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Natarajan`s view on ITC
Gopinath Natarajan, EVP, IIFL PReMIA feels that, overall with a non- cigarette income revenue growing, the delta from that portion also is kind of in favor of o f ITC ITC . Natarajan told CNBC-TV18, “The market’s kind of surprised quite a few people with this kind of a big move. Overall, the markets have been possibly moving in about 7-8% kind of a range with a pivot being at about 5500. Especially if you see in with the kind of flavors the market has liked the kind k ind of things markets have been liking ITC is clearly one among them.” He further added, “ITC has been a performer for almost few months now. Possibly also because of the fact that it not only brings about a defensive flavor, but their cigarette business is doing well. The pricing power is there in the cigarette business and also the non- cigarette income like your Sunfeast, your Ashirwad, all these also achieving some kind of scale that’s also a key point, which is in favor of ITC. Overall with a noncigarette income revenue growing, the delta from that portion also is kind of in favor of ITC. So that’s possibly a few reasons why marke
Late entrant ITC is making competition count in the Rs 29,000-crore personal care industry ITC may be a late entrant in the Rs 29,000-crore p ersonal care industry growing at 12 per cent every year, but it sure is making competition count. Some number crunching will establish that the cigarette-to-hotels major has indeed made inroads into an intensely competitive market often marked by pressured margins. In just two years, ITC's personal care business has notched up market share of about 5 per cent (volume) in soaps, and around 3.4 per cent in shampoos. Brands Vivel and Superia are each estimated to be more than Rs 200 crore per annum in consumer spend. Putting those numbers in context is a IMRB household panel survey in February 2010 that indicates Vivel and Superia soaps and shampoos have been purchased by over seven crore households, representing nearly 30 per cent of Indian households. What helped ITC cut across the clutter is probably its product proposition: a wide range of products meeting international quality standards but developed on the basis of Indian consumer experience. Of course, chief executive of personal care strategic business unit, Sandeep Kaul, believes it's not one selling proposition, but several that have helped ITC carve out a place in the market. "We offer a superior value proposition to the consumer and we have an intimate understanding of consumer insight. And, of course, the aesthetics. These are the cornerstones of our value proposition," Kaul says. No doubt. At ITC, there is a lot that goes into understanding the consumer. The company spent close to four years researching at its centre in Bangalore before the first product from the personal care stable rolled out. "That is why our products have been accepted by the consumer. We probably have the fastest growing set of brands in the market," Kaul points out before adding rather modestly that the base is also small. ITC's non-cigarette fast moving consumer goods (FMCG) business - which contributes close to 50 per cent to the company's turnover - registered a strong set of numbers in the third quarter of 2011 and among the highlights was a continued reduction in loss reported by the FMCG business. While revenues increased 23.8 per cent year-on-year to Rs 1,104 crore, losses came down by Rs 1 2 crore to Rs 74 crore, though sequentially it increased due to new launches. Angel Broking Research expects the revenue traction in the segment to continue and loss to reduce albeit at a slower pace than FY2010, though breakeven is likely to be achieved only in FY2013. Engagement with consumers, promotional activities and new age consumer connect avenues have had their roles to play, but it is the relentless rollout of products that has given ITC's FMCG portfolio so much visibility. In a short span of time, ITC has managed to create a presence across different price points, almost bombarding the market with
launches. In the super premium segment, it has Essenza Di Wills fragrances, in premium Fiama Di Wills, in the midmarket segment Vivel and in the popular segment Superia. There is a segment below the popular, but ITC is not present at that price band. While the company has kept its fragrances small, it gives ITC's FMCG portfolio a prestige value, priced as they are on par with international designer fragrances. "It is doing very well, considering that the distribution has been kept limited. We would like to keep it that way. We need a particular ambience for the brand to be presented," Kaul points out. Launch pad
"Our track record in launching new pr oducts has been pretty excellent," Kaul says. That's putting it mildly. The personal care business of ITC has gained ground leveraging investments in R&D, product development and brand building. The company made a foray into the fast-growing and relatively under-penetrated domestic skin care market with the launch of Vivel Active Fair Cream (the fairness cream market is estimated at Rs 1,900 crore) in June 2010. The product has been well received in the launch markets and is being progressively rolled out to target markets. The business expanded its product portfolio in the soaps category with the launch of Vivel Glycerine Milk Cream, a new offering in the winter segment. Vivel Deo Spirit, its offering in the freshness segment, was extended to Andhra Pradesh, Kerala and Karnataka last winter. The anti-hair fall shampoo variant under the Fiama Di Wills brand