Segment and grow - Business Standard - The Strategist May 23, 2011 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 personal 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 12 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 mid-market 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.

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