PROJECT REPORT

ON

ITC FOODS

1
 INDEX

Sr. No. Contents Page

No.
1. Executive Summary 4
1. Introduction 5
2. Background 7
3. Market & Competition 8
• Ready to Eat
• Confectionary
• Staples
• Biscuits
• Snacks
4. Financial Data 14
5. Strategy 19
6. Structure 22
7. Culture 25
• Vision
• Mission
• Core Values
• Philosophy
• Design
8. Effectiveness 27
9. Contribution 29
10. Bibliography 30

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 EXECUTIVE SUMMARY

ITC was established on Aug 24, 1910 as the Imperial Tobacco Company of India Ltd in
Kolkata and its name was changed to I.T.C. Limited in 1974 and finally they changed it
to ITC Ltd in 2001. ITC has diversified presence in tobacco, foods and confectionery,
apparel, paper boards, packaging and hotel businesses.

The Foods Division is the most recent diversification of the ITC group. They entered in
this business in 2001. They launched KoI brand under Ready to Eat segment .They
expanded with brand launches in the Confectionery, Staples and Snacks Food segments.

ITC has fulfilled all needs and requirements of the people. If the company maintains its
standard or increases it in the near future it surely will attain the no. 1 position in the
market.

Here, through our report we have tried to study the environment in which ITC foods
operate. We have also analyzed the market of ITC foods and the competition involved.
We have also studied the various strategies adopted by company to achieve its goals and
the structure and the culture developed within ITC to support its objective. Also, an effort
has been made to project ITC’s future prospects, sales and profits.

3
 INTRODUCTION

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.
For ITC, the packaged foods is an ideal business to utilize ITC's proven strengths in the
areas of hospitality, 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 taste and the expertise required to translate this knowledge
into delightful dining experiences for the consumers. ITC has stood for quality products
for over 98 years to the Indian consumer and several of its brands are today
internationally benchmarked for quality.

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 Bengaluru.
ITC has over the last 98 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 utilized
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:

1. Ready To Eat Foods

2. Staples
3. Confectionery
4. Snack Foods

In order to assure consumers of the highest standards of food safety and hygiene, ITC is
engaged in assisting outsourced manufacturers in implementing world-class hygiene
standards through HACCP certification. The unwavering commitment to internationally
benchmarked quality standards enabled ITC to rapidly gain market standing in all its 6
brands:

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 1. Kitchens of India
2. Aashirvaad
3. Sunfeast
4. mint-o

5. Candyman
6. Bingo!

Recently, on Aug 1, 2008, ITC Foods has drawn up plans to extend its Kitchen of India
brand to frozen foods.

ITC’s Branded Packaged Foods business continues to expand with sales growing by 23%
over the previous year. Apart from the development costs of new products, the business
has had to contend with the recent economic slowdown and severe cost increases in input
commodities including wheat, vegetable oil, maize and skimmed milk powder, in
addition to the soaring fuel prices. Having acquired reasonable scale in a relatively short
span of time, the business is progressively focusing on consolidating the portfolio in
certain categories, improving market servicing and driving supply chain efficiencies.

5
 BACKGROUND NOTE (ITC)

ITC was established on August 24, 1910 as the Imperial Tobacco Company of India
Limited in Kolkata. Initially, the company was involved in the trading of imported
cigarettes.
In 1925, in a backward integration move, the company started a packaging and printing
business.
The name of the company was changed to India Tobacco Company Limited (I.T.C. Ltd.)
in 1974.
In 1975, I.T.C. Ltd., through ITC-Welcomgroup, tied up with the US-based Sheraton
Corporation to enter the hospitality industry. It acquired its first hotel in Madras (later
renamed Chennai) in Tamil Nadu and called it the Welcomgroup Chola Sheraton.

I.T.C. Ltd established ITC Bhadrachalam Paperboards Ltd. (IBPL) in 1975. The company
started production at its integrated pulp and paper/board manufacturing facility at
Bhadrachalam, Andhra Pradesh, in 1979.

