ITC plans to foray into oral care segment

Analysts confident of company's performance in competitive categories

Cigarettes-to-hotels major ITC is believed to be considering forays into various new segments, including oral care. The company’s foods segment is fast approaching break-even, and its personal care division is also faring well.

Those in the know say ITC, which manufactures and sells 80 per cent of all cigarettes in India, is eyeing oral care as a growth prospect. The Rs 6,000-crore toothpaste market in India is growing 19 per cent a year. And, many companies are eyeing this space. GSK’s Sensodyne, which targets those with sensitive teeth, is recording annual sales of about Rs 100 crore. Pegged at Rs 950 crore, sensitivity, the largest of the emerging toothpaste categories, is growing 30-40 per cent a year. In the last few months, GSK and Colgate have launched several products in the gum care and teeth whitening segments.

ITC, much like other consumer companies, has watched how the oral care sector has evolved in the last two years, according to people familiar with the development. An analyst said the company had adequate resources for a category such as oral care, considered competitive, with a penetration level of 55-56 per cent in India. For the six months ended September 30, 2012, ITC’s cash and cash equivalents stood at Rs 1,758 crore, on a standalone basis. The company is yet to declare its full-year numbers for the financial year ended March.

When contacted, ITC declined to comment on the issue.

Sources privy to the development said the company’s confidence in considering new areas stemmed from its success in foods and personal care — segments it had stepped into after many players had already acquired critical mass. ITC’s foods division, only a decade old, has crossed the Rs 3,000-crore mark, in terms of turnover. It has cut its losses significantly and records growth of about 25 per cent a year. Analysts expect this business to break-even soon.

Personal care, though a smaller segment in its non-cigarette fast-moving consumer goods business worth about Rs 6,000 crore, is growing at about 25 per cent a year, in terms of revenue. Analysts say the business, estimated at Rs 700-800 crore, is likely to break-even in the next two years. “ITC has demonstrated it has the staying power in competitive categories such as foods and personal care, despite being a late entrant in these segments. While oral care is growing, the initial challenges would be there,” said Nitin Mathur, analyst (consumer & retail) at Mumbai-based brokerage Espirito Santo Securities.