launched in September 2010 has also been successful, says the company. Recently, ITC entered the men's grooming segment with the Aqua Pulse shower gel and soap. "We are progressively seeing a trend, wherein men are beginning to look for value propositions and products created keeping them in mind. People are becoming more and more discerning," Kaul explains. The business is investing in building a strong portfolio of products and b rands through well-defined research and development strategies backed by the company's state-of-the-art R&D centre. It is also continuously enhancing the quality of engagement with consumers through efficient deployment of media, direct contact and promotional activities across conventional and new age consumer connect avenues. The business continues to leverage investments in manufacturing facilities at Haridwar (Uttarakhand) and Manpura (Himachal Pradesh). Apart from the fiscal benefits that accrue on such investments, these facilities also provide a higher degree of flexibility in manufacturing. Kaul vows that products and variants will keep rolling. "We are in the process of rolling out products in categories where we have already entered. That process will go on," he says. Peer companies believe Kaul. "We respect them as a company with good financial capability, distribution and management," Emami director, Harsh Agarwal says. In a market as big as Rs 29,000 crore, there is possibly space for many players. In all these launches ITC has followed the top-down approach that has given it tremendous success in its lifestyle retailing and the stationery segment foray as well as its food business. ITC stepped into lifestyle and the stationery segments about a decade ago with premium Paperkraft notebooks and Wills Sport apparel. It's only much later that it introduced mass market brands Classmate notebooks and John Players menswear. Then in 2001 ITC entered the food business with premium ready-to-eat brand Kitchens of India and followed it up in 2003 with the launch of the Aashirvaad range of ready meals in the Rs 35-50 price band.
MARKETING MATTERS With the core proposition to offer consumers a unique brand experience, ITC's personal care business has engaged in a slew of consumer contact programmes: •
Fiama Di Wills collaborated with Walt Disney to launch a limited edition Fiama Di Wills Hannah Montana pack for Indian teens. This association with Walt Disney's teen popstar provided a unique opp ortunity for Fiama Di Wills to engage with a younger demography. Fiama Di Wills "Shine in Style" Hannah Montana Packs received an overwhelming response, says the company
The Vivel Active Fair within months of its launch received extremely encouraging consumer response. The brand, in a special initiative for consumers in Kerala, gave young women an opportunity to be the next gorgeous face of the Malayalam film industry. Reputed Malayalam director Lal Jose was roped in for the selection process. Vivel Soaps undertook the Vivel Lakshadhikari contest in Andhra Pradesh. The contest offers consumers an opportunity to win Rs 5 lakh on completion of a simple slogan 'Vivel should make your dream come true because...' and along with it, send any three Vivel soap wrappers/cartons to a mailing address. The first couple of Vivel Lakshadhikaris were announced recently and felicitated by brand ambassador and Tamil actor Trisha Krishnan. Superia recently announced its 'Superia Saundarya Sakhi' initiative in Uttar Pradesh. It is an initiative to enhance skills of women entrepreneurs in the business of beauty across the state of Uttar Pradesh. As a part of this initiative, Superia will reach out to 4,000 beauty parlour owners in more than 30 districts of Uttar Pradesh. Superia has also announced the 'Superia Chamakta Sitara' campaign in Uttar Pradesh. The contest, in association with schools across 29 districts of Uttar Pradesh, aims to recognise all-round development among students. Students from grade 7 to 12 will compete to become the 'Superia Chamakta Sitaras'. These students will be judged on the parameters of grooming, attendance, academics and extracurricular activities. The campaign will reach out to more than 1,000 schools.
ersonal care companies are operating the consumer-oriented industry that constantly thrives on the sale of manufactured products. The industry is mainly engaged in the manufacture of consumer products that are used mainly for the purpose of beautification and they are also sometimes equipped with personal hygiene products for men and women. However, there is only a slight variation between the products in personal care category and products in cosmetics category. Cosmetics products mainly deals with the luxury goods that are used for beautification purpose, while personal care products are health care products
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ITC Ltd, which made a big-splash entry in 2007 into the highly competitive market for consumer products such as soaps and shampoos, plans to expand its range of personal care brands as it strives for a bigger market share. “We are working on three new categories. These are in advanced stages of development,” said Sandeep Kaul, chief operating officer for ITC’s personal care business. ITC’s current personal-care portfolio includes soaps, shampoos and fragrances. These products are marketed under the Fiama Di Wills, Superia and Vivel brands. Superia caters to the mass consumer segment, Vivel targets the premium and Fiama the so-called super-premium market. Products are priced at between a low of Rs 5 for a mass-market soap to Rs2,100 for a high-end perfume.