In 1990, I.T.C. Ltd. set up an International Business Division (IBD) for export of
agricommodities.
I.T.C. started a greeting cards business under the brand name Expressions in the year
2000.
In the same year, I.T.C. also entered the fashion retailing business by extending its well
known cigarette brand Wills. The retail outlets were called Wills Lifestyle and offered
premium leisure wear for men and women under the Wills Sport brand.

In September 2001, the company was renamed ITC Ltd (without full stops, and with no
meaning attributed to the alphabets).

In 2001, ITC made an entry into the foods business.

In 2002, the company launched another clothing brand, John Players, which targeted the
urban youth.
In 2004, ITC was one of eight Indian companies to make it to the “Forbes ‘A’ List”8
which featured 400 of “the world’s best big companies”.
In Oct 2005, ITC has launched an exclusive line of prestige fine fragrances and personal
care products under the Essenza Di Wills brand.
In late 2007, ITC launched Fiama Di Wills soaps and shampoos following the success of
Essenza Di Wills.

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In Dec 2007 ITC launches ECF (Elemental Chlorine Free). ITC is the first and only
Company in India using the ECF technology.

Market and Competition

Indian Foods market is a monopolistic market. There are many competitors in all the
categories and although they all have similar products available at similar prices, they are
trying to prove themselves different through their marketing strategies. However, entry to
this business is easy and ITC has utilized this fact very efficiently to their benefit as they
entered into the several categories among this Foods business.

READY TO EAT

ITC entered into the branded and packaged foods business in with the launch of Kitchens
of India brand. In 2004, the company launched KoI brand fruits and spice conserves and
cooking pastes. The fruits and spice conserves, were developed jointly with Karen
Anand, a food expert. Priced at Rs. 70, these were targeted at the premium segment. The
KoI cooking pastes, which were priced at Rs.30 for a 100g pack, also targeted the high-
end market. Multi-purpose cooking pastes were also launched under the Aashirvaad
brand and these were priced at Rs. 10 for 80g pack. The manufacturing of these products
was outsourced to contract manufacturers for saving the operating cost.

ITC entered the branded spices market in 2005 and the Instant Mix segment in 2006, both
under the Aashirvaad Brand. As on April 2006, the total turnover in the Indian ready-to-
eat and ready-to-cook segments was only around Rs. 700 million, but it continued to post
an annual growth of 20%. By early 2006, though ITC had captured a 35% market share in
the ready-to-eat segment, MTR was the clear market leader with close to 60% in market
share. ITC exported 40-50% of KoI brand products (in terms of volumes) to the US,
Canada, the UK, Switzerland, and Australia.

In May 2006, ITC planned to introduce ten more varieties under the KoI brand within a
price range of Rs. 35 to Rs. 98. In 2007, some new products have been launched under
Ready To Eat category like chutneys, curries, conserves, biryanis (Noor Mahal, Bhori
Biryani and some new range of products under Gharana (Paneer Malai, Keema Mutter).
After launching all these products ITC FOODS is looking to share 50 to 60% of market
by 2008-2009.Following are the major competitors ITC is competing with in Ready to
Eat category:

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Brands Description
Gits produces the selected range of popular ready to cook and
Gits instant foods that cover a range of ethnic Indian cuisine-and
where the recipes have "Global pallete acceptance".

Offers packaged Bhel puri chats such as Sev Puri, Chana Masala,
Haldirams Samosa, Pakoras, Alu Tikki, Pao Bhaji, Gol Gappa, Dhokla
among others

Offers packaged sweets,syrups,namkeens, cookies, pickles, aloo

Masala, Bhujia, Bhelpuri, Chana Dal, Kajui Ladoo and many
Ethnic Kitchens
more items.

MTR foods currently comprise twenty-two delicious and

MTR
completely authentic Indian curries, gravies and rice.

Priya has a range of popular traditional recipes starting from Dal

Makhani, Navaratan Kurma to Palak Paneer, Paneer Butter
Priyafoods Masala, Punjabi Chhole and Rajma Masala along with true
southern delicacies like Andhra Veg Pulav, Mango Dal, Gongura
Dal.

