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    One of India's longest-serving bosses is getting another extension. Here's why

    Synopsis

    ITC is trying to emerge as a modern diversified fast-moving consumer goods (FMCG) player while trying to shed its cigarette and tobacco legacy.

    YC-Deveshwar-
    Since the company had started to diversify and expand under Deveshwar's, it might find his presence helpful at this crucial transition.
    Why does conglomerate ITC Ltd want to extend tenure of non-executive chairman YC Deveshwar by another two years from 2020 to 2022? ITC has sent a notice to shareholders for the 107th annual general meeting to be held here next month which says Deveshwar would continue to mentor the senior management “given the increasing size and complexity of the organisation".

    ITC is trying to emerge as a modern diversified fast-moving consumer goods (FMCG) player while trying to shed its cigarette and tobacco legacy. In 2016-17, cigarettes had accounted for 58 per cent of its revenue, and 85 per cent of its net profit. The stock tanks on the bourses if taxes on cigarettes go up. It has remained subdued for almost a year because of fear of impact due to the goods and services tax (GST).

    Over the past two decades, ITC has tried hard to shed its cigarette-maker tag. The question is, has ITC done enough to set itself on course to emerge as a company that does not depend on cigarettes, and will it complete the journey anytime soon?

    ITC already has 25 “mother brands” (Sunfeast, Ashirvaad, etc) in its FMCG portfolio targeted at market segments, and expansion plans will involve filling in the sub-segments covered by these brands with sub-brands and product variations.

    For example, ITC was the number two player in shower gel but was not present in body wash, something it is entering now. The Ashirvaad brand, for instance, has now been extended to spices. It is a Rs 4,200 crore brand and is expected to grow fast with other products, apart from atta, under its banner. At the same time, ITC continues to launch new brands. Dermafique, for example, is its first premium skin care offering, being launched in April

    ITC has also been growing the FMCG portfolio through acquisitions. In 2014, it acquired B Natural from south Indian juicemaker Balan Natural. In 2015, it acquired Shower to Shower and Savlon brands from Johnson & Johnson and in 2017, Charmis from Colgate-Palmolive.

    Nascent segments where ITC is likely to scale up fast are juices, dairy, spices and salt. Then there are the premium offerings. ITC has also entered the coffee and chocolates markets at the top-end luxury segments — via boutiques at ITC’s hotels and a few select malls.

    The company wants to achieve FMCG turnover of Rs 1 lakh crore by 2030. In 2016-17, ITC’s FMCG arm had clocked a turnover of Rs 10,000 crore, and in the nine months ended December 31, 2017, it crossed Rs 8,000 crore. To compare, FMCG major Hindustan Unilever reported a revenue of Rs 34,487 crore in 2016-17.

    Deveshwar was instrumental in transforming the Kolkata-based company from being mostly a cigarette maker to a conglomerate with interests in sectors such as fast-moving consumer goods, hotels, paper and packaging, and agri-business. He was among the first CEOs to tap India’s vast countryside, by way of his unique e-Choupal concept — linking directly with farmers via the Internet for procurement of products — and by entering the FMCG space in rural areas.

    Since the company had started to diversify and expand under Deveshwar's, it might find his presence helpful at this crucial transition. However, many think Deveshwar's continued presence will cast a long shadow on the executive leadership.


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