ITC says near-term outlook uncertain, localised lockdowns impacting recovery

Diversified group ITC Ltd's chairman Sanjiv Puri on Friday said the near-term outlook remains "uncertain" amid constantly evolving consumer trends and industry dynamics in view of the "yet unfolding impact" of Covid-19.

Also, he said the spate of localised lockdowns is further impacting the recovery momentum.

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Puri, however, said that other than the hotel's segment and cigarettes, education and stationery products, progressive normalisation was witnessed in the latter part of the first quarter across all operating segments.

"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," the chairman said while addressing the company's shareholders at the annual general meeting.

Puri said the company will continue to closely monitor the situation and respond with agility to strengthen its market standing while sharply focusing on cost reduction measures.

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Discretionary spends in the market are down and there is evidence of value-seeking behaviour with a shift to larger basket purchases, large value packs with infrequent shopping frequency, he added.

The estimates for the Indian economy indicate a substantial contraction in 2020-21, with several sectors experiencing severe demand destruction, he said, adding "this is likely to shrink livelihood opportunities considerably causing severe stress on consumer spends."

Such a situation, he stressed, calls for a strategic response focusing on the vigorous pursuit of "value-accretive opportunities leveraging the company's institutional strengths on the one hand whilst driving thrift, cost optimisation and conservation of cash on the other".

Puri added that black swan events like this pandemic also brings opportunities like never before and unleash forces of innovation and creativity to shape a more sustainable and inclusive future.

"There is no doubt that the task ahead will be daunting. Though the Indian economy will face multi-dimensional challenges in the short term, it is certainly reassuring that our country remains one of the major economies in the world with huge potential," he said.

According to Puri, the future will belong to purposeful enterprises, which will constantly build competitiveness with agility and innovation to respond speedily to external shocks and emerge even stronger from the crisis.

Responding with agility to emerging consumer needs, ITC had fast-tracked the design, development and go-to-market strategy of innovative products and services, he said.

ITC had leveraged its innovation engine and had rapidly introduced over 40 first-to-market products and variants during the pandemic to meet emerging consumer demand, Puri said.

While these science-led innovations witnessed encouraging consumer response, he said a surge in demand in food and hygiene products required a substantive scale-up incapacity.

The company ramped up production of its hygiene products like Savlon sanitisers 275 times to cater to the surge in demand, he said.

Over 180 factories manufacturing essential products in Foods, Personal Care and Hygiene, as well as Paperboards and Packaging, were progressively made operational, the chairman said.

Moreover, after lockdown digital shopping surged “exponentially” even as neighbourhood grocery stores emerged as the lifeline for essential supplies, he noted.

ITC, he said, was the first company to move in collaborations with several online food aggregators such as Dominos, Swiggy, Zomato, Dunzo and direct selling firm Amway to leverage their direct to home reach.

According to Puri, reports suggest an increase in demand for products and services that focus on health, wellness, safety and hygiene and consumers continue to prefer trusted brands.

"Quite expectedly, the demand for essential products in the food and hygiene segments witnessed a surge,” he added.

During the April-June quarter, the nationwide lockdowns had impacted ITC's performance, particularly in segments such as hotels, cigarettes, education and stationery products, paperboards and packaging businesses.

ITC, which sources over 3 million tonnes of agri-products from 22 states said, it is well poised to expand its horizons in the agricultural sector.

It is stepping up farmer engagement in wheat, potato, chillies and fruits and vegetables through a crop value chain cluster model to connect small farmers to markets.

"We are now ready to implement e-Choupal 4.0 at scale and bring the benefits of the digital revolution to empower farmers even more effectively,” he said.

This digital platform, designed as a crop agnostic integrated solution framework, will synergistically aggregate technologies like remote sensing, precision farming, drone-based services, quality assaying, e-marketplace and many others, he said.

"It is now ITC's vision to empower 10 million farmers in India multiplying livelihoods that will benefit over 50 million people," he added.

While talking about sustainability goal, Puri said: ”ITC aspires to meet 50 per cent of its total energy consumption from renewable sources by 2030.

In FY 2019-20, it had a revenue of Rs 46,807.34 crore.