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 Market Share - Ready To Eat

9%
ITC Ltd.
8%
MTR
48%
Kohinoor

35%
Others(Gits, Priya
Foods etc.)

as on June, 2008

CONFECTIONERY

Confectionary market in India is about Rs.2500 crore. It is loosely divided into seven
categories:

1. Hard boiled candies

2. Toffies
3. Eclairs
4. Chewing gum
5. Bubble gum
6. Mints
7. lozenges

ITC has currently in market with its two brands “Mint-o” and “Candyman”. ITC’s
Mint-O fresh secured a 17% share of Indian cough lozenges market ahead of former
leader Perfetti which only achieved 14.3% with chloromint. The Indian giant marked the
confectionary sector in 2002 and has only two brands “mint-o fresh” and “Candyman”.
But in overall confectionary market they are lagging behind having just 3% market share
as compared to market leader Perfetti with more than 37% market and providing larger
number of brands.

Perfetti van melle ITC Ltd. Nestle Cadbury

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Alpenliebe Candyman . Kit Kat Bubbaloo
Alpenliebe Minto . Kit Kat Lite Dairymilk
Creamfills . Milky Bar Eclairs
Alpenliebe . Munch % Star
Lollipop . Milk Chocolate Gems
Big Babol . Fun Bar Perk
Center Fresh . Polo Halls
Center Fruit . Polo Power mint
Center Shock . Munch Pop Choc
Chatar Patar . Éclairs
Chlor-mint
Chocotella
Cofitos
Fruittella
Happydent White
Protex Happydent
Marbels
Mentos
Chocoliebe

Market Share - Confectionery

ITC Ltd.
3%

Perfetti Van Melle

42% 37%
Cadbury

Nestle

7% 11% Others(Parle,
Joyco, HUL etc.)

as on June, 2008

STAPLES
ITC entered the staples market in 2002 with wheat flour under the Aashirvaad brand. In
2003, ITC extended the Aashirvaad brand to edible salt. By early 2006, ITC had a 40%
market share in the Rs. 6 billion packaged flour business. Its closest competitor HLL’s
Annapurna brand was trailing behind with a market share of 18%. The market was
growing at 12%. Under its Aashirvad brand ITC FOODS also launched salt, mixers,
ready to cook pastes. In the Rs. 4 billion organized salt market (as of 2006), Tata Salt was

10
the market leader with a 28% market share. ITC had only a 5% share of the market. Other
players in this business are HLL (Knorr Annapurna), Nirma (Shudh), Marico
Industries (Saffola), etc.

Market Share - Staples

ITC Ltd.

24%
HLL
42%

Pillsbury
13%

Others(Sri Lal
21% Mahal, Local
Brands etc.)

as on June, 2008

BISCUITS:

Indian biscuit market is estimated to be around 5000 crore. Biscuit industry in India in the
organized sector produces around 60% of the total production, the balance 40% being
contributed by the unorganized bakeries. ITC with its premium product, SUNFEAST, is
acquiring a big share of market. Within few years, they are able to get 12% share of the
market.

Britannia ITC Ltd Parle Priyagold

(Sunfeast)
Tiger Marie Parle-g Butter Bite
Nutrichoice Dream cream Krack-Jack Classic Cream
Junior Milky Magic Monaco Butter Lite
Good Day, Fit kit Kreams Big Boss
50 50, Choco Nut Hide and Seek Marie Lite
Treat Butter Nut Milk Shakti Magic Gold
Pure Magic,
Milk Bikis
Good Morning.

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 Market Share - Biscuits

ITC Ltd.
8% 12%
Priyagold
10%

32% Britannia

Parle

38% Others(Bonn,
Anmol etc.)

as on June, 2008

SNACKS:

Snacks industry overview

Snacks industry in India is worth 1800 Crores of Rs. and growing at 10% is one of the
largest markets in the world, out of which potato chips holds the major market share of
around 85%.

