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Saturday, October 31, 2020

ITC gears up for ‘next normal’ with agility in adversity, synergy in diversity, compassion in crisis: ITC Chairman Sanjiv Puri

Though the Indian economy will face multidimensional challenges in the short term, it is certainly reassuring that our country remains one of the major economies in the world with huge potential.

In his AGM address Sanjiv Puri, Chairman, ITC, shared his vision on the organisation’s top strategic priorities in preparing for the ‘next normal’ and reimagining the future for ITC during the unprecedented times, its resolve to support an Atmanirbhar Bharat as well as the company’s superordinate national purpose to create larger value for the country and its stakeholders.

The excerpt from the speech is below:

Disruptive black swan events of the kind we are facing now, not only test resilience and adaptive capacity but can also unleash forces of innovation and creativity to shape a more sustainable and inclusive future. 

Though the Indian economy will face multidimensional challenges in the short term, it is certainly reassuring that our country remains one of the major economies in the world with huge potential.

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ITC: performance highlights

Gross Revenue and PBT (before exceptional items) for FY20 stood at around Rs 46,300 crores and Rs 19,300 crores respectively. Non-cigarette segment revenue rose to Rs 31,000 crores during the year, accounting for nearly 60% of ITC’s total segment revenue.

ITC’s world-class FMCG brands clocked an annual consumer spend of over Rs 19,700 crores in aggregate during the year. Comparable revenue grew ahead of industry, amidst subdued demand conditions, while profitability improved significantly. Segment EBITDA recorded a robust growth of 33% during the year. The recent acquisition of Sunrise Foods, which was completed during the lockdown even in a ‘work from home’ state, will further add vibrancy to ITC’s portfolio. 

It is encouraging that the FMCG-others segment delivered a comparable revenue growth of 19%, whilst segment EBITDA demonstrated strong growth of 42% during the period. This was driven by revenue growth of 34% in staples, convenience foods and health & hygiene products, which represent 75% of the portfolio.

ITC: a sustainability pioneer

ITC is the only enterprise in the world of comparable dimensions to be carbon positive, water positive and solid waste recycling positive for more than a decade now. ITC has been ranked no.1 globally amongst its peers and no.3 overall on ESG performance in the food products industry by Sustainalytics, a renowned global ESG rating company. This year, ITC’s paperboards unit at Kovai became the 1st facility in India and the 2nd in the world to be awarded the Alliance for Water Stewardship Platinum-level certification – the highest recognition for water stewardship in the world. It is a matter of deep satisfaction that ITC today supports over 6 million livelihoods.

ITC: the response to the pandemic

As the pandemic unfolded, ITC responded with agility, resilience and compassion to adapt to the new normal. A Covid Contingency Fund of Rs 215 crores was set up to address the needs of the distressed. Together with local authorities, a combination of cooked meals, food and hygiene products were also distributed across 25 states and union territories. 

To ensure liquidity in the hands of farmers, ITC’s procurement of agri produce was intensified. ITC has worked with the government’s MGNREGA programme to create 7.6 lakh person days of work in just 45 days. ITC also extended financial support to its supply chain partners for obtaining a Covid-19 insurance cover for their associates, covering hospitalisation and diagnostic expenses.  

ITC ramped up production capacity and resumed distribution in record time, with extreme focus on safety protocols. Over 180 factories manufacturing essential products in foods, personal care and hygiene as well as paperboards and packaging were progressively made operational. More than 85% of ITC’s WDs and associated warehouses were made operational within 10 days of the lockdown, servicing millions of consumers with highly motivated frontline teams. 

Responding with agility to emerging consumer needs, ITC fast tracked the design, development and go-to-market strategy of innovative products and services. The Savlon portfolio of hygiene products was augmented with differentiated offerings including disinfectant sprays, advanced ‘Hexa’ sanitisers, soaps, bodywash, germ protection wipes and so on. 

Other innovative products include ‘Nimwash’ – with 100% natural action for washing vegetables and fruits, B Natural Plus range of immunity beverages, Bingo! range of new snacks, a wide array of ITC Master Chef frozen foods and a variety of Farmland frozen vegetables to cater to the increasing demand for safe and high quality products. ITC also repurposed its perfume manufacturing facility in Manpura, Himachal Pradesh on a war footing. Manufacture of ITC’s hygiene products like Savlon sanitisers was ramped up by 275 times to cater to the surge in demand.

