A

Project Report
On

ITC – Aashirvaad Atta

1
 Contents

Topics Page No.

Executive Summary 3

Introduction 4
♦ Preamble
♦ History and Evolution 5
♦ Corporate Strategies 9
♦ Board of Governors 9
♦ Operating Units in India 9

Market Analysis
♦ SWOT Analysis 10
♦ Understanding the four P’s of ITC Food Division 10
♦ Financial Analysis of ITC 18
♦ Competitors Analysis 25
♦ Financial Analysis of Competitors
♦ Price, Place, Product, Promotion Strategies in Orissa 33
♦ Decision Making Process 38
♦ Inferences from the Survey 39

Future Strategies 45

Suggestion and Recommendations 46

Annexure 47

References 55

2
 Executive Summary
In ITC’s branded packaged foods business, the company has created a new epicenter of
rapid growth by blending its time tested key competencies and organizational strengths.
ITC’s portfolio, currently consisting of 45 value added products, appeals to changing
consumer preferences in virtually all categories – staple, confectionery, snack foods and
biscuits, and ready to eat meals.

ITC’s ‘Aashirvaad’ atta has already established leadership as the number one branded
atta among national branded players within barely two years of launch. The ‘Aashirvaad’
assurance of quality now extends to ready-to-eat foods, ready –to- cook pastes, atta and
salt. ITC pioneered the launch of butterscotch cream and Orange Marie biscuits under
the sunfeast brand – example of product innovation widely accepted by the consumer.
ITC has achieved a significant market presence in the confectionery segment with the
rapid growth of the ‘Mint-o’ and Candyman brands, which between them now have 11
variants. ITC’s ‘Kitchens of India’ ranged of gourmet products showcases India’s
traditional cuisine.

The company is engaged in scaling up the supply chain through distributed and
outsourced manufacturing capacity to service market requirement in the cost effective
manner. Significant investment in brand building activities is also envisaged in the light
of heighten competition. Despite sluggish performance and pressure on margins in
recent times the micro trends in FMCG sector shows compelling opportunities. Per
capita consumption and penetration lines of most FMCG categories in India are
relatively low as compared to other south Asian countries. Branded atta consumption in
India is only 5%. Disposable incomes are projected to grow rapidly and drive up the
demand for consumer and FMCG Goods.

Gross turnover of the company for the year 2004-05 grew by 13% to Rs. 13350. Pretax
Profit increased by 15.3%. The financial for the year include Rs. 692 crores representing
net income from exceptional items. ITC has planned to invest around Rs.3500 crores in
the Atta, confectionery businesses and greeting cards over the next five years with its
prime focus on the food business.

Some of the recommendation that can be incorporated for Aashirvaad aata like
collaborating with government for the supply of atta in military canteen, and also with
fast food retail joints in India by giving them some discount, they company can also try
to export its atta to the countries where wheat is currently being exported. Also an
aggressive advertisement is required.

3
 Introduction
Preamble

Over the years, ITC has evolved from a single product company to a multi-business
corporation. Its businesses are spread over a wide spectrum, ranging from cigarettes
and tobacco to hotels, packaging, paper and paperboards and international
commodities trading. Each of these businesses is vastly different from the others in its
type, the state of its evolution and the basic nature of its activity, all of which influence
the choice of the form of governance. The challenge of governance for ITC therefore
lies in fashioning a model that addresses the uniqueness of each of its businesses and
yet strengthens the unity of purpose of the Company as a whole. Globalization will not
only significantly heighten business risks, but will also compel Indian companies to
adopt international norms of transparency and good governance. ITC's governance
policy recognizes the challenge of this new business reality in India.

Definition and Purpose

ITC defines Corporate Governance as a systemic process by which companies are

directed and controlled to enhance their wealth generating capacity. Since large
corporations employ vast quantum of societal resources, we believe that the governance
process should ensure that these companies are managed in a manner that meets
stakeholders aspirations and societal expectations.

Core Principles
ITC's Corporate Governance initiative is based on two core principles. These are :

Management must have the executive freedom to drive the enterprise forward
without undue restraints; and

This freedom of management should be exercised within a framework of effective

accountability.
Cornerstones

From the above definition and core principles of Corporate Governance emerge the
cornerstones of ITC's governance philosophy, namely trusteeship, transparency,
empowerment and accountability, control and ethical corporate citizenship. ITC
believes that the practice of each of these leads to the creation of the right corporate
culture in which the company is managed in a manner that fulfíls the purpose of
Corporate Governance.
4
History and evolution
ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco
Company of India Limited'. Its beginnings were humble. A leased office on Radha
Bazar Lane, Kolkata, was the centre of the Company's existence. The Company
celebrated its 16th birthday on August 24, 1926, by purchasing the plot of land situated
at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs
310,000. This decision of the Company was historic in more ways than one. It was to
mark the beginning of a long and eventful journey into India's future. The Company's
headquarter building, 'Virginia House', which came up on that plot of land two years
later, would go on to become one of Kolkata's most venerated landmarks. The
Company's ownership progressively Indianised, and the name of the Company was
changed to I.T.C. Limited in 1974. In recognition of the Company's multi-business
portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels,
Information Technology, Packaging, Paperboards & Specialty Papers, Agri-Exports,
Foods, Lifestyle Retailing and Greeting Gifting & Stationery - the full stops in the
Company's name were removed effective September 18, 2001. The Company now
stands rechristened 'ITC Limited'.

Though the first six decades of the Company's existence were primarily devoted to
the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the
Seventies witnessed the beginnings of a corporate transformation that would usher in
momentous changes in the life of the Company.

ITC's Packaging & Printing Business Division, was set up in 1925 as a strategic
backward integration for ITC's Cigarettes business. It is today India's most
sophisticated packaging house.

In 1975 the Company launched its Hotels business with the acquisition of a hotel in
Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of
ITC's entry into the hotels business was rooted in the concept of creating value for the
nation. ITC chose the hotels business for its potential to earn high levels of foreign
exchange, create tourism infrastructure and generate large scale direct and indirect
employment. Since then ITC's Hotels business has grown to occupy a position of
leadership, with 66 owned and managed properties spread across India. It also has a
marketing and reservation arrangement with the Sheraton Corporation, the reputed
international hotel chain.

In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam

Paperboards Limited, which today has become the market leader in India.
5
Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002
and became a Division of the Company, Bhadrachalam Paperboards Division. In
November 2002, this division merged with the Company's Tribeni Tissues Division to
form the Paperboards & Specialty Papers Division. ITC's paperboards' technology,
productivity, quality and manufacturing processes are comparable to the best in the
world. It has also made an immense contribution to the development of Sarapaka, an
economically backward area in the state of Andhra Pradesh. It is directly involved in
education, environmental protection and community development. In 2004, ITC
acquired the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd
(BIPCO), near Coimbatore, Tamil Nadu. This KOVAI Unit allows ITC to improve
customer service with reduced lead time and a wider product range.

In 1985, ITC set up Surya Tobacco Co. in Nepal as a joint venture with the reputed
Soaltee group. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and
its name was changed to Surya Nepal Private Limited (Surya Nepal).

In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing

company and a major supplier of tissue paper to the cigarette industry. The merged
entity was named the Tribeni Tissues Division (TTD). To harness strategic and
operational synergies, TTD was merged with the Bhadrachalam Paperboards Division
to form the Paperboards & Specialty Papers Division in November 2002.

Also in 1990, leveraging its agri-sourcing competency, ITC set up the International
Business Division (IBD) for export of agri-commodities. The Division is today one
of India's largest exporters. ITC's unique and now widely acknowledged e-Choupal
initiative began in 2000 with soya farmers in Madhya Pradesh. Now it extends to 6
states covering over 3.1 million farmers.

In 2000, ITC's Packaging & Printing business launched a line of high quality greeting
cards under the brand name 'Expressions'. In 2002, the product range was enlarged
with the introduction of Gift wrappers, Autograph books and Slam books. In the
same year, ITC also launched ‘Expressions Matrubhasha’, a vernacular range of
greeting cards in eight languages and ‘Expressions Paperkraft’, a range of premium
stationery products. In 2003, the company rolled out ‘Classmates’, a range of
notebooks in the school stationery segment.

ITC also entered the Lifestyle Retailing business with the Wills Sport range of
international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain
of exclusive stores later expanded its range to include Wills Classic formal wear (2002)
and Wills Clublife evening wear (2003). ITC also initiated a foray into the popular
segment with its men's wear brand, John Players, in 2002.
6
 In 2000, ITC spun off its information technology business into a wholly owned
subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging
opportunities in this area.

