Premium products in the personal care business at ITC have seen a significant surge in contribution to sales, doubling in the last four years to 38%, as highlighted by Sameer Satpathy, the divisional chief executive for the business. Moreover, these premium offerings account for about two-thirds of all the new products launched in the past two years, indicating a strategic emphasis on premiumization within the sector.
According to analysts, the emphasis on premium products has not only aided ITC in achieving break-even in the personal care sector but has also led to consistent quarterly profits in the business.
While Satpathy declined to comment directly on this matter, he noted that the emphasis on premiumization has positively affected the bottom line by enhancing margins.
“Premium products sales have moved up exponentially from pre-pandemic period and doubled to around 38% of our sales. With growing opportunities in the Indian market, we will continue to strengthen our focus on premiumisation. Companies with capabilities to marry technology, innovation, supply chains and sustainability concerns together will gain much more in premium play,” said Satpathy.
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He mentioned that 65% of the recent personal care product introductions belonged to the premium category, contributing to doubling the segment’s prominence from pre-pandemic levels.
Through this business, ITC operates in categories such as body wash, deodorant, skincare, and floor cleanser, constituting the second crucial element of its strategy to expand the non-cigarette fast-moving consumer goods (FMCG) segment. However, the foods business remains the primary revenue and profit driver within ITC’s non-cigarette FMCG business, boasting market leadership across various categories.
ITC holds the position of the second largest player in the shower gel and women’s deodorant segments within the personal care business. Additionally, its herbal floor cleanser has emerged as the market leader in certain regions like the East. In the October-December quarter, ITC saw a year-on-year expansion of 100 basis points in the EBITDA margins of its non-cigarette FMCG business, reaching 11%. Despite facing challenges such as high input costs and subdued demand, ITC has witnessed an upward trend in EBITDA over the past few quarters.
“Non-cigarette FMCG segment Ebitda margin stood at 11% backed by premiumisation, supply chain optimisation, cost management, digital initiatives and judicious pricing actions,” BNP Paribas said in a recent report.
Satpathy mentioned that premium consumers became more consolidated during the pandemic, especially with the emergence of numerous digital channels.
“We jumped a decade as far as digitalisation is concerned. This boosted sales of premium brands and larger packs since such consumers tend to consume more. The cherry on the cake has been quick commerce,” he said.
ITC has downsized its mass-market brand Superia, primarily operating in the soaps segment, due to its limited market share and low margins. The brand is currently available in select rural markets such as the Hindi heartland and Odisha.
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