Product Price Product Price Product Price

(ITC Ltd) (Frito Lay) (Haldiram)

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Bingo Lays Namkeen
Rs. 5 Rs. 5 Rs. 5
Rs. 10 Rs. 10 Rs. 10
Rs. 20 Rs. 20 Rs. 20
Lehar Namkeen
Rs. 5
Rs. 20
Kurkure
Rs. 5
Rs. 10
Rs. 20

Market Sahre - Snacks

12% 16%

ITC Ltd.
FritoLay India
27%
Haldiram's
Others
45%

as on June, 2008
FINANCIAL DATA

ITC Ltd. started their food division in the year 2001. Since then the growth has been
fantabulous. Their investment has increased year by year considering the scope of food
market. However, they could not sustain the constantly increasing profit margins, mainly
because of their valuable investment in market research, surveys, R&D, costly
advertisements and expansion plan. Moreover they entered in a whole new market of
food, but for this market they already had strong distribution market, which they are
using for their tobacco product. So considering all these factors and short span of time
period, surprisingly they did good job, particularly in snacks, biscuits, Ready to Eat and
staples market.

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Annual Results (ITC) - In Rs. Crores

Annual results in details

Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04
Other income 610.90 336.49 286.08 235.81 224.88

Raw material 4,639.35 5,644.34 4,124.90 2,837.40 2,572.78

Employee expenses 733.32 630.15 541.40 467.26 416.48

Other expenses 4,176.61 2,397.88 1,938.52 1,610.08 1,310.04

Provisions made - - - - -
Depreciation 438.46 362.92 332.34 312.87 241.62
Taxation 1,451.67 1,226.73 988.82 836.00 726.21
Net profit / loss 3,120.10 2,699.97 2,235.35 2,191.40 1,592.85

Net
Operating raw employ
Rate of Increase Sales profit interest
profit material ee cost
ACTORS AFFECTING NET

/ loss
18.0 37.5
2005 7 18.30 8 10.29% 12.19% 71.16%
28.1
PROFIT

2006 6 19.15 2.01 45.38% 15.87% -71.88%

26.3 20.7
2007 4 18.90 9 36.84% 16.39% -72.51%
12.7 15.5
2008 6 11.31 6 -17.81% 16.37% 40.55%
21.3 18.9
Projection for 2009 3 16.92 8 18.67% 15.21% -8.17%

The selling of 13544 crores, with net turnover at 3900 crores registered a growth of
18.4% driven by the non-cigarette business, which grew by 29% due to new investments
in FMCG market. Overall projection for the year 2009, for sales is projected to be at
growth rate of 21.33%.

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SALES OF FOOD SECTOR AND ITS PROJECTION:

2006 2007 2008 2009(projected)

Sales (crores) 1230.54 1698.53 2526.60 3410

The foods business is expanding rapidly with sales growth of 35% in the year 2007. This
range of product includes more than 150 different products. The growth of this sector in
terms of product categorization is as follows.

Sales in biscuits category grew by 55%.

Sales in staples category grew by 52%
Sales in confectionary grew by 51%.
Sales in RTE grew by 35%

ITC Food is looking to expand its RTE category to maximize its profit.

ITC’S NEW CHALLENGES:

This food industry is the industry with very less profit margins. So low operation cost is
the key. Also, Indian middle class is price sensitive. In this area international, national
and also regional competition is very tough. With that wheat, petrol and labor cost is
increasing day by day. Different types of restrictions imposed by the government are also
playing a vital role in reducing profit margins. For example, exporting non-vegetarian
foods out of India is restricted. To cover this up, ITC is trying to reduce cost of its
biscuits by acquiring mass production of wheat directly from farmers through its E-
chaupal initiatives. Also in this way ITC is able to reduce the price of its staples. As far as
Confectionary market is concerned, ITC is looking to launch its brand of chocolate in
collaboration with an American company. After analyzing the food sector, one can say
that it is one of the toughest market to compete in as all the market giants are already
there.

