ITC diversifying tobacco biz to capture US vaping market

ITC is diversifying its tobacco business to manufacture and export nicotine and nicotine-derivative products to capture the growing demand for oral and vaping products in the US and EU markets.

The company’s annual report for FY21 mentions that it has set up a wholly-owned subsidiary, IndiVision, and has obtained necessary regulatory approvals for setting up a facility near Mysuru, Karnataka.

The facility, which will manufacture nicotine and nicotine salts, will conform to stringent US and EU pharmacopoeia standards that define purity levels at 99.2 per cent for nicotine meant for pharmaceutical products.

ITC will leverage the institutional capabilities of its century-old leaf tobacco business for this.

ITC’s cigarettes business saw disruptions across the value chain with the onset of the Covid-19 pandemic.

The company mentioned in its annual report that with easing of restrictions and improvement in mobility from September 2020 onwards, the business recovered progressively over the remainder of the year to reach nearly pre-Covid levels towards the close of the year.

Cigarettes, however, was not ITC’s only business to be impacted by the pandemic.

Much like the rest of the hospitality industry, ITC’s hotels business, too, was impacted.

The second wave triggered a fresh round of restrictions and the company believes that the near-term outlook for the hospitality industry will depend largely on the return of confidence in business and leisure travel.

However, new levers of growth are being created by the company.

With people gravitating towards leisure travel, ITC has launched a new brand, “The Storii” which is a collection of boutique lifestyle properties.

The brand will grow under ITC’s “asset right” model.

In the early part of 2000, ITC had started growing its hotels business by an investment-led strategy, but in the last 2-3 years, it adopted the “asset right” model and will add a large part of the rooms through management contracts.

Storii expects to open its first set of hotels soon while the Welcomhotel portfolio will scale up further in line with the “asset right” strategy.

The non-cigarettes FMCG business grew 15.8 per cent (on a comparable basis) in FY21.

Growth in the first half of the year was driven by a surge in demand for staples and convenience foods and hygiene products; sequential recovery in demand in the discretionary/out of home categories such as snacks, juices, confectionery, body wash and fragrances reflected in the second half performance, the annual report mentioned.

Annual consumer spend from the non-cigarettes FMCG segment in FY21 was over Rs 22,000 crore compared to Rs 19,700 crore in FY20.

The company launched a record number of 120 products during the year.

Exports by branded packaged foods businesses recorded growth led by atta, biscuits and ready-to-eat despite the operational disruptions caused by the pandemic.

The businesses currently exports to over 50 countries, the company said.

The company also leveraged the e-commerce platform during the pandemic and sales through the e-channel more than doubled during the year to over five per cent of segment revenue.