22001881 Project on ITC Foods

7/31/2019 22001881 Project on ITC Foods

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PROJECT REPORT

ON

ITC FOODS

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EXECUTIVE SUMMARY

ITC was established on Aug 24, 1910 as the Imperial Tobacco Company of India Ltd inKolkata and its name was changed to I.T.C. Limited in 1974 and finally they changed itto ITC Ltd in 2001. ITC has diversified presence in tobacco, foods and confectionery,apparel, paper boards, packaging and hotel businesses.

The Foods Division is the most recent diversification of the ITC group. They entered inthis business in 2001. They launched KoI brand under Ready to Eat segment .Theyexpanded with brand launches in the Confectionery, Staples and Snacks Food segments.

ITC has fulfilled all needs and requirements of the people. If the company maintains itsstandard or increases it in the near future it surely will attain the no. 1 position in themarket.

Here, through our report we have tried to study the environment in which ITC foodsoperate. We have also analyzed the market of ITC foods and the competition involved.We have also studied the various strategies adopted by company to achieve its goals andthe structure and the culture developed within ITC to support its objective. Also, an efforthas been made to project ITCs future prospects, sales and profits.

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INTRODUCTION

ITC made its entry into the branded & packaged Foods business in August 2001 with thelaunch of the Kitchens of India brand. A more broad-based entry has been made sinceJune 2002 with brand launches in the Confectionery, Staples and Snack Foods segments.For ITC, the packaged foods is an ideal business to utilize ITC's proven strengths in theareas of hospitality, branded cuisine, contemporary packaging and sourcing ofagricultural commodities. ITC's world famous restaurants like the Bukhara and the Dum

Pukht, nurtured by the Company's Hotels business, demonstrate that ITC has a deepunderstanding of the Indian taste and the expertise required to translate this knowledgeinto delightful dining experiences for the consumers. ITC has stood for quality productsfor over 98 years to the Indian consumer and several of its brands are todayinternationally benchmarked for quality.

All products of ITC's Foods business available in the market today have been craftedbased on consumer insights developed through extensive market research. Apart from thecurrent portfolio of products, several new and innovative products are under developmentin ITC's state-of-the-art Product Development facility located at Bengaluru.ITC has over the last 98 years established a very close business relationship with the

farming community in India and is currently in the process of enhancing the Indianfarmer's ability to link to global markets, through the e-Choupal initiative, and producethe quality demanded by its customers. This long-standing relationship is being utilizedin sourcing best quality agricultural produce for ITC's Foods business.

The Foods business is today represented in 4 categories in the market. These are:

1. Ready To Eat Foods2. Staples3. Confectionery4. Snack Foods

In order to assure consumers of the highest standards of food safety and hygiene, ITC isengaged in assisting outsourced manufacturers in implementing world-class hygienestandards through HACCP certification. The unwavering commitment to internationallybenchmarked quality standards enabled ITC to rapidly gain market standing in all its 6brands:

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http://www.kitchensofindia.com/http://www.itcportal.com/agri_exports/e-choupal_new.htmhttp://www.itcportal.com/agri_exports/e-choupal_new.htmhttp://www.kitchensofindia.com/


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1. Kitchens of India2. Aashirvaad3. Sunfeast4. mint-o

5. Candyman6. Bingo!

Recently, on Aug 1, 2008, ITC Foods has drawn up plans to extend its Kitchen of India

brand to frozen foods.ITCs Branded Packaged Foods business continues to expand with sales growing by 23%over the previous year. Apart from the development costs of new products, the businesshas had to contend with the recent economic slowdown and severe cost increases in inputcommodities including wheat, vegetable oil, maize and skimmed milk powder, inaddition to the soaring fuel prices. Having acquired reasonable scale in a relatively shortspan of time, the business is progressively focusing on consolidating the portfolio incertain categories, improving market servicing and driving supply chain efficiencies.

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http://www.itcportal.com/foods/foods_kitchens.htmlhttp://www.itcportal.com/foods/foods_aashirvaad.htmlhttp://www.itcportal.com/foods/foods_sunfeast.htmlhttp://www.itcportal.com/foods/foods_mint-o.htmlhttp://www.itcportal.com/foods/foods_mint-o.htmlhttp://www.itcportal.com/foods/foods_bingo.htmlhttp://www.itcportal.com/foods/foods_kitchens.htmlhttp://www.itcportal.com/foods/foods_aashirvaad.htmlhttp://www.itcportal.com/foods/foods_sunfeast.htmlhttp://www.itcportal.com/foods/foods_mint-o.htmlhttp://www.itcportal.com/foods/foods_mint-o.htmlhttp://www.itcportal.com/foods/foods_bingo.html