ITC made its entry into the branded & packaged Foods business in August 2001
with the launch of the Kitchens of India brand. A more broad-based entry has been
made since June 2002 with brand launches in the Confectionery, Staples and Snack
Foods segments. In 2002, the 'mint-o’ trade mark was acquired and relaunched in
orange and mint flavours. In the same year ‘Candyman’ was added to the
confectionery range and ‘Aashirvaad’ atta was rolled out. The 'Aashirvaad’ brand now
extends to ready-to-eat foods, ready-to-cook pastes and salt. In 2003 the ‘Candyman’
range was expanded to include deposited candies and éclairs. In 2003 ‘Sunfeast’
biscuits were launched and ‘mint-o’ lemon mint flavour was introduced. In 2004 the
‘Kitchens of India’ brand was extended to cooking pastes.

In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the

entire value chain found yet another expression in the Safety Matches initiative. ITC
now markets popular safety matches brands like iKno, Mangal Deep, VaxLit, Delite
and Aim.

ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the
manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands
include Spriha and Mangal Deep across a range of fragrances like Rose, Jasmine,
Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa.

Corporate Stategies

ITC's corporate strategies are aimed at matching its core capabilities with market
opportunities to produce superior shareholder value. The key corporate strategies are:

Continue to focus on the core businesses of Cigarettes & Tobacco, Hotels, Packaging
& Paperboard.

Ensure that each of its businesses meets the three criteria of sustainability, namely
Market Standing, Profitability and Internal Vitality. Exit from businesses which do not
meet these criteria within an agreed time frame.

Ensure that each business is internationally competitive in the Indian global market.

7
 Create distributed leadership within the organization by nurturing talented and
focused top management teams for each of the businesses.

Institute and practise a system of corporate governance appropriate to ITC's

character and constitution. Such a system of governance must achieve a wholesome
balance between the need for executive freedom for management and the requirement
of a framework for effective accountability.

Secure the future growth of the Company by creating new businesses which leverage
the strength of íts core competencies, residing in various businesses.

Terms of Reference of the Board Committees shall include :

- Objectives, Role, Responsibilities

- Authority / Powers

- Membership & Quorum

- Chairmanship

- Tenure

- Frequency of Meetings

8
 Board of Directors and Shareholding pattern
Shareholding pattern
As on 31st March, 2005
%
Foreign Holdings 51.85
Govt. / Financial Institutions 35.31
Corporate Bodies(not covered above) 0.71
Directors and their Relatives 0
Other including Indian Public 12.14

Board of Directors and remuneration

Chairman Yogesh Chander Deveshwar

Executive Director Sahibzada Syed Habib ur Rehman
Anup Singh
Krishnamoorthy Vaidyanath
Non Executive Director Charles Richard Green
Ajeet Prasad
P B Ramanujam
Basudeb Sen
Ram S Tarneja
Balakrishnan Vijayaraghavan
Company Secretary Bishwa Behari Chatterjee
Director J P Daly
Nominee (LIC) S B Mathur
Director Yesh Pall Gupta

Operating Units in India

The company’s food division has a Operating units at Nagpur and Vardhman with a
development and research centre at Banglore.

9
SWOT Analysis
Strengths Weaknesses
- Wide distribution - Great stress on
network the sun-set
- Presence in varied tobacco industry
sectors - Social stigma
- E-Choupal attached with
tobacco
Threats Opportunities
- Smaller regional - Entry into
players processed foods
- Government - Emergence of
restrictions on the Hyper-Markets
tobacco industry

ITC Four P’s in India - LET'S PUT INDIA FIRST

ITC believes that an effective growth strategy for our nation must address the needs of
rural India, home to 75% of our poor. It is imperative to ensure that India's economic
growth is inclusive, embracing its villages, so as to free millions of our disadvantaged
citizens from the indignity of poverty.
It is ITC's belief that India's rural transformation cannot be brought about by the
government alone. Nor can the efforts of a few enterprises make a decisive difference.
Only an inspired public-private partnership can transform lives and landscapes in rural
India. ITC's humble endeavors have demonstrated that it is possible to create and
sustain a model that can harmonize the need for shareholder value creation with
making a substantial contribution to society.
ITC has partnered the Indian farmer for close to a century. ITC is now engaged in
elevating this partnership to a new paradigm by leveraging information technology
through its trail-blazing e-Choupal initiative. Additionally, ITC is significantly widening
its farmer partnerships to embrace a host of value-adding activities: creating livelihoods

10
by helping poor tribals make their wastelands productive; investing in rainwater
harvesting to bring much-needed irrigation to parched drylands; empowering rural
women by helping them evolve into entrepreneurs; enhancing livestock quality to
significantly improve dairy productivity; providing infrastructural support to make
schools exciting for village children.
Through these rural partnerships, ITC touches the lives of over 3 million villagers
across India.
For ITC, these are expressions of a commitment beyond the market. Of a conviction
that country must come before corporation. Of a true pride in being Citizen First.

ITC is the market leader in cigarettes in India. With its wide range of invaluable brands,
it has a leadership position in every segment of the market. Its highly popular portfolio
of brands includes India Kings, Gold Flake, Navy Cut,
Scissors, Capstan, Berkeley and Bristol.

ITC's leadership is founded on its core strategy of

continuously enhancing product values through significant
investments in product design, manufacturing technology,
quality, marketing and distribution. In just the last 5 years,
ITC has made capital investments of over Rs. 7 billion in
its cigarettes business. In ITC, one of the pioneers of market research in India, the
consumer is still the King. The Company continuously endeavours to provide its
consumers products that are benchmarked to international quality. This strategic focus
on the consumer has paid ITC handsome dividends. The most important of these is its
enriched product mix, unmatched by competition. ITC's share of filter cigarettes in the
country is more than 70%.

In pursuit of international competitiveness, ITC has launched four brands - Checkers,

Hi-Val, Royale Classic and Gold Crest - in the extremely competitive US market.
Recently ITC has launched Royale Classic, Gold Cut and Scissors Filter Kings cigarettes
in the Middle East. The response to these brands has been encouraging. ITC's
cigarettes are produced in its state-of-the-art factories at Bangalore, Munger,
Saharanpur and Kolkata. These factories are known for their high levels of productivity
and very contemporary work environment.

ITC's FMCG businesses have one of the largest retail networks in the country,
consisting of over 2 million retailers. Its reach covers a wide range of the retail
spectrum, from premium outlets in the metros to small shops in the interiors of rural
India.
11
ITC made its entry into the branded & packaged Foods business in August 2001 with
the launch of the Kitchens of India brand. A more broad-based entry has been made
since June 2002 with brand launches in the Confectionery, Staples and Snack Foods
segments.

The packaged foods business is an ideal avenue to leverage ITC's proven strengths in
the areas of hospitality and branded cuisine, contemporary packaging and sourcing of
agricultural commodities. ITC has stood for quality products for over 90 years to the
Indian consumer and several of its brands are today internationally benchmarked for
quality.

The Foods business carries forward this proud tradition to deliver quality food products
to the consumer. All products of ITC's Foods business available in the market today
have been crafted based on consumer insights developed through extensive market
research. Apart from the current portfolio of products, several new and innovative
products are under development in ITC's state-of-the-art Product Development facility
located at Bangalore.

Leadership in the Foods business requires a keen understanding of the supply chain for
agricultural produce. ITC has over the last 90 years established a very close business
relationship with the farming community in India and is currently in the process of
enhancing the Indian farmer's ability to link to global markets, through the e-Choupal
initiative, and produce the quality demanded by its customers. This long-standing
relationship is being leveraged in sourcing best quality agricultural produce for ITC's
Foods business.

The Foods business is today represented in 4 categories in the market. These are:

• Ready To Eat Foods

• Staples
• Confectionery
• Snack Foods

:: ‘Ready To Eat’ Products from ‘Kitchens of India‘

Keeping alive long forgotten Culinary traditions, ‘Kitchens of India’ presents its range
of exotic ready-to-eat cuisines. Each one of these legendary delicacies has been created
by the Master chefs of ITC Hotels, following rare, closely guarded recipes, handed
down through the ages, from one generation to the next. These delicacies are now
available in imported 4-layer retort pouches that keep them fresh for as long as 12
months from the date of packaging.
12
:: ‘Kitchens of India’ Curry Pastes

A special blend of handpicked spices, created by the master Chefs of ‘Kitchens of

India’, in accordance with original, traditional recipes. Just add fresh ingredients, and
cook. It’s truly the most deliciously authentic way to recreate your favorite dishes
(These pastes by themselves are fully vegetarian).
:: ‘Kitchens of India’ Conserves

‘Kitchens of India’ Fruit & Spice Conserves have been skillfully blended by ITC’s
Master Chefs to create unique, delectable flavors by combining the succulent chunks of
fresh fruit with an expert selection of exotic spices, A truly irresistible treat.
:: ‘Kitchens of India’ Chutneys

‘Kitchens of India’ Chutneys have been created by ITC’s Master Chefs. Made from the
finest ingredients and spices, this collection of popular mealtime accompaniments, is
truly a feast for the senses.

