ITC Ltd Strengths | Market Leader & Diversified Business

Did you know? ITC Ltd. is the only company globally, by size and diversity, that is carbon, water, and solid waste recycling positive.

What makes ITC Ltd. unique as a company?

ITC Ltd. is the only large company in the world that is positive in carbon, water, and solid waste recycling. It leads India’s cigarette market, has a diverse business across FMCG, hotels, packaging, and agriculture, and operates with a strong focus on sustainability.

Table of Contents

  • ITC Strengths
  • ITC Weaknesses
  • ITC Opportunities
  • ITC Threats

ITC Strengths

  1. India’s Largest Cigarette Producer
    ITC holds more than 75% market share in India’s cigarette segment by volume. It leads the market with five manufacturing plants in Bengaluru, Kolkata, Munger, Pune, and Saharanpur.
  2. Diverse Business Portfolio
    ITC operates across multiple sectors: FMCG, Hotels, Packaging, Paperboards & Specialty Papers, and Agri-Business. Around 67% of its revenue comes from FMCG, including cigarettes and staple products. Agri-Business contributes 21%, Paperboards & Packaging 11%, and Hotels 2%.
  3. High Market Capitalization
    With a market cap of Rs 4.3 trillion, ITC ranks among India’s top private sector companies. It is the leading stock in its category.
  4. Wide Market Reach
    ITC runs over 10 business lines and exports to 60 countries. It has over 200 manufacturing units in India and distributes through 7 million retail outlets. The company offers more than 25 brands and owns 113 hotel properties.
  5. Growth in Market & E-commerce Sales
    In FY 2021-22, ITC expanded its market coverage by 1.4 times and outlet coverage by 1.1 times. Its multi-channel distribution network grew stronger as a result.
  6. Strong Brand Recognition
    ITC ranks #2 among India’s top FMCG brands. In hospitality, its flagship restaurants Bukhara, Avartana, and Dum Pukht are recognized among the world’s best by 50 Best Discovery.
  7. Smart Acquisitions
    ITC has acquired companies to expand into new areas:
  • Tecnico Agri Sciences, India’s largest seed potato producer with over 50% market share, acquired in 2016.
  • Sunrise Foods, a top Indian spices manufacturer, acquired in 2020.
  • A 10% stake in Blupin Technologies, a platform focused on mother and baby care, acquired in 2022.
  1. Innovative Marketing
    ITC’s B2B app Unnati onboarded over 220,000 retailers within eight months. The ITC e-Store offers more than 700 FMCG products across 45 categories directly to consumers.

ITC Weaknesses

  1. Heavy Dependence on Tobacco
    Despite diversification, cigarettes still generate around 40% of ITC’s revenue and 81% of its operating income.
  2. Negative Public Image
    Tobacco’s link to health and environmental risks affects ITC’s reputation, with over 1 million annual deaths in India attributed to tobacco use.
  3. Regulatory Challenges
    India’s ban on e-cigarettes limits ITC’s ability to diversify into alternatives like vaping, unlike some international competitors.
  4. Legal Disputes
    ITC and Nestle India have a long-running dispute over marketing terms for their noodles brands. The Madras High Court ruled the terms as common language, preventing exclusive claims.

ITC Opportunities

  1. Strong Economic Growth
    India is forecast to be the world’s fastest-growing major economy. Initiatives like the Gati Shakti and PLI schemes support infrastructure and manufacturing growth.
  2. Post-Pandemic Recovery
    ITC’s business is expected to grow in FY-23 with volume increases in cigarettes, recovery in hotels, and improvements in IT services.
  3. Product Diversification
    Shifting focus from tobacco to FMCG and value-accretive acquisitions can boost growth. FMCG staples already account for 40% of segment revenue.
  4. Rising Consumer Demand
    India’s FMCG sector grew 16% in 2021 and is expected to reach $220 billion by 2025, with packaged foods doubling to $70 billion. This creates growth potential for ITC.
  5. Emerging E-commerce Segment
    Growing internet access in cities and rural areas is driving FMCG sales online. ITC can expand its digital sales channels.
  6. AI and Data Analytics
    ITC has invested in AI and next-gen data architecture. There is scope to further use AI for consumer insights and improving agriculture operations.
  7. Low Legal Cigarette Penetration
    Legal cigarettes make up only 8% of consumption in India, far below the global average of 90%. ITC can benefit from stricter regulations to grow legal sales.

ITC Threats

  1. Rising Costs
    Higher commodity prices, energy costs, and supply chain issues have squeezed profit margins recently.
  2. Counterfeit Cigarettes
    Illegal cigarette sales dominate the market, reducing legal sales to just 10%, hurting ITC’s cigarette revenue.
  3. Strict Tobacco Regulations
    Heavy taxes and regulations on cigarettes worldwide push consumers toward lower-taxed or illegal tobacco products. This threatens ITC’s core cigarette business.
  4. Strong Competition
    ITC faces tough competition from local and international FMCG brands and hotel chains. This may limit its market share growth.

If you want a focused view of ITC Ltd., this summary shows its market position, challenges, and growth paths. The company’s unique sustainability status and diversified portfolio give it an edge, but dependence on tobacco and regulatory issues remain risks.