Will ITC emerge as a challenger to HUL in FMCG?
KEY HIGHLIGHTS  ITC has paid Rs 2,150 crore for Sunrise, which is the market leader in the high-margin masala business in West Bengal  The acquisition of Sunrise, which clocked sales worth Rs 591.50 crore in the last financial year, is the biggest by ITC  ITC's non-tobacco FMCG segment revenue grew 12.2 per cent in the first quarter  ITC's revenue declined 17 per cent in Q1 to Rs 9,436 crore, while profit reduced 26 per cent to Rs 2,343 crore because sales dip in cigarettes  ITC, which has completed the acquisition of spice maker Sunrise Foods, is finally switching to an aggressive mode to scale up its non-tobacco fast moving consumer goods (FMCG) segment. Sanjiv Puri, who took charge as chairman a year back, is looking for a massive drive in company's FMCG business with new products, acquisitions and high voltage marketing. Analysts feel that the company was highly conservative until now when it came to acquisitions, marketing and geographical expansions compared to Hindustan Unilever and others. "But in the first quarter, it was the non-tobacco FMCG business of the company that has shown resilience. ITC should kickstart the journey to scale up FMCG portfolio using the substantial cashflow support from cigarette business," said an executive with a retail chain. ITC has paid Rs 2,150 crore for Sunrise, which is the market leader in the high-margin masala business in West Bengal. ITC has the potential to expand the Sunrise business pan-India through its FMCG channels. "Similarly, ITC should beef up its share in all regions with new products and acquisitions," said a Mumbai-based analyst. Tata Consumer Products (TCPL), which was formed by merging the consumer portfolio of Tata Chemicals with Tata Global Beverages, has also turned aggressive in the FMCG space as opportunities rise for trusted brands. TCPL houses popular brands like Tata Salt, Tata Tea, Tetley, Eight O' clock and Himalayan Water. The other aggressive Indian players in the space are Dabur, Godrej Consumer Products and Marico. The acquisition of Sunrise, which clocked sales worth Rs 591.50 crore in the last financial year, is the biggest by ITC, which has largely been focused on building its own brands all these years. ITC's non-tobacco FMCG segment revenue grew 12.2 per cent in the first quarter. Excluding the Education and Stationery Products Business (ESPB), which was impacted by the closure of educational institutions in the wake of the pandemic, the segment revenue grew by 18.8 per cent. The segment EBITDA grew by 42 per cent to Rs 257 crore with margins expanding by 170 basis points year-on-year. Overall, the revenue of ITC declined 17 per cent to Rs 9,436 crore, while profit reduced 26 per cent to Rs 2,343 crore because of the sales dip in cigarettes. Earnings Per Share for the quarter was Rs 1.91 (previous year Rs 2.59). Staples, convenience foods and health & hygiene products, representing around 75 per cent of the FMCG portfolio recorded strong growth of 34 per cent, the company said. The discretionary categories and those with higher 'out-of-home' consumption salience degrew by 25 per cent, but witnessed progressive normalisation with improved growth momentum, it added. In the staples, snacks and meals category, 'Aashirvaad' atta posted strong growth. 'Yippee!' Noodles and 'Sunfeast' biscuits and cakes posted substantial growth driven by increased 'at-home' consumption. The 'Bingo!' snacks category saw subdued operational performance due to restricted mobility, initially. In the dairy & beverages category, 'Aashirvaad Svasti' range of fresh dairy products and ghee recorded strong growth. The chocolates and confectionery categories were severely impacted, reflecting the subdued demand for discretionary products. Personal Care Products Business recorded substantial growth in revenue. The company expanded manufacturing capacity for 'Savlon' antiseptic liquid, soap, handwash, hand sanitiser and 'Fiama' handwash products in the market. The company expanded its presence in the emerging channels of modern trade and e-commerce during the quarter, growing at over 20 per cent and 90 per cent, respectively. In the modern trade channel, the company carried out direct store deliveries, significantly reducing the time to market. It also scaled up presence on leading e-commerce platforms. Also read: Now send WhatsApp text to Starbucks, McDonald's to place an order