ITC majorly known as the largest manufacturer of cigarettes is now focusing on FMCG (Fast Moving Consumer goods). In addition to their focus, have acquired Kolkata-based spice maker company Sunrise for a deal of Rs. 2150 Cr on later May 2020.
In further progression and to make a strong presence in the FMCG sector, they have announced the acquisition of Delectable Technologies, a lending machine manufacture company.
The total cost of the acquisition is about Rs. 7.5 Cr in four tranches, which accounts for about 33.42% of shares on a complete dilute basis.
This acquisition will be a value addition for ITC as a company focusing on FMCG as its second-largest business.
DELECTABLE TECHNOLOGIES PVT LTD:
This vending machine manufacturer was found by an IITian, Satvik Sarwarde in the year 2014 as a startup. Currently, the company holds a net worth of Rs. 1.48 Cr.
They have grown from 0.67 lakhs in the year FY2016-17 to 69.15 Lakhs in FY2018-2019. In the three years, the company has grown up to 369.07% per year.
Also, the company has launched the Agzo application, which helps in customizing the vending machine with goods as suggested by the customer.
The key focusing strategies of the Agzo app with the lending machine
· In < 60 seconds.
· All digital payments.
· Never out of stock.
· Customized product Mix.
The Vending machine operates like an ATM of FMCG products. It can be seen widely in airports, railway stations, Shopping malls, corporate buildings, and in a few supermarkets.
In recent times, the lending machines business has merged across India. As you can see the company has grown its revenue up to 369% every year.
ITC AS FMCG FOCUS COMPANY:
Many investors categorized ITC as a cigarette, but in recent years, the total revenue share of the cigarette business is come down. Which is substituted by FMCG.
The FMCG business has built a revenue of 12844 Cr. The 10-year growth of the ITC FMCG business has grown by 13.43% year on year. This is one of the phenomenal growth in the FMCG sector.
There are many world-class brands from branded packaged foods, personal care products, Education and stationery products, Incense sticks, and safety matches.
There are almost 25 world-class product brands that contribute in an insane way to the FMCG Business
· “Aashirvaad” the brand which compiles Atta accounts for Rs. 6000 Cr business in revenue. It rules the market share as a leader in the Atta industry.
· “Sunfeast” as a brand accounts for Rs. 4000 Cr. The Dark Fantasy has made Sunfeast as No.1 Cream biscuit brand. You would have seen in all supermarkets Sunfeast would achieve half of the rack as Britannia.
· “Bingo” which is the No.1 brand of Bridges segment of snacks food has a turnover of Rs. 2700 Cr. Bingo is well seen in the nod and corner of every retail shop in India.
· “Classmate” is the No. 1 brand in notebooks, pens, pencils, stationery, and papers. It holds a revenue of Rs. 1400 Cr. Adding to this ITC has newly launched Paperkraftwhich includes premium notes, notepads, and pens.
· “Yippee” is the No. 2 in Noodles business in India. This accounts for a revenue of Rs. 1300 Cr.
· Mangaldeep and Vivel hold a business revenue of Rs. 800 Cr and Rs. 500 Cr respectively.
Apart from this, there are many brands and new launches which will make a benchmark in the future. They are
Personal Care:
§ Fiama
§ Nimyle
§ Salvon
§ Engage
§ Essenza Di Wills
§ DermaFique
§ Charmis.
· Branded Packed Foods
§ Natural B
§ Sunfeast Wonderz milk
§ ITC Master Chef
§ Farmland
§ Fabelle
§ Sunbean
§ Kitchen of India
§ Candyman
§ Mint-O
§ Gumon.
FUTURE OF ITC FMCG BUSINESS:
In recent times, there have been many launches in the FMCG sectors. The company is completely focused on building the FMCG business as its strong revenue builder.
So, the company has invested a huge amount in the FMCG sector in bringing out world-class brands with more competency.
As of date, they have almost 900 patent products, still focusing on creating more products. Their vision is to build a strong position in the FMCG sector, hence becoming a strong competitor to Hindustan Unilever (HUL) with nearly 3000 products by 2030.
As they have bought Sunrise (a spice company) and delectable technologies (which have grown by 393%) will definitely increase the share of voice in the FMCG sector.
Henceforth, ITC-branded packed foods will be available in every supermarket, shopping mall, airport, and railway. This is going to increase the overall business of ITC by FMCG products.
Insights for Investors:
· Many retail investors might be thinking, the share price of ITC has grown in the last 1 year. But in reality, the company tends to grow year after year.
· ITC shares will be in every intelligent investor’s portfolio who invests in the business and value of the company.
· ITC as a company will be a big competitor to HUL in the FMCG sector in 10 years. The company may split into 5 different companies.
· The company is honoring its shareholders with dividends and bonuses.
· This deal of acquiring 33.42% stakes in delectable technologies is going to strengthen the presence of ITC in the FMCG sector.