GROWTH AND INVESTMENT PLANS:

This food sector is the most promising field and has already overtaken IT and
PHARMACEUTICALS Sector of India. Even Indian Government is looking to develop
this sector. That’s the reason central Government has already passed several projects for

15
food parks. In this way FDI in this sector is possible. Also government in its 2006 budget
has reduced custom duty from 16% to 8% on packaged food and also excises duty on
instant food mixes. This will help ITC to be competitive in the market. Recently ITC has
started exporting packaged food from its Bangalore plant. It is also planning to open one
more new plant in Calcutta for Indian market. They are looking to add several products in
their RTE list which will be exported as well. Also in late 2007 ITC has acquired one
Australian Plant and seed technology industry. Through this they will provide highly
valuable seeds and other solutions to farmers in India, which ultimately will increase the
productivity and cost effectiveness for their staples and biscuits business.
Its turnover in the foods business was around Rs. 8 billion in 2005-06 which further
increased to Rs. 10.2 billion in year 2006-2007.
ITC has decided to make an investment of 300 crores over a period of 5 years. ITC Foods
has also decided not to make heavy investments in manufacturing unless volumes pick
up. As of today ITC has invested 20 crores in R & D and planning to invest further 15
crores to produce new products in different categories.
Thus looking at all the strategy of ITC future investment and planning. The future
investment plan is as follows

Rate of Increase Sales Operating Profits Net Profit/loss

2005 18.07 18.30 37.58
2006 28.16 19.15 2.01
2007 26.34 18.90 20.79
2008 12.76 11.31 15.56
2009(Projected) 21.33 16.92 18.98

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 Rate of Increase of Sales with Projection for 2009

30.00
28.16
26.34
25.00
percent increase

20.00 21.33
18.07
15.00
12.76
10.00
5.00

0.00
2005 2006 2007 2008 Projection
for 2009
ye ars

Rate of Increase of Operating Profit with Projection for

2009

25.00

20.00
Percent Increase

18.30 19.15 18.90

16.92
15.00
11.31
10.00

5.00

0.00
2005 2006 2007 2008 Projection
for 2009
Ye ars

17
 Rate of Increase of Net Profit/Loss with Projection for
2009

40.00
37.58
35.00
Percent Increase

30.00
25.00
20.00 20.79 18.98
15.00 15.56
10.00
5.00
2.01
0.00
2005 2006 2007 2008 Projection
for 2009
years

Major Strategies Adopted by ITC Foods

Entering the foods business was itself a strategic decision for ITC. While ITC’s core
business, tobacco, was under pressure owing to several factors like government bans on
advertising and on smoking in public places, hikes in the excise duty for cigarettes, and
anti tobacco campaigns, ITC planned to deploy its surplus in the packaged food business
where it saw huge business potential. Following are some of the strategies that ITC
adopted to make its food business a success:

• Entering into less competitive or unexplored markets (Ready to eat, Staples,

Wafers): When ITC entered into the foods business in 2001, it focused on
unleashing the areas where the competition is very less or there is no competition.
It started with packaged ready to eat food and later extended that to Aashirvaad
brand of edible salt and Atta. Recently ITC has announced its desire to forge in
the frozen foods category in the domestic market. Players in this category are
limited and ITC hope to exploit this fact. Also, in Bingo, although the competition
is tough but there is only one player with whom ITC has to compete i.e. Frito Lay.
This strategy has helped ITC to quickly establish itself in the above mentioned
businesses.

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• Distribution Network: ITC already had a huge distribution network due to its
tobacco business. ITC used this network to distribute their biscuits and wafers.
This not only provided a good launch to their products but also helped in boosting
sales. Today, ITC’s Bingo and Sunfeast are available at nearly 1.8 million outlets
whereas Parle is available at only 1.5 million outlets.

