Achieving Rs 1 lakh crore in fast-moving consumer goods (FMCG) continues to be ITC's aspiration, said Sanjiv Puri, CEO, to CNBC-TV18.
He said Rs 100,000 crore revenue for FMCG by 2030 may be delayed by two to three years, but will continue to be the company's target.
Puri also added that tax environment is now more stable post GST disruption.
You came in when it was the aftermarket demonetisation. You took over in February of 2017 and have seen the Goods and Services Tax (GST) rollout and all of this has had a fair degree of disruption on the business ecosystem. Given where we stand today and the fact is that consumption continues to be the big growth driver, the big growth engine, what are you seeing in terms of the macros before I start to talk to you about the micros?
First of all, let me say that GST was a very welcome step. It is indeed truly a transformative reform that is going to create a common Indian market and it augurs well for the economy. So whilst, there were some hiccups and I would say that hiccups were perhaps less than I thought that we would have. But the good thing is that they are behind us and we are much more stable today.
Do you get a sense that at least on the taxation front, on the regulatory front, that we are now in a stable regime? Is that what you are factoring in because the cess is now and the changes with the cess are over and done with, GST collections are picking up, so the pressure to revise the cess perhaps has abated somewhat, what is your own sense on the tax environment?
It is difficult to predict but I am an optimist. So, I hope this is what will happen during the year. The good thing also is that the monsoon is predicted to be normal. So that itself should give a little fillip to the consumption. With the recovery that is happening now and with all the events of last year behind us, I think it augurs well for the year ahead.
Is the recovery largely on account of the base effect or do you believe that we are now headed back in the trajectory of the pre-demonetisation times?
I would say, it is certainly at that level and with the fillip in agriculture and the investments that the government is proposing now in the rural sector, I think probably it is going to take us to a little better trajectory. It should build up step by step.
Let me then ask you about the micros and start by asking you about the cigarette business because while it continues to contribute about half your revenues, it is 90% of the EBIT. What is the trend now in terms of volume growth? Do you believe that decline that you have been witnessing quarter after quarter is now on the way to being arrested?
As you know, the big concern that we have always had with the cigarette industry is that with high increase in taxation, which is about more than 200% in the last few years, the unintended consequence is that the legal industry takes the blow and illegal grows. Today, one in four cigarettes in India is illegal and also the ratio of taxes between cigarettes and other forms of consumptions, which are often made in unorganised sector and often escape paying taxes etc, is over 50 times now. So that also gets a shift.
With the GST in place now and tax that probably isn’t your number one risk or number one concern today, is it?
In a stable environment, yes, illegal does not grow and overtime it gives an opportunity for the legal industry to recover. It does. But that depends on the tax regime. If it is stable, I think the legal industry should recover. The illegal industry will not get a fillip like it has been getting in the past.
It is odd because I don’t want to talk about whether you are likely to see a growth in volumes because obviously it has other implications but purely from a business perspective and this is what the market wants to know. Because if I look at the trend, Q4 of FY16 0.5%, Q1 of FY17 3%, then minus 1% in Q3 of FY17, minus 7% in Q2 of FY18, so what can we now expect in terms of the trajectory for volume growth for the cigarette business?
It is difficult to forecast.
Is the worst behind you?
I am hopeful, yes and I hope that there is a better appreciation of the fact that high doses of taxation or sharp increases only increase the illicit industry. We are seeing this in the media, there is virtually hardly any day - in fact in the last two years, there was a report recently that said that illicit has gone up by 136%.
FICCI had estimated in 2014 that the loss to the exchequer is Rs 9,000 crore. If you were to extrapolate from where we are today, the figure is going to be much larger. At the end of the day, by illicit gaining, no stakeholder in the economy gains. Neither the government gains, neither the farmers gain. because the illicit cigarettes also come from across the border, they don’t use Indian tobacco and Indian manufacturers don’t gain.
So in a stable regime, certainly the industry will have opportunity to recover and specific forecast that even with that assumption, we do not give forecast. So I cannot give you but if you look at historical trends and if there is a stable regime, the legal industry does recover and illicit is contained to where it is.
