The food sector is navigating a new phase of demand, driven by rising affordability, premiumisation and changing consumer preferences. Hemant Malik, executive director, ITC, who oversees its foods and personal care products businesses, in an interview with Viveat Susan Pinto, discusses the evolving consumer landscape, the shift towards healthier packaged foods, festive premiumisation, and ITC’s push into fresh food. Excerpts:
GST rationalisation gave food demand a big boost. What are the demand trends a year after the tax reform?
It has largely been a positive story for the food sector over the last one year. The GST rationalisation on several food products, from 18% or 12% to 5%, was passed on to consumers. This had a positive impact, making products more affordable and accessible. It kick-started demand across both urban and rural markets. This momentum continues to this day. However, we are witnessing inflation coming back because of uncertainties arising from geopolitical conflicts.
Edible oil, for instance, is a significant component of packaged-food input costs, whose prices have increased from Rs 80 to Rs 140-145 a litre recently. We have taken some price hikes but our focus has been on strategic cost management and supply-chain efficiencies. I don’t see the need for any further price hikes immediately, though packaging-material inflation and weather-related disruptions remain key areas to monitor. Despite the challenges, food demand continues to remain stable.
How do you see ITC’s food business evolve amid the shift from unbranded to branded products?
The packaged-food opportunity in India continues to be significant. Penetration is just about 14-15%, so there is substantial headroom for growth. At ITC Foods, our ambition is to be a leader in every segment we operate in, while growing faster than the industry. Certain evolving consumer need-spaces are creating opportunities for innovative offerings. For example, health and nutrition are increasingly emerging as important growth drivers.
Consumers are seeking healthier products with low sugar, fat and salt, as well as products with higher protein content. But food ultimately has to taste good. The challenge is to combine nutrition with taste and affordability. At ITC, we are bringing together product development, innovation and technology to create nutrition-dense products that are also tasty.
Is the festive season increasingly an opportunity to drive premiumisation?
Absolutely. We have a broader strategy around premiumisation. First, we view premiumisation as an opportunity to encourage consumers to trade up, given rising aspirations and increasing disposable incomes. Second, we use festivals as an opportunity to showcase our premium products. Gifting has become much easier now because of quick commerce. Consumers are also increasingly preferring health-oriented gifting options.
Packaged foods lend themselves well to this trend because they have a longer shelf life, unlike traditional sweet boxes. We are curating unique gifting options across categories such as Fabelle chocolates, Yoga Bar and Right Shift portfolio that is targeted specifically at consumers in the 40+ age group. The focus is also on affordable premiumisation, which means offering innovative products at accessible price points. We expect strong festive opportunities around Ganesh Chaturthi, Durga Puja and Diwali. The festive mood appears buoyant despite weather-related and geopolitical uncertainties.
How will El Nino impact food production and consumption?
The impact of El Nino is certainly something that we are closely monitoring. The possible impact may be felt both in terms of quantity and quality of agricultural produce, which could in turn affect prices. The early signals seem to suggest that conditions are stable from the perspective of both groundwater and moisture levels. We are keeping a close watch on climatic conditions through September, as sowing will begin immediately thereafter.
Earlier this year, ITC launched its fresh-food initiative. How is it shaping up?
Consumers today increasingly perceive shorter shelf life as an indicator of freshness. Earlier, we introduced ready-to-eat chapatis under the Aashirvaad brand. These have a shelf life of only five days and require refrigeration. The dough is rolled into sheets, and consumers simply need to place it on a tawa to prepare fresh chapatis. We started this initiative in Kerala and have since expanded to Bengaluru, with Mumbai and Delhi on the anvil. We have also forayed into fresh cookies, snacks such as murukku and mixtures, as well as fresh chutneys with no preservatives and a shelf life of 15 days. The challenge lies in managing the supply chain. With a short shelf life, demand forecasting and replenishment have to be precise.
Besides low shelf-life packaged foods, we are also scaling up the fresh food business, which delivers freshly cooked cuisine through food-delivery apps under four brands – Aashirvaad Soul Creations, Sunfeast Baked Creations, ITC Master Chef Creations and Sansho by ITC Master Chef.