ITC Focuses On Premium Goods In Hunt For Margins

(MENAFN- Live Mint) "New Delhi: ITC Ltd is rapidly premiumizing its portfolio with an eye on aspirational shoppers, as consumer goods makers pivot to the juicier side of the retail market for higher margins has typically been a value market, with more consumers buying low-priced unit packs. However, over the years, rising prosperity have prompted shoppers to increasingly buy differentiated products such as fragrant body washes, value-added hair oils and organic wheat flour. These evolving preferences have spurred companies such as ITC, Hindustan Unilever Ltd, Dabur India, Marico and Nestle to accelerate the launch of such premium products.“The bottom of the pyramid is already saturated and as the market gets fragmented, and consumers go in for more premium and differentiated offerings, we're going to go up the value chain. That's what we are launching more of,” B. Sumant, executive director, ITC, said in an interview instance, 37% of ITC's personal-care portfolio is now what the company calls premium; the number was 26% till two years ago. the company's personal-care business comprises brands such as Fiama Di Wills, Savlon, Vivel, Engage, and Dermafique, among several others. Similarly, 35% of all the packaged foods and beverages portfolio is now premium. As much as 35% of the Mangaldeep agarbatti (incense sticks) portfolio is premium FY23, packaged food products reported gross revenues of ₹15,768 crore for the company, up from ₹13,199.59 crore in FY22. Education, stationery products, personal care, matches and incense sticks contributed gross revenues of ₹3,341 in the previous fiscal year, compared with ₹2,793.53 in the year prior the last two years, ITC has also accelerated the pace of new launches to expand its existing core brands into new adjacencies - extensions of an existing core product, let's say flour, into value-added items such as spices - as well as get into new categories instance, over the past three years, nearly 300 new products were launched, including several premium products, chairman Sanjiv Puri said at the company's 112th annual general meeting earlier this year. Some recent examples include Sunfeast Dark Fantasy desserts, Engage L'amante premium perfumes and Classmate Interaktiv notebooks. The company's mega brands are also addressing adjacencies such as Aashirvaad range of frozen breads, vermicelli, fresh paneer slices and Sunfeast Dark Fantasy milkshakes, he had said then has also launched charcoal-infused men's soap under the Fiama brand-richly priced at ₹95 for 125 grams. Its Engage L'amante perfumes are priced upwards of ₹600. More recently, it launched Sunfeast fruit smoothies priced at ₹70-dairy beverages are typically priced between ₹30 and ₹35. Meanwhile, Aashirvaad, its staples brand, has seen new additions such as gluten-free flour, multi-millet mixes and ragi flour. A pack of 1 kilogram ragi flour is priced at ₹90, while regular wheat atta is priced at around ₹60. It also sells a ₹1,100 moisturizer under skin care brand Dermafique. It also makes millet cookies future consumer trends that ITC is pursuing, Sumant highlighted the company's focus on expanding its health and wellness offerings, alongside the development of premium personal care products cigarette-to-hotel conglomerate is also using technology and data to accelerate innovation and speed-to-market.“The other trend that we see post covid is there's a K-shaped recovery. So, we see a lot of growth at the top or the premium end of the market, while we see strain at the bottom of the market. We've actually launched a whole range of premium products over the last 12 months where we see demand,” he said, analysts tracking the sector said the move is aligned to help lift margins.“ITC's approach to driving the salience of premium products in FMCG (non-cigarettes) is helping its brands turn more aspirational. This strategy may have limited growth for the segment but will help build the segment margin faster,” said Nitin Gupta, analyst at Emkay Global isn't the only one chasing affluent shoppers rival Hindustan Unilever, premium products accounted for 33% of its product mix in FY22, with the share of such products having steadily increased over the past decade. In FY12, premium products formed just 22% of the company's portfolio. In particular, HUL is driving premiumization in its skin care brands such as Pond's and laundry brand Surf Excel, apart from the launch of premium beauty brands such as Acne Squad and Find Your Happy Place levels are the same pan-India, albeit consumers are buying at different price points, Sumant observed.


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