Whalesbook
Food Growth Decelerates
Kolkata | Mumbai: ITC Ltd.'s ambitious push into the packaged foods sector is encountering significant turbulence, with growth rates decelerating and market share eroding across several key categories. This performance falls short of the robust expansion promised to investors more than two years ago.
The conglomerate's packaged foods business, once lauded as India's fastest-growing at a 13% decade-long CAGR, has slowed considerably. Over the past three years, the compounded annual growth rate has dropped to approximately 7.7%. This slowdown impacts ITC's strategy to reduce its heavy reliance on its dominant cigarette business.
Market Share Erosion
NielsenIQ data, verified by industry executives, reveals a concerning trend. ITC's value share in biscuits, its largest food category, has remained flat at around 8% for three years. The company has also lost ground in western snacks, with value share falling to 11% from 13% in two years. The B-Natural juice portfolio has seen the sharpest decline, its value share dropping to 3.3% from 5.4% in just one year.
Company Response
A company spokesperson acknowledged that syndicated surveys may not accurately capture new launches or pricing changes, particularly from fast-growing alternative channels. These channels reportedly contribute about 30% of FMCG sales, with digital-first brands achieving an annual run rate of ₹1,100 crore. The company insists it is investing in a future-ready portfolio driven by consumer trends, premiumization, and convenience.
Analyst Views
Industry analysts point to intense competition from focused pure-play companies and a surge of D2C brands as significant challenges. Abneesh Roy, executive director at Nuvama Institutional Equities, noted that while Sunfeast Dark Fantasy was a success, subsequent product launches have lacked disruptive power. He cited consumer shifts and health concerns impacting juices, and the innovation treadmill in snacks against players like Bikaji and Haldiram's.
Diversification Challenge
The food business is critical for ITC's diversification efforts, especially as taxes on cigarettes are expected to rise significantly, potentially up to 30%. This increase could dent cigarette sales. Last fiscal year, ITC's food business recorded its slowest growth in over a decade, with gross sales rising only 6% to ₹18,282 crore. Analysts suggest ITC's strategy of building a broad FMCG portfolio, rather than focusing on dominating specific categories like rivals Britannia and PepsiCo, may be contributing to this struggle for incremental market share.