Biscuits Industry Key Players Volumes Distribution Practices

To Estimate the Biscuits Industry and identify the critical success factors
OBJECTIVE OF THE STUDY
To determine the key players operating in the industry by estimating their
volumes and critically evaluate their distribution practices.
Scope of the study: The study shall entail the following:
• Complete understanding of the category and industry.
- The key players with brand wise volumes
- Availability & Visibility figures of key players by channels
• Understanding of the distribution process and the components of the
distribution chain:
- The players: Distributor, trade (Wholesale & retail), Salesman.
- Various channels and their dynamics (wholesale, convenience,
grocer, tea stall/restaurant…).
- Distribution infrastructure (vehicle, sales force…)
- Distribution norms and practices: (inventory, billing, credit, delivery,
frequency of service…)
- Strengths and weaknesses of various players as regard distribution.
• Understanding of various trade schemes in the market.

- Critically analyze the schemes as regards their design and
effectiveness.
• Recommendations for ITC to formulate a distribution strategy to align
with industry needs.
Location of the Study: Saharanpur.
Duration of the Study: 6 weeks
Methodology:
The project be broadly divided into 3 parts:
• Part 1: Understanding of the distribution systems at different WD point
(across companies).
• Part 2: Collection of data regarding industry figures, key players,
availability, schemes etc by carrying out a detailed market survey.
• Part 3: Collation of data and preparation of recommendations.
Part 1 and Part 2 should be carried out simultaneously.

LITERATURE REVIEW
MARKETING CHANNEL
Marketing channel are sets of interdependent organizations, involved in the
process of making a product or service available for use or consumption.
From the outset, it should be recognized that not only do marketing channels
satisfy demand of supplier goods and services at right place, quantity,
quality and price, but they also stimulate demand through the potential
activities of the unit (e.g., retailer, manufacturer, representative, sales officer,
wholesaler comprises them. Therefore the channel should be viewed as an
orchestrated network that creates value for the use of consumers through
the generation of firm, possession, time and place utilities. Members of
marketing channel perform a number of key functions. Some of the functions
are:
1. Information
2. Promotion
3. Negotiation
4. Ordering
5. Financing
6. Risk taking
7. Physical possession
8. Payment
1. Information: the collection and dissemination of marketing research
information about potential and current customer, competitors and the
other forces in market environment.
2. Promotion: The development and pervasive communication design to
attract customer to its offer.
3. Negotiation: The attempt to reach the final agreement on price and
other form so that transfer of ownership or possession can be
affected.
4. Ordering: Marketing channel member’s communication of intervention
to buy to the manufacturer goods.
5. Financing: the acquisition and allocation of funds required to finance
inventories at different links of marketing channel.
6. Physical possession: The successive storage and movement of
physical product from raw materials to the final customers.
7. Payment: Buyers payment of the bill to the seller through banks and
other financial institutions.

DISTRIBUTION STRATEGIES
Companies have to decide on the number of intermediaries to use in their
channel. The various strategies that are available are as follows:
• Exclusive distribution
• Selective distribution
• Intensive distribution
Exclusive distribution: It involves severely limiting the number of
intermediaries handling the company goods or services. It is used when the
producer wants to maintain a great deal of control over the source level and
service output offered by the reseller. Often it involves exhaustive dealer
agreement in which dealer agrees not to carry competitive brand. By
generating exclusive distribution, the product hopes to obtain more
aggressive and knowledge selling. Exclusive distribution tends to enhance
the product image and attain larger markups. It requires greater partnership
between the seller and the reseller and it is found in major industrial
products, automobiles sector etc.
Selective distribution: It involves more than a few and less than all of the
intermediaries who are willing to carry a particular product. It is use both by
established companies and by new companies seeking to obtain distributors.
In this distribution the company does not have to dissipate its effort over
many outlet, rather it can develop a good working relation with its selected
intermediaries and expect a better than average selling effort with more
control and less cost than intensive distribution.
Intensive distribution: This involves placing the goods or services in as
many outlets as possible. When the consumers require a great deal of
location convenience. This strategy is generally used for consumer items like
tobacco products, soap, snacks and cosmetics.

DISTRIBUTION CHANNEL
Distribution issues come into play heavily in deciding brand level strategy. In
order to secure a more exclusive brand label, for example, it is usually
necessary to sacrifice volume—it would do no good for Mercedes-Benz to
create a large number of low priced automobiles. Some firms can be very
profitable going for quantity where economies of scale come into play and
smaller margins on a large number of units add up—e.g., McDonald’s
survives on much smaller margins than upscale restaurants, but may make
larger profits because of volume. Some firms choose to engage in a niching
strategy where they forsake most customers to focus on a small segment
where less competition exists (e.g., clothing for very tall people).
Distribution Objectives
Interrelated objectives: A firm’s distribution objectives will ultimately be highly
related—some will enhance each other while others will compete. For
example, as we have discussed, more exclusive and higher service
distribution will generally entail less intensity and lesser reach. Cost has to
be traded off against speed of delivery and intensity (it is much more
expensive to have a product available in convenience stores than in
supermarkets, for example).
Narrow vs. wide reach: The extent to which a firm should seek narrow
(exclusive) vs. wide (intense) distribution depends on a number of factors.

One issue is the consumer’s likelihood of switching and willingness to
search. For example, most consumers will switch soft drink brands rather
than walking from a vending machine to a convenience store several blocks
away, so intensity of distribution is essential here. However, for sewing
machines, consumers will expect to travel at least to a department or
discount store, and premium brands may have more credibility if they are
carried only in full service specialty stores.
Retailers involved in a more exclusive distribution arrangement are likely to
be more “loyal”—i.e., they will tend to
• Recommend the product to the customer and thus sell large quantities;
• Carry larger inventories and selections; and
• Provide more services
Thus, for example, Compaq in its early history instituted a policy that all
computers must be purchased through a dealer. On the surface, Compaq
passed up the opportunity to sell large numbers of computers directly to
large firms without sharing the profits with dealers. On the other hand,
dealers were more likely to recommend Compaq since they knew that
consumers would be buying these from dealers. When customers came in
asking for IBMs, the dealers were more likely to indicate that if they really
wanted those, they could have them—“But first, let’s show you how you will
get much better value with a Compaq.”

Distribution opportunities: Distribution provides a number of opportunities for
the marketer that may normally be associated with other elements of the
marketing mix. For example, for a cost, the firm can promote its objective by
such activities as in-store demonstrations/samples and special placement
(for which the retailer is often paid). Placement is also an opportunity for
promotion—e.g., airlines know that they, as “prestige accounts,” can get very
good deals from soft drink makers who are eager to have their products
offered on the airlines. Similarly, it may be useful to give away, or sell at low
prices, certain premiums (e.g., T-shirts or cups with the corporate logo.) It
may even be possible to have advertisements printed on the retailer’s bags
(e.g., “Got milk?”)
Other opportunities involve “parallel” distribution (e.g., having products sold
both through conventional channels and through the Internet or factory outlet
stores). Partnerships and joint promotions may involve distribution (e.g.,
Burger King sells clearly branded Hershey pies).
Deciding on a strategy. In view of the need for markets to be balanced, the
same distribution strategy is unlikely to be successful for each firm. The
question, then, is exactly which strategy should one use? It may not be
obvious whether higher margins in a selective distribution setting will
compensate for smaller unit sales. Here, various research tools are useful.
In focus groups, it is possible to assess what consumers are looking for and
which attributes are more important. Scanner data, indicating how frequently
various products are purchased and items whose sales correlate with each
other may suggest the best placement strategies. It may also, to the extent
ethically possible, be useful to observe consumers in the field using products
and making purchase decisions.
Here, one can observe factors such as:
♦ How much time is devoted to selecting a product in a given category,
♦ How many products are compared,
♦ What different kinds of products are compared or are substitutes (e.g.,
frozen yogurt vs. cookies in a mall), and
♦ What are “complementing” products that may cue the purchase of others
if placed nearby?
Channel members—both wholesalers and retailers—may have valuable
information, but their comments should be viewed with suspicion as they
have their own agendas and may distort information.
Direct Marketing
We consider direct marketing early in the term as a “contrast” situation
against which later channels can be compared. In general, you cannot save
money by “eliminating the middleman” because intermediaries specialize in
performing certain tasks that they can perform more cheaply than the
manufacturer. Most grocery products are most efficiently sold to the
consumer through retail stores that take a modest mark-up—it would not
make sense for manufacturers to ship their grocery products in small
quantities directly to consumers.
Intermediaries perform tasks such as
♦ Moving the goods efficiently (e.g., large quantities are moved from
factories or warehouses to retail stores);
♦ Breaking bulk (manufacturers sell to a modest number of wholesalers in
large quantities—quantities are then gradually broken down as they
make their way toward the consumer);
♦ Consolidating goods (retail stores carry a wide assortment of goods from
different manufacturers—e.g., supermarkets span from toilet paper to
catsup); and
♦ Adding services (e.g., demonstrations and repairs).
Direct marketers come in a variety of forms, but their categorization is
somewhat arbitrary. The main thing to consider here is each firm’s functions
and intentions. Some firms sell directly to consumers with the express
purpose of eliminating retailers that supposedly add cost (e.g., Dell
Computer). Others are in the business not so much to save on costs, but
rather to reach groups of consumers who are not easily reached through the
stores. Others—e.g., online travel agents or check printers—provide heavily
customized services where the user can perform much of the work.
Telemarketers operate by making the promotion an integral part of the

process—you are explained the benefits of the product in an advertisement
or infomercial and you then order directly in response to the promotion.
Finally, some firms combine these roles—e.g., Geico is a customizer, but
also claims, in principle, to cut out intermediaries.
There are certain circumstances when direct marketing may be more useful
—e.g., when absolute margins are very large (e.g., computers) or when a
large inventory may be needed (e.g., computer CDs) or when the customer
base is widely dispersed (e.g., bee keepers).
Direct marketing offers exceptional opportunities for segmentation because
marketers can buy lists of consumer names, addresses, and phone-numbers
that indicate their specific interests. For example, if we want to target auto
enthusiasts, we can buy lists of subscribers to auto magazines and people
who have bought auto supplies through the mail. We can also buy lists of
people who have particular auto makes registered.

CHANNEL STRUCTURE
Paths to the customer
For most products and situations, it is generally more efficient for a
manufacturer to go through a distributor rather than selling directly to the
customer. This is especially the case when consumers need to have variety
and assortment (e.g., consumer would like to buy not just toothpaste but
also other personal hygiene products, and even other grocery products at
the same place), when products are bought in small volumes or at low value
(e.g., a candy bar sells for less than Rs. 20), or even intermediaries have
skills or resources that the manufacturer does not (a sales force,
warehousing, and financing). Nevertheless, there are situations when these
conditions are not met—most typically in industrial settings. As an extreme
case, most airlines are perfectly happy only being able to buy aircraft and
accessories from Boeing and would prefer not to go through a retailer—
particularly since the planes are often highly customized. More in the "gray"
area, it may or may not be appropriate to sell microcomputers directly to
consumers rather than going through a distributor—the costs of providing
those costs may be roughly comparable to the margin that a distributor
would take.
Potential channel structures

Channel structures can assume a variety of forms. In the extreme case of
Boeing aircraft or commercial satellites, the product is made by the
manufacturer and sent directly to the customer’s preferred delivery site. The
manufacturer, may, however, involve a broker or agent who handles
negotiations but does not take physical possession of the property. When
deals take on a smaller magnitude, however, it may be appropriate to
involve retailer--but no other intermediary. For example, automobiles, small
planes, and yachts are frequently sold by the manufacturer to a dealer who
then sends directly to the customer. It does not make sense to deliver these
bulky products to a wholesaler only to move them again. On the other hand,
it would not make sense for a Mumbai customer to fly to Delhi, buy a car
there, and then drive it home. As the need for variety increases, a
wholesaler may then be introduced. For example, an office supply store
needs to sell more merchandise than any one manufacturer can produce.
Therefore, a wholesaler will buy a very large quantity of binders, file folders,
staplers, reams of paper, glue sticks, and similar products and sell this in
smaller quantities—say 200 staplers at a time—to the office supply store,
which, in turn, may go to another wholesaler who has acquired telephones,
typewriters, and photocopiers. Note that more than one wholesaler level may
be involved—a local wholesaler serving the Inland Empire may buy from
each of the two wholesalers listed above and then sell all, or most, of the
products needed by local office supply stores. Finally, even in longer
channels, agents or brokers may be involved. This, in particular, will happen

when the owner of a small, entrepreneurial company has more experience
with technology than with businesses negotiations. Here, the manufacturer
can be freed, in return for paying the agent, from such tasks, allowing him or
her to focus on what he or she does well.
Criteria in selecting channel members
Typically, the most important consideration whether to include a potential
channel member is the cost at which he or she can perform the required
functions at the needed level of service. For example, it will be much less
expensive for a specialty foods manufacturer to have a wholesaler get its
products to the retailer. On the other hand, it would not be cost effective for
Procter & Gamble and Wal-Mart to involve a third party to move their
merchandise—Wal-Mart has been able to develop, based on its information
systems and huge demand volumes, a more efficient distribution system.
Note the important caveat that cost alone is not the only consideration
—premium furniture must arrive in the store on time in perfect condition, so
paying more for a more dependable distributor would be indicated. Further,
channels for perishable products are often inefficiently short, but the
additional cost is needed in order to ensure that the merchandise moves
quickly. Note also that image is important—Wal-Mart could very efficiently
carry Rolex watches, but this would destroy value from the brand.
"Piggy-backing." A special opportunity to gain distribution that a
manufacturer would otherwise lack involves "piggy-backing." Here, a

manufacturer enlists another manufacturer that already has a channel to a
desired customer base, to pick up products into an existing channel. For
example, a manufacturer of rhinoceros and hippopotamus shampoo might
be able to reach zoos by approaching a manufacturer of crocodile teeth
cleaning supplies that already reaches this target. In the case of reciprocal
piggy-backing, the shampoo manufacturer might then, in turn, bring the teeth
cleaning supplies through its existing channel to exotic animal veterinarians.
Parallel Distribution. Most manufacturers find it useful to go through at
least one wholesaler in order to reach the retailer, and it is simply not
efficient for Colgate to sell directly to pathetic little "mom and pop"
neighborhood stores. However, large retail chains such as K-Mart and
Ralph’s buy toothpaste and other Colgate products in such large volumes
that it may be efficient to sell directly to those chains. Thus, we have a
"parallel" distribution network whereby some retailers buy through a
distributor and others do not. Note that we may also be tempted to add a
direct channel—e.g., many clothing manufacturers have factory outlet
stores. However, note that the full service retailers will likely object to being
"undercut" in this manner and may decide to drop or give less emphasis to
the brand. It may be possible to minimize this contract by precautions such
as (1) having outlet stores located in vacation areas not within easy access
of most people, (2) presenting the merchandise as being slightly irregular,
and/or (3) emphasizing discontinued brands and merchandise not sold in
regular stores.
Evaluating Channel Performance. The performance of channel members
should be periodically monitored—a channel member may have looked
attractive earlier but may not, in practice be able to live up to promises. (This
can be either because of complacency or because the channel member
simply did not realize the skills and resources needed to perform to
standards). Thus, performance level (service outputs) and costs should be
evaluated. Further, changes in technology or in the market place may make
it worthwhile to shift certain functions to another channel member (e.g., a
distributor has expanded its coverage into another region or may have
gained or lost access to certain retail chains). Finally, the extent to which
compensation is awarded in proportion to performance should be
reassessed—e.g., a distributor that ends up holding inventory longer or
taking on more returns may need additional compensation.

