Indian Tobacco Company(ITC) in FMCG

Presented by group 8

Saurabh Srivastava(WMP10034)Shirish Agarwal(WMP10036)

Shubhank Rathour(10037)Anshul Verma(WMP10055)

Syed Fuzal Hasan(WMP10087)

ITC - OverviewITC Limited, a multi-business conglomerate, has diversified presence in FMCG, Hotels, Paperboards and Packaging, Agri Business and Information Technology.

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited and I.T.C. Limited in 1974.

Fast Moving Consumer Goods comprising Foods, Personal Care, Cigarettes and Cigars, Branded Apparel, Education and Stationery Products, Incense Sticks and Safety Matches, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and Information Technology.

ITC Position The fast moving consumer goods (FMCG) segment is the fourth largest sector in the Indian economy. The market size of FMCG in India is estimated to grow from US$ 30 billion in 2011 to US$ 74 billion in 2018. Food products is the leading segment, accounting for 43 per cent of the overall market share.

Personal care (22 per cent) fabric care (12 per cent)

Consumer durables market is expected to double at 14.7 per cent CAGR to US$ 12.5 billion in FY15 from US$ 6.3 billion in FY10.

Growing awareness, easier access, and changing lifestyles have been the key growth drivers for the sector.

ITC: Vision, Mission & Strategic Intent

VisionSustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Company's stakeholders.

MissionTo enhance the wealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder value.

Strategic IntentITC's strategic intent to secure long-term growth by synergizing and blending the diverse pool of competencies residing in its various businesses to exploit emerging opportunities in the FMCG sector.

Macro-Environmental Factors affecting firm continued..

  Analysis of the macro -environmental factors on FMCG IndustryYear

Total Income (in Cr.)

Total Expenses (in Cr.)

Total Sales (in Cr.)

PAT (in Cr.)

GDP (%)

Inflation (%)

Interest Rate (%)

Exchange Rate(Rs/$)

2006-2007 2,669,124.40 2,597,034.30 2,598,591.30 123,510 9.60 6.50 9.00 45.282007-2008 3,196,801.50 3,117,734 3,115,253.70 140,402.80 9.30 4.70 9.00 40.242008-2009 3,837,415.60 3,715,446 3,743,104.20 159,328.90 6.70 8.10 8.80 45.922009-2010 4,264,310.10 4,160,620 4,179,643.40 194,354.30 8.40 3.80 7.50 47.422010-2011 4,904,398.20 4,801,506.70 4,813,662.80 199,320.80 8.40 9.60 9.50 45.572011-2012 4,840,471.60 4,711,692.10 4,737,063.50 222,934.70 6.50 8.90 9.30 47.95

Compound Annual Growth Rate (%) 10.43 10.44 10.53 10.34 -6.49 1.67 1.08 2.66

Macro-Environmental Factors affecting firm continued..

Macro-Environmental Factors affecting firm continued.. Negative GDP growth rate shows the decreasing trend during the year 2011-12 because

of economic policy and fall in production.

Inflation rate refers to a general rise in prices measured against a standard level of purchasing power.

The Government of India (GOI) has recently approved 51 per cent FDI in multi-brand retail, which will boost the nascent organised retail market in the country. It has also allowed 100 per cent FDI in the cash and carry segment and in single-brand retail.

Interest rates on deposits growth rate was 1.08 per cent which shows the fluctuating trend from 7.5 to 9.5 during this period. The Interest rate is increased which helps to encourage the saving habit of an individual.

Reduction in purchasing power Market share can decrease Decrease in consumer spending

External Environment Analysis of the Firm           

Economical Factor           

            1. Slowdown in global economic scenario affects the industry.2. This leads to consumers not opting to buy expensive products or services and pressurizes the FMCG companies to reduce the prices for the products and services.

                                                                                                                                                               

Political Factors  

PEST Analysis 

Technological Factor

1. Political factors will have a greater influence on the organization and industry and it is the duty of the organizations to comply with it.2. Transportation and infrastructure facilities are improving not only in urban but also in the rural area which will help in distribution network.