:: Aashirvaad

Aashirvaad ReadyMeals

ITC Foods launched a range of Ready-To-Eat dishes under the 'Aashirvaad

ReadyMeals' label, in Hyderabad, on 25th June 2003. The range now comprises nine
dishes and two Combo packs. The dishes on offer currently are Rajma Masala, Nav
Ratan Kurma, Dal Makhani, Aloo Mutter, Palak Paneer, Pindi Chana, Pav Bhaji, Mutter
Paneer and Yellow Dal Tadka. Rajma Masala & Basmati Rice and Yellow Dal Tadka &
Basmati Rice are available in Combo packs.

The Dishes are priced between Rs. 30/- to Rs. 40/- for a 285 gms pouch and the
Combo packs are priced at Rs. 45/- for a 485 gms pack.

The unique packaging form, using a retort process, ensures that the original freshness
and taste of the recipes is protected without the use of preservatives.

:: Staples

13
Extensively using its e-Choupal network to source meticulously selected grains from the
best wheat growing regions in India. And processing them
to stringent quality standards. Creating India's largest
national atta brand within two years of launch.

Aashirvaad ReadyMeals and Cooking Paste make life hassle-

free for the busy housewife, leaving her more time with
the family. Aashirvaad iodised salt ensures taste and health
for the entire family.

The product is now available all over India.

ITC Foods also aims to delight the consumer

through superior and innovative packaging. The
Aashirvaad package is PET Poly, with the design showcasing the farming process
undertaken in the rural heartland of India in the form of a Madhubani painting.
‘Aashirvaad Select’ Atta (2 kg pack) was awarded the World Star Award for Excellence
in Packaging in the Consumer Pack Category. This is one of the most prestigious
awards in the world for Packaging. ITC has also created a first in packaging in the
branded atta category by introducing its premium offering in carton packaging and
offering vacuum sealing in the 5kg premium pack. Both these innovations maintain the
freshness of the product.

Aashirvaad Salt

ITC launched branded packaged salt under the brand name ‘Aashirvaad Salt’ on 26th
March, 2003. The product is available in grocery stores around the country.
:: Confectionery

ITC currently has two brands in the confectionery segment - "Mint-O" and
"Candyman" .

ITC acquired the brand "mint-o" from Candico in March 2002. ITC re-launched the
compressed mint product mint-o with new and improved product and packaging. mint-
o is the first mint in India to be also available in an orange flavour besides the regular
mint flavour. An innovative "Lemon mint" flavour was launched on 26th February,
2003. The product is available in two sizes – rolls of 20s and 6s. mint-o offers the
discerning consumer a value-added mint that captures the international essence of
youthful "cool". mint-o is currently available in all major markets.

14
'Mint-O Fresh', a hard-boiled mint candy, was launched in October 2004 in two
flavours. This launch extended the Mint-O brand, which had been present only as
compressed mint tablets. The launch of Mint-O Fresh is in line with ITC's marketing
strategy of adding excitement and contributing to the growth of the confectionery
category. It is in line with its business strategy of providing the adult consumer with the
complete range of mint-based confectionery products across price points.

Candyman Butterscotch Licks and Orange Licks was launched in December 2003 and
is now available in markets across the country. This marked ITC's entry into the
deposited candy market. In addition, Candyman Eclairs and Candyman hard boiled
candies like Wild Banana, Mango Delite, Orange Josh and Pineapple Punch are also
available across India.

:: Snack foods : Sunfeast

Riding on the success of offerings in the Glucose, Marie and Cream categories, ITC has
recently
enriched its
‘Sunfeast’ range of
biscuits. The
Company has now launched three new cream
flavours -- namely Coconut, Strawberry and
Pineapple. Strawberry & Pineapple creams
have flavour enhancers. A flavour
enhancer provides a burst of flavour to the consumer. ITC has pioneered the launch of
coconut cream biscuits in India.

‘Sunfeast’ has also entered the milk biscuit category with its ‘Sunfeast Milky Magic’
biscuits. These biscuits are made out of cow’s milk. Sunfeast has tied up with ‘Aavin’,
the biggest milk brand in Tamil Nadu, for sourcing cow’s milk. Milky Magic, made with
cow's milk, gives them high energy, stamina and health; while the Jagmag 'flavour
bursts' of the Strawberry and Pineapple Cream biscuits melt in their mouths.

ITC's Sunfeast is a brand driven by innovative product development at ITC's state-of-

the-art food technology centre in Bangalore. Every Sunfeast product is made with
utmost care, ensuring world class standards of hygiene.

Both the new cream biscuits and milk biscuits have received an enthusiastic response
from consumers. The snack food team is geared and ready to further enrich its product
portfolio in the near future.
15
The Elemental Chlorine Free (ECF) paper and paperboards manufactured by ITC have
set new norms in consumer safety. It is the first and only company in India to make
environment-friendly ECF paperboards for foodgrade packaging.

Backed by an investment of more than one thousand crores to upgrade technology to

global standards, ITC's paperboards business is the largest in India with a capacity of
nearly 3,50,000 tonnes. Supported by a unique R&D-based clonal forestry programme
which creates thousands of livelihood opportunities for poor tribals.

Summary of Price, Place, Promotion and Product of ITC Food division

This is one area where the company had some cushion in the form of its extensive and
long established distribution network for cigarettes. The company could leverage its
vast and wide-reaching network to ensure that the products are made available
everywhere. New distribution inroads were made, and deepening it remains an ongoing
task. From the one million paan, bidi shops it reached out to, ITC has added another
half-a-million outlets to sell its other products. Today it has a retail network of 1.5
million outlets across the country and continues to expand this network.

The company did not have any problem in making the product available even
just after its launch because all the stores and retailers dealing with ITC cigarettes were
given the all the new products of food division on credit. The products have their
presence in retail store and supermarkets. The company used its available resources and
later added on to them in terms of transportation, inventory storage and location and
coverage was already there for the cigarettes. The company had to ensure that the
brands be consolidated and people be made to change their earlier preferences. The
company was sure the superior quality of the products would do the same for them.
The company’s rich experience in Indian market comes handy in such situation.

The company used both television and print media to launch its products.
The company has signed up superstar Shah Rukh Khan as the brand ambassador for
Sunfeast. This association is expected to yield significant value addition by reinforcing
the brand attributes and reiterating the 'spread the smile' positioning.
Khushiyaan Chun Chun ke (Happiness handpicked) the campaign for Aashirvaad’ promises the
Indian housewife the joy of providing her family with the most delightful home-made
rotis, made from the finest quality atta. ITC uses the sourcing strength of its e-
Choupals to buy wheat directly from the farmers to deliver happiness to the Indian
consumer. The concept of e-Choupal was also used to appeal to the emotions of the
people.
16
Sales promotions like extra offerings on biscuits and free salt on purchase of Asirvaad
Atta are used to boost the sales.
Point-of-purchase promotions like putting posters and banners on shop floors are used
to raise the awareness of the brand and influence the buying decision of the consumer
at the shop floor.
ITC Foods also announced plans to enter the Guinness World Record through a
plantation drive. To be taken up under the Sunfeast Hara Banao Campaign, the company
aims to plant a record breaking 2,00,000 saplings in the Bhadrachalam area of Andhra
Pradesh during the last week of August. The record aimed is for the maximum number
of saplings planted on a single day. A number of farmers and children are expected to
participate.

Not in a hurry to make profits, ITC's foods division is taking its time to draw upon all
the possible synergies it has with the group's cigarettes and hotels businesses. While
ITC did its homework well in advance when it made a leap into foods nearly two years
ago, taking advantage of its extensive cigarette distribution network, its network with
farmers and the brand equity of its hotels' restaurants should give its foods business the
competitive advantage it has been looking for.

ITC’s entry into the food market was a late one and it was one of the new SBUs of the
company as part of its diversification strategy. Thus there were established market
players in the biscuits and confectionary (Brittania) and branded atta (Pillsbury) sector.
The target market for the company in the business was the entire “Great Indian
Middle Class”. ITC has launched its products on national basis and it caters to the need
of all kinds of consumers. The goal was to capture as much as market share possible in
the entire packaged food business. The main focus of the company was on volume and
thus they followed penetrative pricing policy. The key is the ability to keep costs down.
The company follows umbrella branding, so that when it advertises Aashirvaad atta, we
get a rub-off on all Aashirvaad products such as salt and ready-to-eat foods. The
Aashirvaad brand of atta was priced very close to other branded atta’s like Pillsbury and
Nature fresh, though it is still very costly compared to unbranded atta available in the
market. The company had to benchmark all its prices against the established players.
There could not be any differentiation on the basis of price. Quality was decided to be
the main differentiator. During the launch the company gave all the products to the
wholesalers on credit.