DISTRIBUTION OPPORTUNITIES
First of all, we must consider what is realistically available to each firm. A
small manufacturer of potato chips would like to be available in grocery
stores nationally, but this may not be realistic. We need to consider, then,
both who will be willing to carry our products and whom we would actually
like to carry them. In general, for convenience products, intense distribution
is desirable, but only brands that have a certain amount of power—e.g., an
established brand name—can hope to gain national intense distribution.
Note that for convenience goods, intense distribution is less likely to harm
the brand image—it is not a problem, for example, for Haagen Dazs to be
available in a convenience store along with bargain brands—it is expected
that people will not travel much for these products, so they should be
available anywhere the consumer demands them. However, in the category
of shopping goods, having Rolex watches sold in discount stores would be
undesirable—here, consumers do travel, and goods are evaluated by
customers to some extent based on the surrounding merchandise.
Distribution Options
Major brand standard convenience good
 Moderately intense distribution inappropriate; selective distribution
Premium brand shopping good

 Selective distribution
Niche brand
 National moderately intense distribution unrealistic; local or "invited"
national distribution
Minor brand shopping good
 Moderately intense distribution (e.g., TVs in discount store)
Major brand shopping good
 National regional intense distribution unrealistic; local or "invited" national
distribution
Minor brand convenience good
 Intense distribution possible but not appropriate; selective preferred
Upscale brand convenience good
 Intense distribution (limiting distribution would mean forfeiting brand
status)
PRODUCT TYPE
The product life cycle. In general, a brand can expect lesser distribution in
its early stages—fewer retailers are motivated to carry it. Similarly, when a
product category is new, it will be available in fewer stores—e.g., in the early
days, computer disks were available only in specialty stores, but now they
can be found in supermarkets and convenience stores as well. Certain
products that are not well established may have to get their start on
"infomercials," only slowly getting entry into other types out outlets. (Please
see PowerPoint chart).
Brief review of distribution intensity issues:
 Full service retailers tend dislike intensive distribution.
 Low service channel members can "free ride" on full service sellers.
 Manufacturers may be tempted toward intensive distribution—
appropriate only for some; may be profitable in the short run.
 Market balance suggests a need for diversity in product categories where
intensive distribution is appropriate.
 Service requirements differ by product category.

CHOOSING DISTRIBUTION METHODS
Once you have selected and developed a unique product or business idea,
correctly positioned and targeted it to buyers, and developed your packaging
and pricing, the selection of distribution channels and sales representation is
key to successful marketing.
It's fairly easy to change many of your marketing tactics and strategies on a
periodic basis; pricing, packaging, and product mix are among these flexible
choices. However, distribution and sales decisions, once made, are much
more difficult to change. And distribution affects the selection and utilization
of all other marketing tools.
There is a wide variety of possible distribution channels, including:
 Retail outlets owned by your company or by an independent merchant
or chain
 Wholesale outlets of your own or those of independent distributors or
brokers
 Sales force compensated by salary, commission, or both
 Direct mail via your own catalog or flyers
 Telemarketing on your own or through a contract firm
 Cybermarketing, surfing the newest frontier

 TV and cable direct marketing and home shopping channels
Distribution choices for a service business follow the same lines as those for
a physical product. For example, financial planning services may be offered
from printed material, sold at retail by consultants, delivered electronically by
computer, or relayed by phone, fax or mail.
Steps for selecting distribution and sales force representation include:
♦ Identify how competitors' products are sold.
♦ Analyze strengths, weaknesses, opportunities, and threats for your
business.
♦ Examine costs of channels and sales force options.
♦ Determine which distribution options match your overall marketing
strategy.
♦ Prioritize your distribution choices.
This exercise is applicable for both large and small businesses.
Matching Distribution to Your Goals
A small company must work harder at focusing limited resources, especially
with distribution and sales force options. In some cases, the only sales force
option is for the owner to do it himself or herself, as in a small retail shop, or
consulting/service businesses.
Some distribution channels and sales force options may be attractive, but
off-strategy for the small company. A list of all possible distribution channels
and accompanying sales force options should be matched against company
marketing objectives.
For example, a company selling gourmet cooking equipment has many
options for distribution and sales force representation, including:
 Company retail stores, with company sales personnel
 Specialty food stores, with sales brokers
 Department stores, with sales brokers
 Hardware stores, with sales brokers
 Specialty chains (e.g., Williams-Sonoma, Crate & Barrel), with sales
brokers
 Direct mail, with company personnel
 Distributors, with company sales managers, brokers, distributor sales
reps
The company's products are positioned as the highest-quality cookware,
used by celebrity chefs and guaranteed for the life of the end user/buyer.
Target end users/buyers are upscale, well-educated, urban consumers who
read upscale food magazines (e.g., Gourmet, Food & Wine), dine out at
gourmet restaurants, drink wine, travel, drive expensive cars, and spend
heavily on luxury purchases. Ideally, the company wants their products
distributed through every upscale channel that caters to this exclusive target
group.
Because of the positioning of the gourmet cookware, the company believed
that hardware stores and direct mail were not consistent with the image and
reputation that they were trying to establish with their positioning. Company
retail stores, while desirable, were financially risky and too expensive at the
early stage of development. Distributors were also eliminated because of the
time and knowledge required of distributor sales personnel, coupled with the
belief that distributors could not be encouraged to learn enough or devote
enough time to the product line. In addition, the estimated 35 percent to 40
percent discount with shipping expense to distributors was financially
unattractive.
The company decided the best distribution channels were direct sales to
specialty stores and upscale department stores such as Marshall Field's,
Bloomingdale's, and Nieman-Marcus. Their sales force consisted of three
regional managers with professional cooking experience, who also did
demos in stores with the cookware. In addition, the company had the extra
margin available to afford this highly trained and motivated sales force since
distributors were not utilized.

Costs of Distribution Channels
Obviously, financial resources and cost-effectiveness are important in
considering distribution and sales force options. What can you afford, and
what will give you the most bang for your buck?
For example, Life Designs, an independent architect specializing in
residential work, has identified three primary distribution channels for its
residential design services and estimated costs for each one:
♦ Media sales: This channel is composed of competitors who advertise in
local city and county magazines, newspapers, and real-estate flyers,
subdivided by home-design only firms and home-design and industrial-
design firms. Ad inquiries are referred by the various media groups
carrying the ads. This quasi-sales force is paid on commission for
referrals that turn into jobs.
♦ Contractors and developers: This distribution channel is composed of
referrals from contractors and developers who receive a commission
from home owners and buyers. The contractors and developers are the
"sales" personnel, who expect a commission and entertainment.
♦ University design department: This is a closed distribution channel for
architectural students and professors only. It is not open to any other
architects. However, this architect's reputation may be enhanced by
occasional lectures at the university.

Life Designs knows from talking with media suppliers, competitors, and
contractors that the least expensive distribution channel is sales from
contractors and developers. However, the frequency of sales referrals and
volume of business is unpredictable. It is also somewhat out of the
architect's control because the business is dependent upon many outside
variables such as the economy, style of home wanted by buyers, etc.
Life Designs decides to work with two distribution channels concurrently —
both media and the contractor/developer channels, since most of the
spending commitment is for media. The contractor/developer channel
requires personal time and some minor entertainment expenses (wining and
dining the contractors). This one-man architect firm cannot spare much free
time, and media spending will provide a good alternative when he is busy
with a project.
Prioritizing Distribution Options
In some cases, a small business can pursue distribution into several
different channels. However, most small businesses must prioritize
distribution channel and sales force options over several years of growth and
evolving resources for the company. For example, food supplements and
vitamins are sold through a multitude of channels, including:
 multi-level "network" organizations, with company and independent sales
reps
 Health food stores, with company reps and sales brokers
 Department stores, with company reps and sales brokers
 Drug stores, with company reps and sales brokers
 Grocery stores, with company reps and sales brokers
 Mass merchandise stores, with company reps and sales brokers
 Club member warehouse stores, with company reps and sales brokers
 Direct mail, with company personnel
 Distributors, with company sales managers, brokers, distributor sales
reps
 Doctors’ offices, with company sales managers, brokers, distributor sales
reps
It is not always possible for a company, small or large, to take advantage of
all possible channels that match the marketing strategy it wants to achieve.
Financial considerations aside, it may be wise to prioritize the orderly
development and attack each distribution channel in order of easiest entry
and least competitive resistance, for example.
Other factors such as geographic proximity, ability and availability of
management to control many different channels simultaneously, availability

of experienced sales reps, marketing experience by channel, competitive
strengths by channel, manufacturing capacities, and product life cycles by
channel should be considered.
For small companies, key factors to prioritize your choice of channels
include a shorter list:
 Financial resources and risks ("How much money do we have to risk
against our objectives and marketing programs?")
 Competitors’ strengths and market share ("Are they big enough and
mean enough to hurt us, and what are their objectives?")
 Management experience by channel ("What do we know about each
channel's opportunities and threats?")
 Product positioning to target buyers ("Will the strengths of our product
uniqueness help sell it to interested buyers and can we communicate our
uniqueness effectively?")
INTRODUCTION
The Indian bakery market is still in a nascent stage. In a country where
average per capita income hovers around US$ 450 per annum, bakery items
are not very high on the list of priorities for the masses. Low margins, and a
high level of fragmentation characterize the bakery segment. Awareness is
nearly 100%, however, penetration is lower in rural areas at 15-20% and at
60% in urban areas. This is mainly because these products are consumed
as snacks, and do not form part of the main course meal.
However, over the past few years’ bakery products have shown a marked
improvement in volumes and customer base. But this growth has mainly
come from bread and biscuits segment. Infact one can safely say that bread
and biscuits constitute around 75% of the Rs 70 bn Indian bakery market.
Bread and biscuits have grown largely because these products are
characterized by the huge presence of unorganized sector (60%), as they
were reserved for the small-scale industry earlier. Also, bread to some
extent is consumed as a food supplement in the urban areas.
The Pie
Product Market size Market size Growt Penetratio
(Rs m) h n
( '000 (%) Urba Rura
tonnes)
n l
Bakery Items 70,000 - 8% 60% 20%
Biscuits 35,000 1,100 7%
Cakes 750 70 4-5%
Bread 11,000 1,400 3-4%
Other bakery products like cakes and pastries are also on the growth mode,
but the growth rates leave much to be desired. These products do not yet
have a mass appeal and are basically centred on the urban areas. In these
two categories also local manufacturers hold a sizeable chunk of the market.
Over the last few years, branded companies like Parle and Britannia have
upped their ante and introduced new products with slick packaging in order
to grow the market. These companies’ prospects were also buoyed post
deregulation of the biscuit industry in April 1997. Before that, the biscuit
segment was reserved for the small-scale industries.
Realising the mental block against premium bakery products these
companies employed a two-pronged strategy, especially in biscuits. To gain
volumes these companies continued to back glucose biscuits aimed at the
mass, and for margins they continued to stack up their portfolios with new
brands and variants. As a result, the unorganised segment that dominated
over 60% of the biscuit market in 1995-96, now sees its share shrunk to
around 50% levels.

The biscuit market is now estimated to be 1.1 m tonnes, valued at over 35
bn. Britannia and Parle control 38% and 29% respectively of the organised
biscuits market. Volumes, brand loyalty and strong distribution networks
drive this market, which is growing at 6-7% annually.
On the other hand, the 1.4 m tonnes bread market valued at Rs 11 bn, is
dominated by local manufacturers (80%). Market growth is 3-4%, but it is
much higher for organised sector (brands). Brands like Modern and Britannia
are major players in the bread market (10% and 5% market share
respectively), and together they account for 90% of the organised bread
market.
With Hindustan Lever’s acquisition of Modern Foods, this segment is likely to
see increased market penetration and rivalry in the years to come. HLL
plans to enter the bakery segment in a big way and this should be a key
driver for the industry’s growth.
According to estimates, the bakery market is poised to touch Rs 100 bn by
the year 2005 (a CAGR growth of 9.3% from current levels). However, with
the current slowdown faced by the FMCG sector as whole, the growth rates
have hit a speed breaker. It is only when the recent good monsoons give
impetus to demand, the segment would see its fortunes reviving. But in the
near term such relief looks unlikely.
In the longer term the bakery segment is likely to see competition getting
even more intense with new entrants especially MNC’s. Marketing wars
would get even more cut throat as players try to convert consumers of
unbranded products to branded products. The urban areas are likely to
continue seeing new high end products in all categories of the bakery
industry. But the road for this segment’s growth would be slow and steady.
ADVERTISING IN THE BISCUITS
• Biscuit advertising on television is pretty seasonal with the spends
peaking in the first and last quarter each year.
• Britannia industries and Parle products top the advertiser list with
nearly 68 per cent of the advertising in this category in 2003.
• Biscuit advertisers prefer advertising in drama/soap, feature films and
comedies which make up for 54 per cent of the spends in this
category in 2003.
Looking at the graph that shows the trend of advertising in the biscuits
category on the television, one can see there is a rise in advertising in this
category from 2000 onwards. The graph shows the indexed spends of the
biscuits category on television advertising since 2000.

Advertising in the biscuits category is expected to be quite seasonal. Let's
check out whether that's actually the case.

The graph confirms that biscuit advertising on television is pretty seasonal
with the spends peaking in the first and the last quarter each year.
Let's look at the advertisers, which dominate in this category. The graph
shows that Britannia Industries ltd and Parle products tops the advertiser list
with nearly 35 per cent and 33 per cent of the advertising respectively. Surya
food and Agro pvt ltd at the third position, ITC ltd at the fourth position,
Hindustan Lever ltd at the fifth position, Heinz at the sixtrh position with
nearly 15.6 per cent, 4.7 per cent, 4.4 per cent and 1.7 per cent of the
advertising share. Other advertisers are Anmol Biscuit pvt ltd, Lancer food
products, Dukes biscuits and Apsara food industries pvt ltd.
Are there any particular program genres, which biscuit advertisers prefer?
Let's look at the chart below for answers.

The graph makes it clear that drama/soap, feature films and comedies make
up for nearly 54 per cent of the television advertising spends in the biscuits
category in 2003. Cartoons/animation is ranked fourth accounting nearly 12
per cent of the spends in the television medium in this category.