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BACKGROUND NOTE (ITC)

ITC was established on August 24, 1910 as the Imperial Tobacco Company of IndiaLimited in Kolkata. Initially, the company was involved in the trading of importedcigarettes.In 1925, in a backward integration move, the company started a packaging and printing

business.The name of the company was changed to India Tobacco Company Limited (I.T.C. Ltd.)

in 1974.In 1975, I.T.C. Ltd., through ITC-Welcomgroup, tied up with the US-based SheratonCorporation to enter the hospitality industry. It acquired its first hotel in Madras (laterrenamed Chennai) in Tamil Nadu and called it the Welcomgroup Chola Sheraton.

I.T.C. Ltd established ITC Bhadrachalam Paperboards Ltd. (IBPL) in 1975. The companystarted production at its integrated pulp and paper/board manufacturing facility atBhadrachalam, Andhra Pradesh, in 1979.

In 1990, I.T.C. Ltd. set up an International Business Division (IBD) for export ofagricommodities.I.T.C. started a greeting cards business under the brand name Expressions in the year2000.In the same year, I.T.C. also entered the fashion retailing business by extending its wellknown cigarette brand Wills. The retail outlets were called Wills Lifestyle and offeredpremium leisure wear for men and women under the Wills Sport brand.

In September2001, the company was renamed ITC Ltd (without full stops, and with nomeaning attributed to the alphabets).

In 2001, ITC made an entry into the foods business.

In 2002, the company launched another clothing brand, John Players, which targeted theurban youth.In 2004, ITC was one of eight Indian companies to make it to the Forbes A List8which featured 400 of the worlds best big companies.In Oct 2005, ITC has launched an exclusive line of prestige fine fragrances and personalcare products under the Essenza Di Wills brand.In late 2007, ITC launched Fiama Di Wills soaps and shampoos following the success ofEssenza Di Wills.

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In Dec 2007 ITC launches ECF (Elemental Chlorine Free). ITC is the first and onlyCompany in India using the ECF technology.

Market and Competition

Indian Foods market is a monopolistic market. There are many competitors in all thecategories and although they all have similar products available at similar prices, they aretrying to prove themselves different through their marketing strategies. However, entry tothis business is easy and ITC has utilized this fact very efficiently to their benefit as they

entered into the several categories among this Foods business.

READY TO EAT

ITC entered into the branded and packaged foods business in with the launch of Kitchensof India brand. In 2004, the company launched KoI brand fruits and spice conserves andcooking pastes. The fruits and spice conserves, were developed jointly with KarenAnand, a food expert. Priced at Rs. 70, these were targeted at the premium segment. TheKoI cooking pastes, which were priced at Rs.30 for a 100g pack, also targeted the high-

end market. Multi-purpose cooking pastes were also launched under the Aashirvaadbrand and these were priced at Rs. 10 for 80g pack. The manufacturing of these productswas outsourced to contract manufacturers for saving the operating cost.

ITC entered the branded spices market in 2005 and the Instant Mix segment in 2006, bothunder the Aashirvaad Brand. As on April 2006, the total turnover in the Indian ready-to-eat and ready-to-cook segments was only around Rs. 700 million, but it continued to postan annual growth of 20%. By early 2006, though ITC had captured a 35% market share inthe ready-to-eat segment, MTR was the clear market leader with close to 60% in marketshare. ITC exported 40-50% of KoI brand products (in terms of volumes) to the US,Canada, the UK, Switzerland, and Australia.

In May 2006, ITC planned to introduce ten more varieties under the KoI brand within aprice range of Rs. 35 to Rs. 98. In 2007, some new products have been launched underReady To Eat category like chutneys, curries, conserves, biryanis (Noor Mahal, BhoriBiryani and some new range of products under Gharana (Paneer Malai, Keema Mutter).After launching all these products ITC FOODS is looking to share 50 to 60% of marketby 2008-2009.Following are the major competitors ITC is competing with in Ready toEat category:

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Brands Description

GitsGits produces the selected range of popular ready to cook andinstant foods that cover a range of ethnic Indian cuisine-andwhere the recipes have "Global pallete acceptance".

HaldiramsOffers packaged Bhel puri chats such as Sev Puri, Chana Masala,Samosa, Pakoras, Alu Tikki, Pao Bhaji, Gol Gappa, Dhoklaamong others

Ethnic Kitchens

Offers packaged sweets,syrups,namkeens, cookies, pickles, alooMasala, Bhujia, Bhelpuri, Chana Dal, Kajui Ladoo and manymore items.

