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This focus on premium products has also helped ITC break even in the personal care business that is now generating profit consistently quarter on quarter, analysts said.
While Satpathy refused to specifically comment on this, he said this focus on premiumisation has a positive impact on the bottom line by improving margins.
“Premium products sales have moved up exponentially from pre-pandemic period and doubled to around 38% of our sales. With growing opportunities in the Indian market, we will continue to strengthen our focus on premiumisation. Companies with capabilities to marry technology, innovation, supply chains and sustainability concerns together will gain much more in premium play,” said Satpathy.
He said 65% of all new personal care product launches were in the premium segment which helped to double the saliency of the segment from pre-pandemic levels.
ITC operates in categories like body wash, deodorant, skin care and floor cleanser through this business which is the second critical piece of its strategy to grow the non-cigarette fast moving consumer goods (FMCG) segment. The foods business is the largest revenue and profit generator for the company’s non-cigarette FMCG business where it has market leadership in multiple categories.In the personal care business, ITC is the second largest player in shower gel, women’s deodorant while its herbal floor cleanser is now the leader in some markets like the East. In the October-December quarter ITC expanded the non-cigarette FMCG business Ebitda margins by 100 basis points year-on-year to 11%. The Ebitda is on an upward swing for the last few quarters for ITC despite high input cost and subdued demand.”Non-cigarette FMCG segment Ebitda margin stood at 11% backed by premiumisation, supply chain optimisation, cost management, digital initiatives and judicious pricing actions,” BNP Paribas said in a recent report.
Satpathy said premium consumers got aggregated during the pandemic and when a lot of digital channels opened up. “We jumped a decade as far as digitalisation is concerned. This boosted sales of premium brands and larger packs since such consumers tend to consume more. The cherry on the cake has been quick commerce,” he said.
ITC has also shrunk its mass market brand Superia, which operates in the soaps segment, since it did not gain much market share and margins too were low. The brand is sold in a few rural markets such as the Hindi heartland and Odisha.
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