MAJOR PLAYERS IN BISCUIT INDUSTRY
BRITTANNIA
Britannia was incorporated in 1918 as Britannia Biscuits Co Ltd in Calcutta.
In 1924, Pea Frean UK acquired a controlling stake, which later passed on
to the Associated Biscuits International (ABI) a UK based company. During
the ’50s and’ 60s, Britannia expanded operations to Mumbai, Delhi and
Chennai. Exports of sea foods started in the ’70s. In 1987, Nabisco, a well
known European food company, acquired ABI. In 1989, J M Pillai, a
Singapore based NRI businessman along with the Groupe Danone acquired
Asian operations of Nabisco, thus acquiring controlling stake in Britannia.
Later, Grop Danone and Nusli Wadia took over Pillai’s holdings.
In 1977, the Government reserved the industry for small scale sector, which
constrained Britannia's growth. Britannia adopted a strategy of engaging
contract packers (CP) in the small scale sector. This led to several
inefficiencies at the operating level. In April ’97, the Government dereserved
the biscuit sector from small scale. Britannia has expanded captive
manufacturing facilities and has modernized and upgraded its facilities in the
last five years. It has also forayed into the Dairy Business with the launch of
Cheese, Butter, Ghee, Dairy whitener and flavored milk products.
Parent Group
Britannia's controlling stake is jointly with Groupe Danone and Nusli Wadia.
Groupe Danone is one of the leading players in the world in bakery products
business. It acquired interest in Britannia Industries in 1989 and acquired
controlling stake in 1993..Nusli Wadia group is one of the leading industrial
houses in the country, with interests mainly in textiles and petrochemicals.
Plant locations
Britannia's plants are located in the 4 major metro cities - Kolkatta, Mumbai,
Delhi and Chennai. A large part of products are also outsourced from third
party producers. Dairy products are out sourced from three producers -
Dynamix Dairy based in Baramati, Maharashtra, Modern Dairy at Karnal in
Haryana) and Thacker Dairy Products at Howrah in West Bengal.
Business
Britannia core businesses constitute of Bakery and Dairy products. Bakery
products account for 90% of the revenues and include Biscuits, Bread and
Cake & Rusk. Dairy products contribute to 10% of Britannia’s annual
turnover of Rs13.38bn.
Over the years, Britannia has introduced and developed a full line of brands
in all segments of the biscuit market. The company's Tiger range of glucose
biscuits have been a runaway success, enabling the company to expand its
presence in the largest gluco category of the biscuit market. In salty-sweet
segment Parle’s Krackjack and Britannia’s Fifty-Fifty compete very closely.
Britannia’s other major brands include Marie, Thin Arrowroot, Bourbon, Milk-
bikis, Nice, Snax, Coconut Crunchies, Pure Magic, Good Day, Jim-Jam and
Chekkers. It has also launched biscuits like Vita MarieGold, Nutri-Choice etc,
under the health positioning.
Bakery products major, Britannia Industries, had a brilliant FY04. The
company reported over 11% topline growth during the year, where most of
its FMCG peers found it tough to grow the topline. Focus on improving cost
efficiencies aided operating margin expansion. The company finished FY04
with nearly 20% bottomline growth.

(Rs m) 4QFY03 4QFY04 Change FY03 FY04 Change
Net Sales 3,167 3,627 14.5% 12,959 14,396 11.1%
Other Income 208 306 47.1% 329 546 66.0%
Expenditure 2,857 3,281 14.8% 11,487 12,695 10.5%
Operating Profit 310 346 11.6% 1,472 1,701 15.6%
(EBDIT)
Operating Profit 9.8% 9.5% 11.4% 11.8%
Margin (%)
Interest 29 7 -75.9% 111 60 -45.9%
Depreciation 66 57 -13.6% 261 224 -14.2%
Profit before Tax 423 588 39.0% 1,429 1,963 37.4%
Tax 141 202 43.3% 482 656 36.1%
Extraordinary items 9 -83 - 44 -119 -
Profit after Tax 291 303 4.1% 991 1,188 19.9%
Net profit margin 9.2% 8.4% 7.6% 8.3%
(%)
Effective tax rate 33.3% 34.4% 33.7% 33.4%
(%)
No. of Shares (m) 25.9 25.1 25.9 25.1
Diluted earnings per 46.4 48.3 39.5 47.3
share* (x)
P/E ratio (x) 13.0 13.3
(* annualised)
The key reason for the strength in topline is believed to be the increasing
affordability of branded biscuits that aided volume growth. Moreover, the
company's repackaged and relaunched most of its biscuit brands. This
seemed to have kept the momentum going for Britannia. Apart from this,
Britannia continued to focus on ways to bring down its costs. VRS and lower
cost of debt has helped the company improve profitability.
The hiving off of properties has led to lower depreciation provisioning. The
company also received an order in favour of closure of its Mumbai plant. The
matter though is still sub-judice. After the break away from the dairy
business, the company's cash flows seemed to have improved significantly.
The company reported a strong 66% growth in other income, seemingly led
by sale of the company's mutual fund investments. All this led to a 36%
growth in profit before tax and extraordinary items.
Threat from competition
The key threats for the company are the growing competition in the biscuit
segment and the possibility of pricing pressures in the mass market.
Competitors such as Parle-G and Surya Foods have already carved out a
significant share in the mass market through aggressive pricing, where

Britannia's brand, Tiger, is trying to enlarge its share. At the higher end of
the market too, competition is hotting up, with players such as ITC rolling out
new extensions.
Britannia's profits in 2003-04 received a one-time boost from the cut in
excise duty on biscuits. This may not be repeated this fiscal.
However, the company's new cost-reduction measures may help alleviate
these pressures to some extent. The company has recently initiated

proceedings to close down its Mumbai unit and set up new manufacturing
facilities at Uttaranchal, which will significantly lower its excise and tax
burden.
The cost savings from the Mumbai unit closure, if it proceeds as planned,
could help lower the company's cost structure and put it in a better position
to compete in the mass market.

Britannia Industries Ltd. (BIL) is one of the leading producers of biscuits and
bakery products in the country. BIL’s marketing campaigns riding on the
cricket mania especially during the World Cup, have probably been the most
successful, which have added to its growth and visibility. The findings of a
recent study conducted by a private channel have also rated Britannia as
the most liked biscuit brand among kids.
Union Budget 2003-04 halved the excise duty on biscuits from 16% to
8%. Excise duty of 16% on biscuits was quite high and hence, BIL was
be the biggest beneficiary of this excise duty reduction. This also took
away some of the pricing advantage from the unorganized sector and
the pricing differential between the organised and the unorganized
sectors would also be bridged.
BIL HIGHLIGHTS:
 BIL’s biscuit volume growth has outpaced the segment driven by the
various initiatives taken by the management. Tiger biscuits launch in July
1997 led Britannia’s foray into the glucose category. Tiger now
contributes about 40% to the biscuits turnover and has been Britannia’s
biggest success.
 BIL has decided to focus on seven core brands in the biscuits and
bakerycategory. The brands include Good Day, Tiger, 50-50, Snax, and
the Cream Treat brands, among others. Last year, the company acquired
Kwality biscuits. Maska Chaska, the snack biscuit extension of Britannia's
50-50, is selling more than the mother brand in certain markets like north
Karnataka. And in doing so, Maska Chaska is contributing nearly 30% to
the mother brand 50-50's total sales across the country.
 To establish a presence at various points of consumer visits, the
company is now in talks with specialty coffee outlets and petrol pumps to
place its products at strategic sites.
 Britannia, which has agreed in-principle to acquire a 49% stake in Kwality
Biscuits and Snacko Bisc, has the option of hiking the holding in the two
companies to 100%. The company had acquired Kwality Biscuits and
Snacko Bisc to increase its presence in the southern market. Britannia is
expected to complete the acquisition of the 49% stake in Kwality Biscuits
and Snacko Bisc by the end of the current fiscal.
 The effect of a poor monsoon last year is not likely to affect growth
significantly. Though, Britannia derives close to 40% of its sales from the
rural markets, the biscuit category is likely to be more resilient compared
 Other factors, which support its higher-than-market growth are the
existence of relatively smaller players like Bakeman’s and Nutrine within
the organised sector that continue to be soft targets and the
aggressiveness of Britannia.The company is likely to better its operating
margins through greater volume sales as well as increasing productivity.

Volumes are expected to increase as company may pass on some of the
excise duty cut benefit to the customers.

PARLE
A long time ago, when the British ruled India, a small factory was set up in
the suburbs of of Mumbai city, to manufacture sweets and toffees. The year
was 1929 and the market was dominated by famous international brands
that were imported freely. Despite the odds and unequal competition, this
company called Parle Products, survived and succeeded, by adhering to
high quality and improvising from time to time.
A decade later, in 1939, Parle Products began manufacturing biscuits, in
addition to sweets and toffees. Having already established a reputation for
quality, the Parle brand name grew in strength with this diversification. Parle
Glucose and Parle Monaco were the first brands of biscuits to be introduced,
which later went on to become leading names for great taste and quality.
The strength of the Parle Brand
Over the years, Parle has grown to become a multi-million US Dollar
company. Many of the Parle products - biscuits or confectionaries, are
market leaders in their category and have won acclaim at the Monde
Selection, since 1971. Today, Parle enjoys a 40% share of the total biscuit
market and a 15% share of the total confectionary market, in India. The
Parle Biscuit brands, such as, Parle-G, Monaco and Krackjack and
confectionery brands, such as, Melody, Poppins, Mangobite and Kismi,
enjoy a strong imagery and appeal amongst consumers.

Be it a big city or a remote village of India, the Parle name symbolizes
quality, health and great taste! And yet, we know that this reputation has
been built, by constantly innovating and catering to new tastes. This can be
seen by the success of new brands, such as, Hide & Seek, or the single
twist wrapping of Mango bite. In this way, by concentrating on consumer
tastes and preferences and emphasizing Research & Development, the
Parle brand grows from strength to strength.
The Quality Commitment
Parle Products has one factory at Mumbai that manufactures biscuits &
confectioneries while another factory at Bahadurgarh, in Haryana
manufactures biscuits. Apart from this, Parle has manufacturing facilities at
Neemrana, in Rajasthan and at Bangalore in Karnataka. The factories at
Bahadurgarh and Neemrana are the largest such manufacturing facilites in
India. Parle Products also has 14 manufacturing units for biscuits & 5
manufacturing units for confectioneries, on contract. All these factories are
located at strategic locations, so as to ensure a constant output & easy
distribution. Each factory has state-of-the-art machinery with automatic
printing & packaging facilities.
All Parle products are manufactured under the most hygienic conditions.
Great care is exercised in the selection & quality control of raw materials,
packaging materials & rigid quality standards are ensured at every stage of
the manufacturing process. Every batch of biscuits & confectioneries are

thoroughly checked by expert staff, using the most modern equipment.
The Marketing Strength
The extensive distribution network, built over the years, is a major strength
for Parle Products. Parle biscuits & sweets are available to consumers, even
in the most remote places and in the smallest of villages with a population of
just 500.
Parle has nearly 1,500 wholesalers, catering to 4,25,000 retail outlets
directly or indirectly. A two hundred strong dedicated field force services
these wholesalers & retailers. Additionally, there are 31 depots and C&F
agents supplying goods to the wide distribution network.
The Parle marketing philosophy emphasizes catering to the masses. They
constantly endeavour at designing products that provide nutrition & fun to
the common man. Most Parle offerings are in the low & mid-range price
segments. This is based on their cultivated understanding of the Indian
consumer psyche. The value-for-money positioning helps generate large
sales volumes for the products.
However, Parle Products also manufactures a variety of premium products
for the up-market, urban consumers. And in this way, caters a range of
products to a variety of consumers.
Import-Export
The immense popularity of Parle products in India was always a challenge
to their production capacity. Now, using more modern techniques for
capacity expansion, they have begun spreading their wings and are going
global. Parle bisuits and confectionaries are fast gaining acceptance in
international markets, such as, Abu Dhabi, Africa, Dubai, South America
and Sri Lanka. Even the more sophisticated markets like USA & Australia,
now relish Parle products. As part of the efforts towards a larger share of the
global market, Parle has initiated the process of getting ISO 9000
certification. Many Parle Products have also won Gold, silver and
bronze medals at the Monde Selection.

PRIYA GOLD BISCUITS
TOUGH cookie. The term sits well on the shoulders of Shekhar Agarwal,
Director of the Rs 150-crore, Delhi-based Surya Food & Agro Ltd, the
company behind the Priyagold brand of biscuits. Unfazed by the muscle of
big-ticket competitors such as Britannia and Parle, Agarwal modestly tells
Catalyst that the reactive strategies adopted by his competitors speak for
themselves.
A decade of being in the business has got Priyagold the perception of being
a brand name to reckon with in the Northern region, a distribution network
that has helped the brand chart its way in Western India as well, and
recognition for quality production from Surya Food & Agro's manufacturing
plant at Surajpur (Greater Noida) in Uttar Pradesh. And while all these
factors have played significant roles in getting Priyagold where it is today, is
its competitive pricing that remains his brand's main strength.
A fact acknowledged by FMCG analysts. "It is a matter of concern that
regional players such as Priyagold offer products at retail prices that are
almost half that of established players such as Britannia. The product
offerings from such regional players may not necessarily be innovative on
taste, but are priced very aggressively and do not compromise on quality,"
observes an FMCG analyst. Some of Britannia's products such as Marie,
Good Day and Milk Bikis, for example, have been the victims of this strategy,
registering some decline in market share in recent months, according to an
AC Nielsen report.
This trend is highlighted more in semi-urban and rural markets, known to
occupy a significant share of the overall Rs 3,000-crore domestic biscuit
market. In fact, close to 70 per cent of Priyagold's sales are accounted for by
semi-urban rural markets, and the skew is expected to continue in favour of
these markets.
On the other hand, intensified competition from regional players has led the
established Britannia and Parle to squeeze their profit margins, offer
products at various price points, introduce small pack sizes, and offer
aggressive marketing promotions. And even as the battle royale continues
between Britannia and Parle on a national level, Surya Agro now claims
market leadership in the non-glucose biscuit segment, which, according to
industry estimates, accounts for 30 per cent of the overall biscuits market.
For all practical purposes then, Priyagold is hot property, especially for first
time entrants in the biscuits category. Surya Food & Agro has been
approached several times by FMCG multinationals, with proposals of either
acquiring the Priyagold brand, or forging strategic alliances with the
company.
It is very difficult for any company to enter the domestic biscuits market.
First, consider the competition. Britannia and Parle are very aggressive
nationally, in the East Priya Biscuits is tough competition for any new player,
while Duke is strong in the South. Then, of course, there is Priyagold. Yet
another player is Bakeman's. The second reason is that margins have to be
incurred at dealer, distributor and stockist levels. Then there are other
factors such as large investments involved in manufacturing and brand
building. It makes it easier for any company wanting to enter this segment,
therefore, to buy out an existing brand.
Recent times have thrown up examples of several established FMCG
players going slow on biscuits. Kellogg's recently stopped active production
of biscuits, Dabur has ruled out an entry and Nestle SA sold off the assets of
Excelsia Foods some months ago. There has been talk of Hindustan Lever,
too, extending its Modern brand to biscuits, but nothing has been announced
yet.
Surya Food & Agro, meanwhile, appears to be going full steam ahead. The
company now proposes to take on Britannia on its own turf. Their
strongholds are Uttar Pradesh, Punjab and Haryana, but they plan to foray
into the Southern market by the end of the current calendar year, beginning
with Karnataka. Surya Food intends to subsequently set up a manufacturing
unit in the State.
Up North, plans to set up a fresh manufacturing facility in Greater Noida next
financial year are currently being finalised. The proposed investment in this
plant will be about Rs 20 crore,. Production in full swing is expected to begin
by the end of this month at the company's third manufacturing base, in

Lucknow. The Lucknow plant, set up on an investment of Rs 5 crore,
commenced production about two months ago. Consolidation of production
is obviously a significant strategy for the company now, with its existing
manufacturing bases in Surajpur with seven biscuit lines and Faizabad, a
franchisee unit, in place. On the product front, 23 varieties of biscuits are
currently being produced by the company, and there is a plan to foray into
salty biscuits next year.
In the current fiscal, meanwhile, expect more of last year's Hak se maango
advertising, complete with its small-town appeal. Surya Food plans to hike
its consolidated ad spend to Rs 8 crore this fiscal, against the Rs 5 crore
spent on advertising last year.
On the exports front, the company plans to take its Priyagold brand to
markets such as Dubai, Muscat and Oman.
The Priyagold story, which began in late 1993 as a family business led by
entrepreneur B. P. Agarwal on an investment of Rs 1.5 crore, doesn't seem
to be playing second fiddle to anyone. With a target of doubling sales
turnover to Rs 300 crore in the current fiscal, the cookie certainly isn't
crumbling for Priyagold.