MTRMTR foods currently comprise twenty-two delicious andcompletely authentic Indian curries, gravies and rice.

Priyafoods

Priya has a range of popular traditional recipes starting from DalMakhani, Navaratan Kurma to Palak Paneer, Paneer ButterMasala, Punjabi Chhole and Rajma Masala along with truesouthern delicacies like Andhra Veg Pulav, Mango Dal, GonguraDal.

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http://www.gitsfood.com/http://www.haldiramusa.com/http://www.ethnickitchens.com/DProduct.aspx?CatId=4http://www.mtrfoods.com/readytoeat/index.htmhttp://priyafoods.tradeindia.com/http://www.gitsfood.com/http://www.haldiramusa.com/http://www.ethnickitchens.com/DProduct.aspx?CatId=4http://www.ethnickitchens.com/DProduct.aspx?CatId=4http://www.mtrfoods.com/readytoeat/index.htmhttp://priyafoods.tradeindia.com/


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Market Share - Ready To Eat

48%

35%

8%

9%ITC Ltd.

MTR

Kohinoor

Others(Gits, Priya

Foods etc.)

as on June, 2008

CONFECTIONERY

Confectionary market in India is about Rs.2500 crore. It is loosely divided into sevencategories:

1. Hard boiled candies2. Toffies3. Eclairs4. Chewing gum

5. Bubble gum6. Mints7. lozenges

ITC has currently in market with its two brands Mint-o and Candyman. ITCsMint-O fresh secured a 17% share of Indian cough lozenges market ahead of formerleader Perfetti which only achieved 14.3% with chloromint. The Indian giant marked theconfectionary sector in 2002 and has only two brands mint-o fresh and Candyman.But in overall confectionary market they are lagging behind having just 3% market shareas compared to market leader Perfetti with more than 37% market and providing larger

number of brands.

Perfetti van melle ITC Ltd. Nestle Cadbury

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AlpenliebeAlpenliebeCreamfillsAlpenliebeLollipop

Big BabolCenter FreshCenter FruitCenter ShockChatar PatarChlor-mintChocotellaCofitosFruittellaHappydent WhiteProtex Happydent

MarbelsMentosChocoliebe

CandymanMinto

. Kit Kat

. Kit Kat Lite

. Milky Bar

. Munch

. Milk Chocolate

. Fun Bar. Polo

. Polo Power mint

. Munch Pop Choc

. clairs

BubbalooDairymilkEclairs% StarGems

PerkHalls

Market Share - Confectionery

3%

37%

11%7%

42%

ITC Ltd.

Perfetti Van Melle

Cadbury

Nestle

Others(Parle,

Joyco, HUL etc.)

as on June, 2008

STAPLES

ITC entered the staples market in 2002 with wheat flour under the Aashirvaad brand. In2003, ITC extended the Aashirvaad brand to edible salt. By early 2006, ITC had a 40%market share in the Rs. 6 billion packaged flour business. Its closest competitor HLLsAnnapurna brand was trailing behind with a market share of 18%. The market wasgrowing at 12%. Under its Aashirvad brand ITC FOODS also launched salt, mixers,ready to cook pastes. In the Rs. 4 billion organized salt market (as of 2006), Tata Salt was

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the market leader with a 28% market share. ITC had only a 5% share of the market. Otherplayers in this business are HLL (Knorr Annapurna), Nirma (Shudh), MaricoIndustries (Saffola), etc.

Market Share - Staples

42%

21%

13%

24%

ITC Ltd.

HLL

Pillsbury

Others(Sri Lal

Mahal, Local

Brands etc.)

as on June, 2008

BISCUITS:

Indian biscuit market is estimated to be around 5000 crore. Biscuit industry in India in theorganized sector produces around 60% of the total production, the balance 40% being

contributed by the unorganized bakeries. ITC with its premium product, SUNFEAST, isacquiring a big share of market. Within few years, they are able to get 12% share of themarket.

Britannia ITC Ltd

(Sunfeast)

Parle Priyagold

TigerNutrichoiceJuniorGood Day,50 50,TreatPure Magic,Milk BikisGood Morning.

MarieDream creamMilky MagicFit kitChoco NutButter Nut

Parle-gKrack-JackMonacoKreamsHide and SeekMilk Shakti

Butter BiteClassic CreamButter LiteBig BossMarie LiteMagic Gold

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Market Share - Biscuits

12%

10%

38%

32%

8%ITC Ltd.

