ITC Business Model: How does ITC Earn Money?

ITC Limited, established in 1910 as the Imperial Tobacco Company of India Limited, has evolved into one of India’s foremost conglomerates, with a diversified presence across various sectors. Headquartered in Kolkata, ITC’s business portfolio spans Fast-Moving Consumer Goods (FMCG), Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, and Information Technology. This diversification has been central to ITC’s strategy, enabling it to mitigate risks associated with dependence on a single sector and capitalize on emerging opportunities in the Indian market.

Cigarettes and Tobacco Products

Historically, ITC’s foundation was built upon its cigarette business, and this segment continues to be a significant contributor to the company’s revenue and profits. As of the financial year ending March 31, 2024, ITC reported a Gross Revenue of ₹69,446 crores and a Net Profit of ₹20,422 crores. A substantial portion of this revenue is attributed to its cigarettes segment, which includes well-known brands such as Gold Flake, Wills Navy Cut, and Classic. Despite increasing health awareness and regulatory challenges, ITC has maintained its market leadership in the Indian cigarette industry, controlling nearly 80% of the legal market share. This dominance is facilitated by strong brand recognition, extensive distribution networks, and the company’s ability to navigate complex regulatory landscapes.

FMCG – Diversification and Growth

In a strategic move to reduce dependence on tobacco, ITC ventured into the FMCG sector in 2001. Over the years, the company has built a robust portfolio of brands across various categories:

• Branded Packaged Foods: ITC’s food brands have gained significant market share in their respective categories. For instance, Aashirvaad is a leading brand in the packaged atta (wheat flour) market, while Sunfeast has established a strong presence in the biscuits segment. Other notable brands include Bingo! (snacks), Yippee! (noodles), and B Natural (fruit juices).
• Personal Care: The company has introduced brands like Fiama, Vivel, and Engage, catering to segments such as soaps, shampoos, and deodorants. These brands have been developed to meet the evolving preferences of Indian consumers, emphasizing quality and innovation.
• Education and Stationery Products: ITC’s Classmate and Paperkraft brands have become synonymous with quality stationery products in India. Classmate, in particular, has a significant market share in the notebooks segment, appealing to students across the country.

The FMCG segment, excluding cigarettes, has shown impressive growth, contributing significantly to ITC’s diversified revenue streams. This expansion is a testament to ITC’s ability to leverage its deep understanding of the Indian market, strong distribution capabilities, and commitment to quality.

Hotels

ITC’s foray into the hospitality sector is marked by its chain of luxury hotels across India. The Hotels segment, while capital-intensive, aligns with ITC’s commitment to showcasing Indian culture and providing world-class services. As of the financial year ending March 31, 2024, ITC’s hotel properties have received international recognition for their sustainability initiatives. Notably, 12 of its hotel properties have received LEED Zero Carbon certification, and 4 properties have received LEED Zero Water certification, underscoring ITC’s dedication to environmental stewardship.

Paperboards, Specialty Papers, and Packaging

ITC is a prominent player in the paperboards and specialty papers industry in India. This segment caters to a wide range of packaging and printing needs, serving industries such as pharmaceuticals, FMCG, and publishing. ITC’s commitment to sustainability is evident in this segment, with a focus on renewable resources and eco-friendly practices. The company’s Packaging and Printing Business provides superior packaging solutions, enhancing the brand appeal of products while adhering to high environmental standards.

Agri-Business

Leveraging its deep linkages with the rural economy, ITC’s Agri-Business division is one of India’s largest exporters of agricultural commodities. The company sources a variety of products, including soya, coffee, and wheat, directly from farmers. A cornerstone of this segment is the e-Choupal initiative, a pioneering effort to empower farmers with real-time information and facilitate efficient supply chain management. By providing internet access and market information, e-Choupal enhances farmers’ decision-making capabilities, leading to improved productivity and incomes.

Information Technology

ITC’s presence in the IT sector is embodied by ITC Infotech, a global IT services company. ITC Infotech offers business and technology solutions to enterprises across industries such as banking, healthcare, and manufacturing. This segment complements ITC’s diversified portfolio, contributing to its revenue while enabling digital transformation across its businesses.

Financial Performance and Revenue Distribution

ITC’s diversified business model has enabled it to achieve robust financial performance. For the financial year ending March 31, 2024, the company reported a Gross Revenue of ₹69,446 crores, reflecting a 6.8% growth (excluding Agri-Business). The Profit After Tax stood at ₹20,422 crores, marking an 8.9% increase year-over-year. The revenue distribution underscores the company’s diversified earnings base, with significant contributions from both traditional and new business segments.

