Will take a year to achieve double-digit Ebitda margin for non-cigarette FMCG business: ITC

“The carefully selected portfolio, with substantial headroom to grow, is estimated to have a total addressable market potential of Rs 5 trillion by 2030, which is among the highest in the Indian FMCG space,” Puri told shareholders during the company AGM on Wednesday.

Will take a year to achieve double-digit Ebitda margin for non-cigarette FMCG business: ITC

ITC chairman and MD Sanjiv Puri on Thursday reiterated that the diversified conglomerate aspires to grow the Ebitda margin for its non-cigarette FMCG business by 100 basis points (bps) every year. He further said it is expected to take about a year to achieve a “double-digit” Ebitda margin for the segment, once the high inflationary pressure normalises.

Talking to the media at a virtual press meet, Puri said the conglomerate was able to expand the Ebitda margin by 10 bps for the non-cigarette FMCG business last fiscal due to “unprecedented inflation”.

“But, then we have to look at in the context of what had happened to the industry. It was able to marginally expand. While that’s not been the trend generally. But this could be just a short-term challenge. Certainly, the aspiration for 100 bps every year is there. Ebitda (margin) is already at 9%. So, once the situation normalises, it takes about a year to get the double-digit Ebitda (margin) and beyond that,” he pointed out. He, however, added that the country’s FMCG industry will have to wait for inflation to ebb.

“While it (inflation) is monitorable. I wouldn’t yet want to say that things are fine. But there are some signs that there is some level of moderation. But the situation is fairly dynamic and one has to monitor it,” the chairman emphasised.

Significantly, the company has improved its Ebitda margin by 650 bps over the last five years for its non-cigarette FMCG businesses. ITC said, as far as, commodity prices are concerned, at this point, there is some cooling off for sure. But it would be really difficult to predict the timing of normalisation as there are multiple factors at play. There are supply-side challenges and energy prices remain elevated. “There will be some moderations as the signs show, but for sometime inflation will remain at an elevated level compared to what was in the past,” Puri said.

On-demand recovery for FMCG products in rural markets, he said there is “some stress” on demand for sure. However, the positive thing is the realisation this time is better although the input cost has also gone up. “But there will be some positive. And that should work well, and we should see its impact of it in the latter part of the year. But yes, there is some level of stress,” he said.

On product prices, the company said it normally tries and manages any pressure on prices through cost efficiencies and looking at the assortment that it has. “We understand the stress on account of inflation and therefore raising prices is the last lever we try. But this time the magnitude of inflation is so high some price action was required. That is the last thing we do,” the chairman added.

The cigarette-to-soap maker’s portfolio of non-cigarette FMCG brands represented an annual consumer spend of over `24,000 crore for the last financial year, registering a growth of around 9% year-on-year. The portfolio of non-cigarette FMCG brands includes Aashirvaad, Sunfeast, Yippee!, Bingo!, Savlon and B Natural, among others.

“The carefully selected portfolio, with substantial headroom to grow, is estimated to have a total addressable market potential of Rs 5 trillion by 2030, which is among the highest in the Indian FMCG space,” Puri told shareholders during the company AGM on Wednesday.

On growth plans, the company said the focus is on building some of its core brands to adjacencies and building certain categories for the future. Those are the kind of areas where it is putting on new investment. There is no plan per se immediately to get in another category. Right now the focus is more on strengthening and building on the areas that it has identified. “Of course, we are continuously scanning and examining if there are more opportunities, but at the moment the idea is to scale up our core brands, use that to the best adjacencies and build new vectors for growth for categories of future like frozen snacks or Nimyle natural cleaner,” the chairman added.

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