Other prominent players:
• Ampee Industries Pvt. Ltd
• Ampro Biscuits
• Bakewal
• Dalmia Biscuits
• Delta Foods
• Real Foods
• Super Snacks
• Tashi Commercial Corporation

COMPANY PROFILE - ITC LIMITED
ITC is one of India's foremost private sector companies with a market
capitalisation of around US $ 6 billion and a turnover of US $ 2.6 billion.
Rated among the World's Leading Companies by Forbes magazine, ITC
ranks fourth in net profit among India's private sector corporations . ITC has
a diversified presence in Cigarettes, Hotels, Paperboards & Specialty
Papers, Packaging, Agri-Business, Branded Apparel, Packaged Foods &
Confectionery, Greeting Cards and other FMCG products. While ITC is an
outstanding market leader in its traditional businesses of Cigarettes, Hotels,
Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share
even in its nascent businesses of Branded Apparel, Greeting Cards and
Packaged Foods & Confectionery.
As one of India's most valuable and respected corporations, ITC is widely
perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls
this source of inspiration "a commitment beyond the market". In his own
words: "ITC believes that its aspiration to create enduring value for the
nation provides the motive force to sustain growing shareholder value. ITC
practises this philosophy by not only driving each of its businesses towards
international competitiveness but by also consciously contributing to
enhancing the competitiveness of the larger value chain of which it is a part."
ITC's diversified status originates from its corporate strategy aimed at
creating multiple drivers of growth anchored on its time-tested core

competencies: unmatched distribution reach, superior brand-building
capabilities, effective supply chain management and acknowledged service
skills in hoteliering. Over time, the strategic forays into new businesses are
expected to garner a significant share of these emerging high-growth
markets in India.
ITC's Agri-Business is one of India's largest exporters of agricultural
products. ITC is one of the country's biggest foreign exchange earners (US $
2 billion in the last decade). The Company's 'e-Choupal' initiative is enabling
Indian agriculture significantly enhance its competitiveness by empowering
Indian farmers through the power of the Internet. This transformational
strategy, which has already become the subject matter of a case study at
Harvard Business School, is expected to progressively create for ITC a huge
rural distribution infrastructure, significantly enhancing the Company's
marketing reach.
ITC's wholly owned Information Technology subsidiary, ITC Infotech India
Limited, is aggressively pursuing emerging opportunities in providing end-to-
end IT solutions, including e-enabled services and business process
outsourcing.
ITC's production facilities and hotels have won numerous national and
international awards for quality, productivity, safety and environment
management systems. ITC was the first company in India to be rated for
Corporate Governance by ICRA, an associate of Moody's Investors Service,

which accorded it the second highest rating, signifying "a high level of
assurance on the quality of corporate governance."
ITC employs over 15,000 people at more than 60 locations across India.
Ranked among the top five sustained value creators in India by 'Business
Today-Stern Stewart' in their studies conducted between 2000 and 2003,
ITC continuously endeavors to enhance its wealth generating capabilities in
a globalising environment to consistently reward its 1,47,035 shareholders,
fulfil the aspirations of its stakeholders and meet societal expectations. This
over-arching vision of the company is expressively captured in its corporate
positioning statement: "Enduring Value. For the nation. For the
Shareholder."
LEADERSHIP
Flowing from the concept and principles of Corporate Governance adopted
by the Company, leadership within ITC is exercised at three levels. The
Board of Directors at the apex, as trustee of shareholders, carries the
responsibility for strategic supervision of the Company. The strategic
management of the Company rests with the Corporate Management
Committee comprising the wholetime Directors and members drawn from
senior management. The executive management of each business division
is vested with the Divisional Management Committee (DMC), headed by the

Chief Executive. Each DMC is responsible for and totally focused on the
management of its assigned business.
This three-tiered interlinked leadership process creates a wholesome
balance between the need for focus and executive freedom, and the need
for supervision and control.

ITC's Core Values are aimed at developing a customer-focused, high-
performance organisation which creates value for all its stakeholders:
Trusteeship
As professional managers, we are conscious that ITC has been given to us
in "trust" by all our stakeholders. We will redeem the trust reposed in us by
continuously adding value to ITC.
Customer Focus
We will always be customer focused. We will deliver what the customer
needs in terms of value, quality and satisfaction.
Respect For People
We will respect and value people and uphold humanness and human
dignity.
We will value differences in individual perspectives. We want individuals to
dream, create and experiment in pursuit of opportunities and achieve
leadership through teamwork.
Excellence
We will strive for excellence in whatever we do. We will do what is right, do it
well and win.

Innovation
We will constantly innovate and strive to better our processes, products,
services and management practices.
Ethical Corporate Citizenship
We will pursue exemplary standards of ethical behaviour. We will at all times
comply with the laws of the land.
Preamble
Over the years, ITC has evolved from a single product company to a multi-
business corporation. Its businesses are spread over a wide spectrum,
ranging from cigarettes and tobacco to hotels, packaging, paper and
paperboards and international commodities trading. Each of these
businesses is vastly different from the others in its type, the state of its
evolution and the basic nature of its activity, all of which influence the choice
of the form of governance. The challenge of governance for ITC therefore
lies in fashioning a model that addresses the uniqueness of each of its
businesses and yet strengthens the unity of purpose of the Company as a
whole.
Since the commencement of the liberalisation process, India's economic
scenario has begun to alter radically. Globalisation will not only significantly
heighten business risks, but will also compel Indian companies to adopt
international norms of transparency and good governance. Equally, in the

resultant competitive context, freedom of executive management and its
ability to respond to the dynamics of a fast changing business environment
will be the new success factors. ITC's governance policy recognises the
challenge of this new business reality in India.
DEFINITION AND PURPOSE
ITC defines Corporate Governance as a systemic process by which
companies are directed and controlled to enhance their wealth generating
capacity. Since large corporations employ vast quantum of societal
resources, we believe that the governance process should ensure that these
companies are managed in a manner that meets stakeholders aspirations
and societal expectations.
CORE PRINCIPLES
ITC's Corporate Governance initiative is based on two core principles. These
are :
♦ Management must have the executive freedom to drive the enterprise
forward without undue restraints; and
♦ This freedom of management should be exercised within a framework of
effective accountability.
ITC believes that any meaningful policy on Corporate Governance must
provide empowerment to the executive management of the Company, and

simultaneously create a mechanism of checks and balances which ensures
that the decision making powers vested in the executive management is not
only not misused, but is used with care and responsibility to meet
stakeholder aspirations and societal expectations.
Cornerstones
From the above definition and core principles of Corporate Governance
emerge the cornerstones of ITC's governance philosophy, namely
trusteeship, transparency, empowerment and accountability, control and
ethical corporate citizenship. ITC believes that the practice of each of these
leads to the creation of the right corporate culture in which the company is
managed in a manner that fulfíls the purpose of Corporate Governance.
Trusteeship
ITC believes that large corporations like itself have both a social and
economic purpose. They represent a coalition of interests, namely those of
the shareholders, other providers of capital, business associates and
employees. This belief therefore casts a responsibility of trusteeship on the
Company's Board of Directors. They are to act as trustees to protect and
enhance shareholder value, as well as to ensure that the Company fulfils its
obligations and responsibilities to its other stakeholders. Inherent in the
concept of trusteeship is the responsibility to ensure equity, namely, that the
rights of all shareholders, large or small, are protected.

Transparency
ITC believes that transparency means explaining Company's policies and
actions to those to whom it has responsibilities. Therefore transparency must
lead to maximum appropriate disclosures without jeopardising the
Company's strategic interests. Internally, transparency means openness in
Company's relationship with its employees, as well as the conduct of its
business in a manner that will bear scrutiny. We believe transparency
enhances accountability.
Empowerment and Accountability
Empowerment is an essential concomitant of ITC's first core principle of
governance that management must have the freedom to drive the enterprise
forward. ITC believes that empowerment is a process of actualising the
potential of its employees. Empowerment unleashes creativity and
innovation throughout the organisation by truly vesting decision-making
powers at the most appropriate levels in the organisational hierarchy.
ITC believes that the Board of Directors are accountable to the
shareholders, and the management is accountable to the Board of Directors.
We believe that empowerment, combined with accountability, provides an
impetus to performance and improves effectiveness, thereby enhancing
shareholder value.
Control
ITC believes that control is a necessary concomitant of its second core
principle of governance that the freedom of management should be
exercised within a framework of appropriate checks and balances. Control
should prevent misuse of power, facilitate timely management response to
change, and ensure that business risks are pre-emptively and effectively
managed.
Ethical Corporate Citizenship
ITC believes that corporations like itself have a responsibility to set
exemplary standards of ethical behaviour, both internally within the
organisation, as well as in their external relationships. We believe that
unethical behaviour corrupts organisational culture and undermines
stakeholder value.
CORPORATE CITIZEN
As a responsible corporate citizen, ITC promotes art, culture and education,
besides working for the protection and enrichment of the environment and
overall social development.

Community Development
ITC's deep organic link with rural India is almost a century old. The Indian
Leaf Tobacco Development Division (ILTD) pioneered scientific tobacco
farming in the country in 1912. It has worked with farmers to improve skills,
farming techniques, crop quality and agricultural productivity. Scientific
farming techniques and crop development have significantly increased the
yield per hectare, thereby bringing prosperity to farmers in Andhra Pradesh
and Karnataka. ILTD has also served as the vital link between the Indian
farmer and the global markets. It has educated the farmer on global trends
and helped him grow varieties of tobacco that enjoy significant demand
internationally.
ILTD's contribution to India's rural development extends to healthcare also.
The Division conducts regular free medical camps for eye treatment,
immunisation and sterilisation. Tens of thousands of villagers around ILTD's
operational sites have immensely benefited from these camps.
ILTD prioritises its developmental activities through regular socio-economic
surveys. The Division has improved the quality of life in villages through
vocational training programmes in photography, mechanical repairs, nursing
and driving, all of which facilitate self-employment. There are also
programmes that motivate women to form self-help groups to supplement
family income. Other schemes provide sanitation, borewells, drinking water
and lighting in villages. ILTD's extensive involvement with the local

community has earned for it the sobriquet, `Talli' company which in Telugu
means the `mother' company.
ITC's factories in Saharanpur in Uttar Pradesh, Munger in Bihar, Bangalore
in Karnataka and Kolkata in West Bengal actively involve themselves with
community development through various welfare schemes. These schemes
include immunisation programmes, creation of awareness on the critical
need for family planning, vocational guidance courses, construction of bus
shelters, care of the handicapped, establishment of libraries and the
organisation of blood donation and eye camps. Additionally, in partnership
with NGOs, ITC is engaged in making schools attractive to children and their
parents to maximise enrolment and minimise dropouts by improving the
quality of infrastructure and teachers' training in government schools.
Education
In keeping with national priorities, ITC has always been involved in
promoting the spread of education. ITC units support local educational
institutions with funds, infrastructure and equipment. In many places, what
began as an employee-oriented educational venture has grown to serve the
local community as a whole. At Tiruvottiyur near Chennai, the Nehru
Matriculation Higher Secondary School, supported by the Packaging &
Printing Division (PPD), began in 1967 in a thatched hut with 15 students
and 2 teachers. Today it has 1,150 students and 50 staff members. Only 15
per cent of its students belong to the families of ITC employees.

Similarly, the Tribeni Tissues Vidyapith in West Bengal started as a primary
school for employees' children in 1962. It has grown to be a Council for the
Indian School Certificate-affiliated institution. More than half of its students
are non-ITC children.
ITC is also currently supporting 100 `Fundaschools' in Madhya Pradesh for
five years as part of the state government's innovative initiative to
universalise primary education.
ITC pioneered the first private sector institute of hotel management, the
Welcomgroup Graduate School of Hotel Administration in Manipal,
Karnataka. Recognised by the International Hotel Association, Paris, the
school is acknowledged as a centre of excellence by the hospitality industry.
ITC is a founder-member of the Indian Institute of Management (IIM),
Ahmedabad, the International Management Institute (IMI), Delhi, and the
Academy for Management Excellence (ACME), Chennai and the Indian
School of Business, Hyderabad, which has a strategic alliance with the
Wharton Business School, USA.
Protecting the Environment
ITC has demonstrated a deep and abiding commitment to preserve, protect
and enrich the environment. The Company has undertaken several major
initiatives in this area.

The `Green Guntur' project in Andhra Pradesh is a remarkable case study
on enhancement in environmental quality. Working closely with municipal
authorities, government departments and local organisations, ITC has
planted 50,000 avenue plants and distributed 175,000 fruit saplings in
Guntur. The Company has also taken up plantation and afforestation work in
Chirala, Rajahmundry, Anaparti, Ongole and Mysore. Over the last six years
nearly 8 million saplings have been planted in Andhra Pradesh and
Karnataka.
The 'WelcomEnviron' programme demonstrates ITC-Welcomgroup's keen
ecology consciousness. Recycling precious natural resources, planting
saplings and organising anti-pollution drives are among its several
environmental programmes. ITC's paper mills recycle invaluable water
resources. The treated water is channelled to local farmers, reducing their
dependence on irrigation and enabling them to produce an additional crop.
As part of its contribution to urban beautification, ITC has adopted parks,
gardens and traffic islands in its various locations. ITC has received several
awards for `Best Maintained Buildings and Gardens'.
ITC Hotel Maurya Sheraton was India's first five star hotel to obtain the
prestigious ISO 14001 certification for its Environment Management
Systems. The Green Leaf Threshing Plant at Chirala in Andhra Pradesh was
similarly the first tobacco plant in the world to get ISO 14001 environmental
certification. The Kidderpore cigarette factory became the world's first ISO
14001-certified cigarette plant.

FINANCIALS
ITC reported a 23.8 per cent jump in net sales for the March quarter, which
is huge considering that sales had grown just 5.6 per cent in the nine months
till December. True, cigarette sales have been higher in the second half of
the year compared with the first six months, but this hardly explains the huge
differential in growth rates.
A look at the segment results shows that growth last quarter was driven by
the agri-business, which grew sales by 63.6 per cent last quarter and
accounted for half the company's incremental sales. This was in stark
contrast to the 14 per cent fall in sales recorded by this segment in the nine
months till December. Analysts point out that soya exports were strong last
quarter; aided by firm prices globally. Soya prices have now come off from
their highs, and one should also note that the agri business fluctuates
because of seasonal variations. In any case, despite the surge in sales last
quarter, the agri business reported margins of less than four per cent.
What's more important is that the cigarette sales have picked up. In the first
half period, revenue from cigarette sales had grown just 3.7 per cent. In the
second half, the growth almost doubled to seven per cent. The incremental
growth is primarily volume driven, since there haven't been price increases
since April last year.

