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ITC to enter dairy food market

Mumbai, Sep 7 () : ITC, India’s biggest cigarette maker is going on to add dairy products, drinks and perhaps even healthy breakfast foods to its consumer product business.

With the Health Ministry proposal to put more clamps of use of tobacco, ITC Ltd market share is 80 percent of the cigarettes sold in Inda. An estimated 275 million people use tobacco products in India.

Like the rest of the World, India follows anti-smoking regulations due to which the company’s core tobacco business is getting hit and to offset this, it is venturing into heath and nutrition products, drinks and healthy breakfast foods and expand its consumer products business which is losing money.

Chief executive of ITC Foods, , Chitranjan Dar told Reuters in a phone interview that health and nutrition will be a very strong focus area for ITC in the coming years as Indians are turning health-conscious in their food choices.

ITC, with a market capitalisation of $38 billion and India’s fifth most valuable company makes crackers, potato chips, cookies and crackers  and next step is to venture into dairy and breakfast foods.

British American Tobacco has 30.8 % share in ITC, the century-old company once known as Imperial Tobacco. Half of the revenue comes from sale of cigarettes while its consumer division dealing with foods is a loss.

With the exception of packaged flour, ITC‘s market share in food and consumer products is not much and has only 15 percent of the market for any product category in which it competes despite having spent 45 billion rupees ($809 million) to build up its food and consumer product segments over the past 10 years.

After Australia banned the use of logos on cigarette packs on Aug. 15, India is expected to do so and this led to ITC stocks to be downgraded. Investors took away initially $1.3 billion from ITC’s market value after Australia’s move, but the stock recovered in part because majority of Indian smokers buy cigarettes in single sticks, not packs.

Outpacing the 13 percent rise in the index, ITC shares have risen 32 percent this year. Worth $13 billion and growing at 15-20 percent a year, Sunfeast biscuits, Bingo snacks and the Fiama Di Wills range of soaps and shampoos of ITC are competing with Hindustan Unilever Ltd, Procter & Gamble, Godrej Consumer Products Ltd and Dabur India Ltd.

On overall profit, the consumer goods division lost 1.96 billion rupees before interest and tax even though sales rose 24 percent to 55.3 billion rupees in the year to March, accounting for 22 percent of total ITC revenue.

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