To reach millions of consumers confined to their homes, ITC was a first mover in entering into collaborations with companies such as Dominos, Swiggy, Zomato, Dunzo and Amway to leverage their direct to home reach. The innovative ‘ITC Store on Wheels’ initiative was launched to directly service residential complexes.

Reimagining the future

Reimagining the future will encompass 3 distinct phases which will co-exist in the journey ahead. First, a ‘survival’ phase as corporates brace to manage the current crisis. Second, a ‘reboot’ phase as businesses align to the new normal with certain segments experiencing demand destruction, some new trends emerging whilst several pre-crisis trends gain accelerated pace. Third, as the crisis ebbs, corporates will have to gear up for the ‘next normal’ with some trends moderating, some remaining at an elevated level, certain segments witnessing recovery, whilst new opportunities and industry dynamics get constantly redefined.  

Building competitiveness & resilience

I am deeply convinced that the future will belong to purposeful enterprises who will constantly build competitiveness with agility and innovation to respond speedily to external shocks and emerge even stronger from the crisis. It is this compelling strategic response that drives ITC to strengthen organisational vitality in a manner that is future-ready, fosters extreme competitiveness, whilst contributing meaningfully to the vision of an Atmanirbhar Bharat. 

This vitality is today manifest in the robust ecosystem of ITC where differentiated products and services can move from the drawing board to the market in record speed; where trusted world-class Indian brands have been built and nurtured; where supply chains can be realigned to react swiftly to disruptions; where timely partnerships can be orchestrated; where extreme focus is provided to sweating assets and getting more out of less; where critical infrastructure and relationships nurtured across the value chain can be repurposed to sharpen competitive advantage; where sustainability is embedded in strategy and action to make larger societal value creation an integral part of business outcomes; and where dedicated talent is inspired by a larger sense of purpose. 

ITC’s investments in state-of-the-art integrated manufacturing facilities with a distributed footprint, that support indigenous supply-chains, enabled swift realignment and resilience to changing circumstances. Such close-to-market factories ensure product freshness, improve market responsiveness, enable cost-optimisation and provide heightened focus on product hygiene, safety and quality. 

Building resilience and responsible competitiveness is integral to ITC’s DNA and a strategic driver of growth creating enduring shareholder value. The current pandemic reinforces the need for resilience, which will continue to be an area of strategic priority for ITC.

Key themes: How ITC’s competitive ability reinforces its future-readiness

Purposeful innovation for consumers

Global research today points to the consumers’ increasing demand for products and services that focus on health, wellness, safety and hygiene. Consumers continue to prefer trusted brands. Quite expectedly, the demand for essential products in the food and hygiene segments witnessed a surge. There is a growing preference for organic, naturals and fresh products though consumers also seek indulgence, comfort eating and even resort to ‘revenge’ consumption. Frozen food, ready-to-eat or cook meals score high on convenience, during these trying times. 

The home has now become the epicenter of life, substituting dining out, entertainment and socialising. Cooking exotic meals, becoming an accomplished home-chef are new entertainment and family occasions. Discretionary spends are down, and there is evidence of value-seeking behaviour. There is a shift to larger basket purchases, large value packs with infrequent shopping frequency. Digital shopping surged exponentially even as neighbourhood grocery stores emerged as the lifeline for essential supplies.

ITC’s innovation engine is at work 24×7 to develop future-ready products. This was leveraged by ITC to rapidly introduce over 40 high quality, first-to-market products and variants during the pandemic to meet emerging consumer demand.

Reimagining digital transformation

Accelerated digital transformation is integral to ITC’s future-ready strategy and is increasingly being harnessed to enhance competitive advantage. New technologies such as Industry 4.0, Artificial Intelligence, Big Data, industrial Internet of Things (IoT) and Machine Learning are being deployed by all businesses, including ITC’s supply chain and logistics to enhance operational effectiveness. Substantial investments have been made in the creation of a digital ecosystem to drive smart manufacturing, product quality, traceability and supply chain agility, amongst others. This accelerated digital journey has begun to demonstrate appreciable outcomes.

ITC’s marketing command centre – ‘Sixth Sense’ – leverages cloud-technology, cutting-edge social-media engagement tools and a digital marketing & analytics platform to drive contextual communication and product development rapidly. The Centre has today developed into a real time repository on market trends.