    1. Technological advancement makes the supply chain and transactions along the chain simple. 2. Organizations reduced costs with effective IT technologies and increased the rate of information transactions.

            

             3. Technology is playing a key and huge part in the FMCG sector by developing the new packaging, increasing productivity and longer shelf life of food products.

                       

            Social Factor              1. Promotions and offers have

considerable impact on consumers.2. Reliability and product attributesplays a very important role for low income and price conscious set of consumers.

                                                                                   

Porter’s 5 force analysisPorter's forces Measures

Threat of new entrants - Low1. Economics of scale2. Product Differentiation3. Capital Requirement4. Access to Distribution Channels

Threat of substitutes - High

1. There are scarce customers because the industry saturated and the competitors try to snatch their share of market.2. Market players use all sorts of tactics and activities from intensive advertisement campaigns to promotional stuff and price wars etc. 3. Products with improving price/performance tradeoff relative to present industry products.

Rivalry among competitors - High

1. Market players use all sorts of tactics and activities from intensive advertisement campaigns to promotional stuff and price wars etc. 2. Using price competition3. Making new product introduction

Porter’s 5 force analysisPorter's forces Measures

Bargaining power of suppliers - High

1. There is large number of supplier available and the raw materials are also readily available. 2. There is no monopoly situation in the supplier side because the suppliers are also competing among themselves.3. Buyer is not an important customer to supplier

Bargaining power of buyers - High

1. Low switching cost2. Buyers are numerous and fragmented3. There is no threat of buying one product over other.

Competitors Analysis

Competitors - Key Financial RatioITC Competitors Key Financial Ratios Comparison

Profitability Ratios   Year 2015

year 2014

Year 2013

Year 2012

Year 2011

Operating Profit Margin(%) ITC 36.9 37.47 35.54 35.15 34.54  HUL 16.9 15.97 15.51 14.88 13.57  Nestle 20.7 21.39 22.29 20.97 19.91  Dabur 17.27 16.95 17.34 17.47 19.06  Britania 10.75 9.45 6.61 5.61 5.48    Profit Before Interest And Tax Margin(%) ITC 32.88 33.64 31.88 31.34 30.65  HUL 15.66 14.71 14.26 13.72 12.28  Nestle 17.12 17.61 18.89 18.87 17.77  Dabur 15.66 15.49 15.35 15.49 17.76  Britania 9 8.4 5.54 4.6 4.37    Gross Profit Margin(%) ITC 34.27 34.76 32.88 32.37 31.48  HUL 15.97 15.04 14.59 13.89 12.45  Nestle 17.27 17.77 18.96 18.93 17.87  Dabur 16.06 15.84 15.66 15.72 17.91  Britania 9.11 8.45 5.59 4.66 4.42    Net Profit Margin(%) ITC 26.31 26.43 24.8 24.47 23.24  HUL 14 13.8 14.7 12.16 11.68  Nestle 12.02 12.27 12.81 12.79 13  Dabur 14.04 13.8 13.58 12.32 14.39  Britania 8.67 5.86 4.16 3.75 3.44

Industry Performance TrendsTo Include three to five different measures. For e.g., ROIC, Sales value/ volume, Profits.Growth The overall fast moving consumer goods (FMCG) market is expected to increase at compound

annual growth rate (CAGR) of 14.7 per cent , with the rural FMCG market expected to increase at a CAGR of 16.3 per cent

Rising incomes and growing youth population have been key growth drivers for the sector. Brand Consciousness has also aided demand. It is estimated that First Time Modern Trade Shoppers spend has reached $ 1 billion by 2015.

The industry has witnessed healthy foreign direct investment (FDI) inflow, as the sector accounted for 2 per cent of the country’s total FDI inflow over April 2000 to March 2013. Organised retail share is expected to double to 14-18 per cent of the overall retail market by 2015.

Rural demand growth is expected to occur mainly with consumers moving up towards premium products.

Thank you