Priyagold

Britannia

Parle

Others(Bonn,

Anmol etc.)

as on June, 2008

SNACKS:

Snacks industry overview

Snacks industry in India is worth 1800 Crores of Rs. and growing at 10% is one of thelargest markets in the world, out of which potato chips holds the major market share ofaround 85%.

Product Price

(ITC Ltd)

Product Price

(Frito Lay)

Product Price

(Haldiram)

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BingoRs. 5Rs. 10Rs. 20

LaysRs. 5Rs. 10Rs. 20

Lehar Namkeen

Rs. 5Rs. 20Kurkure

Rs. 5Rs. 10Rs. 20

NamkeenRs. 5Rs. 10Rs. 20

Market Sahre - Snacks

16%

45%

27%

12%

ITC Ltd.

FritoLay India

Haldiram's

Others

as on June, 2008

FINANCIAL DATA

ITC Ltd. started their food division in the year 2001. Since then the growth has beenfantabulous. Their investment has increased year by year considering the scope of food

market. However, they could not sustain the constantly increasing profit margins, mainlybecause of their valuable investment in market research, surveys, R&D, costlyadvertisements and expansion plan. Moreover they entered in a whole new market offood, but for this market they already had strong distribution market, which they areusing for their tobacco product. So considering all these factors and short span of timeperiod, surprisingly they did good job, particularly in snacks, biscuits, Ready to Eat andstaples market.

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Annual Results (ITC) - In Rs. Crores

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04Other income 610.90 336.49 286.08 235.81 224.88

Raw material 4,639.35 5,644.34 4,124.90 2,837.40 2,572.78

Employee expenses 733.32 630.15 541.40 467.26 416.48

Other expenses 4,176.61 2,397.88 1,938.52 1,610.08 1,310.04Provisions made - - - - -Depreciation 438.46 362.92 332.34 312.87 241.62Taxation 1,451.67 1,226.73 988.82 836.00 726.21Net profit / loss 3,120.10 2,699.97 2,235.35 2,191.40 1,592.85

Rate of Increase SalesOperatingprofit

Netprofit/ loss

ACTORSAFFECTING

NET

PROFIT

rawmaterial

employee cost

interest

2005 18.07 18.30 37.58 10.29% 12.19% 71.16%

200628.16 19.15 2.01 45.38% 15.87% -71.88%

200726.34 18.90

20.79 36.84% 16.39% -72.51%

200812.76 11.31

15.56 -17.81% 16.37% 40.55%

Projection for 200921.3

3 16.9218.9

8 18.67% 15.21% -8.17%

The selling of 13544 crores, with net turnover at 3900 crores registered a growth of18.4% driven by the non-cigarette business, which grew by 29% due to new investmentsin FMCG market. Overall projection for the year 2009, for sales is projected to be atgrowth rate of 21.33%.

Annual results in details

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SALES OF FOOD SECTOR AND ITS PROJECTION:

2006 2007 2008 2009(projected)Sales (crores) 1230.54 1698.53 2526.60 3410

The foods business is expanding rapidly with sales growth of 35% in the year 2007. Thisrange of product includes more than 150 different products. The growth of this sector interms of product categorization is as follows.

Sales in biscuits category grew by 55%.Sales in staples category grew by 52%Sales in confectionary grew by 51%.

Sales in RTE grew by 35%

ITC Food is looking to expand its RTE category to maximize its profit.

ITCS NEW CHALLENGES:

This food industry is the industry with very less profit margins. So low operation cost isthe key. Also, Indian middle class is price sensitive. In this area international, national

and also regional competition is very tough. With that wheat, petrol and labor cost isincreasing day by day. Different types of restrictions imposed by the government are alsoplaying a vital role in reducing profit margins. For example, exporting non-vegetarianfoods out of India is restricted. To cover this up, ITC is trying to reduce cost of itsbiscuits by acquiring mass production of wheat directly from farmers through its E-chaupal initiatives. Also in this way ITC is able to reduce the price of its staples. As far asConfectionary market is concerned, ITC is looking to launch its brand of chocolate incollaboration with an American company. After analyzing the food sector, one can saythat it is one of the toughest market to compete in as all the market giants are alreadythere.

GROWTH AND INVESTMENT PLANS:

This food sector is the most promising field and has already overtaken IT andPHARMACEUTICALS Sector of India. Even Indian Government is looking to developthis sector. Thats the reason central Government has already passed several projects for

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food parks. In this way FDI in this sector is possible. Also government in its 2006 budgethas reduced custom duty from 16% to 8% on packaged food and also excises duty oninstant food mixes. This will help ITC to be competitive in the market. Recently ITC hasstarted exporting packaged food from its Bangalore plant. It is also planning to open onemore new plant in Calcutta for Indian market. They are looking to add several products in

their RTE list which will be exported as well. Also in late 2007 ITC has acquired oneAustralian Plant and seed technology industry. Through this they will provide highlyvaluable seeds and other solutions to farmers in India, which ultimately will increase theproductivity and cost effectiveness for their staples and biscuits business.