Strategic Initiatives and Future Outlook

ITC continues to focus on innovation, sustainability, and digital transformation as key pillars of its growth strategy. The company is investing in developing premium and differentiated products across its FMCG portfolio to cater to evolving consumer preferences. In the Agri-Business segment, ITC is enhancing its value-added product portfolio and expanding its footprint in international markets. The Hotels business is poised for growth with new properties in the pipeline, emphasizing luxury and sustainability. ITC Infotech is strengthening its capabilities in emerging technologies to drive digital solutions for clients globally.

In conclusion, ITC’s diversified business model, underpinned by strong brands, extensive distribution networks, and a commitment to sustainability, has enabled it to build multiple drivers of growth

and resilience. The company’s ability to operate across various sectors has not only mitigated risks but also positioned it as a key player in India’s economic landscape. Looking ahead, ITC is focused on strengthening its market position through innovation, sustainability, and digital transformation.

Sustainability as a Core Business Strategy

One of ITC’s distinguishing factors is its unwavering commitment to sustainability. The company has adopted a triple bottom line approach, balancing economic, social, and environmental considerations. Key sustainability initiatives include:

• Carbon Neutrality: ITC is one of the few companies globally to be carbon-positive for over 18 years, water-positive for 21 years, and solid waste recycling-positive for 16 years.
• Sustainable Sourcing: ITC ensures that raw materials for its paper and agri-business segments come from responsibly managed and renewable sources. Over 50% of ITC’s energy requirements are met from renewable sources.
• Social Initiatives: ITC’s Social Investments Program includes initiatives such as watershed development, primary education, and women’s empowerment, positively impacting millions of lives in rural India.

This focus on sustainability not only aligns with ITC’s corporate social responsibility (CSR) goals but also enhances its brand equity and long-term viability.

Digital Transformation and E-commerce Growth

ITC has embraced digital transformation to enhance operational efficiency and improve customer experiences. The company has invested in AI, machine learning, and cloud computing to streamline processes and drive data-driven decision-making. ITC’s direct-to-consumer (D2C) brands are expanding through e-commerce platforms, including ITC e-store, which caters to online buyers for FMCG products.

Additionally, ITC Infotech, the company’s IT services arm, is focusing on digital solutions across BFSI (Banking, Financial Services & Insurance), healthcare, and retail sectors, helping enterprises adapt to the digital economy.

ITC’s Future Growth Strategies

Given ITC’s strong financial position and diversified business model, its future growth strategies revolve around:

1. Expansion of the FMCG Portfolio
   • Increasing market penetration for existing brands like Aashirvaad, Sunfeast, Bingo! and Yippee!
   • Launching new premium and health-focused product lines to cater to evolving consumer preferences.
   • Strengthening its presence in the personal care segment, competing with established players like HUL, P&G, and Dabur.
2. Strengthening the Hotels Business
   • With travel and tourism rebounding post-pandemic, ITC is expanding its luxury and premium hotel segment.
   • The asset-right strategy (focusing on management contracts instead of capital-heavy hotel ownership) will help drive profitability.
3. Boosting Agri-Business and E-Choupal Expansion
   • ITC aims to deepen its farm-to-fork model by increasing sourcing from farmers and enhancing value-added agri-products.
   • The e-Choupal initiative will be digitally upgraded to support rural entrepreneurship and enhance agri-supply chain efficiency.
4. Leveraging ITC Infotech for Global IT Expansion
   • ITC Infotech is focusing on cloud computing, cybersecurity, and AI-driven solutions to capture a larger global market share.
   • Partnerships with global tech firms will further ITC Infotech’s digital capabilities.
5. Sustainability and Green Growth
   • Investment in carbon capture technologies and plastic waste reduction to reinforce ITC’s leadership in sustainability.
   • Expansion of renewable energy projects to support the company’s net-zero carbon goal.

Challenges and Risks

Despite ITC’s strengths, the company faces challenges such as:

• Regulatory Hurdles: The cigarette business, which remains a major revenue contributor, is subject to high taxation, increasing regulatory restrictions, and anti-smoking campaigns.
• Intense Competition in FMCG: The FMCG sector in India is highly competitive, with players like HUL, Nestlé, and Britannia posing challenges.
• Economic Volatility: Changes in inflation rates, commodity prices, and consumer spending patterns could impact business performance.
• Evolving Consumer Trends: The shift towards health-conscious eating, organic products, and sustainable brands requires continuous innovation.

Final Thoughts: ITC’s Business Model as a Long-Term Success Strategy

ITC’s ability to diversify beyond cigarettes and build strong brands in FMCG, Agri-business, Hotels, and IT services has enabled it to establish itself as a multi-sector leader. The company’s investments in technology, sustainability, and digital transformation ensure it remains future-ready.

With a strong balance sheet, growing FMCG business, leadership in sustainability, and expanding digital ecosystem, ITC is well-positioned to capitalize on India’s growing consumer market. While challenges exist, the company’s strategic initiatives, operational efficiency, and commitment to innovation will continue to drive long-term profitability and shareholder value.