17
Financial Analysis of ITC

PROFITABILITY OF OPERATIONS

ITC has traditionally been a profitable company giving the shareholder and excellent
performance year on year. ITC Ltd has posted a net profit of Rs 1837 Crore for the
year ended 31st march 2005 as compared to Rs 1593 Crore for the year ended 31st
march 2004. Total income has increased from Rs 12,040 Crore in 2004 to Rs 13585
Crore in 2005.

ANALYSIS OF ITC’s FINANCIAL STATEMENTS

We will be studying the financial health, profitability and operational efficiency of the
company .We have taken the financial statements of ITC Limited for the past 5 years
and made an in depth analysis using ratios. We have computed the following:
1. Growth Trends – To know the growth trends in total sales and profits of ITC.
2. Liquidity ratios – Ability of the business to meet its short term obligations
3. Asset management ratios -To access the operational efficiency
4. Debt Management Ratios– To assess the companies’ ability to meet its long
term obligations and to study the capital structure
5. Profitability Ratios – To access the profitability of the with regard to its Sales
and investments.

SOURCES AND USES OF FUNDS

ITC is a business conglomerate with huge reserves. Most of financing has been
done through the reserves built up over the years. Close 95%of its sources are
shareholders fund (90% being reserves). In 2000 borrowings formed a
substantial part of the balance sheet approximately 19%. Over the years it has
reduced its dependence on borrowings. Presently it has debt equity ratio of
approximately 1.5%. Now borrowings form only 2.2% of sources. The company
has no debentures or bonds. There were some debentures issued earlier but all
have matured. The reduction in borrowings has reduced the interest burden on
the company.
The company’s investments vary in nature due to its diversity. The fixed asset
component isn’t very large because apart form the hotels & paper processing
business, the other businesses are not capital intensive. There is huge inventory
component. The investments outside the company are huge and have been
increasing. This does not speak well about the company’s management.

18
RATIO ANALYSIS

HORIZONTAL ANALYSIS
As can be seen from the growth rates share holders funds have been growing
steadily. This is mainly due to the growth in retained earnings. An important
aspect which can be seen is variations in the growth rates of investments. With
such growth rates we may infer that the company has no strategy in place for the
investments. A huge proportion of investments are in mutual fund schemes
which don’t give very high returns. This may also be construed as an indication
of the company having no “good” projects left.
We can also see the company is moving towards zero debt policy by the negative
growth rates in loans. The current liabilities have been growing at fast rate which
is because of its better management of its suppliers.
Sales have been growing steadily. It is important to note that though the
manufacturing expenses have grown faster than the sales profitability has not
reduced. This is because of raw materials and duties which form the major
portion of its cost have grown at a slower rate.

GROWTH RATES (%) 00-01 01-02 02-03 03-04 04-05

Share Holders Funds 26.29 24.86 21.56 19.45 23.18
Loans 31.56 -66.82 -58.94 3.41 102.47
Current Liabilities 7.66 35.02 28.96 29.51 -14.12
Fixed Assets (net) 41.88 60.26 15.61 9.39 19.78
Current Assets 26.18 4.67 15.72 -0.80 1.55
Investments 1.99 -34.53 104.28 108.86 26.87

I. INCOME (GROWTH RATES IN %) 00-01 01-02 02-03 03-04 04-05

Sales 9.12 15.62 14.14 8.15 12.98
Other Income 18.09 16.74 18.60 24.07 4.86
Total 9.25 15.63 14.21 8.41 17.62
II. EXPENDITURE (GROWTH RATES IN 04-05
%) 00-01 01-02 02-03 03-04
Raw Materials etc. -2.02 27.96 19.61 5.48 15.98
Excise Duties and Taxes on Sales of Products
and Services 8.24 7.35 9.96 4.09 6.84
Manufacturing, Selling etc. Expenses 4.15 36.22 13.48 19.60 21.35
Depreciation 18.06 54.37 20.28 5.05 29.28
Total 5.49 16.96 13.04 7.24 18.87

19
VERTICAL ANALYSIS

Through the common size analysis the note worth aspects that can seen are
• Increase in shareholders funds from 81% to 94.4%
• Decrease in loans form 19% to 2.2%
• Fixed assets have grown from 37% to 53.8%
• Investments have a very fluctuating pattern.
• Inventories have fallen from 27%to 25.2%.
• Current liabilities have increased from 33% to 43.4%.
The implications of the above have been discussed earlier. We may hazard a guess
that inventory management has been improving specially seen in light of increasing
sales. But this should been seen in isolation.

Investment in Years

5000
Investment (In Crores)

4000

3000
Investments
2000

1000

0
2000 2001 2002 2003 2004 2005
Years

Loans

1000
Loans (In Crores)

800

600
Loan
400

200

0
2000 2001 2002 2003 2004 2005
Years

20
LIQUIDITY RATIOS
As can be seen by both the current ratio and quick ratio have been decreasing. Not a very good sign.
The liquidity of the company is falling i.e. the ability of the company to pay of its current liabilities are
falling. This is must be seen along with the fact the working capital position is improving. These would
in general move in opposite directions. The company should go in for an optimal trade off between
the two. But as long as the current ratio is more than 1 we can say that the company has the ability to
meet its short term obligations.

LIQUIDITY RATIOS 2001 2002 2003 2004 2005

Current ratio 1.61 1.89 1.47 1.31 1.01
quick ratio 0.99 1.18 0.91 0.80 0.53

Current Liabilities
400000
350000
300000
Current Liabilities

250000
Liabilities
200000 Provisions
150000 Current Liabilities
100000
50000
0
2000 2001 2002 2003 2004
Years

21
ASSET MANAGEMENT RATIOS OR THE ACTIVITY RATIOS
We have made the calculations assuming that there are no cash sales (only credit sales)
The company has not a very good performance here. Accept for debtors turnover ratio most have
declined over the five year period. Though the company has made improvements in working capital it
has fared rather badly in the inventory days.

ASSET MANAGEMENT
RATIOS 2001 2002 2003 2004 2005
receivables turnover ratio
(annual credit sales/acc
receivables) 69.09 84.40 49.18 46.60 43.54
average collection period
(365/receivables turnover ratio) 5.28 4.32 7.42 7.83 8.38
inventory period
(inventory*365/cogs) 51.41 59.92 55.21 58.81 66.06
TA turnover ratio (sales/TA) 1.61 1.45 1.41 1.34 1.19
FA turnover ratio (sales/FA) 6.22 4.78 3.45 3.41 3.37

DEBT MANAGEMENT RATIOS OR THE LEVERAGE RATIOS

The company is following a policy to reduce debt. Its debt managed ratios have improved. It’s
becoming unleveraged firm. This means that though the company’s credit worthiness has improved, it
is not taking advantage of interest deductions as allowed by the tax laws. This is not a very good policy
because it reduces the wealth creating capacity of the firm. Though such a policy will be helpful if the
company is to go in for new debt because its credit rating would be higher it could result in cheaper
funds.

22
 DEBT
MANAGEMENT
RATIOS 2001 2002 2003 2004 2005

debt/net worth 0.2332237 0.2430153 0.0768422 0.0318493 0.023526

loans / TA 0.1321631 0.143273 0.0474749 0.0200969 0.014533

TA / net worth 1.7646651 1.69617 1.6185856 1.5847882 1.618817

interest coverage
ratio 11.92 19.85 24.94 59.52 83.1

PROFITABILITY RATIOS
Its profit margin has improved over the years from 15% to 19%.
Net income over net worth has reducing over the years. The fall is showing a trend. This is probably
because of lack of ‘good’ projects. The retained earning not being able to generate profits at the same
rate

PROFITABILITY RATIOS 2001 2002 2003 2004 2005

EV
Net Income to Sales 0.15 0.18 0.17 0.18 0.19
AL
Net Income to Total Assets 0.36 0.36 0.35 0.36 0.35
UA
Earnings Before Interest and
TI
taxes / Total Assets 0.39 0.38 0.37 0.37 0.35
ON
RA
Net Income over Net worth 0.44 0.45 0.40 0.39 0.37 TI
OS OR THE RATE OF RETURN RATIOS
The MV/BV ratio has been decreasing this is mainly due to the increase in share prices. A ratio of 4
may seem to indicate that its overvalued but that’s not the case because the future expectation for ITC
is very good. As it can be seen, it has been paying high dividends as a percentage of net profit which
may indicate that the company has fewer opportunities to invest. Hence, the increase in the dividend
payment.