Its turnover in the foods business was around Rs. 8 billion in 2005-06 which furtherincreased to Rs. 10.2 billion in year 2006-2007.ITC has decided to make an investment of 300 crores over a period of 5 years. ITC Foodshas also decided not to make heavy investments in manufacturing unless volumes pickup. As of today ITC has invested 20 crores in R & D and planning to invest further 15crores to produce new products in different categories.Thus looking at all the strategy of ITC future investment and planning. The future

investment plan is as follows

Rate of Increase Sales Operating Profits Net Profit/loss

2005 18.07 18.30 37.58

2006 28.16 19.15 2.01

2007 26.34 18.90 20.79

2008 12.76 11.31 15.562009(Projected) 21.33 16.92 18.98

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Rate of Increase of Sales with Projection for 2009

18.07

28.1626.34

12.76

21.33

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2005 2006 2007 2008 Projection

for 2009

years

percentincreas

e

Rate of Increase of Operating Profit with Projection for

2009

18.30 19.15 18.90

11.31

16.92

0.00

5.00

10.00

15.00

20.00

25.00

2005 2006 2007 2008 Projection

for 2009

Years

PercentI

ncrease

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Rate of Increase of Net Profit/Loss with Projection for

2009

37.58

2.01

20.79

15.5618.98

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.0040.00

2005 2006 2007 2008 Projection

for 2009

years

PercentIncrease

Major Strategies Adopted by ITC Foods

Entering the foods business was itself a strategic decision for ITC. While ITCs corebusiness, tobacco, was under pressure owing to several factors like government bans onadvertising and on smoking in public places, hikes in the excise duty for cigarettes, andanti tobacco campaigns, ITC planned to deploy its surplus in the packaged food businesswhere it saw huge business potential. Following are some of the strategies that ITCadopted to make its food business a success:

Entering into less competitive or unexplored markets (Ready to eat, Staples,

Wafers): When ITC entered into the foods business in 2001, it focused onunleashing the areas where the competition is very less or there is no competition.It started with packaged ready to eat food and later extended that to Aashirvaad

brand of edible salt and Atta. Recently ITC has announced its desire to forge inthe frozen foods category in the domestic market. Players in this category arelimited and ITC hope to exploit this fact. Also, in Bingo, although the competitionis tough but there is only one player with whom ITC has to compete i.e. Frito Lay.This strategy has helped ITC to quickly establish itself in the above mentionedbusinesses.

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Distribution Network: ITC already had a huge distribution network due to itstobacco business. ITC used this network to distribute their biscuits and wafers.This not only provided a good launch to their products but also helped in boostingsales. Today, ITCs Bingo and Sunfeast are available at nearly 1.8 million outletswhereas Parle is available at only 1.5 million outlets.

Market differentiation (Ready to eat, Biscuits): ITC started packaged foodsbusiness with the KoI brand of ready-to cook products. They were positioned aspremium products with target groups including tourists, NRIs, etc. In Biscuitsalso, ITC launched differentiated products in each and every segment. For e.g. itintroduced an Orange Marie, a butterscotch cream biscuit, chilli flakes in a biscuitand even honey flavor under the Sunfeast brand.

In March 2005, ITC Foods launched Sunfeast Pasta, a whole wheat based producttargeted at children. It was expected to compete with products like Nestles

Maggie noodles. With this strategy ITC built for itself new markets.

Cost control strategy (all products): When ITC started the foods division, itsmain challenge was to compete with the players who were already there. Toovercome this challenge, ITC realized that they have to offer products at a pricewhich is either equal or less than what the competitors are offering. To do this,they planned to capitalize by leveraging the strength of the groups other

businesses. ITCs printing and packaging business provided high-quality, cost-effective, and innovative packaging. ITC also enjoyed cost advantages over itscompetitors owing to its electronic procurement system called e-Choupal. Thishelped ITC to compete with the best.

Diversification of products (Biscuits, Wafers, and Ready to Eat): One of theITCs successful strategies has been the method of diversifications among itsvarious products. If we talk just about Bingo, ITC has come up with 16 flavors incomparison to its competitor Lays of Frito Lay which has only 4 major flavors.Same is the case with Ready to Eat food category and Biscuits.

