Recently, following British American Tobacco (BAT)'s $31.5 billion writedown on the value of some U.S. cigarette brands, Indian tobacco company ITC surpassed BAT and became the world's third largest tobacco company, with a market value of $68.6 billion as of the end of 2023 Dollar. Let's take a look at ITC Company.
01. Implement diversification strategy
Founded in 1910 and headquartered in Kolkata, West Bengal, ITC is one of the country's most prominent private companies, ranking highly in Bloomberg Economics' analysis of Indian conglomerates' governance, liquidity and leverage. In fact, ITC is not a "serious" tobacco company, but a large-scale conglomerate with a diversified industrial layout, covering the fast moving consumer goods industry (FMCG), hotel industry, paperboard and packaging industry, as well as agricultural enterprises and information technology industry .
As of September 30, 2023, ITC's tobacco business revenue only accounted for 37% of ITC's total revenue, but its profits accounted for 78% of the company's pre-tax profits. In addition to the tobacco business, ITC is India's largest company in the field of fast moving consumer goods and agriculture. It also occupies a prominent position in the paper industry and is the second largest hotel chain group in India.
In the past three years, ITC's diversification strategy, profitability growth of FMCG business, growth in cigarette sales and recovery of the hotel industry have continued to gain favor from investors, and the stock has been on an upward trend.
02. Tobacco business leads the Indian market
As the leader in the tobacco market in India, ITC operates three categories of tobacco products, including cigarettes, e-cigarettes and nicotine gum, with cigarette processing plants in Bangalore, Mangalore, Saharanpur, Kolkata and Pune equipped with Using cutting-edge technology and advanced equipment, the cigarettes produced are sold throughout India and continue to create value for consumers. ITC owns several cigarette brands including Insignia, India Kings, Classic, Gold Flake, Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut and Duke & Royal. Among them, Insignia is the first brand of ITC and one of the top cigarette brands in the world. It was first launched in Mumbai in 2003 and quickly became popular around the world. Of course, Insignia is also very expensive.
Recently, Indian law enforcement agencies have cracked down on illegal tobacco sales. ITC has used this to recover market share and sales from the black market, boosting demand for Indian tobacco and increasing fiscal revenue. At the same time, ITC continues to strengthen its product portfolio through innovation, premiumization and improved product availability, with several recently launched new products under the brand performing well.
In terms of tobacco leaf production, ITC has unique crop development capabilities that provide complete traceability and ensure sustainability of the entire value chain. Its subsidiary IndiVision (IIVL) has facilities that produce nicotine and nicotine derivatives and has regulatory approvals from the US and EU pharmacopoeias.
In addition to the Indian market, ITC is also a major player in the West Asian tobacco market. The U.S. tobacco market has always been extremely competitive, and ITC provides it with high-quality, cost-effective cigarettes and user-developed solutions.
03. Actively expand non-tobacco business
In a turbulent environment with inflation, ITC's stable cash flow and dividends are highly valued by investors and continue to develop the value of its non-cigarette business. Increased investment is underway in innovative, environmentally friendly packaging solutions that can replace single-use plastics. The company sustainably managed 60,000 metric tons of plastic waste in fiscal 2023, exceeding packaging use, maintaining its plastic-neutral status for the second year in a row.
ITC has a comprehensive intervention approach to waste management, with a focus on plastics. The cardboard, paper and packaging business continues to develop sustainable packaging solutions to replace single-use plastics. Many brands and businesses have also innovated to reduce the use of plastic and deliver on the company's commitment to creating a positive environmental footprint.
In addition, ITC has conducted extensive research into laminated and molded fiber platforms at its Center for Life Sciences and Technology, pioneering sustainable packaging options and developing a range of environmentally friendly products, including recyclable paperboards FiloPack and FiloServe, and Two biodegradable cardboards, OmegaBev and OmegaBarr.
04. Coping with challenges and promising future
During the COVID-19 epidemic, ITC's operating environment was full of challenges, uncertainty and volatility due to unprecedented inflationary headwinds and tense geopolitical situations. During this period, ITC's business also experienced major disruptions, but the company actively intervened, effectively utilized its institutional advantages, digital technology and lessons learned from previous waves to respond quickly at all operational nodes. This includes reconfiguring and adjusting supply chain operations through dynamic planning to meet market demand, strengthening the direct impact of all traditional trade channels on target markets, and expanding the network to effectively serve rural and combined urban and rural markets, ultimately achieving revenue and profit growth. Strong growth.
At the same time, ITC continues to introduce modern technologies to modernize its manufacturing facilities, ensure higher levels of productivity, product excellence, drive innovation and set new standards in quality, sustainability, supply chain responsiveness and productivity. Benchmark, using cutting-edge technologies such as Industry 4.0 and data science to build an intelligent manufacturing environment for interconnected systems. These measures will further boost the market and achieve a sustainable future.