Near-term demand outlook still uncertain: ITC's Puri at AGM

"The near-term outlook remains uncertain as consumer trends and industry dynamics constantly evolve in the backdrop of the yet unfolding impact of the pandemic and shape of economic recovery. Your company shall continue to closely monitor the situation and respond with agility to strengthen its market standing while sharply focusing on cost reduction measures," Sanjiv Puri, chairman, ITC Ltd., told shareholders at the company’s 109 AGM on Friday.

Puri said localised lockdowns were having an adverse impact on recovery momentum.

He said discretionary spends are down and consumer behaviour is more "value-seeking"...There is a shift to larger basket purchases, large value packs with infrequent shopping frequency."

The government's wide-ranging reforms, accelerated infrastructural development and policy interventions are, however, expected to spur growth over time, he added.

ITC, which has business spanning hotels, agriculture infrastructure, sale of packed consumer goods, cigarettes, paper and packaging, reported a 26% year-on-year drop in its June quarter net profit while revenues fell 17.4% to ₹9,501 crore. However, its packaged consumer goods segment (FMCG-others) including wheat flour, health and hygiene products, packaged noodles, cookies reported a 19% comparable growth during the first quarter fuelled by demand for in-home snacking and cooking.

The company, however, said that other than the hotels segment and its education and stationery products business, it witnessed "progressive normalisation" in the later part of the first quarter across all operating segments.

For the full year, the company’s FMCG brands including Aashirvaad, YiPPee! Noodles, Savlon clocked an annual consumer spend of over ₹19,700 crores.

ITC was also quick to launch new products such as surface disinfectants under its Savlon brand, during the peak of the lockdown. In fact, the manufacturing capacity of Savlon sanitisers was ramped up by 275 times to cater to the surge in demand. In all, ITC launched 40 first-to-market products and variants during the pandemic to meet emerging consumer demand for such products.

Puri said consumers continue to prefer trusted brands and organic products, a result of health and safety concerns indicating a shift in consumer behaviour. Home has now become the epicentre of life, substituting dining out, entertainment and socialising, he said.

“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," he said.

Moreover, the company also launched an online ordering system for retailers to address the surge in demand for FMCG goods during the lockdown. ITC also enhanced presence across e-commerce platforms that led to accelerated growth in sales and marketing of its FMCG products.

"Accelerated digital transformation is integral to your company'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 your Company's supply chain and logistics to enhance operational effectiveness," Puri said in his AGM speech.