Moreover, for the full year, the division reported a near 100 basis points
improvement in operating margin (adjusted for one-offs).
The plethora of other FMCG business - ranging from agarbattis to branded
garments- grew smartly by 178.5 per cent, but some of that growth was due
to an entry into new segments like biscuits. But losses in the segment were
cut from 112 per cent of sales in FY03 to 57.33 per cent last year. The hotels
business rode piggyback on the improvement in the tourism segment, and
notched a 33 per cent increase in sales and an extremely high 740 basis
points jump in profit margin. The paper business grew just 7.8 per cent,
because of capacity constraints, but sales of value-added products grew 18
per cent. There's more good news: capacity is set to almost double by the
end of this year compared to end-FY03 after the acquisition of the
paperboards business of BILT Industrial Packaging (last year) and the
capacity expansion being done at the plant in Sarapaka, Andhra Pradesh.
Dividend payout has inched up from Rs 15 last year to Rs 20 this year, but is
still a small fraction of the company's free cash flow.
ITC Ltd registered 16.2% rise in net profit at Rs 1,592.85 crore in 2003-04
against Rs 1371.35 crore in the previous fiscal. The company's net income
was up 11% to Rs 6,695.32 crore against Rs 6,035.37 crore in the previous
year, while total expenditure rose 10.7% to Rs 4,109.85 crore compared to
Rs 3,712 crore in 2002-2003.

ITC's net profit in Q4 of 2003-04 surged 19.8% to Rs 387.06 crore against
Rs 323.42 crore in the year-ago period. Net income in the period was up
22.6% to Rs 1,938.16 crore compared to Rs 1,579.93 crore. The board of
directors, which met here on Friday to adopt the results, recommended a
dividend of Rs 20 per share against the previous year's Rs 15 per share,
which would entail a cash outflow of Rs 495 crore.
The company's profit before tax in 2003-04 increased 12.8% to Rs 2,319.06
crore against Rs 2,056.19 crore and net interest liability was Rs 24.79 crore
against Rs 29.84 crore in 2002-03. While depreciation rose by 2.1% and
stood at Rs 241.62 crore against Rs 237.34 crore in the last fiscal. The
company paid Rs 726.21 crore as tax in 2003-04 against Rs 684.84 crore in
the last fiscal, an increase of 6%. ITC leveraged its leadership in the
cigarettes segment with a revenue growth of 5.3% at Rs 9,230 crore against
Rs 8,764 crore last year. The company's operating profit in this segment
stood at Rs 2,033 crore against Rs 1,923 crore in 2002-03, a rise of 5.7%.
ITC Ltd's new FMCG businesses posted a rapid topline growth on the back
of new product launches and extension of the existing product range to
target markets. Revenues from these businesses grew three-fold during the
year at Rs 304 crore against Rs 109 crore in 2002-03. However, the division
increased its losses to Rs 174 crore against Rs 122 crore last year. In the
year under review, ITC's hotel business posted a growth in revenues of 33%
at Rs 257 crore against Rs 193 crore in 2002-03.

Profit before tax trebled compared to last year and stood at Rs 32 crore
against Rs 10 crore. ITC more than doubled its e-Choupal network during
the year, adding over 2,000 choupals. Till date, 4,150 choupals have been
set up, reaching out to over two million farmers in over 20,000 villages
across India.
Agri commodity exports of soya, rice, coffee and marine products touched
Rs 574 crore during 2003-04, an increase of 58% over the previous year.
The revenues from the agri business stood at Rs 1,709 crore against Rs
1,658 crore in the previous year, an increase of 3%. Operating profits of this
division stood at Rs 90 crore against Rs 84 crore of 2002-03, a rise of 7.1%.
The company's paper board, specialty paper and packaging business saw
18% higher sales of value-added products. The revenues from this division
were at Rs 1,253 crore against Rs 1,163 crore last year, a rise of 7.7%.
Profit before tax was at Rs 230 crore against Rs 226 crore in 2002-03, an
increase of 1.8%.
PUFF AND TOUGH
Twelve Months Ended
Mar 31, 04 Mar 31, 03
Net Sales Turnover 6470.44 5865.78
Net Income 6695.32 6035.37
Total Expenditure 4109.85 3712.00
Profit Before Tax 2319.06 2056.19
Provision For Taxation 726.21 684.84
Net Profit 1592.85 1371.35
(In Rs crore)
The stock of tobacco major ITC has come down by 9 per cent to Rs1,081 on
March 18, 2004 on BSE, from its 52 week high of Rs1,185 on March 8,
2004. But this 10-day aberration apart, the stock had surged 21.6 per cent
from a low of Rs974.50 on February 5, 2004. Some analysts believe that
investors moving out of Hindustan Lever may have helped the ITC stock in
recent times.
SEGMENTS
CIGARETTES
ITC is the market leader in cigarettes in India. With its wide range of
invaluable brands, it has a leadership position in every segment of the
market. Its highly popular portfolio of brands includes Insignia, India
Kings, Classic, Gold Flake, Navy Cut, Scissors, Capstan, Berkeley and
Bristol.
ITC's leadership is founded on its core strategy of continuously enhancing
product values through significant investments in product design,
manufacturing technology, quality, marketing and distribution. In just
the last 5 years, ITC has made capital investments of over Rs. 7 billion
in its cigarettes business. In ITC, one of the pioneers of market research
in India, the consumer is still the King. The Company continuously
endeavours to provide its consumers products that are benchmarked to
international quality. This strategic focus on the consumer has paid ITC
handsome dividends. The most important of these is its enriched
product mix, unmatched by competition. ITC's share of filter cigarettes in
the country is more than 70%.
In pursuit of international competitiveness, ITC has launched four brands -
Checkers, Hi-Val, Royale Classic and Gold Crest - in the extremely
competitive US market. Recently ITC has launched Royale Classic,

Gold Cut and Scissors Filter Kings cigarettes in the Middle East. The
response to these brands has been encouraging. ITC's cigarettes are
produced in its state-of-the-art factories at Bangalore, Munger,
Saharanpur and Kolkata. These factories are known for their high levels of
productivity and very contemporary work environment.
ITC's FMCG businesses have one of the largest retail networks in the
country, consisting of over 2 million retailers. Its reach covers a wide
range of the retail spectrum, from premium outlets in the metros to small
shops in the interiors of rural India.
AWARDS
ITC's Cigarettes business has won numerous awards for its quality,
environmental management systems and product excellence:
♦ ITC's cigarette factory in Kidderpore, Kolkata, has been awarded the
OHSAS:18001 Certificate by Det Norske Veritas (DNV) for its
Occupational Health and Safety Management System (OHSMS).
♦ The Kolkata factory has been placed First in Category 'B' for having
made the best efforts towards Safety Management in the Safety
Contest of the Confederation of Indian Industry-Eastern Region (CII-
ER).
♦ ITC has been awarded the "Best Manufacturer of Cigarettes" and "3rd
Best Exporter of Tobacco Products" for 2003, by the Tobacco Board
of India.
♦ The Saharanpur factory has won the "GOLD" Award, 2003 on
Occupational Safety from The Royal Society for the Prevention of
Accidents (RoSPA), UK.
♦ The Kolkata factory was the first cigarette factory in the world to
receive the ISO 14001 accreditation for their environmental management
systems. The Saharanpur and Bangalore factories have also received
the ISO 14001 certification.
♦ The Munger, Saharanpur and Bangalore factories have received the
prestigious Sword of Honour Award from the British Safety Council
for highest standards of safety.
♦ All cigarette factories have ISO 9002 quality certification. ITC's Tobacco
Technology Centre at Peenya, Bangalore has the distinction of being
the first independent R&D centre in India to get ISO 9001 accreditation.
♦ The Kolkata factory has won the Rajiv Gandhi National Quality Award
(Best in Eastern Region) for 1998.

LIFESTYLE RETAILING
Over the last three years, ITC's Lifestyle Retailing Business Division has
established a nationwide retailing presence through its Wills Lifestyle chain
of exclusive specialty stores. Beginning with its initial offering of Wills Sport
relaxed wear from the first store at South Extension, New Delhi in July 2000,
it has expanded its basket of offerings to the premium consumer with Wills
Classic formal wear, Wills Clublife evening wear and designer accessories
from Furla and Valentino of Italy.
With a distinctive presence across segments at the premium end, ITC has
also initiated a foray into the popular segment with its men's wear brand
John Players - thereby aspiring to build a dominant presence in the apparel
market through a robust portfolio of offerings.
ITC's Wills Lifestyle believes in the philosophy of 'Enjoying the Change' -
the change that comes through actively exploring one's own
multifacetedness and stretching one's limits. This season, Wills Lifestyle
presents a complete fashion wardrobe that complements every facet of your
lifestyle.
Wills Lifestyle has been established as a chain of exclusive specialty stores
providing the Indian consumer a truly 'International Shopping Experience'
through world-class ambience, customer facilitation and clearly differentiated
product presentation. There are currently 48 stores in 38 cities across the

country and these have established themselves as preferred shopping
destinations in the prime shopping districts.
At Wills Lifestyle, customers can browse at leisure, and shop in a relaxed
and pleasing atmosphere. The use of space is refreshing, which is reflected
even in the spacious changing rooms. Every store offers an international
retailing ambience with the extensive use of glass, steel and granite,
reflecting the most contemporary trends in store design, thereby creating a
splendid backdrop for the premium offerings.
At the Images Fashion Awards 2001 & 2003, Wills Lifestyle was declared
"The Most Admired Exclusive Brand Retail Chain of the Year".
'Wills Sport', fashionable relaxed wear for men and women has, over eight
seasons, become the vibrant face of contemporary fashion. At the Images
Fashion Awards 2001, 'Wills Sport' was declared "The Most Admired
Brand Launch of the Year". Following this, Wills Sport was declared "The
Most Admired Women's wear Brand of the Year", at Images Fashion
Awards 2002. This season, Wills Sport presents "Mediterranea" -
fashionable relaxed wear in oceanic blues, haute cirrus whites and bleached
sand beiges.
Wills Classic formal wear was launched in November 2002, providing the
premium consumer a distinct product offering and a unique brand

positioning. Featuring luxurious fabrics crafted to perfection with the most
contemporary styling, Wills Classic formal wear is positioned as the brand
for New Age Leaders, who inspire innovation and enterprise, breaking the
shackles of hierarchy and domination. It is a meticulously crafted range that
is a fitting tribute to the New Age leader. This season, Wills Classic presents
"Corporate Headlines" - news making stripes for New Age Leaders.
Having established a distinctive presence in the premium apparel segment
in a short span of time with Wills Sport premium relaxed wear and Wills
Classic New Age formals, Wills Lifestyle launched Wills Clublife in May
2003 in the growing evening wear segment, thereby strengthening its
portfolio in the premium segment. The brand is uniquely positioned to
complement the glittering evening life of premium consumers perfectly.This
season, Wills Clublife presents "Ibiza Lounge" - glamorous evening wear in
a heady mix of bold Blacks and charming Whites.
Wills Lifestyle complements the range of premium apparel with a tempting
choice of fashion accessories, which, by a special arrangement with
international design houses, includes signature eyewear from Valentino and
designer handbags from Furla of Italy.
ITC launched its brand of men's apparel in the popular segment, John
Players in December 2002 to broad-base the array of branded apparel that
the Company offers and further strengthen its robust branded garment
portfolio. This foray into the popular segment leverages ITC's proven
competencies in building long-term trade partnerships and establishing
omnipresent brand availability.
The John Players range of men's apparel endeavours to provide
unbeatable value to the Indian male consumer by delivering outstanding
quality at accessible every day prices, ranging from Rs.400 to Rs.900.
The brand promise is built upon Comfort as its core philosophy. Comfort is a
state of mind and comfortable clothes complement that state of mind, aptly
captured in the baseline "John players - for comfortable minds". The
brand is now available in over 3000 multi-brand outlets across the country.
With the creation of an international class retail chain 'Wills Lifestyle', the
building of a powerful brand portfolio in the highly competitive premium
market of branded garments and the impactful launch of 'John Players' in
the popular segment, ITC's Lifestyle Retailing is poised to grow and build a
dominant presence in the country's fashion industry.

GREETING GIFTING AND STATIONERY
ITC has now become the second largest player in India's greeting cards
industry with its ‘Expressions’ range of Greeting Cards. For attaining this
position, the Company has strategically leveraged its expertise in
Paperboards and Packaging, and its unique capability to manufacture
environment-friendly Elemental Chlorine-Free (ECF) pulp and world-class
paperboards.
With the launch of ITC's ‘Paperkraft’ and ‘Classmate’ ranges of notebooks,
the Company has also emerged as a serious and significant marketer of
Stationery brands for school and college students.
ITC’s extensive India-wide distribution network enables its greeting
cards reach over 12,000 multi brand outlets in over 700 cities
nationally. In the last three years, 10,000 greeting card designs have
reached these outlets with the help of a web-enabled e-commerce
model. The Greeting Cards Business also markets the SOS Children’s
Villages of India range of greeting cards. The SOS brand is now the third
largest brand in the social cause segment in greeting cards.
ITC has systematically built up a huge repertoire of national and
international images and designs, including masterpieces of well-
known artists, This serves as a ready source of creative designs for the
Company's Greeting Cards. This bank of designs has helped ITC offer cards
to consumers suiting a wide range of occasions, relationships and styles of
expression.
ITC's launch of Vernacular Greeting Cards, under the ‘Matrubhasha’ brand,
is an innovative, unique and important value offering. It allows consumers to
reach out to their loved ones in the language of their hearts- their mother
tongue.
ITC’s venture into paper-based Stationery is also gaining momentum in the
market. The ‘Classmate’ range of notebooks for school children and the
‘Paperkraft’ range for college and office usage are now available in over
100 cities. ITC has also launched ‘White Gold’ premium bond paper for
discerning consumers. The Stationery business not only leverages ITC’s
proven strengths in Paper and Packaging but also the design capabilities of
the Greeting Cards team, acknowledged to be among the best in India.

SAFETY MATCHES
As part of its strategic initiative to create multiple drivers of growth in the
FMCG sector, ITC has commenced marketing safety matches sourced from
the small-scale sector. This business leverages the core strengths of ITC in
marketing and distribution, brand building, supply chain management and
paperboard & packaging to offer Indian consumers high quality safety
matches.
These matches are available in unique designs and with innovative value
added features. ITC's brands like iKno, Mangal Deep, VaxLit, Delite and
Aim have already become popular. The Aim brand of ITC Matches has
already become the largest selling brand of Safety Matches in India within
just one year of its launch. Export of premium brands has also commenced
to markets such as The USA and West Africa. Through its participation in
the business, ITC aims to enhance the competitiveness of the small and
medium scale sectors through its complementary R&D based product
development and marketing strengths, especially the breadth and depth of
the Company's trade marketing and distribution.
AGARBATTIS
As part of its strategic initiative to create multiple drivers of growth in the
FMCG sector, ITC has commenced marketing agarbattis (incense sticks)
sourced from the small-scale sector. This business leverages the core
strengths of ITC in marketing and distribution, brand building, supply chain
management and paperboard & packaging to offer Indian consumers high
quality agarbattis.
ITC has launched brands like Spriha and Mangal Deep across a range of
fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur,
Sambrani and Nagchampa. Attractively packaged, these brands have been
appropriately priced to appeal to a cross-section of consumers at various
price segments.These agarbattis are available in 'Fragrance locked' packets.
'Fragrance locking' is a unique concept of packaging which helps to retain
the fragrance for a longer period.
Through its participation in the business, ITC aims to enhance the
competitiveness of the small and medium scale sectors through its
complementary R&D based product development and marketing strengths,
especially the breadth and depth of the Company's trade marketing and
distribution.
ITC is also supporting an 'agarbatti community participation programme' run
by the Vyakti Vikas Kendra, a non-profit organisation founded by Sri Sri
Ravishankar of the Art of Living, near Bangalore. At least 100 village women
will benefit from their training in agarbatti rolling. ITC will furthermore extend
support to other NGOs, whereby the agarbattis rolled by these women will
be used by ITC's agarbatti manufacturing associates in Bangalore and the
finished product marketed by ITC under its brand names.

