How ITC is churning value from its highly commoditised agri business division

Source : Business Today

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@dmuthuk @ITCCorpCom

Around 20% of agri business division's revenue in FY21 came from its value-added business.
ITC in recent years has launched frozen vegetables such as peas, tinda and parwal under the Farmland brand. It has also launched frozen shrimps under Kitchens of India. Acc to management, β€œThe agri-business is the source of competitive advantage for our food business”

In case of Frozen Peas that is available in market, by the time you open the pack and rehydrate for usage in the kitchen, the outer layer comes off.

How ITC differentiates this from others - they ensure that the crop is harvested at the right time and is frozen in 4-14 hours, so the freshness is sealed. They ensure that the product is freezed for a time such that sweetness is preserved and product is fresh when opened.

Also, company is investing in offering value-added commodities. Wheat used 2 make Roti is different 4m wheat that is used in baking Pizza,etc. this division supply wheat & other commodities to food brands & QSR’s, foresee a huge business potential in wheat & other commodities.
Management expects agri divisions margin will improve over a period of time.

For instance, when it comes to spices, most global and Indian brands do stringent checks on pesticide residues. ITC's value-add is to work closely with farmers, help them forecast potential pest attacks and therefore minimise the use of pesticide.

The company forayed into medicinal herbs. It set up a 110-acre farm in Madhya Pradesh a few years ago, where it has been experimenting with medicinal herbs such as ashwagandha, tulsi and a host of other herbs. Management intends to scale it up.

Personalised solutions to farmers via eChoupal platform has helped farmer earn more on back of better yield which altogether helps the company.

This strategy is implemented across various products that the company procures from farmers across India.

Currently, agri division’s value addition brings in 20% of the revenue. Management expects this share in revenue would rise to 50% in next couple of years.


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