23
Evaluation Ratios 2001 2002 2003 2004 2005
BOOK VALUE OF SHARES 141.44 177.23 214.29 256.35 315.63
MARKET PRICES 741.45 814.00 706.30 628.25 1043.10
MV/BV 5.24 4.75 3.29 2.45 3.30
EARNINGS PER SHARE 41.00 48.07 55.41 64.34 73.72
MARKET PRICE /
EARNINGS PER SHARE 18.54 16.79 13.20 10.17 12.42
DIVIDENDS / NET PROFIT 0.24 0.29 0.27 0.31 0.35

24
 Competitors Analysis
Annapurna Fortified Atta - tasty and healthy

This particular atta is fortified with extra iron and vitamin B1 (Thiamine), B2
(Riboflavin) and B 3 (Niacin). Annapurna Fortified Atta has twice as much iron as
chakki atta. Therefore consumption of rotis or chapatis, which is equivalent to 300 gms
of Annapurna Fortified Atta in our daily meals, meets the daily requirement of iron and
vitamins.

Compared to chakki atta (which most consumers normally partake), Annapurna

Fortified Atta is better in every way. It is made from a premium MP sharbati wheat
blend that yields soft and tasty chapatis or rotis. What's most important though is that
Annapurna is healthy and nutritive, since it is enriched with extra iron and vitamins. It
proves to be a rich source of iron which consumers cannot obtain even if they use the
best quality wheat at the best chakki.

25
At present, HLL's products, manufactured across the country, are distributed through a
network of about 7,000 redistribution stockists covering about one million retail
outlets. The distribution network directly covers the entire urban population.

In addition to the ongoing commitment to the traditional grocery trade, HLL is

building a special relationship with the small but fast emerging modern trade. Their
scale enables us to provide superior customer service including daily servicing,
improving their range availability whilst reducing inventories. They are using the
opportunity of interfacing more directly with our consumers in this retail environment
through specially designed communication and promotions. This is building traffic into
the stores while yielding high growth for our business.

An IT-powered system has been implemented to supply stocks to redistribution

stockists on a continuous replenishment basis. The objective is to catalyse HLL’s
growth by ensuring that the right product is available at the right place in right
quantities, in the most cost-effective manner. For this, stockists have been connected
with the company through an Internet-based network, called RSNet, for online
interaction on orders, dispatches, information sharing and monitoring. RS Net covers
about 80% of the company's turnover. Today, the sales system gets to know every day
what HLL stockists have sold to almost a million outlets across the country. RS Net is
part of Project Leap, HLL's end-to-end supply chain, which also includes a back-end
system connecting suppliers, all company sites and stretching right upto stockists.

RS Net has come as a force multiplier for HLL Way, the company's action-plan to
maximize the number of outlets reached and to achieve leadership in every outlet, by
unshackling the field force to solely focus on secondary sales from the stockists to
retailers and market activation. HLL Way has also led to implementing best practices in
customer management and common norms and processes across the company.
Powered by the IT tools it has further improved customer service, while ensuring
superior availability and impactful visibility at retail points.

The challenge of the rural markets

70% of India's population resides in villages. Penetrating the rural markets is, therefore,
one of the key challenges for any marketer. While rural markets present a great
opportunity to companies, they also impose major challenges. At HLL, we have been at
the forefront of experimenting with innovative methods to reach the rural consumer.

Indirect-Coverage
26
Under the Indirect Coverage (IDC) method, company vans were replaced by vans
belonging to Redistribution Stockists, which serviced a select group of neighboring
markets.

Operation-Harvest

The reach of conventional media and, therefore, awareness of different products in

rural markets is weak. It was also not always feasible for the Redistribution Stockist to
cover all these markets due to high costs involved. Yet, these markets are important
since growth opportunities are high.

Operation Harvest endeavored to supplement the role of conventional media in rural

India and, in the process, forge relationships and loyalty with rural consumers.
Operation Harvest also involved conducting of product awareness programmes on
vans.
Cinema van operations

These are typically funded by the Redistribution Stockiest. Cinema Van Operations
have films and audio cassettes with song and dance sequences from popular films, also
comprising advertisements of HLL products.

Single-Distribution-Channel

For rural India, HLL has established a single distribution channel by consolidating
categories. In a significant move, with long-term benefits, HLL has mounted an
initiative, Project Streamline, to further increase its rural reach with the help of rural
sub-stockists. It has already appointed 6000 such sub-stockists. As a result, the
distribution network directly covers about 50,000 villages, reaching about 250 million
consumers.

Distribution will acquire a further edge with Project Shakti, HLL's partnership with Self
Help Groups of rural women. The project, started in 2001, already covers over 5000
villages in 52 districts of Andhra Pradesh, Karnataka Madhya Pradesh and Gujarat, and
is being progressively extended. The vision is to reach over 100,000 villages, thereby
touching about 100 million consumers. The SHGs have chosen to adopt distribution of
HLL's products as a business venture, armed with training from HLL and support from
government agencies concerned and NGOs.

27
 A typical Shakti entrepreneur conducts business of around Rs.15000 per month, which
gives her an income in excess of Rs.1000 per month on a sustainable basis. As most of
these women are from below the poverty line, and live in extremely small villages (less
than 2000 population), this earning is very significant, and is almost double of their past
household income. For HLL, the project is bringing new villages under direct
distribution coverage. Plans are being drawn up to cover more states, and provide
products/services in agriculture, health, insurance and education. This will both catalyze
holistic rural development and also help the SHGs generate even more income. This
model creates a symbiotic partnership between HLL and its consumers, some of whom
will also draw on the company for their livelihood, and helps build a self-sustaining
virtuous cycle of growth.

INDUSTRY COMPARISON
For a meaningful comparison we have chosen HLL because it is the only company with similar
interests and of similar size. Other companies in the cigarette industry are too small for any
meaningful comparison.
Current Ratio

The current ratio of HLL has more or less remained constant whereas for ITC it’s been
coming down lately. Even though the current ratio for ITC is coming down, it’s still higher than that
of HLL. It gives ITC a better position for any investments needed.
As we see the decreasing graph of ITC down the years prove that the company is investing in a lot of
programs as in e-choupal etc, whereas HLL has been keeping a nearly constant liquidity ratio.

Debt to Networth

Debt Vs Net worth

9.00
8.00
7.00
6.00
5.00 HLL
4.00 ITC
3.00
2.00
1.00
0.00
2000 2001 2002 2003

28
 The debt to net worth ratio is extremely low for the both the companies from 2000 to 2002,
but in 2003 due to a high value of debt taken by HLL, the ratio has gone up for HLL. ITC has hardly
got any debt and so manages to maintain a constant ratio as the high amount of net worth keeps the
debt to net worth ratio at a minimum. From the small amount of debt in 2000 and 2001, it has actually
come down to an extremely low value of debt during the last two years.
Debt to Total Assets

Debt Vs Total Assets

0.50
0.45
0.40
0.35
0.30
HLL
0.25
0.20 ITC
0.15
0.10
0.05
0.00
2000 2001 2002 2003

With a very low debt, but lower total assets, the debt to total assets ratio of ITC is much more
than HLL, which enjoys a high value of Total assets. In 2003 we can see a very high value of the ratio
mostly because of the high value of debt taken by HLL. As the main competitor’s debt to total assets
ratio increases, ITC’s ratio has come down since 2001 and now is at a very low level compared to
HLL.

Total Assets to Net Worth

As the total assets of HLL have been increasing over the years, with a lower value of net worth
the ratio has been increasing over the years. In case of ITC with total assets reducing from the earlier
years but a similar trend of increasing net worth the ratio has been more or less constant.

29
 Total Assets Vs Net Worth

0.35
0.30
0.25
0.20 HLL
0.15 ITC
0.10
0.05
0.00
2000 2001 2002 2003

Godrej Pillsbury

Godrej Pillsbury has made a considerable dent in south India with its Pillsbury Chakki
Fresh Atta cornering about 13 per cent market share in the branded-flour market.

This has elevated the Pillsbury brand to the second slot displacing DCW's Captian
Cook atta in the south. Hindustan Lever reigns supreme with its Annapurna brand.
Earlier, DCW's Captain Cook brand had a good grip on the market with its position
being second only to Annapurna.

Both Lever's Annapurna and Pillsbury's Chakki Fresh Atta brand have gained market
share since May this year in the southern market. These two brands have continuously
gained market share since their launch.