I know you are constrained from giving us the guidance but let me ask you and then I would like to focus on the big fives that Sanjiv Puri is focusing on. So let me ask you to start with the first and that has to do with the cigarette business, what is the big vision that you now have as far as this part of the business is concerned, which continues to be the profit driver for ITC?
Fundamentally, what is most important to us is that we should not be seeding ground to anybody else whether it is competitors and more importantly through illegal or through other forms of consumption. We do understand that there are societal concerns. We do understand that there is a need to regulate and control the industry, which is fine. But what we say is that the regulatory environment should not be discriminatory, it should not be such that gives a fillip to either other forms or through illegal.
The reason I asked you that is because when we last spoke, you said and this is taking YC Deveshwar legacy forward that it is not just about creating shareholder value, it is also about creating societal value. In the context of being able to create societal value then, what is the vision as far as the cigarette business is concerned because whether it is in terms of fresh capital deployment which is being pushed towards new businesses, the FMCG business for instance, what can we expect in terms of strategy and vision as far as the cigarette business is concerned, that is my last question on this before I move to the other areas?
As far as cigarette business is concerned, it will be allowed to perform in the sector the way it needs to perform. It is not that because there is more capital employment in other segments that this segment is starved. This is a segment that has got surplus capacities today. Industry has got surplus capacity and it is a fairly mature business. So therefore, it will get what it wants but naturally the order of investments will not be similar to new businesses. So that is why capital deployment is higher in other segments. It is 80% in the non-tobacco segment today.
As far as this business is concerned, as I said, we understand that there are going to be regulations which is fine. We do not think it is in anybody’s interest for us to seed grounds to illegal to other forms or for competition, so we will defend our position and we will advocate for that.
I will talk to you about FDI in tobacco which is another issue that has come back on the table but I will address that in a bit. Let me talk to you now about the FMCG business because that is where most people are keen to understand what the strategy is going to be going forward. Give me a sense of what we can expect in terms of new categories that you intend to get into? When we last spoke, you have spoken about four categories, you have already launched your frozen shrimp business, you have already started your foray into the skincare business via an acquisition of Charmis. So give me a sense of what next as far as new categories in the FMCG business?
Let me step back first and say that if you look at how the FMCG is performing, we continue to grow much ahead of industry and so is the case this year and this is on the back of comparatively much stronger performance in the previous year, which had certain events which led to a muted growth. We grew 13% in FMCG that year and we are sustaining the momentum, and this year we have entered in to four new categories.
We have put in about 30 plus new products into the market. In the year ahead, we will see an equal number of new categories that we will get into. A larger number of new product launches and some of the categories that you will see us - one of them that is getting rolled out as we speak is frozen snacks. It should be in the market very soon under the ITC Masterchef brand. Right now, we are doing the institutional piece, which will be followed by the rail consumer side of it. Then, we will be coming out with the dairy beverages very soon and there will be another two-three categories that we will get into during the course of the year.
Those are – we are yet deciding which two or which three to do. We have a pipeline. So nearer the time by the second quarter, we will take a final call which ones to go with.
Frozen snacks you will get into and the dairy based beverage segment is what you are going to foray into. You said frozen snacks you have already rolled out on the B2B side and B2C you will roll out shortly, how soon do we see the dairy beverage being launched?
It should happen by Q2.
Skincare, you have acquired Charmis. Do you intend to build momentum in this category which is a competitive segment and do you intend to be on the premium side or do you intend to be on the mass side?
Both. Our entry into this popular segment is through Charmis. Charmis is a well-known brand but it is a brand that has not been sufficiently invested in the recent past. So, we will certainly build it over time. We have also entered – as we are speaking, we are rolling it out – the premium skincare category with a brand, called Dermafique and it is completely designed for the Indian skin types. So it has been designed in our life sciences and technology centre.
Is this an acquisition or is it a licensing arrangement?
It is not a licensing arrangement. It is a home grown brand. It is developed entirely by life sciences and technology centre and tested on Indian skin types and we have had superior performance to the benchmarks and that is why now we are ready to roll it out. We are going to start. I know it is a competitive category, so we will start in very selectively and then build it overtime.
Given the fact that you are entering these very competitive segments, what is the outlook in terms of pricing power, what is the outlook in terms of advertising and marketing spends? Are we likely to see that go up significantly given the fact that these are new forays and new launches that you are taking forward?