HOTELS
ITC Ltd entered the hotels business in 1975 with the acquisition of a hotel in
Chennai, which was rechristened Welcomgroup Chola Sheraton. Since then
the ITC-Welcomgroup brand has become synonymous with Indian
hospitality. Today amongst India's finest and fastest growing hotel
chains, it consists of over 55 hotels across more than 55 destinations in
India. These include super deluxe and five star hotels, heritage palaces,
havelis and resorts and full service budget hotels. These hotels are
managed by ITC's subsidiary, ITC Hotels Limited. Currently nine of the ITC-
Welcomgroup hotels are marketed world-wide by the Sheraton Corporation,
which is part of Starwood Hotels & Resorts, the well known global hospitality
chain.
The 515-room ITC Hotel Maurya Sheraton & Towers at New Delhi is not only
amongst the leading business hotel in the country, but is in a class by itself.
Complete with the 'ITC One', the hotel has played host to a galaxy of world
dignitaries, including Bill Clinton and Bill Gates. In fact, even as he was
leaving the White House, the former US President nostalgically recalled the
memories of a fabulous Indian meal he and his family had at the Bukhara
restaurant in the hotel. Bukhara has been declared the Best Indian
Restaurant in the world for 2004, by 'The Restaurant Magazine', UK. It
has also been voted the Best Restaurant in Asia and is the only Indian
restaurant to feature in the list of 50 Best Restaurants in the World.
The 386-room ITC Hotel Grand Maratha, opened in February 2001 is

perceived as amongst the leading and the finest properties in Mumbai,
designed in a grandiose classic style, the hotel pays tribute to Mumbai's
colonial roots and the spirit of the Great Marathas.
In keeping with its plan to have a presence in every major business
destination in India, ITC-Welcomgroup unveiled one of Asia's finest business
resort, the 239-room ITC Hotel Sonar Bangla Sheraton & Towers in
Kolkata on December 31, 2002.
The construction of another business hotel, the ITC Grand Central at
Mumbai is underway.
WelcomHotel Mughal Sheraton at Agra, a proud recipient of Asia's first
Aga Khan Award for Architecture, is an outstanding resort hotel, lavishly
spreading across 32 acres of beautifully landscaped Mughal gardens.
ITC-Welcomgroup also pioneered a holistic concept of "branded
accommodation" in the hospitality industry. It was the first to launch the
powerful idea of a 'Hotel within a Hotel' by segmenting and branding the
hotel services. It created the exclusive 'ITC One', 'Sheraton Towers' and
the 'Executive Club' each catering to the needs of the global business
traveller with unmatched quality and a range of services.
Similarly, the WelcomHeritage brand brings together a chain of palaces,
forts, havelies and resorts that offer a unique experience. WelcomHeritage
endeavours to preserve ancient royal homes and the historical Indian

grandeur, opulence of romance, valour and adventure for the future Indian
generations. WelcomHeritage Hotels, provide a fine range of hotel services
inside these architectural legacies present in Rajasthan, Punjab, Himachal
Pradesh, Madhya Pradesh, Uttaranchal, Jammu & Kashmir and West
Bengal.
ITC-Welcomgroup was also the first to brand its cuisine. The
Bukhara, the Dakshin and the Dum Pukht are today powerful cuisine
brands, which delight connoisseurs in restaurants in several ITC-
Welcomgroup hotels. Others included Dublin, West View, Maroush
and the Pan Asian.
Fortune hotels are a part of the well thought-out growth strategy that brings
out the mid level business and leisure traveler under the ITC-Welcomgroup
umbrella, offering full service properties without compromising on quality.
With a strong presence at Ahmedabad, Thiruvananthapuram, Calicut,
Darjeeling, Jamshedpur, Vapi, Hyderabad, Indore, Ootacamund, Madurai,
Jodhpur, Tirupati and Port Blair, it will be shortly commissioning several
more hotels across India.
ITC-Welcomgroup's strategy of benchmarking against international
standards has won its hotels many laurels.
♦ ITC Hotel Maurya Sheraton and Towers is the only hotel in India, to have
won the British Safety Council's 'Sword of Honour' thrice.

♦ ITC Hotel Maurya Sheraton and Towers, New Delhi is also India's first
hotel to be accorded the ISO 14001 certification for its Environment
Management Systems. Five more ITC-Welcomgroup Hotels followed in
quick succession: ITC Hotel Windsor Sheraton and Towers, Bangalore;
ITC Hotel Kakatiya Sheraton and Towers, Hyderabad; WecomHotel
Mughal Sheraton, Agra; WelcomHotel Rajputana Palace Sheraton,
Jaipur and WelcomHotel Chola Sheraton, Chennai.
♦ ITC Hotel Maurya Sheraton and Towers is the first hotel in India to be
awarded the Golden Peacock Environment Management Award for
2001 by the World Environment Foundation.
♦ ITC Hotel Grand Maratha Sheraton & Towers at Mumbai was declared to
be the Best Luxury Hotel of the Year 2002, by the Federation of Hotel
and Restaurant Associations of India.
♦ WelcomHotel Mughal Sheraton at Agra was Asia's first winner of the
Aga Khan Award for Architecture.
♦ The prestigious 'Golden Fork Award', was also bestowed, by the
International Food and Wine Writers Guild, to Bukhara and Dum Pukht
restaurants at the Maurya Sheraton.
♦ Bukhara at ITC Hotel Maurya Sheraton and Towers in New Delhi has
been declared the Best Indian Restaurant in the world (for the third
consecutive year since 2002) by 'The Restaurant Magazine', UK. It has

also been voted the Best Restaurant in Asia and is the only Indian
restaurant to feature in the list of 50 Best Restaurants in the World.
♦ Maurya and Mughal Sheraton have both won the 'Green Hotelier
Awards'.
♦ Maurya has also won the International Hotels & Restaurants
Association (IH & RA) environmental award: twice.
♦ Maurya has won the Federation of Hotel & Restaurant Association of
India 'Environment Champion Hotel of the Year' in 2002 and 1997.
Mughal Sheraton, Agra, has won this award in 2003.
♦ Bay Island at Port Blair, Andaman, was presented 'The Tourism For
Tomorrow' award by British Airways in 1993.

PAERBOARD
After the amalgamation of the erstwhile ITC Bhadrachalam Paperboards
Limited with ITC, ITC has now integrated its Paperboard and Specialty
Papers businesses into its newly created Paperboards & Specialty Papers
Division (PSPD), to harness strategic and operational synergies.
ITC is one of the world's most modern and contemporary manufacturers of
packaging boards. With a manufacturing capacity projected to touch 360,000
tonnes per year by the end of 2004, the Paperboards business is the
Indian market leader across all carton-consuming segments including
cigarettes, foods, beverages, pharma, personal care & toiletries,
durables and match shells.
The erstwhile ITC Bhadrachalam Paperboards Limited was incorporated in
1975. It set up an integrated pulp and paper/board manufacturing facility in
1979 at Bhadrachalam in Andhra Pradesh in south India, 300 kms. east of
Hyderabad. Since then, the mill facilities have been continuously
upgraded to achieve internationally benchmarked quality standards
and operational efficiencies. In 1998, the Paperboards business
commissioned a new production line for coated boards, incorporating a
coated board machine of 120,000 tpa and finishing equipment sourced from
internationally renowned suppliers. A major project to modernise the pulp

mill to produce 100,000 tpa of Elemental Chlorine Free (ECF) quality
pulp has been completed. In 2004, ITC acquired the paperboard
manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO),
near Coimbatore, Tamil Nadu. This KOVAI Unit will allow ITC to improve
customer service with reduced lead time and a wider product range.
The Company's paperboard products include :
ackaging boards - coated folding box boards, solid bleached sulphate
boards, white lined chipboards, liquid packaging boards, cast coated papers
and boards.
The Division also produces quality
printing & writing papers,
eco-friendly papers,
photocopier papers.
Specialised premium paperboards from the Division include the 'Cyber
Cypak' range of folding box boards for high value cartons, the 'Pearl
Graphik' high value SBS boards for greeting cards and covers, the 'Indolux'
high gloss cast coated papers and boards, the value-for-money 'Ecoviron'
range of recycled white lined chip boards for everyday products. The
Division is the market leader in Carton Boards & Liquid Packaging

Boards. ITC's Paperboard products are used by almost all well-known
FMCG brands in India.
ITC is the largest exporter of coated boards from India. More than 25 per
cent of the coated boards made by the Company are sold in international
markets including Malaysia, Sri Lanka, Bangladesh, Iran, Australia,
UAE, Saudi Arabia, Singapore and Hong Kong.
ITC has set up India's first world-class plant for the manufacture of
premium Cast Coated Boards which meet highly sophisticated packaging
and printing requirements. ITC also pioneered the development of Liquid
Packaging Boards and baseboard for Plasterboards. These continuous
product development efforts have reinforced and strengthened ITC's market
leadership in the Paperboards business.
A strong customer focus is a basic article of faith with the Paperboards
business. The 'Total Quality Assurance' concept is practiced at every
stage of manufacture. State-of-the-art on-line process control and
scanning systems deliver internationally accepted quality standards.
In a farsighted corporate effort to improve ITC's global competitiveness on
the basis of the availability of fibre, ITC has launched a major social and
farm forestry programme with clonal plantations. The programme also
consistently enriches the environment. Under this green initiative, the
Division supplies millions of clonal saplings every year to farmers in

Andhra Pradesh and obtains a part of its raw materials from these
plantations.
The Division initiated bio-technological research in 1989 to develop and
propagate genetically superior, high-yielding, disease-resistant clones. Large
scale plantations have been raised on over 10,000 hectares of lands
belonging to the farming community with 72 high yielding varieties of
eucalyptus, popularly called 'Bhadrachalam' clones. The yield from
these 'Bhadrachalam' clones is thrice that of the normal seed route
plantations. The Company disseminates its research knowhow on best
agricultural practices to farmers through free consultancy services.
ITC is the premier manufacturer of Specialty Papers in India, with a
diversified product range. ITC's Specialty papers are used in the
manufacture of cigarettes, decorative laminates, electrical equipment,
fireworks and automotive filters. They are also used for fine printing,
packaging and carbonising.
The Division pioneered the manufacture of Specialty Papers for the
Indian cigarette industry in 1949. It currently offers a comprehensive range
of Cigarette Tissues, Plug Wrap, Tipping Base, printed tipping papers
and Metallising Base.

Specific customer needs are the focal point for the Specialty Papers mill of
the Division at Chandrahati, West Bengal. The mill reconfigures systems and
processes to meet specific customer needs. Quality control processes at the
mill are designed to ensure consistent high quality at every stage of
manufacture. On-line monitoring and documentation of production
parameters are carried out for continuous correction and updation of
quality standards.
A Product Development Team ensures Total Quality Management (TQM) in
all operations. The TQM group coordinates with the marketing, production
and research teams to ensure international standards in products and
services. It evolves long-term product development solutions on the
basis of customer specifications and market trends.
The Company has significant and sophisticated capabilities in product
development and research in pulp and paper. ITC has collaborated with
the United Nations Development Programme (UNDP) and the
Government of India on research programmes on the manufacture of
high quality pulp.
The Division exports cigarette tissues and decorative laminates to Iran,
Indonesia, Philippines, Sri Lanka, Nepal, Bhutan and Bangladesh.
paper
ITC's Paperboards & Specialty Papers business has won numerous
awards for quality, environmental management systems and product
excellence:
Paperboards Business
♦ The CII ENCON Award for 2002-2003. The award has been instituted by
CII for excellence in energy management.
♦ The business emerged winners in 2003 of the prestigious Golden
Peacock Environment Management Award, instituted by the World
Environment Foundation.
♦ ISO 14001 Environment Management Systems certification in 2001
♦ Capexil's Special Export Award in recognition of highest exports, in
value terms, in the Paper and Paperboard category for 1999-2000 and
2002-2003
♦ The prestigious Indira Priyadarshini Vrikshamitra Award for the
outstanding contribution to the cause of afforestation and the
development of wastelands.
♦ ISO 9002 certification for the Bhadrachalam factory.
♦ The Vantech Industry Rolling Trophy for "Research & Development"
from the Confederation of Indian Industry (Southern region)

♦ The Rajiv Gandhi Parti Bhoomi Mitra Award for Developing non-forest
wastelands in the country from Department of Wastelands Development,
Government of India
♦ National Award for Energy Conservation in the Paper & Pulp Sector
from the Department of Power, Ministry of Power & Non-Conventional
Energy Sources, Govt. of India
Specialty Papers Business
♦ ISO 9001 accreditation in November, 1999. Certification done by Lloyds
Register, which has certified most leading cigarette paper manufacturers
in the world.
♦ The Specialty Papers business has been accredited to UK and US
quality bodies like UKAS and RAB.
♦ The Gold Award for Safety in 1999 from the Royal Society for
Prevention of Accidents (RoSPA), UK.
♦ The business emerged runners-up in 2000 in the prestigious
Golden Peacock Environment Management Award, instituted by the
World Environment Foundation.
PACKAGING
ITC's Packaging & Printing Business is the country's largest convertor of
paperboard into packaging. It converts over 35,000 tonnes of paper and

paperboard per annum into a variety of value-added packaging solutions for
the cigarette, liquor, food & beverage and personal products and IT
packaging.
The Division, which was set up in 1925 as a strategic backward integration
for ITC's Cigarettes business, is today India's most sophisticated packaging
house. State-of-the-art technology, world-class quality and a highly skilled
and dedicated team have combined to position ITC as the first-choice
supplier of high value added packaging.
The Division supplies value-added packaging to the Company's Cigarettes
business. Its client list includes several well-known national and international
companies like British American Tobacco, Surya Nepal Private Limited,
VST Industries, GTC, UB Group, Shaw Wallace, Seagrams, Allied
Domecq, Whyte & Mackay, Hindustan Lever, Tata Tetley and Nestle,
Reckitt Benkiser India Limited, JK Helene Curtis, etc.
With two ISO 9000:2000 certified & ISO 14001 certified packaging factories
at Tiruvottiyur near Chennai and Munger in Bihar, the Company offers a
comprehensive product range in packaging:
♦ flip-top boxes
♦ display outers
♦ shells and slides

♦ softcup and strap
♦ labels
♦ bundle wraps
♦ flap boxes
♦ inner frames
♦ coupon inserts
♦ folding cartons
♦ shoulder boxes
♦ pre-printed cork tipping
ITC occupies a leadership position in cigarette and liquor packaging in India.
It supplies packaging to cover 70 billion cigarettes a year domestically, and
supplies packaging for 15 billion cigarette sticks a year for the export
market. It is the largest supplier of liquor mono cartons in the country.
ITC has enhanced the value of some of the most favoured brands with
superior look-and-feel packaging, using the best raw materials and process
combinations, and an in-house pre-press Design Centre.
A Product Introduction Process team pioneers packaging innovations. The
team uses a unique process to pilot the client's packaging through its
manufacturing system. Specifications are evolved based on clients' needs.

