Diversified conglomerate, ITC has launched as many as 70 products in the non-cigarettes fast moving consumer goods (FMCG) space cashing in on the changing dynamics of the pandemic-stricken consumer space, beating its previous high of 60 launches.
The 70 launches were made in the first half of the financial year alone and were mostly focused on hygiene, health & wellness, naturals and convenience, which were in high demand as Covid -19 raged across the world. The number of launches exceeds what ITC had done in the whole of the last financial year; in 2019-20, ITC had 60 launches, while in the year before, the number stood at 50.
In order to cash in on the continued traction for hygiene products, ITC launched a range of products under the Savlon brand – disinfectant sprays, fabric disinfectant sprays, spray and wipes, germ protection wipes, Hexa sanitiser and advanced body washes – some of which were manufactured during the lockdown.
The brand is now on course to record an annual consumer spend of Rs 1,000 crore in FY21.
Some of the other launches that captured the changing consumer behavior were: ready-to-cook chapattis (Aashirvaad), Select milk with a daily report card (Aashirvaad), immunity juices (B-Natural), frozen vegetables (Farmland), among others.
In the quarter ended September, the non-cigarettes FMCG segment got a leg-up with highest quarterly revenues at Rs 3,794.95 crore for all segments, except education and stationery products business.
The company attributed it to deployment of innovative delivery models, use of alternate channels, expansion in reach, agility in execution and leveraging digital technologies to service market requirements.
Pre-tax profits from the segment were at Rs 252.68 crore compared to Rs 90.46 crore in the year ago period; in the previous quarter, the profits stood at Rs 125.41 crore.
As consumers opted for contactless transactions, sales through e-commerce platforms more than doubled during the quarter gone by, to nearly 5 per cent of segment revenue. Sales in modern trade channels, however, grew at a slower pace as localised lockdowns impacted footfall and consumers preferred neighbourhood/online stores as safer options.
An Edelweiss report said that ITC’s FMCG business has shown good operating profitability since FY19 onwards and the trend is expected to improve going forward.
However, while non-cigarettes FMCG got a boost, the cigarettes business was impacted in the quarter due to localised lockdowns, pulling down the overall performance.
Net revenue saw an year-on-year decline of 14.4 per cent; sequentially, however, it was up 33 per cent.
A Motilal Oswal report said that cigarette volumes were likely to have declined 12 per cent, which was below the expected 7 per cent decline. The net EBIT margin for the cigarettes business contracted 880 bps year-on-year to 63.4 per cent, it said.
Apart from lockdowns, high taxes on cigarettes, too, have been an overhang. The company said that the 13 per cent tax hike which cane into effect from February 20 added to pressure on legal industry. Additionally, there are concerns with ESG that persist on cigarettes, as globally, cigarette companies are being screened out by ESG investors.