We will support each brand to the extent that it is required. We have a lot of gestating categories, our advertising spends in comparable categories are more than what industry does and that will be sustained. Now, what type of investment each one of these category requires at this point of time and what it requires in future will depend on the manner in which we roll out and the manner in which we execute this strategy.
What is the broad investment plan for the FMCG business for this financial year?
Our advertising and marketing spends.
Not just advertising and marketing, all together?
You are talking of capital investment as well?
It is like the capital investment. Let me answer that first piece. It is a little bit of a rolling target because there is infrastructure that we have created. We have commercialised four Integrated Consumer Goods Manufacturing and Logistics (ICMLs) last year. We are going to do three this year. Each one of them is designed for a much higher capacity and the lines are put in as the market demands it. So it is better to look at a combined picture. So we are going to have investments of between what we have done and what we are going to do is going to be in the region of over Rs 10,000 crore.
Over Rs 10,000 crore in this financial year?
No, not in this financial year. I am saying, by the time we are done, we are right now constructing the number of ICMLs and there will be some happening after that. So when we complete all of this, it is going to be over Rs 10,000 crore.
When we spoke - the target for the FMCG business is a fairly aspirational one at Rs 1 lakh crore in revenues by 2030, are you on track to be able to get to that number? I am looking at your revenue picture for FY16, Rs 9,751 crore, FY17, Rs 10,522 crore, nine months FY18, Rs 8,277 crore, are you on track to meet that number or is it more aspirational in nature?
You are right, it is an aspirational target but nonetheless we are committed to that target and that is how we are gearing up the enterprise and that is the reason why we continue to widen and deepen our portfolio. We continue to strengthen our reach, our direct distribution, we are entering newer categories and all of this is directed towards achieving the goal that we have.
The growth rates, I do understand need to be much higher to be able to get to that figure by 2030 so it may get delayed by 2-3 years, that is fine but we are gunning for that figure and that is how we are organising ourselves to get there. We are not giving up on that target. It is a question of time, maybe a little bit here and there but that ambition remains.
What about the road to profitability as far as this business is concerned? If one looks at the margin picture, FY16, 0.9%, FY17, 0.3%, nine months FY18, 0.9%, I understand that these are businesses that you want to invest in and to some extent, the investment will continue over the next few years but what is the aspiration now when it comes to profitability?
It is like this that if I look at my business models and the cost structures around which these categories are being involved, I think they are fairly competitive. The ICMLs for example, when we are bringing our manufacturing closer to the demand centres and we also create the backward linkages in that region, so we get a very competitive value chain.
Yes, in the short-term, there are costs of having additional capacities but ultimately it will make us more efficient and we are very confident that we are in the right direction as far as that is concerned.
Besides this, there are gestating costs of newer categories. If you look at our portfolio, we have categories that I would say not even nascent, we are incubating. We are building on the brands and therefore at the right time, we will get to the market. So there are costs associated with that.
But as our older categories, Aashirvaad is a Rs 4,000 crore plus brand, Sunfeast is Rs 3,000 crore, we have three brands that have crossed Rs 1,000 crore mark, which is Bingo, Yippee and Classmate. So as our earlier brands have started to get scaled, I think they are now in a position at a profit and loss (P&L) level to more than support the investments that we are going to make in the newer categories. So we will see a much better trajectory but yes, it will be a while before we get to the benchmark level of profitability where we will be.
What is a while? Five years, more than five years, what are you factoring in, what is the blueprint?
I cannot give you a guidance there.
Given the fact that you have talked about this backward integration that is a big focus area for you, the fact that operational efficiencies are being eked out whether it is through your logistics model, transportation model, so on and so forth, so what can be then expect in terms of the margin picture. How much do you believe you will be able to squeeze out on account of all of this and push up the margins?
I think the years ahead will give you the picture and I can certainly say for sure that trajectory is going to only get better as we go forward but specific numbers, I would hesitate from putting it because as a policy we do not give guidance.
Let me ask you two specific questions. One criticism perhaps or comment or observation has been that you have been slow on going to market. Maybe the gestation time takes too long, is that something that you are now looking at correcting, is that something that you are actively pursuing?