According to industry estimates, while Annapurna has upped its share to around 31 per
cent in July from 28.8 per cent in May, the Pillsbury brand has appreciated its share to
the current position from 9.5 per cent in May.

The loser has been Captain Cook, whose market share has dropped to around 12 per
cent in July from 14 per cent in May. Captain Cook’s market share has dropped mainly
because of a slowdown in DCW's promotional activity, said industry observers.

The country's branded-flour market has been growing rapidly at around 40 per cent to
45 per cent per annum. The southern market contributes around 25 per cent of the all-

30
India volumes of 1.5 lakh tonnes valued at around Rs 200 crore. Industry sources said
that the market is seen growing at a faster pace in the south.

According to Godrej Pillsbury chief executive officer Samir Behl, the company will
soon roll out the atta brand nationally, after having tested the waters in the south first.
It is learnt that the brand will soon be launched in Mumbai as part of Godrej Pillsbury's
expansion drive. The company is in the midst of beefing up its national distribution
network.

Nature fresh

SLUGGISH commodity-to-brand movement; procurement issues magnified by weak

Government policies; competition as intimidating as Hindustan Lever, Agro Tech
Foods Ltd and Pillsbury; strong regional players as aggressive as Shakti Bhog atta,
Dandi salt and a host of combatants in South India.

According to Sidhant Khosla, Director, Cargill India Pvt Ltd, purity is critical and
freshness is a commitment. The ambition is driven by Cargill Corporation's vision of
being the global leader in nourishment.

NatureFresh is now present across six product categories. Brand NatureFresh began its
journey in India with atta, followed it up by refined vegetable oils, and then came maida
and suji. Earlier this year, NatureFresh was extended to salt, and rice in basmati and
non-basmati form in five variants was introduced just about two months ago. More
branded staples are expected this year, though plans are under wraps for the time being.

Now take brand presence. NatureFresh's distribution has been up and running. The
brand is now available across 1.1 lakh retail outlets, across some 600 towns and cities.
An additional 15,000 outlets are likely to be added this fiscal.

If NatureFresh is making big names in the industry sit up and take note, it is because
Cargill India is not exactly just a new kid on the block. Cargill India Pvt Ltd, the 100 per
cent subsidiary of the Minneapolis-based, $49 billion agri-foods major, has varied
interests. And given its historical strengths in agri-economy and logistics management,
Cargill India is advantageously positioned to service its supply chain.

Today, by volumes, NatureFresh atta accounts for about 50 per cent of Cargill India's
sales, by volumes. In terms of value, NatureFresh atta and oils are equally placed. While
for atta, NatureFresh has been highlighting quality, consistency and packaging as its key
differentiators, the oils are being pushed on the `light and pure' attribute.

31
On the pricing front, NatureFresh has been on par with any other brand on the shelf.
Given that the price relationship with value is critical, our products are priced as
competitively as any other brand. According to an analyst, as commodities move
towards branding, brands have been moving towards commoditization, as far as pricing
goes.

NatureFresh Gold, a premium variant of NatureFresh atta, was added to the brand
basket about three months ago. According to Cargill officials, the new variant is made
from pure desi wheat, while the original NatureFresh is a full-fiber wholewheat fortified
atta. NatureFresh Gold is priced at Rs 92 for a 5 kg pack; almost double that of the
original NatureFresh brand.

While analysts point out that staples is a category extremely sensitive to pricing, Cargill
India says its objective is to straddle as many price points as possible. The commodity
market will progressively move into the branded portfolio as long as the `value delivery'
is in line with the product price.

Branded, packaged sugar is estimated to be a 40,000 tonnes market, while the size of
the domestic branded wheat market is estimated at roughly 1.8 lakh tonnes. While it is
generally accepted that the standards of hygiene of atta ground at the chakki (flour mill)
are far from desirable, the branded atta business continues to account for a minuscule
one per cent of the total atta business. And according to ORG-MARG's retail store
audit data, the size of the iodized branded salt market is estimated at 15 lakh tonnes per
annum (which works out to about Rs 500 crore by value). National brands comprise
only 45 per cent share of this market. Among other reasons, one reason why salt is
bigger than other branded commodities is the Government's iodization drive.

Meanwhile, Cargill India has made "substantial" investment in its research and
development facility in Noida (near Delhi), to initiate work on process improvement,
identifying wheat by mandi, and working directly with farmers. In addition to its
company-owned production facility in Noida, Cargill India has three contract
manufacturers for atta, four for vegetable oils, and one each for salt and rice. As and
when Cargill's domestic operations expand, capacities within existing facilities could be
increased, or the company could consider adding fresh contract manufacturers.

Packaging is another area where Cargill says it has invested heavily. One example is
transparent pouches for refined oils - a first in the industry. A fresh communication
tack for both NatureFresh atta and vegetable oils is expected to break on television.

The NatureFresh ad account is handled by HTA. According to Cargill officials, the new
advertising will be significantly different from the earlier communication. While ad and
32
promotional budgets are not available, the company says it is doing the needful to take
the battle of the brand head on.

Overview of ITC’s Product, Price, Promotions, and Place

Strategy in Orissa Market

The Product Mix of ITC in Orissa Market

ITC offers a Product Mix for the customers i.e. a set of all the products and items that
it offers for sale. It has a good length and width of the Product Mix. The length and
width of the Product Mix in orissa can be summarized as follows: -

33
 Product Mix Width
Biscuits Atta Ready Confectiona
Meal ry
Sunfeast Aashirvaa ARM Minto
Product Glucose d W.W.
Line Length Atta
Sunfeast Cooking Mint-o
Cream Paste Fresh
Marrie Candyman
HBC
Candyman
Eclairs

ITC had launched nearly all the products range off Non tobacco Products; they are very
aggressive in their distribution of such products. Among them the Ashirvaad is the
market leader in Orissa in the branded atta category and at the second rung after
Britannia. The existing network of ITC’s Cigarettes distribution is being used
extensively for the sales all products of ITC Food division. They are trying to
capitalized the market by associating the products with the ITC brand.
Products Launched in Orissa Market: -

1) Sunfeast Biscuit
2) Aashirvaad Atta
3) Aashirvaad Salt
4) Ready Meals
5) Salted Biscuits are to be launched sooner

ITC Pricing strategy:

The pricing of the ITC food division depends upon the Customers’ demand schedule,
the cost function and the competitors’ price. The pricing of the company is such that it
caters to the need of all income groups of people but special provision has been kept
for Low and middle income group, and their pricing are competitive with respect to
other players in Orrisa like Britannia, Parle and Briskfarm.

The company follows the Going rate pricing that is the price of the product depends
upon the competitors price. The firm chooses pricing more or less the same as Market
leader.
34
The company offers two types of Pricing Discount and allowance: -

1) Price Discount: This is the discount in price to those who purchase in the large
volumes. ITC’s too following such discount mostly at the distributor’s level and
retailer’s level. The distributors are given a 2 -2.5% discount on the marked price
on all the ITC’s non food division products, and the retailer’s are given 15-20%
for the same. Price reduction is also done for the other customers who buy the
product such as Aashirvaad atta in bulk quantity.
2) Quantity Discount: Some Extra Packets of Aashirvaad atta are given free to the
distributors if they fulfill certain targets at the same price for the same quantity.

Credits and Pricing: -

The price of the products get changed for amount of the credits if they availed that and
in certains cases like Sunfeast Biscuits no credits are provided. In case of Aashirvaad
atta the credit is usually given for 7 days, as a result of which the discount on the price
is reduced by 1%.

Promotion in Orissa Market: -

A particular budget is allocated for the promotion of the Aashirvaad Atta and other
food division product, the local promotion scheme is decided by the Area Sales
Manages, it give its suggestion to the District office and that is forwarded to the Head
Quarter in Kolkatta. As the promotional scheme for the Aashirvaad atta 1 Kg of
packed Aashirvaad atta was distributed freely to the various house hold through out
Orissa. Later in another promotional scheme a packet of Aashirvaad salt was given free
with a packet of 5 Kg Aashirvaad atta.

In another promotional scheme for Biscuits a particular number of cases is given freely
to the distributors according to the amount of sale they make, this was a drop down
promotion i.e. of the number of free cases that a particular distributors gets, off them a
certain part is reserved for the retailers and customer if they buy a certain level of
biscuit quantity. This promotional activity was aimed at the low selling areas of Orissa.

In past the company has done its promotional activity mainly through the local mode of
transport like Auto and rickshaw and giving ads in local newspaper. No specific ads
have been made for the Orissa market. Free Packets of Biscuit and Aashirvaad atta
sample were distributed freely to the people.

