📈 ITC's Miraculous Growth From Meme Stock to Top Gainer: Explained
How did ITC go from being a meme stock to becoming a top gainer in 2023? Read on.
2021 Flashback:
ITC became India's favourite meme stock. Why?
Well, its stock price barely budged in five years:
Share price in May 2016: Rs. 211.80
Share price in May 2021: Rs. 212.60
Now, fast forward to 2023, and it's a whole new ball game.
Seems like ITC is back in its game and how!
Its stock rose 38%!
In Q2 FY24, ITC’s revenue from operations rose by 2.6% to Rs.16,550 Crores.
Its net profits rose by 10.3% from Rs. 4,466 Crores to Rs. 4,927 Crores!
How did ITC turn the tables?
Read on.
Back in FY13, the cigarettes business’ contribution to ITC’s total revenue stood at 47%.
In FY23?
37%! A decline of 10 percentage points!
Maybe this strategic shift of focus from tobacco to FMCG has worked for ITC.
And maybe, it makes more sense to be laser-focused on the FMCG segment.
After all, demand in the FMCG sector is surely rising!
In Q2 2023, FMCG industry in India saw a 7.5% consumption growth.
The FMCG Story
Now, what was ITC’s game plan to enter the FMCG market?
Simple: diversify and conquer.
From biscuits to stationery, ITC has it all.
It adds 100 FMCG products every year to its product portfolio.
Has this paid off?
Haha, you bet!
By December 2023, ITC became the largest FMCG manufacturer in the food space.
Yes, its sales took over giants like Adani Wilmar, Britannia, and Parle Products!
And it's not stopping here.
It is spreading its wings far and wide through strategic acquisitions.
This year, it acquired a 39% stake for Rs. 175 Crore in the brand Yoga Bar.
Yoga Bar is a D2C brand that sells nutrition bars, muesli, oats and cereals.
Guess it fits perfectly in ITC's portfolio of the ‘Good for You” segment, no?
It also acquired an additional stake in Delectable Technologies, which operates the Azgo app. What does it do?
It operates vending machines selling snacks and other fast-moving consumer goods.
So, this acquisition is further set to strengthen the presence of ITC’s FMCG products in the distribution channel of vending machines.
ITC Next Strategy
Looks like ITC is trying to strengthen its FMCG business even more via:
Investments in FMCG infrastructure
DigiArc: a smart digital infrastructure comprising 200 factories, 50 warehouses, 3,000 distributors and 26 lakh retailers
Omnichannel distribution network
What's more?
ITC is also investing in sustainable packaging and FoodTech.
Why FoodTech?
Well, FoodTech sits at the sweet intersection of food, tech and hotels.
It has already achieved product-market fit with the cloud-kitchen model in Bangalore with 3 brands:
ITC Master Chef Creations
ITC Aashirvaad Soul Creations
ITC Sunfeast Baked Creations
Clearly, ITC is doing a lot - especially in moving away from the highly regulated tobacco space and towards FMCG.
Here's a million dollar question for you:
When will ITC hive off its FMCG business?
More importantly, should it?!
Comment below 👇🏼
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