ET 500 2011: We want to be largest consumer goods group, says Pradeep Dhobale, ED of ITC

Predominantly a cigarette maker, ITC has diversified into sectors such as processed foods and personal products. The company is on track to emerge as a full-fledged, diversified FMCG conglomerate over the next decade, says Pradeep Dhobale, executive director, ITC in an interview. Edited excerpts:

What are the key challenges ahead over the next decade?

ITC’s wide portfolio of businesses covers segments such as fast-moving consumer goods, paper and paperboards, packaging, hotels, agri-business and information technology. Given this array of businesses, the challenges for the future are obviously multi-dimensional, dynamic and evolving over time.

ITC has scaled up rapidly in the FMCG space in a very short span of time. This not only requires establishment of new manufacturing operations, but also efficient multiple distribution channels across locations. The creation of an efficient supply chain and enhancement of logistics infrastructure is imperative to grow new businesses.

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Every effort is being made to augment the company's capabilities in manufacturing and distribution as businesses expand. There is a significant and continuous engagement in development of new products and services, which are superior and offer a differentiated value proposition for discerning customers.

Disproportionate taxation coupled with a growing incidence of smuggling and illegal manufacturing continue to adversely impact the Indian cigarette industry. This has led to a dwindling of cigarette’s share in total tobacco consumption from about 25% in the 1970s to about 15% now. At the same time, total tobacco consumption in the country has continued to grow by way of increased consumption of other revenue inefficient forms of tobacco, including chewing tobacco and bidis.

As a company extensively engaged in the nation’s agricultural sector, ITC creates significant livelihood opportunities for farmers in rural India. Conducive policies will not only help in unleashing the nation’s agricultural potential, but will also enhance productivity of the agri-sector thereby releasing surplus land for other competing needs.

What are your views on the competitive scenario and how it is likely to evolve?

The relative strength of the Indian economy in an extremely volatile world economic scenario has attracted global players to the Indian market. Rising incomes and a young demographic profile have fostered an increasing demand for world-class products and services. Therefore, the intensity of competition will continue to grow.

Over the years, ITC has assiduously crafted a winning combination of organisational hardware and software to serve as a source of sustainable competitive advantage. We believe that this preparedness makes the company future-ready as it pursues its strategic intent to create an exemplary Indian enterprise with multiple drivers of growth.

Though ITC appears to be a conglomerate with diverse businesses, it has created a unique source of competitive advantage by creating special synergies utilising this business diversity. For example, ITC's foods business derives unique competitive strengths arising out of synergies of its diverse businesses such as agri sourcing of commodities through e-Choupal, culinary expertise of the master chefs of its hotels business, innovative packaging solutions provided by ITC's packaging business and reach of its trade marketing and distribution infrastructure.

ITC's diverse portfolio of businesses is driven by proven core competencies, world-class human capital and strategic assets such as popular brands, trade marketing and distribution infrastructure, deep linkages in rural India in addition to its strong balance sheet and R&D investments.

Where do you see your company ten years from now?

ITC’s goal is to be the largest consumer goods conglomerate in the country while at the same time consolidating and enhancing its leadership position in paperboards, hotels and agri-business. ITC's domain expertise also lends a unique source of competitive advantage to its IT business.

The company is constantly evaluating new categories in its existing businesses. On the one hand, ITC is exploring market opportunities in terms of both size and growth potential that would make for a meaningful engagement for the company. On the other hand, it is also looking for opportunities that can leverage its institutional strengths.

Today, ITC is the country's leading FMCG marketer, the clear market leader in paperboard and packaging industry, the second-largest hotel chain, as well as the country's foremost agri-business player. Its IT business is also one of the fastest growing in the mid-tier segment. In addition, ITC is acknowledged as a global exemplar in sustainable business practices, infusing the company with a unique source of competitive advantage.

What is your plan for corporate long-term sustainability?

ITC draws justifiable pride in being the only enterprise in the world of comparable size to have achieved and sustained the three global environmental distinctions of being carbon positive for six years now, water positive for nine years and solid waste recycling positive for four years. Our businesses have generated sustainable livelihood opportunities for over 5 million people, many of whom represent the most vulnerable in society.

For example, focus on the promotion of sustainable agricultural practices in rural India has not only created meaningful livelihood opportunities for farmers, but has ensured a unique source of competitive advantage in agri-sourcing for ITC’s foods business.

Similarly, by investing in large-scale social and farm forestry the company has not only created livelihoods for poor tribals and marginal farmers, but has also secured a competitive source of wood fibre for its paperboards business. Large investments in renewable energy will also ensure energy security in the years to come. ITC's low-carbon growth strategy will also help it meet the challenges of climate change and global warming more effectively.