Kaul refused to disclose details on the new product categories the company plans to introduce. Anand Shah, a Mumbai-based analyst at Angle Broking Ltd, said the segments could include skin care (moisturisers and face and body creams), handwash lotions and deodorants. The consumer and personal care products market is highly competitive, dominated by well-entrenched brands from companies such as Hindustan Unilever Ltd (HUL), Procter and Gamble Ltd, L’Oreal India Pvt. Ltd, Dabur India Ltd and Cavinkare Pvt. Ltd. The personal care segment is dominated by HUL, whose brands, including Lux, Dove, Sunsilk and Clinic Plus, have 52.7% market share in soaps and 46.5% in shampoos, according to HUL. While ITC refused to reveal numbers related to its market share, two analysts based in Mumbai who didn’t want to be named said the company had around a 2% share of the total personal-care products market. “Our existing portfolio has received good response an d as we move forward, the company will launch more and more new products in line with the growth strategy,” Kaul said. The Kolkata-based company recently launched a new anti-dandruff shampoo called Ultrapro in Hyderabad. The anti-dandruff shampoo market is led by brands such as Clinic All Clear and Head and Shoulders, from HUL and Procter and Gamble, respectively. ITC will use actor Hrithik Roshan to endorse the shampoo and plans to take the product national. “Usually, a national roll-out takes around five-six months,” Kaul said. The total shampoo market, according to Kaul, is estimated at around Rs2,200 crore. Antidandruff brands make up Rs600 crore of this. ITC has made sizeable investments in launching personal care products, spending heavily on advertising and promotions and distribution. The company’s sales grew 16% to Rs7,662.99 crore and net profit declined by 0.15% to Rs1,551 crore in the first six months of 2008-09. “We have very clear internal targets and milestones for our progress and we are meeting those milestones,” Kaul said about the profitability of the personal care products category.
The category is at a very nascent stage and unpenetrated,” said Pritesh Chheda, analyst at Emkay Share and Stock Brokers Ltd. “There are some brands such as Nivea and Olay in skincare, which are picking up. Also, there are many imported brands which keep getting launched.”
HUL’s share has declined although the market itself is expanding in value terms, notwithstanding the economic slowdown. According to AC Nielsen, the toilet soaps
market was estimated to be worth an annual Rs7,258.17 crore at the end of September, up 12.8% from a year earlier.
The market for shampoos grew 14.6% to Rs2,377.47 crore, for toothpastes 14.1% to Rs3,018.46 crore and skin creams 18% to Rs3,095.61 crore, the market research firm said.
HUL’s market share declines on competition, slow economic growth India’s largest consumer products company by sales, Hindustan Unilever Ltd (HUL) has seen its share shrink, though the market is expanding in spite of the economic slowdown.
HUL is facing increased competition with the entry of cigarette maker and hotel company ITC Ltd into personal care products such as shampoos, hair conditioners, soaps and bodywashes with brands such as Vivel, Fiama Di Wills and Superia earlier this year.
“HUL continues to be a market leader in most of the FMCG (fast-moving consumer goods) categories, but, yes in some categories the company’s share has been going down consistently such as soaps and shampoos, as ITC’s products are gaining market share,” said an analyst at a Mumbai-based firm who did not want to be named.
ITC declined to comment on its market share. “ITC’s entry has clearly impacted market shares of HUL,” said Emkay’s Chheda. “Currently, ITC must be having around 1.5-2% share and entry of a strong player definitely impacts the existing one. But still, ITC will take another two years to grab 5-7 % share of the soaps and shampoos category.” HUL posted a 19.7% increase in net sales during the quarter ended September to Rs 4,028 crore, from Rs3,365 crore a year earlier. The home and personal care division grew by 22.5%.
The company isn’t pressing any alarm buttons yet. “Market share, in the short term, is the outcome of market dynamics,” an HUL spokesman said in an email. “We continue to
invest in our brands and categories through innovation, product quality and marketing spends. As we grow our core, we will continue to drive both market and category development.”
“We believe that our brand development and activation, coupled with proper investments over time, will help us maintain our leadership position,” the spokesman added.
The Morgan Stanley note continues: “We believe that ITC, like P&G, will be a formidable new player in personal products. The management’s commitment to this segment remains strong, and the company is likely to enter skin care in the next two quarters. ITC has gained shares of 100 basis points in soaps and 20 basis points in shampoos since October, with a significantly higher investment. Due to better profitability in food categories, however, we expect the company’s non-tobacco FMCG losses to fall from Rs 360 crore to Rs 270 crore in the current year.” Very few Indian companies have reinvented themselves as ITC has. Realising long ago that cigarette cannot be its bread and butter for long, given the rising campaign against smoking, the company first moved into hotels and then into the FMCG business – both have brought handsome rewards. Even in organisational matters, it has brought about vast changes. For example, its divisional CEOs run their businesses almost independently; yet there’s a high level of synergy across those businesses.