Hit by second wave of COVID-19, ITC expects rural demand to be blunted

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ITC in its annual report said on the consumption side, urban-led recovery may be relatively muted compared to the first wave of COVID-19.

Hit by second wave of COVID-19, ITC expects rural demand to be blunted
The severe intensity of the second wave of COVID-19 has triggered a fresh round of disruptions leading to slackening in the recovery momentum, hotels-to-cigarettes conglomerate ITC said in its annual report.
Flagging concerns over heightened uncertainty in the timing and shape of the recovery trajectory, ITC said on the consumption side, urban-led recovery may be relatively muted compared to the first wave. This because consumers are switching to precautionary savings mode and rising healthcare costs are eating into household spending.
Rural demand, the company added, is likely to be blunted as well with the virus spreading to the hinterland in the second wave, "A rapid scale-up in the pace of vaccination and gearing up of the healthcare infrastructure to mitigate the impact of possible future outbreaks would be critical going forward."
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The severity of the second wave, ITC said, remains a key monitorable for the FMCG industry in the near term with consumers adopting a more precautionary savings approach with resources being set aside for medical needs.
In its FMCG business, ITC said there was a marked preference for larger pack formats as consumers sought to reduce the frequency of purchases. The demand for health & hygiene products, it said, remained elevated through the year even as the pace of growth moderated as compared to the first half of the year.
As ITC looks to continue rapidly scaling up the FMCG businesses, the company will look to address adjacent growth opportunities in its 25 mother brands. The company is also proactively pursuing value accretive acquisitions, joint ventures, and collaboration opportunities in the FMCG business segment.
ITC's snacks business -- which is dependent on out-of-home consumption – and its 'B Natural’ range of juices – which also disruptions during the peak season -- was severely impacted in FY21.
Meanwhile, ITC's personal care business saw growth driven by products in the health and hygiene space. 'Savlon' witnessed significant growth in revenue and reached nearly Rs 1,200 crore in terms of consumer spends, ITC said.
With the pandemic seeing increased adoption of online shopping for daily essentials as well and ITC aggressively pushing its D2C platform ITC e-Store, sales through the e-commerce channel more than doubled during the year, taking its salience to over 5 percent of revenue of the FMCG-others business segment. The company also plans to rapidly scale up the ITC e-store in the coming months on the back of good responses from consumers.
According to the company, as the Indian economy recovers from the severe impact of the pandemic, policy interventions would need to be sharply focused on supporting sustainable livelihoods and fostering inclusive growth." Structural support would need to be provided to sectors with huge economic multiplier impact and those that are still under considerable stress such as MSME, travel & tourism, etc," the company said.

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