining strong consumer traction. They were launched only in East India and will look to expand across India. ITC has also launched Litchi flavoured Lassi and select Indian desserts under Aashirvaad Mithaas brand in select markets.
     
50. Its fibre rich “B-Natural Juices” also made a comeback during the year. ITC continued to leverage the “Fruit and Fibre” proposition of to deepen consumer connect and increase brand affinity. In frozen snacks category, the “ITC Master Chef” sustained industry leading growth with a mix of Indian and Western snacks, dips & spreads.
     
1000. Let us move to the personal care products. In the Personal Wash segment, “Fiama” registered strong growth as people plumped for premium offerings. A new range of “Happy Naturals” Perfume mists and Shower Gels were launched during the year to meet the growing demand for Naturals. The “Vivel” range of soaps also built brand momentum and posted healthy growth.

The growth in the ITC non-cigarette FMCG business has been the outcome of a conscious brand building efforts, a distinct move away from the traditional comfort of the cigarettes business and a calibrated pricing strategy.