Bingo! ITC turns around foods business - Financial Chronicle
May 01, 2011
ITC, the paper to hotels conglomerate, which saw its non-FMCG cigarette business revenues rise by 24 per cent in the quarter ended December 2010, has managed to turn around its foods business.
Chitranjan Dar, divisional chief executive, ITC said the division was now profit-making and he expected it to remain profitable despite a steep rise in input as well as transport costs. ITC, whose pre-tax profits for the quarter ending December 2010 grew 19.4 per cent to cross the Rs 2,000-crore mark has been investing in a raft of businesses from hotels, paper board to FMCGs. It aims to utilise revenues from its tobacco business to build up a profitable franchise in other areas.
The Bingo! range of potato chips saw sales growing by 48 per cent during the December 2010 quarter. In the biscuits category, sales of Sunfeast grew by 28 per cent during the quarter driven by product mix improvement led by significant growth in the sales of value-added variants of cookies and creams. "Snacks and biscuits are the major driver of the foods business growth," said Dar.
While sales are rising at a rapid clip so are costs such as those of packaging that have gone up between a fifth to a quarter. The foods business has been using levers such as product mix enrichment, higher net realisation, smart commodity sourcing and active cost management across the supply chain to get into the black. "Ultimately, increasing our share in a growing market will help ameliorate some of the costs pressures. We are therefore focussed on internal efficiencies so that we only have to pass on between half to 60 per cent of the cost price increases to our end customers," said Dar.
ITC's Foods Division said Dar is now big enough to invest in new categories every year without relying on the parent for funds. "This kind of a calibrated approach will allow us to remain profitable," he said. In September 2010 the company had launched Sunfeast Yippee! Noodles,while selling Aashirvaad atta and branded spices.ITC claims that post the launch of some combo offers on noodles and pasta, sales in both these categories are doing well. Our distribution today is almost 70 per cent of HUL's food business and we are constantly working to grow that," said Dar.