No, I would firstly disagree that we are slow to the market. I am not sure if there is anybody else who in a year enters four new categories and says that in the next year itself we will enter at least those many if not more number of categories and anybody else who puts in more than 30 products into the market in a year and says in the year ahead, we are going to put significantly more than that number. So I won’t say we are slow at getting to the market. I think we are fairly aggressive.
We are building many categories simultaneously. In fact, internally, the debate we have is that are we too fast? Are we getting into too many categories too fast or should we pace it out a little more? So we do have a robust pipeline but we are continuously calibrating that and I would say in the number of categories that we are into and the speed with which we are getting into, I wouldn’t say we are slow. There is hardly any case where so many brands organically have been built in such a period. I have not come across any other case which has built 25 mother brands, got market leadership in some segments and become number two in many segments in such a short period of time and bulk of what I am saying has happened in a little over a decade.
You talked about how you build the momentum on organic growth. How aggressive is the inorganic strategy going to be when it comes to your existing categories as well as the new categories? You have done a few, for instance B Natural, you spoke about Charmis. What is the inorganic plan now as far as ITC is concerned?
We are absolutely keen and open to inorganic.
Across all businesses – paper, hotels?
Hospitals I leave aside for the moment. For all our existing businesses and more particularly FMCG, we are open to it but we would like to do so only when we have something that has a strategic fit with what we are doing. We don't want to buy something just for the sake of buying, a strategic fit is required. We also have 25 mother brands. So we have a plan to grow each one of these brands. So we do not want to create multiple brands for the same positioning etc. that become more inefficient to manage in the future. So when there is a synergistic opportunity, we will definitely do it and provided it comes at a right value. If I buy something that is very expensive, it is only going to erode value.
Is there anything on the radar today that is looking attractive?
Not specifically. We have just done one another small acquisition a few days back.
You spoke of the fact that you do not know any other company that pushes out as many products across different categories as you do into the market. Is there an assessment now of what is working for you, which brands are doing well for you. Is there a blueprint that in categories where you are not in the top three, maybe you want to review and assess whether you should continue or not. Are you deploying capital bases, certain parameters and certain indicators across these brands. What is the vision?
Absolutely. This is a continuous review and I wouldn’t say there are categories which we are not doing well at all. At stock keeping unit (SKU) level yes, we do have an ongoing process of review and churn and fortunately in all the categories that we have got into maybe in the entire category we have not progressed because we have focused in certain sub-segments. For example, even if I look at snacks wherein bridges we are the market leader but we have just entered the extruded snack segment.
So when I look at my performance from the total snack industry, the percentage may appear small but that is also the headroom for me to grow but then if I look at where I am focusing, bridges for example I have done extremely well and now I have gone into extruded snacks.
In chips, I am making good process. So there are pieces in which I am not there and there is no significant category that I have today. In the larger FMCG space where we need to pullback.
There is of course one example in the past where greetings cards for example, we pulled back; we thought that is not an industry for the future, so we pulled back on that and apparels business in which we are not happy with how we are doing, so we are on to a serious restructuring there. We have two brands - Wills Lifestyle and John Players.
So restructuring would mean?
It’s around the retail food brand, the business model and so on.
But you are retaining these businesses?
For the moment we have not taken any decision to do anything otherwise.
But you may be open to the idea of giving them up?
Right now nothing is on the table. Right now we are looking at optimising it.
Looking at optimising it which would mean closures of stores etc. what would it mean. Would it mean curtailing investments across these businesses?
Restructuring – I won’t just relate it to closing stores or opening new ones. It’s more around looking at the way the entire operation is been done and restructuring it end-to-end and it may entail some realignment of distribution models, some realignment of the retail footprint. It may lead to reduction, it may lead to increase. I do not know what the outcome is right now.
By when will you have clarity?
Within the year we should be.
Broadly, if you can give me a sense of what the expectation or the aspiration is for the home and personal care side of the business as well as for the foods business because food is the strong hold at this point in time with most of the brands there that you have identified are pushing and delivering on targets for you. So what is the aspiration broadly if you can share with us for personal care as well as for food both in terms of revenue and hopefully profitability on the personal care side?