Corresponding to the specifications, a variety of packaging solutions is then
generated. The efficacy of the packaging is tested simulating the client's
factory conditions.
pack
ITC's Packaging business has won numerous awards for its quality,
environmental management systems and product excellence:
♦ First in India to be assessed at Level 6 on the International Quality
Rating System (IQRS).
♦ Both the Chennai and Munger factories have obtained ISO 9002
certification. The Tiruvottiyur and Munger factories have also received
the ISO 14001 Environment Management Systems certification.
♦ Quality Improvement (QIMPRO) Benchmark Awards for 1997 and
1998.
♦ British Safety Council Swords of Honour for both the Chennai and
Munger factories.
♦ CAPEXIL Special Export Award for 1999 and Top Export Award for
2000/01.
♦ The World Star award for Aashirvaad Select 2-kg pack in the Consumer
Pack category in 2002, Wills Natural Lights in 1999, Royal Velvet &
Passport whisky cartons in 1998 and Nargis lined tea cartons and
Vacupack bulk packaging for tea in 1997.
♦ Asiastar awards for packaging excellence in 1999, 2000 and in 2001 we
have received 3 Asiastar awards for Surya 10s, Royal Stag 750ml and
No.1 Gift Pack.
♦ India Star Awards for unique, innovative and visually appealing
packaging in 2002 for the Aashirvaad Select 2-kg pack and for Bagpiper
Gold, Royal Challenge and Sara Lee Celebrations packs in 2000

AGRI EXPORTS
ITC's International Business Division (IBD) is the country's second largest
exporter of agri-products with exports of over Rs 5 billion. It currently
focuses on exports of :
Feed Ingredients - Soyameal, Rapeseed Meal
Foodgrains - Rice (Basmati & Non Basmati), Wheat & Wheat Products,
Pulses, Coffee, Black Pepper
Edible Nuts - Sesame Seeds, HPS Groundnuts, Castor oil
Marine Products - Shrimps and Prawns
Processed Fruits - Mango, Papaya and Guava Products
Although one of the relatively younger business divisions of ITC, it has, in a
short span established itself as a first-choice supply chain partner of several
leading international customers. Its major customers include Coke,
Abudhabi Flour Mill, Mitsubishi, among others, who source agriculture
commodities and food products from India. Its customer relationship
management has enabled it to achieve a very high reputation for quality,
reliability and value added services. ITC's website, www.itcibd.com is a
trendsetting customer care intervention in commodity trading. Customers
can access information on crop production and forecasts, market updates,
the latest shipment positions and the prevailing foreign exchange rates.
ITC's unique strength in this business is the extensive backward linkages it
has established with the farmers. This networking with the farming
community has enabled ITC to build a highly cost effective procurement
system. ITC has made significant investments in web-enabling the Indian
farmer. Christened 'e-Choupal', ITC's web plan for the farmer centres
around providing Internet kiosks in villages. Farmers use this technology
infrastructure to access on-line information from ITC's farmer-friendly
websites. Data accessed by the farmers relate to the weather, crop
conditions, best practices in farming, ruling international prices and a host of
other related information.
The websites provide data in both English and the local language. Currently,
the 'e-Choupal' websites provide information to soya farmers in Madhya
Pradesh, Maharashtra and Rajasthan (www.soyachoupal.com), coffee
planters in Karnataka (www.plantersnet.com), aquaculturists in Andhra
Pradesh (www.aquachoupal.com) and wheat farmers in Uttar Pradesh
(www.echoupal.com). ITC plans to extend the 'e-Choupal' to cover 10
million farmers across 100,000 villages covering 15 Indian states.
ITC's countrywide network of procurement teams, handling agents and
contemporary warehousing facilities enable it to source quality merchandise
even at short notice. ITC's processors are handpicked reliable outfits which
ensure hygienic processing and modern packaging. Strictest quality
control is exercised at each stage to preserve the natural flavour, taste
and aroma of the various agri-products.

ITC has been a significant exporter of seafoods from India since 1971.
It exports frozen as well as cooked shrimps and other seafood products to
Japan, USA and Europe. Its well-known brands include Gold Ribbon, Blue
Ribbon, Aqua Kings, Aqua Bay and Aqua Feast.
ITC's International Business Division continues to use innovation as its core
strategy to retain its position as the one-stop shop for sourcing agri-
commodities from India.
ITC's Agri-Exports business has won numerous awards:
♦ The coveted "Golden Star Trading House" status by the Government
of India.
♦ The NASSCOM award for 'Best IT User in FMCG' in 2003. The Award is
a recognition of ITC's successful integration of its IT usage with its
business processes, specially the e-Choupal initiative.
♦ The Seagate Intelligent Enterprise of the Year 2003 Award, for the
most innovative usage of Information Technology. This award recognises
ITC’s pathbreaking e-Choupal initiative

LEAF TOBACCO
ITC pioneered the cultivation and development of Cigarette Tobaccos
in India. For over 90 years, its Indian Leaf Tobacco Development Division
has worked closely with farmers to grow quality cigarette tobaccos. It is the
largest buyer, processor and exporter of cigarette tobaccos in India.
ITC buys nearly 40 per cent of all cigarette type tobaccos grown in
India. It has a team of experienced and highly skilled buyers and classifiers
who source tobaccos to exacting customer specifications. It has been
India’s single largest integrated source of quality tobaccos for
customers in 37 countries over the last six decades. ITC maintains a
large inventory of quality tobaccos, making it a “One-Stop-Shop” for Indian
cigarette tobaccos. This strategic policy insulates customers from crop
fluctuations. ITC's comprehensive and sophisticated R&D facilities
cover all aspects of cultivation, processing and packing. Thus, ITC's
value proposition to its customers is timely delivery of quality tobaccos at
competitive prices.
ITC's Green Leaf Processing plants at Anaparti and Chirala in Andhra
Pradesh, the tobacco belt of India, are among the best in the world. State-
of-the-art technology, including sophisticated quality controls, enables
ITC to process and deliver 100 million kgs of high quality tobaccos per
annum. These factories are supported with in-house warehousing

which are benchmarked to international standards to guarantee hygiene and
infestation control.
ITC's quality emanates from its strategy of intimate involvement with the
tobacco farmers in India. Through technology and knowledge transfer, ITC
enables the Indian tobacco farmer to adopt best practices. ITC's team of
qualified and trained managers and support staff constantly assist the
tobacco farmer in assimilating new ideas in quality and productivity. ITC also
co-operates with Government agencies to develop new varieties of
tobacco, and to develop new areas for tobacco cultivation.
ITC is aggressively exploring strategic growth opportunities by innovatively
blending and extending the Company's proven competencies in the
procurement of agricultural products, storage and supply chain
management. Closely dovetailing with this strategic endeavour, ITC-ILTD is
venturing into the spices business.
This entry into spices, specially branded spices, will further boost ITC's
efforts to export India's agricultural products. ITC's engagement with spices
will effectively leverage ILTD's established expertise in crop development,
procurement, productivity, quality, brand building and marketing to provide
consistently high quality spices to Indian and international customers.

ITC's Leaf Tobacco business has won national and international laurels
for research and development, quality, environmental management
systems and product excellence. The more important of these are:
♦ The Processing plant in Chirala has been accredited with British
Standard 7750, a certification that is an equivalent of ISO 14001, for its
commitment to Environment management systems, as defined by
British Standards.
♦ Chirala factory has won the prestigious Greentech Environment
Excellence Gold Award for the year 2002-03 in Manufacturing Sector
♦ ITC's R&D Center for leaf tobacco has received -
 The Best Research and Development of New Innovation
Gold award for its contribution to farm productivity improvement
through the introduction of improved varieties and propagation of
contemporary and cost effective agro-techniques.
 The Best Energy Conservation Implementation Gold
Award for energy and eco-conservation measures.
♦ Its Green Leaf Threshing plants were the first of their kind in the world
to receive the ISO 9002 quality accreditation. They were also
internationally the first to get the ISO 14001 environment management
system certification.
♦ The processing plant at Chirala was the first unit in India to receive the
Social Accountability Standard Certification (SA 8000) from Det
Norske Veritas. The processing plant at Anaparti has also been
accredited with SA 8000 recently.
♦ The processing plants at Anaparti and Chirala have also obtained the
OHSAS 18001:1999 Certificate. This facilitates the integration of
Quality, Environment, Social Accountability and Occupational Health and
Safety Management Systems.
♦ ILTD has been the recipient of the following awards:
 "Best Exporter of Unmanufactured Tobacco"
(Manufacturers category) for 2003 from the Tobacco Board of
India.
 The Rajiv Gandhi National Quality Award in the 'Best of All'
category for 1994 and 1995 from the Government of India.
 National Safety Awards from the British Safety Council
 Swords of Honour from the British Safety Council. The
processing plant at Chirala has won this award nine times since 1993
and the Anaparti plant six times since 1994.
 RoSPA Gold Awards from the Royal Society for Prevention of
Accidents (RoSPA)
 Special Commendation Safety Certificate from the Ministry
of Labour, Government of India.
 The Chirala plant has won the Greentech Safety Gold Award
for the year 2003-04

FOODS
ITC made its entry into the branded & packaged Foods business in August
2001 with the launch of the Kitchens of India brand. A more broad-based
entry has been made since June 2002 with brand launches in the
Confectionery, Staples and Snack Foods segments.
The packaged foods business is an ideal avenue to leverage ITC's proven
strengths in the areas of hospitality and branded cuisine, contemporary
packaging and sourcing of agricultural commodities. ITC's world famous
restaurants like the Bukhara and the Dum Pukht, nurtured by the
Company's Hotels business, demonstrate that ITC has a deep
understanding of the Indian palate and the expertise required to translate
this knowledge into delightful dining experiences for the consumer. ITC has
stood for quality products for over 90 years to the Indian consumer and
several of its brands are today internationally benchmarked for quality.
The Foods business carries forward this proud tradition to deliver quality
food products to the consumer. All products of ITC's Foods business
available in the market today have been crafted based on consumer insights
developed through extensive market research. Apart from the current
portfolio of products, several new and innovative products are under
development in ITC's state-of-the-art Product Development facility located at
Bangalore.
Leadership in the Foods business requires a keen understanding of the
supply chain for agricultural produce. ITC has over the last 90 years
established a very close business relationship with the farming community in
India and is currently in the process of enhancing the Indian farmer's ability
to link to global markets, through the e-choupal initiative, and produce the
quality demanded by its customers. This long-standing relationship is being
leveraged in sourcing best quality agricultural produce for ITC's Foods
business.
The Foods business is today represented in 4 categories in the market.
These are:
• Ready To Eat Foods
• Staples
• Confectionery
• Snack Foods
Kitchens of India
Kitchens of India brings to the Indian consumer exquisite gourmet Indian
cuisine, capturing the pedigree and expertise of ITC Hotels' Master chefs.
Every single recipe ITC brings to the consumer is authentic and comes at
the end of a long tradition of culinary genius. These carefully guarded
secrets have been handed down through the ages, from one generation to
the next. Kitchens of India allows the consumer to share these wonderful
traditions and partake of sumptuous cuisine fit for kings.
Products
Currently there are a range of products showcasing India's traditional cuisine
as captured in the cooking styles of three of ITC's celebrated restaurants –
the Bukhara, the Dakshin and the Dum Pukht.
Bukhara
The Bukhara captures the culinary heritage of the NorthWest Frontier
province. Kitchens of India offers you Dal Bukhara in this range.
‘Dal Bukhara’
A combination of whole black lentils, tomatoes, ginger and garlic, stirred over
slow coal fires for 18 hours at a stretch.
Dum Pukht
The art of "Dum" cooking (cooked in its own juices) traces its origin to the
times of the "Nawabs of Awadh" rulers of the Northern Provinces of India
during the 18th century. Kitchens of India has currently 2 products
showcasing this style of cooking:
‘Dum ki Khumb’
Button mushrooms, slow cooked in an aromatic gravy of tomatoes, spices,
almonds and green chillies. Imbued with saffron. Best enjoyed with rotis.
Khubani ka Meetha
A delightful dessert of dried apricots and nuts sweetened to perfection. Best
enjoyed with whipped cream.
‘Dakshin’
This cuisine is a reflection of the tradition and culture of the southern Indian
peninsula. The following products are currently offered in this range:
‘Chicken Chettinad’
Chunks of chicken in a paste of curry leaves and freshly ground pepper
married in perfect proportion.
‘Dal Dakshin’
Halved yellow lentils cooked with tomatoes, onions and select Indian spices
in South Indian style.
Gharana
A pan-Indian cuisine specially created by ITC master chefs.

Paneer Darbari
Soft cubes of fresh cheese in an aromatic tomato gravy, laced with butter.
450 grams, retailed at Rs. 150/-. Serves 3-4.
Paneer Mushroom Kofta
Mushroom and fresh cheese dumplings simmered in an aromatic tomato
gravy. 450 grams, retailed at Rs. 150/-. Serves 3-4.
Chicken Darbari
Cubes of chicken in an aromatic tomato gravy, laced with butter. 400 grams,
Rs. 200/-. Serves 3-4.
Locations where available
Products from Kitchens of India are currently available at ITC Hotels and
leading grocers across India.
ITC Hotels
• ITC Hotel Sonar Bangla Sheraton & Towers
• Welcomgroup Rajputana Palace Sheraton, Jaipur
• ITC Hotel Maurya Sheraton & Towers, New Delhi