35
At present there is no promotional scheme in Aashirvaad atta category but in case of
sunfeast biscuit, a promotional scheme to attract the children the company is giving free
things that are used by children like Ruler, Eraser, and Sharpener etc. inside the Biscuit
packets.

In case of Aashirvaad ready meal a promotional activity is going to attract the

housewife by giving them a free dinning table mat free. And for every 2 ARM
(Aashirvaad ready meal) get a 500 ml Pepsi free (mostly in Big Bazzar and Outlets). Biz
Bazzar also offers the customer a special price for the ITC products like Aashirvaad
atta.

As an promotional activity for attracting the Distributors and retailers the company is
quite flexible in replacement policy of the damaged goods as done by Rats, water and
during loading and Unloading.
To promote the various food division product of ITC the company is coaxing
distributors and retailers who are already in business of selling the Cigarettes or other
Tobacco related product of ITC.

Another thing that affects the promotion at the local orissa market is the Advertisement
effect done at the national level such as the recent Ads in which Sharukh Khan has
given a appearance is acting as an attracting point for children and youngster. Even
Sharukh khan is made as the brand Ambassador for Sunfeast Biscuit. Other Ads of
Aashirvaad atta is also liked by the people and have a positive effect in making them
compulsive to buy such products. Ads in National Magazine and newspaper are given
extensively aiming at the literate middle income groups

Still much more dedicated local ads are required for the promotions in terms of local
ads in newspaper and hoardings for the people who are poor and illiterates.

Place relevance for ITC products

There are nearly 37-38 distributors in Orissa for selling the ITC Food division products.
The main branch for distribution of the products is located at Vishakahapattanam to
cater the needs of Orissa and Andhra Market. There CNF godown is located at the
Telangana Peth in Cuttuck, supply for whole of the Orissa is done through this
godown.

Distribution channel is one of the fortes of the ITC food division, where the
infrastructure and distribution channel of Cigarettes is used. The forty strong salesman
team for ITC food division is the backbone of the distribution channel in orissa. There
36
are two ASM (Area Sales Manager) for Orissa market under which there are twelve
Area Executives under him working for Bhubneswar market.

The distributors of Orissa can contact the Branch Manager and the Area Executive for
any suggestion or complain they act as interface between the company and the
distributors.

Analyzing the Price of the various competitors of the Aashirvaad Atta

Unit Mrp

ATTA 7 STAR GOLDEN CHAKKI 10KG 110.00

ATTA 7 STAR GOLDEN CHAKKI 5KG 65.00

ATTA AASHIRVAAD 5 KG 68.00

ATTA AASHIRVAAD 10 KG 105.00

ATTA ANNAPURNA 10KG 135.00

ATTA ANNAPURNA 5KG 65.00

ATTA ANNAPURNA FORTIFIED ATTA 10KG 135.00

37
ATTA HEALTHY WORLD 10 KG 140.00

ATTA NTURE FRESH 10 KG 135.00

Understanding the Decision Making Process of Customers

The Decision Making process of the customers depends upon a large number of factors
among them the following are of more importance: -

Cultural Factors: A person acquires a set of values, perceptions, preferences and

behaviors through his family and culture. More frequently it takes the form of social
classes. They reflect not only income, but occupation, education and area of residence.

38
Personal Factors: Personal factors like Age, occupation, lifestyle, psychographics,
personality plays a important role in the buying behavior of the individual.

Belief and Attitudes: The belief that an individual exist in the mind of the consumer about
the Product and the Brand, and buy in accordance with these belief and attitude.

External factors: Factors like Advertisement, promotions, health, economic environment

etc can also influence the buying decision.

There are five roles that people play in buying decisions i.e. Initiator, Influencer,
Decider, Buyer and the User itself that who buys the product or service.

To understand the buying Decision i.e. the factors that determines the buying process
of the customers in orissa market, with respect to Aashirvaad atta. Our sample size
consist of 68 customers chosen from different segments and on other attributes like
age, sex, income group, location of buying.

The following pattern was seen in the buying decision of the customers of Aashirvaad
atta.

Inferences of the survey

Reason for Purchasing:

39
 Reason For Purchasing

70
60
50

Percentage
40
30
20
10
0
Price Quality Promotion Past
Experience

The main driver in attracting the consumer of the branded atta is Quality of the product
itself with nearly 65% of the people surveyed citing it as the main criterion for choosing
the product, followed by past experience of the consumer with the brand (17.6%). Price
was third criterion with a percentage of 11.7% of the people surveyed gave importance
during buying.

Availability:

Availability

Yes(88.2%)
No(11.8)

The Availability of the Product itself determine the effectiveness and the penetration of
the distribution channel of that particular brand among the people. Of the total number
of people surveyed 88.2% has agreed that the Aashirvaad atta was easily available at
retail shop, supermarket etc. This shows the distribution channel of the Aashirvaad atta
is quite effective.

40
Affectiveness of Advertisement:
Affectiveness of Advertisement

30
25
No. of Customers

20
15
10

5
0
Highly Affective Somewhat Not Affective
Affective Affective

An effective advertisement will attract more and more customer to buy, helps in the
brand and image formation, and informative in telling the USP of the product. In our
survey only 16 or 23% of the sample agrees that the advertisement of Aashirvaad atta is
effective enough to make them buy, and 41% feels that the advertisement was good
enough to make them aware of the product but not capable enough to make them buy
and 36% of the consumer surveyed found the advertisement of the Aashirvaad atta to
be not effective at all. And None of the consumer in the surveyed found that
advertisement for Aashirvaad are Highly Effective.

Place:

Place of Buying

Corporate Store 4

Retail 32

Super Market 28

Wholeseller 4

0 5 10 15 20 25 30 35

Most of the customer buys the product from the nearest retail shop followed by the
supermarket and very few buy from the wholeseller or Corporate store.
41
Customer Satisfaction

Customer Satisfaction

60

Number of Customer
50

40
30
20

10
0
Extremely Satisfied Somewhat Not
Satisfied Satisfied Satisfied

The above graph shows the experience of the customer after using the product i.e.
whether they were satisfied with the product as a whole. The higher the satisfaction
level higher will be the chances that the customer will buy the same brand again and
again that leads to the building of the Brand loyalty. Also it also determines whether
some attribution change or any other modification is required in promoting the brand.
71% of the people surveyed were satisfied with the product and 23.5% were extremely
satisfied with the product and will buy the product again and again and 6% of the
people surveyed where not satisfied with the product.

Decision Maker

Decision Maker

Self (32)

Spouse (32)

Child (0)

ShopKeeper
(4)

These are the person who ultimately decides whether to buy the product or not i.e.
whether the Men or women of the house or the shopkeeper as an external source act as
42
an instigators for making the buying decision. In our case 47% buying decision is done
by the male member of the house and an equal number of people buying decision were
done by spouse or women member of the house. Only 5% of the people get influenced
by the external sources like the shopkeepers. Children don’t play any role in the buying
of Aashirvaad atta according to the sample size surveyed.

Income Group:
Income Group (Rs per Month)

10
31.6
0-10000
26.3
10000-20000
20000-30000
30000+
42.1

Income group determines the sector in which a company wants to foray and be a
market leader; also knowing the income level of the customer will help the company to
modify the products according the buying capability of the customer which depends
upon the Income level. Here we have divided the customers according to Monthly
Income and found that the most of the consumer i.e. 42.1% were falling in the income
group of 20,000-30,000 (Rs. Per month). Followed by the income group of 30,000+,
followed by income group of 10000-20000 (Rs. Per month) with 26.3%. only 10% of
the customer were in Income 0-10,000

Comparison of the Aashirvaad with competitors on the basis of Attributes

43
 Competitors and Attributes

40
35
30 Packaging
25
Price
20
Taste
15
10 Quality
5
0

y
d

sh
rn

ur
aa

ho

fre
pu

lsb
irv

tib
na

Pi

e
sh

ak

tur
An
Aa

Sh

Na
Aashirvaad atta ranks high in quality and taste but lags behind in price where
shaktibhog has the advantage and on packaging where Pillsbury has the lead in the
market.

BRAND AWARENESS TOMA

44
Though it is often taken for granted ,brand awareness can be a key strategic asset. It can
provide a host of competitive advantages. Awareness provides the brand with a sense of
familiarity and people like the familiar. Name awareness can be a signal of presence,
commitment and substance attributes that can be held valuable by the consumers. The logic is
that if a name is recognized there must be a reason. The salience of a brand will determine if it
is recalled at a key time in the purchasing process. Here we present the result of a TOMA test
conducted on a sample of 61 respondents.