• Market differentiation (Ready to eat, Biscuits): ITC started packaged foods

business with the KoI brand of ready-to cook products. They were positioned as
premium products with target groups including tourists, NRIs, etc. In Biscuits
also, ITC launched differentiated products in each and every segment. For e.g. it
introduced an Orange Marie, a butterscotch cream biscuit, chilli flakes in a biscuit
and even honey flavor under the Sunfeast brand.

In March 2005, ITC Foods launched Sunfeast Pasta, a whole wheat based product
targeted at children. It was expected to compete with products like Nestle’s
Maggie noodles. With this strategy ITC built for itself new markets.

• Cost control strategy (all products): When ITC started the foods division, its
main challenge was to compete with the players who were already there. To
overcome this challenge, ITC realized that they have to offer products at a price
which is either equal or less than what the competitors are offering. To do this,
they planned to capitalize by leveraging the strength of the group’s other
businesses. ITC’s printing and packaging business provided high-quality, cost-
effective, and innovative packaging. ITC also enjoyed cost advantages over its
competitors owing to its electronic procurement system called e-Choupal. This
helped ITC to compete with the best.

• Diversification of products (Biscuits, Wafers, and Ready to Eat): One of the

ITC’s successful strategies has been the method of diversifications among its
various products. If we talk just about Bingo, ITC has come up with 16 flavors in
comparison to its competitor ‘Lays’ of ‘Frito Lay’ which has only 4 major flavors.
Same is the case with Ready to Eat food category and Biscuits.

This strategy has helped ITC to attract a wide range of market.

• Extensive advertising (Biscuit, confectionary, wafers): Just like a Bollywood

movie needs good publicity to be a super hit, every new product launched in the
market needs to be known to the consumers before it is launched. Advertising is

19
 where ITC made the difference in comparison to its competitors. They hired the
best professionals and the best ambassadors in the country to make their products
famous. This is evident form the award winning marketing campaign for Bingo
and Minto Fresh. The tagline "Jab Laila ko karna tha impress to majnu ne khayi
mint o fresh" has stood the test of times and is still widely known and
remembered. Hiring the best people from the film industry and sports (Sharukh
Khan and Sachin Tendulkar for Biscuits, Rakhi Sawant for Minto Fresh) showed
ITC’s urge to be the best.

On television, the company booked 10 to 15 spots per channel per day on youth
channels such as MTV and Star World, mass Hindi channels like Zee and Star
TV, and news channels. It also had around 20 spots on a variety of radio channels
and advertised in most leading national dailies. In the top-30 cities, over 1,000
outdoor hoardings advertised the product. According to industry estimates, ITC
spent close to Rs 100 crore on marketing.

This kind of promotion of products helped ITC to make its products known to
everyone and now it was not difficult to attract consumers.

• Regular introduction of new products (all products): Having acquired

reasonable scale in a relatively short span of time, ITC realized that, to remain in
the competition it had to introduce new products regularly. ITC has been
expanding its distribution network aggressively and also their product range. In
biscuits and wafers range, it is launching new products or flavors week after
week. Same is the case with Ready to Eat and Kitchen of India.

• Innovation (all products): When the need to introduce new products arrived,
ITC shifted its focus on to the innovation. Also, ITC was innovative in identifying
the market or niche for all its products.

• Maintenance of freshness and hygiene (all products): ITC positioned its wheat
flour on the health & hygiene and value for money terms. Success in the staples
business, especially in the branded and packaged wheat flour business, depended
on two factors – an effective distribution network and the quality of the product.
Therefore, ITC attempted to ensure that the supply chain was responsive, and laid
emphasis on making accurate sales forecasts using inputs from distributors, sales
personnel and a well-managed MIS system. To maintain freshness of the product,
the company strove to minimize the transit time by regulating the shippers to
maintain company-specific transit norms. The physical aspects of the supply
chain like warehouses and trucks were closely monitored to maintain cleanliness.

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 • From Analyzers to Prospectors (Biscuits): When ITC entered the biscuits
market with Sunfeast in 2003, with three varieties of biscuits - glucose, marie, and
cream, they did what any new player in the market does, imitating and emulating
the leader that was Britannia. Their strategy was to manufacture those products
which are already a success in the market. But, as ITC got hold of the market, it
started to manufacture flavors which were never heard of. This was the result of
ITC’s desire to exploit new product and market opportunities.