Each one of them, we are expecting it to scale up. While foods is a much larger business for us, personal care has done extremely well in the last year and we had some great successes in deodorants, pocket perfumes and lipstick perfumes.
That is going to be something that you are going to invest more and more launches are expected as well?
Yes, we have just done some more variants recently and we are expanding the whole perfumes range. We have also gone into higher price points beside the lower price points. So that is a segment that is doing well for us. Liquids are doing well for us. In shower gels, we are the number two player. Savlon is growing quite well. We are also happy with the progress of both Fiama and Vivel after we restaged more than a year back. So we are happy with the progress in personal care and it’s extremely encouraging and we believe over time it’s also going to scale up.
Moving away from FMCG and to you about some of the other businesses. On the hotel side, at least from market perspective there seems to be a sectoral rerating that we are currently seeing. What is your outlook both in terms of occupancy, in terms of profitability, in terms of supply, demand and what happens with pricing going forward?
For sure, the movement is upward, the trajectory is upward for now and I think the potential is enormous because India is not even 1% of the global tourism as you know, so there is huge potential.
So we expect that this trend should continue and that is also reflected in our results as you have seen for the nine months and we hope that the trajectory will improve going forward and the good thing is that this is a time when we are actually sitting in a fairly healthy pipeline of new properties.
Some of them are – ones that we are constructing ourselves; ITC Kohinoor is going to open in the next couple of months in Hyderabad and year after that we will have ITC Royal Bengal and so on. So there are some that we are constructing and we also have a healthy pipeline of managed properties.
So having created certain iconic properties and iconic cuisine, the brand for ITC hotels per se, we believe that it is a right time now for us to go more aggressively on management contracts and that is where our increasing focus will be.
So you are moving towards an asset light model?
I would say asset right because we already have enough assets. So it is a right mix, it’s the optimal mix is what we are moving towards. We are 50-50 right now in terms of rooms but we would like it to be much more on the managed properties as well so that both of these gives us opportunity to grow much faster. If I was to concentrate only on my properties, my growth is going to be much slower and more capital intensive.
What would the aspiration be in terms of rooms given the fact that there is likely to be change in strategy with more managed hotels coming under the fold?
We would like to see our rooms perhaps something like double in about five years.
What about acquisitions in this business? The government is looking at strategically divesting across all sector. The India Tourism Development Corporation (ITDC) properties are up for grabs, Taj Mansingh seems to have gone cold. What is the story as far as acquisitions are concerned?
As and when there are opportunities and if we believe there is value in it, we will be open to it. The more recent one, you would perhaps be aware of the Park Hotel at Goa, so the honourable Supreme Court has given a judgment where within the next few months, the property will be handed back to us. It has gone through a long period of litigation after we acquired the hotel.
In terms of profitability for the hotel business, given the fact that you are moving towards this asset right model. Is that going to give you a bump up or a boost in terms of profitability?
It is certainly going to give us an improvement in return on capital employed. It will come partly from the fact that the rates as well as the occupancy itself is improving. So that is going to improve it plus when we have optimal mix of managed and owned properties – that itself will improve our return on capital employed for sure.
Since we are talking about return on capital employed, let me ask you some specific question in terms of your capital allocation policy. What are you going to be looking at, what parameters will you look at as you decide how much capital goes to which business or which brand. Is there a Sanjiv Puri matrix that is ready on the table?
First of all, we have said that each one of the segments that we are into we are going to invest to make sure each segment is globally competitive. So we will invest whatever the segment is required and we have the capacity to do so and of course when we say invest it must meet our norms of returns on capital employed.
What are those norms?
I cannot give you. These are internal figures. So, there are parameters and as far as overall profitability is concerned, I cannot benchmark say agri business with paper business or paper business with hotels. I have to benchmark each one of them to the industry that it is operating in. A hotel must be benchmarked to a hotel, agri business to agri business.
So if you look at where we are, I have the highest profitability as far as the paperboard and packaging is concerned, I have the best profitability in the agri business, I have comparable profitability in the hotel business and comparable despite the fact that I have more gestating properties today as a proportion than anybody else.