• Mariott WelcomHotel, New Delhi
• Welcomgroup Mughal Sheraton, Agra
• ITC Hotel Grand Maratha Sheraton & Towers, Mumbai
• WelcomHotel Vadodara, Vadodara
• ITC Hotel Windsor Sheraton & Towers, Bangalore
• ITC Hotel Park Sheraton & Towers, Chennai
• Welcomgroup Chola Sheraton, Chennai
• ITC Hotel Kakatiya Sheraton & Towers, Hyderabad
• Welcomgroup Grand Bay, Visakhapatnam
Food and grocery shops in the following cities
• Srinagar
• Jammu
• Amritsar
• Jullunder
• Chandigarh
• Ludhiana
• Jaipur
• Gurgaon
• Noida
• Delhi
• Dehradun
• Lucknow
• Kanpur
• Allahabad
• Varanasi
• Agra
• Pune
• Mumbai
• Nasik
• Goa
• Baroda
• Surat
• Ahmedabad
• Nagpur
• Aurangabad
• Bhopal
• Indore
• Kozhikode
• Thiruvananthapuram
• Kochi
• Mysore
• Bangalore
• Mangalore
• Coimbatore
• Madurai
• Chennai
• Vijayawada
• Hyderabad
• Guwahati
• Kolkata
• Patna
• Vizag
• Bhubaneshwar
• Cuttack
Aashirvaad ReadyMeals
The new range of Ready-To-Eat cuisine under the 'Aashirvaad ReadyMeals'
label was launched in Hyderabad on 25 th June 2003. Seven products are
currently available in this range i.e. Rajma Masala, Nav Ratan Kurma, Dal
Makhani, Aloo Mattar, Palak Paneer, Pindi Chana and Pav Bhaji. Prices
start at Rs. 35/- for a 285 grams pouch. The unique packaging form ensures
that the original freshness and taste of the recipes is protected without the
use of preservatives.
'Aashirvaad ReadyMeals' is currently available in Hyderabad, Chennai,
Kolkata, Mumbai and Pune in all grocery stores selling ready-to-eat
products.
Staples
ITC entered the branded Atta market with the launch of Aashirvaad Atta in
Jaipur and Chandigarh on 26th May 2002. The product is available all over
India.
Aashirvaad promises the Indian housewife the joy of providing her family
with the most delightful homemade rotis, made from the finest quality atta.
ITC aims to use the sourcing strength of its e-choupals to deliver happiness
to the Indian consumer – Khushiyaan Chun Chun ke (Happiness
handpicked)…. Aashirvaad is made from fine quality wheat, sourced by the
e-choupal network. Premium quality atta made from the best wheat in India
is also available as Aashirvaad Select Atta.
ITC's Foods business also aims to delight the consumer through superior
and innovative packaging. The Aashirvaad package is pet poly, with the
design showcasing the farming process undertaken in the rural heartlands of
India in the form of a Madhubhani painting. Aashirvaad Select (2 kg pack)
was recently awarded the World Star Award for Excellence in Packaging, in
the Consumer Pack Category. This is one of the most prestigious awards in
the world for Packaging. ITC has also created a first in packaging in the
branded atta category by introducing its premium offering in carton
packaging and offering vacuum sealing in the 5kg premium pack. Both these
innovations maintain freshness of the product.
Aashirvaad Salt
ITC launched branded packaged salt under the brand name "Aashirvaad
Salt" on 26th March, 2003. The product is available in grocery stores around
the country.
Confectionery
ITC currently has two brands in the confectionery segment - "Mint-O" and
"Candyman" .
ITC acquired the brand "mint-o" from Candico in March 2002. ITC re-
launched the compressed mint product mint-o with new and improved
product and packaging. mint-o is the first mint in India to be also available in
an orange flavour besides the regular mint flavour. An innovative "Lemon
mint" flavour was launched on 26th February, 2003. The product is available
in two sizes – rolls of 20s and 6s. mint-o offers the discerning consumer a
value-added mint that captures the international essence of youthful "cool".
mint-o is currently available in all major markets.
Candyman Butterscotch Licks and Orange Licks was launched in
December 2003 and is now available in markets across the country. This
marked ITC's entry into the deposited candy market. In addition, Candyman
Eclairs and Candyman hard boiled candies viz. Wild Banana, Mango
Delite, Orange Josh and Pineapple Punch are also available across India.
CRTICAL ANALYSIS OF ITC’S BISCUITS
ITC BRANDED BISCUITS
Continuing its pursuit to expand into other segments to reduce dependence
on the core business of cigarettes, ITC's foods division launched the
`Sunfeast' range of high quality biscuits with offerings in Glucose, Marie and
Cream segments after 12 months of product research and development and
extensive sampling across 14,000 consumers across all POP group
nationally. It was launched nationally in phases in over One million retail
outlets across the country.
They believe that their understanding of the Indian consumer is reflected in
the increasing confidence in the ITC brand and more importantly the trust
that Indian consumers are reposing in all their products.
The company however, outsourced the entire production from two units at
Burdwan and Nagpur instead of setting up its own manufacturing line. The
current capacity of the Burdwan unit is 700 tonnes a month.

They want to emerge as the third largest player in the organised biscuit
market after Britannia and Parle in the next three to four years with a market
share of 10-11 per cent of the organised market. It was hoped that the
turnover of the foods division would jump to Rs. 450-500 crores in the next
four years with biscuits alone contributing close to Rs. 150-200 crores. They
are also looking at two more outsourcing arrangements in Western and
Southern India considering that the value added range market was growing
at 10 per cent annually.
The Sunfeast range is competitively priced and includes two new product
innovations — orange flavoured Marie and Butterscotch flavoured cream
biscuits launched for the first time in the Indian market.
'Sunfeast Biscuits' – Offerings
Sunfeast Glucose Biscuits deliver the Natural Goodness of Wheat and is
available in 100 gms, 75 gms and 19 gms priced at Rs. 4, Rs. 3 and Re 1
respectively, targeting children between the age group 4 – 14 years and their
mothers.
Sunfeast Orange Marie – a very differentiated offering is available in 200
gms, priced at Rs. 13 and 'Sunfeast Marie Light' – Light & Crispy, available
in 200 gms and 400 gms, priced at Rs. 13 and Rs. 24 respectively. Targeting
housewives.
Sunfeast Orange Cream, Sunfeast Butterscotch Cream & Sunfeast Bourbon
Cream – Smooth & Yummy Cream Biscuits, available in 100 gms, priced at
Rs. 11, Rs. 11 and Rs. 12 respectively. Targeting children between the age
group 4 – 14 years.
The launch of “Sunfeast” marked ITC Foods entry into the branded biscuit
market with a range of offerings in both basic and value added segments.
'Sunfeast', with the Brand Essence “Spread the Smile,” connotes happiness,
contentment, satisfaction and pleasure one would derive from the biscuits.
The brand positioning and imagery is reinforced by the Sun mascot
conveying the emotional and gratifying aspects of the product.
This latest offering from ITC Foods is in tune with the company’s strategic
direction to develop new product lines by synergising its proven
competencies.
The entire range of 'Sunfeast Biscuits' is packed in vibrant colours,
distinctive graphics and fonts identifying sub categories and at the same
time, maintaining a consistent look of the umbrella brand “Sunfeast”.
The brand is supported with Television campaigns across National and
Vernacular media – that is distinct, highlighting the product attributes,
quality and the new – first time in the market offerings from Sunfeast. During
the launch phase, Consumer promotions were conducted across retail

outlets – for every purchase of Sunfeast Marie & Sunfeast Cream Biscuits
75gms of
ITC TASTES SUCCESS IN BISCUITS
The company's success in the food products business is attributed to the
depth in its distribution network, ability in brand building and in identifying
quality outsourcing opportunities.
THOUGH the ITC brand is almost synonymous with tobacco, it has in no
way weighed with the people purchasing products of ITC's Foods division
and the company has been able to capture nearly 10 per cent of the market
share for biscuits within a year of the launch of `Sunfeast' range of biscuits.
The biscuits market, which witnessed a growth of 12 per cent during last
year in the country, is expected to sustain its growth during the current year,
too. The biscuits market in the country was estimated to be worth Rs 4,500
crore annually and in terms of quantity it was around 5.12 lakh tonnes. While
the organised, branded segment had a 60 per cent market share the rest
was accounted for by the unorganised sector. Maharashtra and Uttar
Pradesh were two of the largest markets for biscuits and Tamil Nadu, with 9
per cent market share, was ranked third.
ITC Foods division launched biscuits in three segments - Glucose, Marie
and Cream - and it was the first to come out with two new flavours - Orange
Marie and Butterscotch Cream biscuits. While in the rural markets Glucose
biscuits do well, in the urban markets it is the cream biscuits segment.
ITC clearly demarcated its two businesses and food products were sold
through groceries/departmental stores that did not deal in tobacco products.
Hence there was no hesitation on the part of the consumers to accept
biscuits, ready-to-eat food products and chocolates marketed by ITC through
its Foods Division despite the fact that ITC as a brand has long been
associated with tobacco.
The company's success in the food products business is due to the depth in
its distribution network, ability in brand building and in identifying quality
outsourcing opportunities.
ITC entered the biscuits market in August 2003 and it has introduced its
products in Uttar Pradesh, Maharashtra, Kerala, etc. The `Sunfeast' brand of
biscuits have been able to capture a 10 per cent market share where they
have been launched. In Coimbatore, by the end of 2004-05, it would garner
20 per cent of the biscuit market. The market for biscuits is to be good since
the per capita consumption of biscuits was just about 10 kg in India where
was it was 100 kg in countries like the US and even China.
Moreover, from being essentially a favourite of children , biscuits are
emerging as a preferred snacks to be consumed with coffee or tea and this
wider consumer choice promised growing demand for them.

ITC expects maximum sale of biscuits in west India which will cater to
around 29 per cent of the company’s total biscuits sales. The share of east
and south will be somewhat similar at around 23 per cent.
During the current financial year, the company’s food division will
concentrate mainly on strengthening of its distribution network. They are
looking at sales or profit right at this moment. Their primary aim now is to
make their products available in all corners of the country. The company has
no plans to go for export of biscuits in a big way immediately.
DISTRIBUTION NETWORK OF ITC
MOVE over supermarkets, departmental stores. The friendly neighbourhood
panwallah play a major role in the corporate sector what with ITC Ltd’s food
division banks on this segment to give it the winning edge in the war to win
the loyalty of Indian palates.
ITC leveraged its proven strength in retailing especially through the
panwallah segment with which it is particularly familiar, thanks to its cigarette
business, to emerge as a leading player in the branded biscuits market
which it entered barely over month ago.
While grocery stores remained a large part of the retail rollout plan, growth
for them came from the neighbourhood convenience stores and panwallahs
who are familiar with company and brands. The biscuits are now available
across the country through such outlets.

While making inroads into retail has remained a tough challenge for many
MNCs, ITC seems to have cracked the complicated code if you consider the
fact that in a place like Pune, for example- it services four thousand such
outlets on a daily basis with the figure increasing to over two-and-a-half lakh
across the State.
The company has already set in motion a multi-crore brand-building and
promotion exercise for its foray into the biscuits business.
At stake is a Rs 2,700-crore organised market for the product, which is
currently dominated by Britannia and Parle, which currently account for over
80 per cent of the market.
The company’s brand strategy seems to be based on giving established
favourites like Marie and cream biscuit segment a new interpretation to
seduce palates. Thus, while the Marie takes on a new, orange flavoured
avatar, the company is hoping to lure Indian biscuit lovers with an all-new
butterscotch cream avatar for the latter, under its ‘Sunfeast’.
Flavour innovation will lead growth in the cream segment and we will
continually look at launching value-added products to gain leadership
position.
Whether the panwallah will smoothen the journey to number one position
remains to be seen but the company is already claiming that it has got 4-5
per cent of the 600-700 tonnes/month Mumbai market just one month into
the launch.
The company is already launching the product across various cities and
plans to make the brand a national one in the next few months. That is also
planning to offer trade margins that will give competition a run for its money
will, no doubt, help.
It also continues to build its IT-backed rural distribution infrastructure in
support of its FMCG growth strategy because the distribution reach of this e-
biz is more important than its revenue – earning potential. This is important
for India because distribution of products and services to the hinterlands of
India is a daunting task, and this is the bit that most FMCGs as well as the
cola majors are struggling with.
And going to that rural part of India is important, as anyone will tell you
because 700-750 million people live in there. Nor is it simply poor people
who live here. According to the NCAER, nearly 400 million of these people
will earn around Rs.22,000-Rs.45,000 per annum by the year 2006-07.
The hit project include Shakti of HLL, Coke trying mobile dispensing units,
where rather than individual paanwallas coming to town to pick up
replenishments, there are distributors on cycles doing the rounds of these
paanwallas and TTK Prestige’s Project Mobile Prestige. This is where the e-
choupal model is scoring. ITC covers some 18,000 villages currently

reaching 1.8 million farmers and ITC chief Yogi Deveshwar expects the
network to cover 100,000 villages or one-sixth of rural India by 2010.
Move to the Indian retail scene, and there are two things that drive the
business – groceries and clothing. With its e-choupal business helping ITC
improve the quality of its commodities like wheat, coffee, soya, packaged
basmati rice or processed fruits or even frozen and cooked shrimp and
reduce their costs, clearly the company has a head-start in the groceries part
of the business, in terms of its ability to develop private labels. The company
has already made some kind of start into the ready-to-eat business through
its Bukhara brand of dals and various regional preparations. Issues that are
common in this category such as storage temperatures and quality of
canning would have also been addressed; it appears to be available across
40 of the main metros at grocery stores and food outlets.
ITC has also forayed into staples like atta and salt, confectionery like mint
and candy, and snack food like biscuits. And guess where the atta is
sourced from – yes, the e-choupal network. In fact, in a recent interview to a
newspaper daily, the CEO of ITC’s International Business Division which
runs the e-choupals has said the group plans to set up rural malls (selling
tractors, cement, steel, diesel, financial products) of 5 acres each, across 15
states, starting with five by March 2004.
All this, needless to say, can go horribly wrong. But there must be a fairly
good chance of it happening since ITC is one of the few FMCG players that
investment firms like SSKI rate as over-performer is the fact that they believe
ITC to be mulling an entry into a core FMCG category leveraging the strong
distribution network they have, namely, soaps and detergents.


Biscuits Industry Key Players Volumes Distribution Practices

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Biscuits Industry Key Players Volumes Distribution Practices

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To Estimate the Biscuits Industry and identify the critical success factors

OBJECTIVE OF THE STUDY

To determine the key players operating in the industry by estimating their

volumes and critically evaluate their distribution practices.

Scope of the study: The study shall entail the following:

• Complete understanding of the category and industry.

- The key players with brand wise volumes

- Availability & Visibility figures of key players by channels

• Understanding of the distribution process and the components of the

- The players: Distributor, trade (Wholesale & retail), Salesman.

- Various channels and their dynamics (wholesale, convenience,

grocer, tea stall/restaurant…).

- Distribution infrastructure (vehicle, sales force…)

- Distribution norms and practices: (inventory, billing, credit, delivery,

- Strengths and weaknesses of various players as regard distribution.

• Understanding of various trade schemes in the market.

- Critically analyze the schemes as regards their design and

• Recommendations for ITC to formulate a distribution strategy to align

with industry needs.

Location of the Study: Saharanpur.

Duration of the Study: 6 weeks

The project be broadly divided into 3 parts:

• Part 1: Understanding of the distribution systems at different WD point

• Part 2: Collection of data regarding industry figures, key players,

availability, schemes etc by carrying out a detailed market survey.

• Part 3: Collation of data and preparation of recommendations.

Part 1 and Part 2 should be carried out simultaneously.

Marketing channel are sets of interdependent organizations, involved in the

process of making a product or service available for use or consumption.

satisfy demand of supplier goods and services at right place, quantity,

activities of the unit (e.g., retailer, manufacturer, representative, sales officer,

wholesaler comprises them. Therefore the channel should be viewed as an

the generation of firm, possession, time and place utilities. Members of

marketing channel perform a number of key functions. Some of the functions

1. Information: the collection and dissemination of marketing research

information about potential and current customer, competitors and the

other forces in market environment.

2. Promotion: The development and pervasive communication design to

attract customer to its offer.

3. Negotiation: The attempt to reach the final agreement on price and

other form so that transfer of ownership or possession can be

4. Ordering: Marketing channel member’s communication of intervention

to buy to the manufacturer goods.

5. Financing: the acquisition and allocation of funds required to finance

inventories at different links of marketing channel.

6. Physical possession: The successive storage and movement of

physical product from raw materials to the final customers.

other financial institutions.

Companies have to decide on the number of intermediaries to use in their

channel. The various strategies that are available are as follows:

Exclusive distribution: It involves severely limiting the number of

intermediaries handling the company goods or services. It is used when the

service output offered by the reseller. Often it involves exhaustive dealer

agreement in which dealer agrees not to carry competitive brand. By

generating exclusive distribution, the product hopes to obtain more

aggressive and knowledge selling. Exclusive distribution tends to enhance

products, automobiles sector etc.

intermediaries who are willing to carry a particular product. It is use both by

established companies and by new companies seeking to obtain distributors.

control and less cost than intensive distribution.

Intensive distribution: This involves placing the goods or services in as

many outlets as possible. When the consumers require a great deal of