ITC bleeding in trying to de-emphasise its image of a cigarette company
October 29, 2009
ITC Ltd, formerly Indian Tobacco Co Ltd, is known as a cigarette maker. However, over the past decade, the company has been trying to de-emphasise its image and present itself as a diversified conglomerate.
In this process it has merged the hotels business (ITC Hotels) and the paper business (ITC Bhadrachalam) with itself. This may have made sense but ITC’s foray into a variety of fast moving consumer goods (FMCG) products—from garments to matchboxes— has so far proved to be a disaster. During the last two years, it has lost about Rs10 billion on account of its FMCG and other ventures. Its cigarettes business, however, continues to support such adventures.
During the third quarter to end-December, ITC’s FMCG segment, excluding cigarettes, lost almost Rs1.30 billion. On the lower side, in the current quarter, the same is about Rs8.50 billion. Earlier, in June, ITC’s chairman YC Deveshwar declared that during 2008-2009 the company had invested close to Rs4.90 billion in its FMCG business, excluding cigarettes. He, however, did not want to reveal the investment figures for 2009-2010.
The Kolkata-based company forayed into the FMCG business nine years back with its lifestyle retail stores, Wills Lifestyle. Its FMCG business includes products like branded packaged foods (staples, biscuits, confectionery, snack foods and ready-to-eat foods), garments, educational and other stationery products, matchboxes, agarbattis and personal care products.
ITC's effort to portrait itself as a diversified company is proving to be expensive. There is no let-up of the bleeding in sight, either. Losses also stem from its strategy of moving into highly competitive and money-losing businesses like garments and foods to start with rather than personal products. - Pallabika Ganguly[email protected]