ITC’s wholly-owned subsidiary, ITC Infotech has developed appreciable domain-led expertise in emerging areas of digital and automation solutions and is ITC’s strategic partner in its journey of digital transformation. ITC continues to invest in building its digital enterprise capacity and capabilities to stay ahead of the curve and shape formidable strengths for the future. 

Rediscovering sustainability

ITC’s vision to serve a larger national purpose has inspired unique business models that build substantial economic, environmental and social capital for the nation. ITC’s superior environmental benchmarks in all its operations, creation of large forestry and water resources as also a renewable energy portfolio accounting for over 41% of total energy consumption makes ITC an icon of environmental stewardship.

Several innovations, backed by R&D, have led to path breaking initiatives. For example, ITC’s paperboards as well as packaging businesses have introduced several innovative sustainable packaging solutions. These include the recyclable barrier board ‘Filo’ series as an innovative substitute for single-use plastics in the food service segment and the biodegradable ‘Omega Series’ as an alternative to plastic coated containers and cups, and so on. 

ITC has also pioneered a replicable multi-layered plastic waste management model in Pune, providing an end-to-end solution for converting such waste into commercial products based on technical knowhow of the ITC Life Sciences & Technology Centre. 

ITC has set ambitious sustainability goals for the future. ITC aspires to meet 50% of its total energy consumption from renewable sources by 2030. ITC intends to sequester over four times the CO2 emissions from its operations as well as create rainwater harvesting potential equivalent to over five times its net water consumption over the next decade. As part of its waste management programme, the company aims to ensure that 100% of its packaging is reusable, recyclable or compostable in the next decade. ITC’s leadership in sustainability reinforces its aspirations to be a future-ready enterprise, responsive to the needs of society.

Building next generation agriculture

It is critical that the latent power of Next Generation Agriculture is unleashed to raise farmer incomes and drive a virtuous cycle of consumption, investment and employment whilst insulating the farmers from the threat of climate change by the large-scale promotion of sustainable agricultural practices. The recent path-breaking reforms provide an unparalleled opportunity to transform agriculture.

In the true spirit of Atmanirbhar Bharat, ITC has, over several decades, engaged deeply with farmers to address these multi-dimensional challenges and co-create sustainable solutions to raise rural incomes. Powered by ITC’s celebrated e-Choupal, and ITC’s social investments, large-scale interventions have been implemented to enable climate-smart agriculture, enhance productivity, promote value-addition, expand market access and exports. 

To future-proof agriculture and combat climate change, ITC’s Water Stewardship programmes have brought soil and moisture conservation to over 1 million acres whilst initiatives for demand-side management of water that enable ‘more crop per drop’ cover more than 2 lakh acres across 6 states, reducing consumption by as much as 20 to 45%. 

ITC’s Agri-Business lends distinctive competitive advantage to its branded packaged food businesses with superior agri-sourcing that focuses on identity preservation, traceability and certification, as well as lower transaction costs. Today, ITC is one of India’s largest integrated agri business enterprises with a segment revenue of over Rs 10,200 crores. It is also a significant exporter of value-added agri-products and the largest producer of wheat in the private sector. 

ITC sources over 3 million tonnes of agri-products from 225 districts in 22 states. Several competitive agri value chains have been assiduously built over time to benefit farmers.  The wheat and spices value chain is anchored by the Aashirvaad brand as well as exports. The potato value chain is driven by ITC’s Bingo! snacks; the fruits & vegetables value chain is powered by ITC’s B-Natural juices, Farmland and ITC Master Chef frozen foods and the Dairy value chain leverages Aashirvaad Svasti dairy products and Sunfeast Wonderz milk-based beverages. 

These vibrant value-chains provide consumers high quality products whilst generating substantial livelihoods. ITC’s increasing engagement across the perishables value-chain, including value-added products in frozen, purees and dehydrated formats will also spur investments in climate controlled infrastructure and food processing.

ITC is well poised to expand its horizons in the agricultural sector. The transformative agri-reforms will also open up new opportunities. These measures are likely to enhance operational efficiencies and accelerate ITC’s journey towards building a robust and future-ready value-added agri products portfolio catering to both the B2B and B2C channels. ITC is stepping up farmer engagement in wheat, potato, chillies and fruits & vegetables through a Crop Value Chain Cluster model to connect small farmers to markets. 

The company expects to support nearly 3000 FPOs with more than a million farmers across 24 crop value chain clusters in 21 states, shaping competitive agri value-chains and enhancing farmer incomes. These value chains will be anchored by ITC’s large investments in food processing, its vibrant brands as well as exports. 