So even in that situation I am comparable. So we are doing well as far as the profitability of our traditional businesses are concerned and when I am saying traditional businesses those are the one that we have started about a couple of decades back.
FMCG is a newer business, it reflects aggressive investment so over a period time I hope we will get to the same stature in that segment also.
In terms of dividend payout – are you now looking at improving your dividend payout as well because if I look at the dividend payout ratio within you and your peers, FY17 at 56% for you, HUL at 82%, Nestle at 68%. Are we likely to see more generous dividend payout?
The decisions on this are made annually by the board in line with the policy of dividend payout but ITC is in an investment mode and we have one traditional segment which is a cigarette segment which is a large segment for us. We have to create the other segments to be as large both in terms of profitability and revenues. So we need to invest. Therefore, we also need to have resources to invest in the future.
So shareholders shouldn’t get excited about the fact that they are going to get…
I think if we look at shareholder returns over five-ten-twenty year period, I think shareholders would be happy with the returns that they have got. There have been some stresses in the recent past largely related to one segment which has faced a lot of uncertainty, but as a trend we have created shareholder value which we will continue to do so but we also need to conserve capital to be able to invest for the future.
When we last spoke, you had identified eight themes or eight verticals that you are going to bet on and there are some new businesses that you intent to get into. Let me ask you about the announcement that was already made which has to do with the foray into the healthcare space by way of multi- specialty hospital. Where do things stand on that front today?
It is still in early stages so I cannot give you a definite plan.
Is there a pullback or is there a pause or do you want to reassess the decision to want to get into this business. Could you look at a potential acquisition, I mean Fortis is on the block still. It is seeing bevy of suitors. Was that a consideration for you?
No, that was not a consideration and there is no decision yet to either go ahead or pullback because earlier was a shareholder approval. Based on the shareholder approval, now we have to get into this segment and look at all the options that are available. The first step for us is to assemble a team and we have certain principles that were articulated by the board that we want to create a healthcare facility that is going to be based on patient centric protocols. So we needed to put the right kind of team in place that would think that way and evaluate all the options. So let me say that part of the team is just got into place, some more will happen over next few months. Once the team is in place they will deep dive into this segment, evaluate all the options and then go back to the board and then we will take a final decision.
So a foray is still a question mark whether or not you will finally get into the business or not?
Of course because what happened earlier was only a shareholder approval. After that a business plan has to be made and the board has to be finally convinced that yes, it is a right thing to do and then only will the final go ahead happen. o there was no go ahead earlier in that sense. It was a shareholder approval.
Do you expect that decision this year?
Hopefully by in another year’s time, yes, we should have an idea. It is more than likely that we will do something in this segment but final decision will have to be made after the business plan is made and then taken to the board.
Let me ask you about the agri-commodity side of the business as well because there are some interesting developments there as well. The Prime Minister has an aspiration of doubling farm incomes. Most people are sceptical about where things currently are, how to get to that point but I believe you are doing some interesting work with some pilot projects across two states, what is your own sense?
We have a large agricultural business and through the e-Choupal, we have been working with farmers for decades together. We have a very deep relationship and through e-Choupal we connect with 4 million farmers and we are a large source of agri-commodities after the IFCI, we are the larger source of wheat. So we don’t restrict our activities to sourcing, we work with farmers.
The whole idea is to be able to create societal value, create inclusive and competitive value chain. So in that context when the Prime Minister made this call for doubling farm incomes, so as part of our engagement with farmers, we also initiated projects in Uttar Pradesh (UP) and Bihar and said let us work with the farmers round the year, not just on the crop that we are dealing with and make a package that we believe can achieve this target.
Farmers in India are extremely resilient and extremely smart and many of them picked up these practices and there is about close to 30,000 of them in UP that have reported doubling of farm incomes and about 15,000 in Bihar.
Over a period of time, these benefits will accrue to many more farmers because whenever we do the transfer of practices, we do a demonstration in a plot and ask the farmer that you must get 10-15 of your neighbours to come and watch it. So other people are in various stages of assimilating the practices but over time, the beneficiaries will be much larger. These learnings we will try and take to other regions also.
We are quite happy with the results. The other point let me also make on the agricultural business – we have so far or largely focused on sourcing and working with farmers.
