We will not buy at any price, says ITC's Hemant Malik on acquisitions

ITC will pursue selective, value-accretive acquisitions while banking on premiumisation and a gradual recovery in consumption to outpace FMCG industry growth

After two testing years for the fast-moving consumer goods (FMCG) industry, ITC believes it can outpace the market. In a video interview, Hemant Malik, executive director of ITC and in charge of its foods and personal care products businesses, tells Ishita Ayan Dutt that growth will come from multiple vectors — ranging from selective acquisitions to premiumisation — supported by early signs of recovery following recent tax cuts. Edited excerpts:

 

The past two years have seen acquisitions — from organic staples to frozen and ready-to-eat food. How central are mergers and acquisitions to ITC Foods growth strategy?

 

As an organisation, we were earlier relatively cautious about acquisitions, with our primary focus on building brands from scratch. However, with the ITC Next strategy, we have been actively evaluating acquisition opportunities.

 

Our approach is guided by three strategic pillars: building a future-ready portfolio, focusing on high-growth categories aligned with emerging consumer trends, and acquiring strategic capabilities. Across all three, the principles are, first, to identify areas with considerable headroom for growth and, second, to ensure that ITC can add value by leveraging its enterprise strengths.

 

In the case of 24 Mantra Organic, sourcing is a key competitive advantage, and given ITC’s agri expertise, we saw a strong opportunity to scale the business. With Yoga Bar, we refined the value proposition after acquisition, with a sharper focus on protein-led offerings. Prasuma strengthened our future-ready portfolio in the frozen food space, while Sunrise stood out for its growth potential in spices.

 

Acquisitions will remain an important part of our growth agenda, but not the only one. We are building a future-ready food portfolio through both organic and inorganic routes.

 

But you have stayed away from big-ticket acquisitions. Why?

 

The acquisitions we have made will be scaled up over time. We have seen several deals in the food industry happen at very high valuations. We will not buy at any price. Our focus has always been on value-accretive acquisitions.

 

While acquisitions have expanded your portfolio, has the pace of growth in the food business slowed?

 

The past two years have been challenging for the FMCG industry, with volume growth of 3–5 per cent. We have grown at the market rate or higher, and the pace of our growth has not slowed. Today, we are among the top packaged food companies in the country.

 

Our objective is to grow faster than the industry. We have a clear strategy to drive agile innovation in product mix, harness data science and technology, and leverage emerging channels more efficiently.

 

Growth will be anchored in vectors such as premiumisation, health and wellness, fresh offerings, sensorial experiences, indulgence, and convenience. We are also seeing a positive on-ground impact from goods and services tax (GST) rate reductions.

 

Are you seeing an uptick in consumption?

 

Yes, from the third quarter (October-December/Q3) onwards. Across several categories, GST rates have been reduced from 18 per cent to 5 per cent, and in food segments largely from 12 per cent to 5 per cent. These benefits have been passed on to consumers through lower prices.

 

The impact is beginning to reflect in consumption growth across both rural and urban markets, with rural performing better. Improved farm incomes and supportive macroeconomic factors are driving this trend.

 

Urban consumption has been under pressure. How do you see the current situation?

 

Data from syndicated surveys does not fully capture the fastest-growing e-commerce and quick-commerce (qcom) channels, which leads to an underestimation of growth.

 

Inflation has weighed more heavily on urban consumers. This pressure is less pronounced in rural areas. Government measures, including GST rationalisation and income-tax relief, should help over time. We are already seeing green shoots of recovery in urban consumption from Q3 across categories.

 

Premiumisation has been a focus area for ITC. How do you see this segment evolving?

 

The premiumisation story will continue. Typically, products priced about 20 per cent above the category average are considered premium. A super-premium segment — priced roughly 50 per cent higher — is also emerging and is becoming a key focus area for us, especially with the growth of qcom improving access.

 

We are tapping into this space through freshness-led offerings, health and wellness propositions, and enhanced sensorial experiences.