1st 2nd 3rd

Brand recall recall recall
Ashirvaad 16 7 11
Annapurna 27 15 8
Pillusbury 6 20 11
Shaktibhog 10 9 7
Naturefresh 0 3 3
Captain
Cook 2 3 4
Amritbhog 0 1 2
Govindbhog 0 0 1
TOTAL 61 58 47

TOMA

Ashirvaad
0%3%0%
0% Annapurna
16% 26%
Pillusbury
10% Shaktibhog
Naturefresh
Captain Cook
45% Amritbhog
Govindbhog

TOMA at FIRST RECALL

A quick look at the data shows that Ashirvaad though being a clear market leader does not
lead in the brand recall. It is its closest competitor Annapurna that leads in the brand recall.
This shows that Ashirvaad has not been able to connect with the consumers. It needs to invest
in aggressive marketing and advertising to connect with the emotions of the consumer to have
a sustainable market share and growth.

45
 FUTURE PLANS OF THE COMPANY

Today, the Aashirvaad brand stands for atta and salt and is expected to add suji, spices
and rice in the staples segment. In the ready-to-eat segment, Aashirvaad has been
expanding the range and the latest offering includes its combo packs of rice and gravies.
Besides, an all-purpose curry paste has also been included in the range. To make a
success of any foods business, apart from understanding the palate, it would be
procurement and sourcing which have to deliver on two fronts: mainly that of quality
and efficiency.

The quarter also marked the company's foray into the branded spices market under the
'Aashirvaad' brand, leveraging the strong brand association with superior quality and
consistency. Product extension is currently underway to target markets in the North
and West. 'Aashirvaad' Atta continued to gain increasing consumer acceptance, further
consolidating its position as the clear market leader amongst national branded players.
In an aggressive bid to pump up volumes, ITC Ltd Foods Division is chalking out a
multi-pronged strategy which includes extension of its distribution network, marketing
initiatives and new product launches. For starters, the company is planning to extend
the reach of its flagship brand ‘Aashirvaad Atta’ to 350 new markets in the next few
months.
At present, ITC’s atta brand is available in 500 markets across the country.
They are planning to launch our biscuit brand in small towns and villages. To promote
the bran, they are planning to take it to one million schools by the end of this year.

As for its ready to eat category Kitchens of India (KOI), the company’s strategy is to
expand the KOI product porfolio. In this category, the company plans to introduce
new products to meet the evolving needs of consumers. This premium brand is
targeted at tourists, consumers who order at home, NRIs and women in the age group
25 plus.
Last year, ITC Foods forayed into the ready to eat category with its brand KOI.

Extending the portfolio under the Aashirvaad brand name, ITC has launched
Aashirvaad Multipurpose Cooking Paste and Kitchens of India Curry Paste. ITC has
recently launched India's first instant pasta snack, Sunfeast Pasta Treat. Made from high
protein Durum wheat, Sunfeast Pasta Treat is not fried and does not contain maida,
making it a nutritious snack. This ready to cook pasta comes with a saucemaker inside
the pack. It is currently available in four exciting flavours: Masala, Tomato and Cheese,
Sour Cream Onion and Cheese.

Recommendations
46
According to the survey conducted and after analyzing the Price, Promotion, Place and
Product of the ITC and the consumer behavior in the orissa market the company can
implement the following measure for increasing the sales and volume of the Aashirvaad
atta.

v Advertisement for the Aashirvaad atta is found to be ineffective and infrequent.

So, the company can come up with an aggressive advertisement to attract the
Indian housewife as they are found to be the decision maker in the buying of
Atta.
v The company can come up the concept of forming a Retail chain of Food
products across all over India as it is follows the marketing strategy of Umbrella
branding. In such retail chains all the food division products can be sold at the
discounted rate, as more and more products are coming under the Umbrella
products like food processing.
v The Company can collaborate with all the fast food Retail chains like Mc’
Donald, Pizza Hut, Smokin joe etc and other local fast food outlets so that they
will use the Aashirvaad atta at a discounted price or a discount coupon can bee
given of that outlet if they are using Aashirvaad atta.
v The branded atta can be exported to other countries where we are currently
exporting the whole wheat.
v The company can approach the government or distributing the atta in Military
canteens and can sell them to organization that provides the afternoon meals to
the children as a part of mid-day meal scheme.

47
Annexure

48
49
50
51
52
Name of the Respondent:
SEX (F/M): AGE: Occupation:
Income (Monthly):
Usage Rate:

ASHIRVAAD

1. Which brand of atta did you buy last time?

? Ashirvaad Atta …………
? Annapurna Atta…………
? Shaktibhog Atta…………
? Pilsbury Atta …………
? Nature Fresh……………
? Others (Please Specify) ……

2. What was the reason for purchasing the above mentioned product?
? Price
? Quality
? Promotion (Advertisement)
? Past Experience

3. Are you satisfied with the product?

? Extremely satisfied
? Satisfied
? Somewhat satisfied
? Not at all satisfied

4. Which other products have you tried before?

? Ashirvaad Atta …………………..
? Annapurna Atta………………….
? Shaktibhog Atta……………………...
? Pilsbury Atta …………………
? Nature Fresh …………………...
? Others (Please Specify) ………………..

5. Was your choice anyway affected by the promotion/ advertisement strategy adopted by the
company?
? Highly affected
? Affected
? Somewhat affected
? Not at all affected

6. What is your opinion about the advertisement and the promotional activities adopted by the
company?
? Very attractive
? Attractive
? Somewhat attractive
? Not at all attractive

7.Is the product easily available?

? Yes
? No

8. Where did you buy the product?

? Wholeseller
53
 ? Supermarket
? Retail Store
? Any Other(Please specify)
9. Will you like to try any other brand?
? Yes
? No

10. If yes, which brand and why?

? Ashirvaad Atta …………………..
? Annapurna Atta………………….
? Shaktibhog Atta……………………...
? Pilsbury Atta …………………
? Nature Fresh…………
? Others (Please Specify) ………………..

11. Please assign a value from 1-5 to the products mention below according to: -
5 for Excellent
4 for Very Good
3 for Good
2 for Average
1 for Bad

Packaging Price Taste Quality

Ashirvaad
Annapurna
Shaktibhog
Local Brands
Pilsbury
Nature Fresh

12. Who is the decision maker?

? Self
? Spouse
? Child
? Other

13. Where will you decide to buy a product?

? Pre-decided (At home)

? Shopkeeper

14. According to advertisement, (if they can recall) what are the attributes they talked about and the
benefits?

15. How often is this product used in the home?

? Twice in a week (Heavy User)
? Once in a week (Normal User)
? Once in a fortnight (Average User)
? Once in a month (Low User)
? Other than this ………………

54
16. Which brand have you consumed most often?
? Ashirvaad Atta …………
? Annapurna Atta…………
? Shaktibhog Atta…………
? Pilsbury Atta …………
? Nature Fresh……………
? Others (Please Specify) ……
17. Do they remember any promotional strategy for the brand they opted for and which?

18. Have you ever recommended Ashirvaad Atta to others?

? Yes
? No

19. Where do you buy Ashirvaad? Please choose one answer only.
? Grocery store
? Drug store
? Department store
? Other, Please Specify

20. Are you likely to buy Ashirvaad in the future?

? Definitely Not
? Probably Not
? Might or Might not
? Probably
? Definitely

21. How strongly do you associate the following characteristics with Ashirvaad? Please answer using a 1-5
scale where (1) is "No association" and (5) is “High association."

1 2 3 4 5
N/A
No Association High Association

Packaging

Price

Advertisement

Taste

55
 References

Marketing Management – Philip Kotler

CMIE database
Prowess Database

Websites:
http://www.itcportal.com
http://www.google.co.in/
http://www.blonnet.com/
http://www.just-food.com/
http://www.thehindubusinessline.com
http://www.indiainfoline.com/
http://www.foodindia.org
http://www.nseindia.com/
http://www.zoomerang.com/build/survey-modify.zgi#
(Uploaded the Questionnaire for online survey)

56
Filename: Marketing Management Project (ITC-Aashirvaad-Atta)
Directory: C:\Documents and Settings\tapan\Desktop
Template: C:\Documents and Settings\tapan\Application
Data\Microsoft\Templates\Normal.dot
Title: Preamble
Subject:
Author: Shridhar Sharma
Keywords:
Comments:
Creation Date: 12/13/2007 2:57 PM
Change Number: 2
Last Saved On: 12/13/2007 2:57 PM
Last Saved By: tapan
Total Editing Time: 1 Minute
Last Printed On: 12/13/2007 3:10 PM
As of Last Complete Printing
Number of Pages: 56
Number of Words: 12,737 (approx.)
Number of Characters: 72,605 (approx.)