In the recent past and more so now we have created a separate vertical within the agricultural business, which focuses on value added agriculture. So we export now food, spices, which meet all the global norms, this is through a PPP project in Andhra Pradesh.
Then we export organic mango puree then we have shrimps, so we are looking at more and more areas where the agricultural business would add value. So that is going to be a focused area and again leveraging the synergy between – that we pride ourselves in, we are also going to take some of this value added produce to the Indian consumer like we have done with prawns, like we have done with farm land potatoes where we have a variant, which is low sugar and a variant that has got natural anti-oxidants and then like we have done with apples. Indian apples but these are wax-free apples. So we have that one available in the market.
What is the export aspiration? Deveshwar has spent his innings here at ITC, wanting to create Indian brands and he has always been opposed to this idea of royalty being paid to MNCs, what is the export aspiration for ITC for taking Indian brands global?
Over time it would definitely happen as our Indian brands become big and they are able to support their overseas expansion, it would happen. We do have exports today but it is a limited intervention today, limited intervention because we don’t aggressively market these products in other markets. So we have just started to aggressively market in certain neighbouring countries like Nepal and apart from that, we are exporting some of our brands to many countries like 20-30 countries. Aashirvaad Atta goes into many countries, Choco Fills goes into many countries and so on and so forth. A lot of our products are exported but without aggressive marketing.
Is that likely to change?
Not immediately. In the future, certainly yes as our brands have become big enough and they on their own should be able to support the overseas expansion.
You have mentioned Patanjali. So what is the story there in terms of how aggressive Patanjali continues to be in the market place and how you intend to combat that?
I think we are happy that there is another enterprise that is developing Indian brands. We always advocate it. So we are very happy. Competition is always good in the market and there are lessons that all of us have taken from Patanjali.
What is the number one lesson that you have taken from Patanjali?
On speed itself. It is a lesson to understand how you can do so many things simultaneously.
Speed is one, what is the other?
The other would be on how you can manage a brand across many categories which most marketers would hate to do.
You have the power of spirituality mixed with commerce. I don’t know how that will work for somebody like ITC but that is a thought.
But yes, there are limitations to what we can do but certainly it is a lesson that flies in the face of conventional marketing wisdom and I think we have to, as business leaders, acknowledge that whatever be the reason.
Foreign direct investment (FDI) in tobacco, there was a meeting on the April 11, don’t know whether the government is going to rethink, review, obviously you don’t want FDI.
I don’t know what will happen but let me comment from a perspective of FDI in general. Where do you need FDI? You need FDI in segments, which require investments, segments that need to grow. Segments that do not have enough capacity and so on and so forth. So you have to evaluate all these things from these perspectives and then you will arrive at what is the logical answer to this.
E-commerce – there is a possibility of Walmart coming into Flipkart via the FDI route, what about you and e-commerce as something that you would like to consider?
They are channel partners for us so we would like to use them as channel partners. In niche segments, we do have some B2C, for example in kitchens of India, we do have some B2C in our frozen prawns, so in niche segments, it may happen but otherwise e-Commerce players are our channel partners.
What is the top five for Sanjiv Puri for the year ahead or for the next five years?
I think we have to continue around four-five themes that we have got ourselves, which is about strengthening the portfolio and making it more accessible.
Continuing to strengthen the innovation engine which has given us encouraging results so far. Continuing to make investments that will make ITC future ready so that we would not only get scaled but we also become cost competitive.
The fifth piece is going to be around there is a lot of opportunity that there are huge opportunities for enterprises. So we would like to pursue that aggressively. We have done some very interesting work in the last year with very encouraging results.
So we would like to pursue it and of course the last thing is we always say that it is not just about shareholder value, it is about societal value. So we would like to continue to take a few steps forward in our journey of creating an inclusive sustainable and competitive value chain.
You mentioned about doubling the farm income but there are many other areas we have done and one important one is on water security. We have got this huge investment on watershed management and it runs into huge number of structures and we irrigate nearly about 9 lakh acres as of now but from integrated watershed management, we have now moved to, in certain selective areas, water stewardship where we are looking at the entire water balance and the water required for the community and then making a strategy on how we make that sustainable.
First Published: IST