This strategy has helped ITC to attract a wide range of market.

Extensive advertising (Biscuit, confectionary, wafers): Just like a Bollywoodmovie needs good publicity to be a super hit, every new product launched in themarket needs to be known to the consumers before it is launched. Advertising is

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where ITC made the difference in comparison to its competitors. They hired thebest professionals and the best ambassadors in the country to make their productsfamous. This is evident form the award winning marketing campaign for Bingoand Minto Fresh. The tagline "Jab Laila ko karna tha impress to majnu ne khayimint o fresh" has stood the test of times and is still widely known and

remembered. Hiring the best people from the film industry and sports (SharukhKhan and Sachin Tendulkar for Biscuits, Rakhi Sawant for Minto Fresh) showedITCs urge to be the best.

On television, the company booked 10 to 15 spots per channel per day on youthchannels such as MTV and Star World, mass Hindi channels like Zee and StarTV, and news channels. It also had around 20 spots on a variety of radio channelsand advertised in most leading national dailies. In the top-30 cities, over 1,000outdoor hoardings advertised the product. According to industry estimates, ITCspent close to Rs 100 crore on marketing.

This kind of promotion of products helped ITC to make its products known toeveryone and now it was not difficult to attract consumers.

Regular introduction of new products (all products): Having acquiredreasonable scale in a relatively short span of time, ITC realized that, to remain inthe competition it had to introduce new products regularly. ITC has beenexpanding its distribution network aggressively and also their product range. Inbiscuits and wafers range, it is launching new products or flavors week afterweek. Same is the case with Ready to Eat and Kitchen of India.

Innovation (all products): When the need to introduce new products arrived,ITC shifted its focus on to the innovation. Also, ITC was innovative in identifyingthe market or niche for all its products.

Maintenance of freshness and hygiene (all products): ITC positioned its wheatflour on the health & hygiene and value for money terms. Success in the staplesbusiness, especially in the branded and packaged wheat flour business, depended

on two factors an effective distribution network and the quality of the product.Therefore, ITC attempted to ensure that the supply chain was responsive, and laidemphasis on making accurate sales forecasts using inputs from distributors, salespersonnel and a well-managed MIS system. To maintain freshness of the product,the company strove to minimize the transit time by regulating the shippers tomaintain company-specific transit norms. The physical aspects of the supplychain like warehouses and trucks were closely monitored to maintain cleanliness.

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From Analyzers to Prospectors (Biscuits): When ITC entered the biscuitsmarket with Sunfeast in 2003, with three varieties of biscuits - glucose, marie, andcream, they did what any new player in the market does, imitating and emulating

the leader that was Britannia. Their strategy was to manufacture those productswhich are already a success in the market. But, as ITC got hold of the market, itstarted to manufacture flavors which were never heard of. This was the result ofITCs desire to exploit new product and market opportunities.

All the above strategies and with the help of launch of Bingo in 2007, ITC finally tastedsuccess in its food business in 2008 when it became a profitable business for the first timesince its launch in 2001

Structure

ITC has a three-tier management structure.

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At the top are Chairman and Board of Directors, who are responsible for the strategicsupervision of ITC, its wholly owned subsidiaries and their wholly owned subsidiaries.The ITC board is a balanced board comprising Executive and Non-Executive Directors.The Board ensures that the Company has clear goals relating to shareholder value and itsgrowth. It sets strategic goals and seeks accountability for their fulfillment. There are fourboard committees, namely, the Audit Committee, the Nominations Committee, the

Compensation Committee and the Investor Services Committee.

At the second level is the Corporate Management Committee, which is responsible forthe strategic management of the company's businesses within Board-approveddirection/framework. It comprises all the Executive Directors and three or four key seniormembers of management.

Third level consists of divisional CEOs of each business assisted by their owndivisional management committees. Corporate Functions of the Executive ManagementTeam includes Planning and Treasury, Accounting, Legal, Secretarial, Human Resources,Communications, Internal Audit and Information Technology.

The companys organizational structure and governance processes are designed tosupport effective management of multiple businesses while retaining focus on each ofthem." This three-tier governance structure ensures that:For and on behalf of the shareholders the company believes in incorporating strategicgovernance in its work culture so as to ensure that despite being free from involvement in

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the task of strategic management of the Company, it can be conducted by the Board withobjectivity, thereby sharpening and ensuring accountability of management;

With mundane tasks of everyday executive management being delegated the managementremains focused on issues of immediate importance;

The Executive management of the individual businesses that are free of handling strategicmanagement responsibilities of ITC as a whole is then able to channelize their energiesand time in enhancing the effectiveness and overall growth of their individual units.

