ITC readies for foray into dairy, fruit juices with Rs 900-cr spend

ITC is gearing up for a foray into the branded dairy and fruit juice sectors over the next few months. To start with, the company is setting up its first dairy plant in Munger district in Bihar to manufacture value-added milk products.

“The company is developing a back-end structure to ensure an increase in milk yields and milk-processing capacity for our dairy business,” said Chitranjan Dar, CEO of ITC Foods. With this move, ITC will directly compete with established players like Amul, Nestle and Mother Dairy.

For its entry into the two segments, ITC plans to invest Rs 900 crore in calendar year 2015. It plans to position the dairy products and fruit beverages on the health platform.

The company, which sells Sunfeast biscuits and Bingo snacks, is getting ready to introduce fruit juices under the B Natural brand, leveraging its distribution network across the country. In May 2014,

ITC acquired Bangalore-based Balan Natural Food’s B Natural brand for an undisclosed sum. With the launch of B Natural, ITC will compete with PepsiCo India’s Tropicana and Dabur’s Real.

ITC’s non-cigarette FMCG revenue stood at Rs 8,122 crore during FY14.

On the company’s strategic plans, Dar said, “’Leveraging ITC’s institutional strengths that include agri-sourcing, trade marketing, distribution infrastructure and cuisine expertise, we will initially roll out 7-8 variants of fruit juices and nectar under the B Natural brand.”

As for its entry into the dairy business, ITC will be launching products like milk powder and ghee in Q3 FY15. “The focus will be on ensuring excellence in product development and regionalisation of products,” said Dhar. After its first plant in Bihar, ITC plans to set up manufacturing units for dairy products in Uttar Pradesh, Punjab, Maharashtra, Andhra Pradesh and Telangana.

Analysts feel the foray into the dairy sector is a natural extension after the company’s success in packaged foods. “This is the right time for ITC to invest in this business. But its new business won’t be a cakewalk as it competes with market leaders like Amul, Nestle, Britiania and Mother Dairy,” said an industry analyst with a domestic brokerage firm.

“’The company will leverage the strength of its sales distribution network and e-Choupal, a rural distribution model where the company buys directly from farmers, for its dairy foray,” he added.

According to industry sources, ITC’s milk procurement network at Munger covers over 2,800 dairy farmers with average procurement of over 10,000 litres per day. “The company has also started milk-mapping studies in two other locations. ITC is currently developing new products at its food research unit in Bangalore,” added sources.