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ITC Limited

One of India’s most valuable

Ø One of the 8 Indian Companies to feature in

‘Forbes A-list’ for 2004
l Featuring 400 of the World’s ‘best big companies’ with M-cap. >
USD 5 bln. & are rated as the ‘most attractive companies for
Ø Only Indian FMCG Company to feature in Forbes
2000 List
l A comprehensive ranking of world’s biggest companies measured
by a composite of sales, profits, assets & market value
Ø Among top in :
l Sustained value creation (BT-Stern Stewart survey)
l Operating profits
l Cash Profits
Ø Ranks No. 8 among Indian listed Companies by
market cap.(@31/03/06)
No. 1 in FMCG Sector; 6th amongst Private Sector
Vision & Mission
• Vision: Sustain ITC’s position as one of
India’s most valuable corporations
through world class performance,
creating growing value for the Indian
economy and the Company’s
• Mission: To enhance the wealth
generating capability of the enterprise
in a globalizing environment, delivering
superior and sustainable stakeholder
Corporate Strategies
Ø Sustain multiple drivers of growth,
matching internal capabilities with
emerging market opportunities
Ø Pursue World class competitiveness in all
businesses and across the entire value
Ø Best-in-class in terms of:
Ÿ Internal Vitality
Ÿ Market Standing
Ÿ Profitability
Ø Strategy of Organisation and Governance
processes geared to manage multiple
ITC - Business Portfolio


FMCG: Agri Business Paperboar

Cigarettes Hotel Leaf Tobacco d
Other FMCG Paper &
s Agri
Commodities Packaging
ITC’s Cigarettes
Ø Market leadership
Ø Powerful brands across segments
Ø Leadership in all segments - geographic &
Ø Extensive distribution network
Ÿ Over 900 wholesale dealers serving more than
1 million retail outlets
Ø World-class state-of-the-art technology
and products
Ÿ Investment - Rs.10 billion in six years
Ø Exciting long term growth potential
Cigarettes: Growth
Ø Cigarettes account for only 14% of tobacco
consumed in India unlike world pattern of 85% due
to prolonged punitive taxation
Ÿ Cigarettes (14% of tobacco consumption)
contribute nearly 85% of Revenue to the
Exchequer from tobacco sector
Ø Of the 58% of adult Indian males who consume
tobacco, barely 15% can afford cigarettes
Ø Bidi : Cigarettes ratio = 10 : 1
Ø Annual per capita adult cigarette consumption in
India is appx. one tenth world average : 141
Ø Future growth depends on relative rates of growth
of per capita income and moderation in taxes
The BCG Matrix for ITC Ltd.

In India, three major cigarette players

dominate the market, primarily ITC with 72%
market share, Godfrey Phillips with 12% and
VST with 8% share of the market.
Supply Chain Evolution
v Two hundred years ago, giant mechanical machines
replaced labor to complete tasks in large factories.
Railroads, electricity and new communications mediums
expanded markets and also made supply chains better,
faster, and cheaper.

v In the early 1900s, Henry Ford created the first moving

assembly line, utilizing scientific management methods.
This reduced the time required to build a Model T from 728
hours to 1.5 hours, and ushered in the mass production

v But in the 1970s, U.S. manufacturing’s superiority was

challenged by lower costs and higher quality products from
firms in many industries. 10
“..Supply Chain
Management is
Getting the right things
to the right places at the
right times, for profit ..”

New information and

communications technologies
have revolutionized today’s
supply chains, making them
extraordinarily better, faster,

04/02/09 11
Components of supply
The supply chain has basically four components:

v Production: where businesses focus on how much to

produce, where to produce it, and what suppliers to use.

v Inventory: where businesses decide where to store their

products, and how much to store.

v Distribution: where businesses address questions about

how their products should be moved and stored.

v Payments: where businesses look for the best ways to pay

suppliers and get paid by customers.

The efficiency and effectiveness of a supply chain is contingent

on the ability
04/02/09 12
to gather and analyze important information through these
Indian Tobacco Division
of ITC Ltd.

Supply Chain

04/02/09 13
About the Company…
Indian Tobacco Division (ITD)
vMarket leaders in Cigarettes and Tobacco business
& is among India’s most profitable companies
vBrands owned by ITC Ltd are Wills Classic, Wills
Navy Cut, Gold Flake, Bristol and Scissors
vITD also sells two luxury filter brands of its parent
company Benson & Hedges and 555
vFour manufacturing units for cigarettes at
Bangalore, Saharanpur, Kidder pore, Munger
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vIt has 3 contract manufacturers (OCMs)

ØReliable Cigarette and Tobacco Industries

Private Ltd. (RCTI)
ØAsian Tobacco Company (ATC )
ØHyderabad Deccan Cigarette Industries
vHuge distribution network with 19 marketing
branches and 33 Godowns across nation
Also caters to the exports mainly in United States
v04/02/09 15
ITD’s Supply Chain (Before IT
vCigarette manufacturing process involves processing
of tobacco leaf and stem to different tobacco blends,
which is called cut tobacco
vCut tobacco is then converted to cigarettes using
other raw materials for making cigarettes and
packing them in various forms as per the trading
vITD receives various grades of Tobacco Leaf and
Stem from Indian Leaf Tobacco Division (ILTD)
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based mainly in Guntur, Andhra Pradesh
v Processed to form tobacco blends at one of the three
Tobacco Processing Units at Bangalore, Saharanpur
and Munger.
v Tobacco Processing Unit is called PMD or Primary
Manufacturing Division.
v The cut tobacco is then sent to the Secondary
Manufacturing Division (SMD) for making and
packing cigarettes

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v Three OCMs and Kidderpore factory don’t have in-
house PMD, and are supplied with tobacco from one of
the three ITD PMDs
v Rest of the raw material (WMS) required for making or
packing cigarettes is provided to all factories from
various WMS suppliers, most of which are part of ITC
v At SMD, there are two processes: Making and
ü Making process is the rolling of cigarette sticks
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v Cigarettes are categorized in different segments
based on filter or non-filter type, cigarette length,
circumference, pack style, filter length and
cigarette placement. Under each segment there
are various brands.
v Finished Good (Cigarettes) are supplied from the
factories to godowns using mainly road and rail
transportation. From marketing godowns, the FG
flows to wholesale distributors and from there on to
retail channel. Requirement for each warehouse
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ITD Supply Chain Network

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v Raw materials, intermediates and the final product
sourcing/distribution in widespread across the
v Few items have more than 1 supplier for the raw
material e.g. filter rods can be sourced from either
Mumbai, Bangalore or Devas in MP
v Huge supply-demand network for cigarette business,
which must operate in the cost optimal way to
maximize the profits
v Few
04/02/09segments are particular to factories e.g Kingsize