Corporate Governance as defined by ITC is a systemic process by whichcompanies are directed and controlled to enhance their wealth-generating capacity. Acompany employs vast sums of societal resources during this process of wealthgeneration. ITC is of the firm belief that the governance process being followed should

ensure that these resources are used optimally to meet the aspirations of its stakeholdersand society. This is further reflected in the deep commitment of the company tocontribute to the Triple Bottom Line, which is the development of the nationseconomic, ecological and social resources.

The company believes in empowering the executive management. Butcorporate governance ensures a system of checks and balances to ensure that thesepowers that are bestowed upon the executive management are used in a responsiblemanner so as to meet shareholder and societal expectations. The core strengths of ITC'sgovernance philosophy are trusteeship, transparency, empowerment and accountability,control and ethical corporate citizenship. The practice of each of these creates the rightcorporate culture that fulfils the true purpose of Corporate Governance.

Overall, the structure of ITC has high complexity because of horizontal differentiationwithin the organization. The most visible evidence is that of specialization anddepartmentation. Complexity also increases because of spatial differentiation.

The ITC Code of Conduct, as adopted by the Board of Directors, isapplicable to all Directors, senior management and employees of the Company. ThisCode is derived from three interlinked fundamental principles, viz. good corporategovernance, good corporate citizenship and exemplary personal conduct. The Code

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covers ITC's commitment to sustainable development, concern for occupational health,safety and environment, a gender friendly workplace, transparency and auditability, legalcompliance, and the philosophy of leading by personal example. Since non-adherence tothe code is brought to the attention of the immediate reporting authority, formalization isalso there in ITC.

Decision-making is decentralized, as the company believes in giving

executive freedom to the management to drive the enterprise forward without unduerestraints but this freedom of management should be exercised within a framework ofeffective accountability.

CULTURE

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ITC's Vision

Sustain ITC's position as one of India's most valuable corporations through world-class performance.

Create growing value for the Indian economy and the Company's stakeholders.

ITC's Mission

To enhance the wealth generating capability of the enterprise in a globalizingenvironment

Deliver superior and sustainable stakeholder value.

ITC's Core Values

The companys Core Values are aimed at developing a performance-orientedorganization that is highly customer focused and also creates value for those holding

stake in it. It fully understands that it has a commitment to its stakeholders to act as aguardian of the company from stakeholders point of view and deliver results in a mannerthat actualizes stakeholders interest on a long-term basis.

It also delivers on the commitment to its customers by consistently addressing their needson product quality, value and overall satisfaction. It respects the values of people and alsoencourages individuals to pursue their dreams, values their differences and helps them toexperiment in the pursuit of various opportunities.

ITC firmly believes in the concept of Excellence with their mantra being, we do what isright, do it well and win. We will strive for excellence in whatever we do. It is

constantly in the pursuit of better and newer products, processes, services andmanagement practices. Apart from the interest of shareholders they also address theircommitment to the nation to generate economic value, at the same time ensuring that inachieving these goals no compromises are made whatsoever in complying with rules andregulations as specified by law.

ITCs Philosophy

ITC believes in practicing ethical behavior among the corporate citizen. The companyfollows an HR policy that is regulated by Teamwork, Trust, Collaboration, Mutuality,Meritocracy, Objectivity, Collaboration, Self-respect and Human-dignity. It is alsodeeply committed to make the company a gender friendly place for each individual whilealso ensuring enhancement of equal opportunities for men and women, preventing sexualharassment of any form and the adherence to good employment practices. It is ensured

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that the interest of the company is foremost and in this context acceptance of any kind ofgifts or payments from suppliers or customers is viewed as a serious breach of companydiscipline. And such acts are also considered as damaging to the reputation of thecompany.

High standards of house keeping and hygiene are followed to ensure excellent physicalworking conditions. It is understood that all the directors, senior management andemployees shall conduct themselves in an honest manner and avoid any conflict ofinterest.

The top officials and employees of ITC believe that ITC provides them freedom at workand resources to experiment. Employees take pride in working for ITC for its workculture, environment, and the way people are treated. They are consulted before a newproject\system is introduced and their concerns and suggestions addressed. ITC also givesa lot of input to develop their skill and career. They give utmost importance to equal

opportunities, better work environment.