Enabling future-ready innovation

ITC’s deep R&D capabilities are an invaluable asset enabling it to seize emerging opportunities. With more than 350 highly qualified scientists, LSTC has set up futuristic Centres of Excellence in Biosciences, Agrisciences and Materials and has filed over 900 patents. ITC also engages with the start-up ecosystem to gain insights from their vibrant innovative capabilities, and where appropriate, is open to making investments.

In addition to the differentiated range of Savlon products, other innovations developed by LSTC include B Natural Plus beverage, Aashirvaad Svasti Fortified Milk and Ghee, Sunfeast Digestive Veda Marie with goodness of Fibre & Ayurvedic herbs, Fortified YiPPee noodles with 5 vital nutrients and so on. 

ITC is working on multiple value propositions in the areas of functional foods & nutrition.  The continued effort is to develop products with lower sodium and sugar as also to enrich & fortify them with value-added nutrients and ingredients such as probiotics, prebiotics, fibres, nuts, seeds and so on. 

Innovative products are also being developed for a healthier lifestyle relating to Indian traits in diabetes, bone health, cardiovascular, immunity, gluten free, gut health and cognition, among others. ITC’s FMCG products like Mangaldeep agarbattis have also innovated with a “Lo Smoke” variant that emits 80% lesser smoke, whilst ESPB continuously works with LSTC to create superior writing experiences.

Developing entrepreneurial talent

ITC believes in nurturing a talented pool of ‘proneurs’ – entrepreneurial professionals who operate with a start-up mindset but with the crucial advantage of ITC’s institutional resources. The ‘proneural’ mindset, adaptive capacity and deep commitment of ITC’s distributed leadership together with the inspiration to serve a larger national purpose formed the fulcrum of the resilience demonstrated during these difficult times, and will continue to be its strength in the years to come.

ITC: In Support of Atmanirbhar Bharat

ITC’s superordinate goal to serve larger national priorities is enshrined in its credo of Nation First – Sab Saath Badhein. The vision to create multiple drivers of future-ready businesses, competitive and inclusive value chains that retain larger value in India, is deeply aligned to the Prime Minister’s clarion call for an ‘Atmanirbhar Bharat’.

ITC is recognised as a pioneer in enabling agricultural transformation.  Following the success of ITC’s ‘Baareh Mahine Hariyali’ programme aligned to the government’s ‘Doubling Farmers’ Income vision, we are now ready to implement e-Choupal 4.0 at scale and bring the benefits of the digital revolution to empower farmers even more effectively. This digital platform, designed as a crop agnostic integrated solution framework will synergistically aggregate technologies like remote sensing, precision farming, drone-based services, quality assaying, e-marketplace and many others. It is now ITC’s vision to empower 10 million farmers in India by multiplying livelihoods that will benefit over 50 million people. 

ITC’s large afforestation initiative covering over 8,00,000 acres not only enables competitive fibre sourcing for its paperboards business, but has also generated 147 million person days of employment for marginal farmers.

ITC has also invested in an indigenous agarbatti bamboo value chain to contribute to import substitution and retain larger value in the country. It is estimated that domestic cultivation of bamboo for agarbattis, by substituting imports, can generate over 22 million person days of employment per year. Towards this, the government’s recent policy interventions to promote indigenous bamboo cultivation will go a long way in generating gainful livelihoods. ITC is already sourcing bamboo for its Mangaldeep brand and promoting nurseries in north-east India, many of which are run by women.

Over 77 public-private-people partnerships have been forged with state governments and public institutions to bring complementary skills and resources together to benefit rural communities. ITC in collaboration with NITI Aayog has trained 15 lakh farmers in 27 backward districts of 8 states under the Aspirational Districts programme covering 15 crops.

In line with its abiding vision to make a meaningful contribution to inclusive growth, ITC’s portfolio of world-class Indian brands enables retention of larger value within the country, in alignment to the call for ‘Vocal for Local’. Supporting the manufacture of these high quality products, are the ‘Make in India’ investments in state-of-the-art ICMLs, and in India’s largest paperboards facilities that contribute to the nation’s modern industrial infrastructure creating livelihoods across the value chain. 

The company also promotes local entrepreneurship across states in manufacturing ITC’s diverse products. ITC has also created some of the most iconic properties to enrich India’s tourism landscape.

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