DESIGN

Looking at the structure and culture of ITC, we can say that its design is based more orless on the Divisional Structure. ITC has a diversified presence in different industriesand each of its businesses act as an autonomous unit which are coordinated by the top

level, i.e. the board and corporate management committee. The divisional managers areresponsible for performance and hold complete strategic and operating decision-makingauthority. The top management provides support services to the divisions. It acts as anexternal overseer, evaluating and controlling performance. Hence the top management isfree from being concerned with the day-to-day operating details so they can pay attentionto the long term. Big picture, strategic decision making is done at the top level

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Effectiveness

Organizational

Effectiveness criteria Rating Remarks

1 Flexibility 9

Entered into food business because of the variousconstraints in cigarette industry.

Launch of various new products in diverse categories inaccordance to the demand of the consumer market.

2 Acquisition of resources 8

Outsourcing manufacturing of confectionary items,acquisition of an Australian firm for new improvedseeds, set up new plant in Haridwar, where there is notax for first 5 years.

Expanding size of work force by expanding targetmarket

3 Planning 7

Goals are clear and well understood as they are clearabout the markets they want to enter in and the marketsthey do not want to enter.(they didnt enter intochocolates, milk products)

4Productivity and

efficiency

8

Combining various facilities to improve efficiency(manufacturing along with printing and packaging)

Prices of almost all the products are at par with thecompetitors. Also their selling has increased

considerably at an average rate of 20-25% in last 6 yrs.In 2007, At their Haridwar plant they are able to get themore production with the limited technology andmachine utility which they had in 2006.

5Availability ofinformation

8 Employees are always consulted before a newproject/system is introduced.

6 Stability 9 Timely operations are carried out to maintain freshnessof the inputs (Transporters are fined in case of delay)

7 Skilled work force 9

ITC leverage human capital for competitiveness bynurturing knowledge, entrepreneurship and creativity

It has a no. of training programs which helps theemployees gain exposure to the latest technologies anddevelopments.

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Competing Values Framework

Current Framework

Favorable Framework

Environment in which ITC foods division is operating is highly uncertain because of theimmense competition that they are facing in each category and due to the launch of newproducts and flavors in each category every other day. It is also highly intense as the

organizations main strategy to achieve their goals is through extensive marketing and forthat they need to know how their products are received in the market. To do this, they areconducting various surveys and also they are launching their products only after a briefresearch of the market and trials.

ITC Foods aggressive effort to capture market share and heavy investments inmanufacturing and infrastructure suggests that they are focusing mainly on both of theirshort and mid term goals. Thus, the current design of their organization is rational but asthe environment is highly uncertain and intense, they need to move towards aDevelopmental design. The structure of the ITC Foods division is market oriented

because of the same reason that they are focusing into the market deeply; but again as theenvironment is highly uncertain and intense, they need high flexibility within theorganization and hence should move towards an adhocratic structure. Leadership in ITCfoods division is rational as the leader is functioning logically in accordance to the marketforces. Also, he is an expert as he has made optimal use of ITC Ltds resources in ITCFoods division. For example, ITCs distribution network.

Environment Culture Design Structure Leadership Leaders role

Uncertainty Intensity

High High Developmental Adhocracy Idealistic Prime mover

Rational

Market-

oriented Rational Expert

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Bibliography:

www.itcportal.com www.wikipedia.org www.moneycontrol.com www.economictimes.indiatimes.com www.moneycontrol.com www.google.com www.bseindia.com www.perfettivanmelle.in www.cadburyindia.com www.nestle.in www.rediff.com www.thehindubusinessline.com www.kitchensofindia.com www.aashirvaad.com www.bingeonbingo.com www.mycandymanclub.com www.sunfeastharabanao.co
http://www.itcportal.com/http://www.wikipedia.org/http://www.moneycontrol.com/http://www.economictimes.indiatimes.com/http://www.moneycontrol.com/http://www.google.com/http://www.bseindia.com/http://www.perfettivanmelle.in/http://www.cadburyindia.com/http://www.nestle.in/http://www.rediff.com/http://www.thehindubusinessline.com/http://www.kitchensofindia.com/http://www.aashirvaad.com/http://www.bingeonbingo.com/http://www.mycandymanclub.com/http://www.itcportal.com/http://www.wikipedia.org/http://www.moneycontrol.com/http://www.economictimes.indiatimes.com/http://www.moneycontrol.com/http://www.google.com/http://www.bseindia.com/http://www.perfettivanmelle.in/http://www.cadburyindia.com/http://www.nestle.in/http://www.rediff.com/http://www.thehindubusinessline.com/http://www.kitchensofindia.com/http://www.aashirvaad.com/http://www.bingeonbingo.com/http://www.mycandymanclub.com/

Documents

22001881 Project on ITC Foods