All the above strategies and with the help of launch of Bingo in 2007, ITC finally tasted
success in its food business in 2008 when it became a profitable business for the first time
since its launch in 2001

Structure

ITC has a three-tier management structure.

21
At the top are Chairman and Board of Directors, who are responsible for the strategic
supervision of ITC, its wholly owned subsidiaries and their wholly owned subsidiaries.
The ITC board is a balanced board comprising Executive and Non-Executive Directors.
The Board ensures that the Company has clear goals relating to shareholder value and its
growth. It sets strategic goals and seeks accountability for their fulfillment. There are four
board committees, namely, the Audit Committee, the Nominations Committee, the
Compensation Committee and the Investor Services Committee.

At the second level is the Corporate Management Committee, which is responsible for
the strategic management of the company's businesses within Board-approved
direction/framework. It comprises all the Executive Directors and three or four key senior
members of management.

Third level consists of divisional CEOs of each business assisted by their own
divisional management committees. Corporate Functions of the Executive Management
Team includes Planning and Treasury, Accounting, Legal, Secretarial, Human Resources,
Communications, Internal Audit and Information Technology.

The company’s organizational structure and governance processes are designed to

support effective management of multiple businesses while retaining focus on each of
them." This three-tier governance structure ensures that:

For and on behalf of the shareholders the company believes in incorporating strategic
governance in its work culture so as to ensure that despite being free from involvement in

22
the task of strategic management of the Company, it can be conducted by the Board with
objectivity, thereby sharpening and ensuring accountability of management;

With mundane tasks of everyday executive management being delegated the management
remains focused on issues of immediate importance;

The Executive management of the individual businesses that are free of handling strategic
management responsibilities of ITC as a whole is then able to channelize their energies
and time in enhancing the effectiveness and overall growth of their individual units.

Corporate Governance as defined by ITC is a systemic process by which

companies are directed and controlled to enhance their wealth-generating capacity. A
company employs vast sums of societal resources during this process of wealth
generation. ITC is of the firm belief that the governance process being followed should
ensure that these resources are used optimally to meet the aspirations of its stakeholders
and society. This is further reflected in the deep commitment of the company to
contribute to the ‘Triple Bottom Line’, which is the development of the nation’s
economic, ecological and social resources.

The company believes in empowering the executive management. But

corporate governance ensures a system of checks and balances to ensure that these
powers that are bestowed upon the executive management are used in a responsible
manner so as to meet shareholder and societal expectations. The core strengths of ITC's
governance philosophy are trusteeship, transparency, empowerment and accountability,
control and ethical corporate citizenship. The practice of each of these creates the right
corporate culture that fulfils the true purpose of Corporate Governance.

Overall, the structure of ITC has high complexity because of horizontal differentiation
within the organization. The most visible evidence is that of specialization and
departmentation. Complexity also increases because of spatial differentiation.

The ITC Code of Conduct, as adopted by the Board of Directors, is

applicable to all Directors, senior management and employees of the Company. This
Code is derived from three interlinked fundamental principles, viz. good corporate
governance, good corporate citizenship and exemplary personal conduct. The Code

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covers ITC's commitment to sustainable development, concern for occupational health,
safety and environment, a gender friendly workplace, transparency and auditability, legal
compliance, and the philosophy of leading by personal example. Since non-adherence to
the code is brought to the attention of the immediate reporting authority, formalization is
also there in ITC.

Decision-making is decentralized, as the company believes in giving

executive freedom to the management to drive the enterprise forward without undue
restraints but this freedom of management should be exercised within a framework of
effective accountability.

CULTURE

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ITC's Vision

• Sustain ITC's position as one of India's most valuable corporations through world-
class performance.
• Create growing value for the Indian economy and the Company's stakeholders.

ITC's Mission

• To enhance the wealth generating capability of the enterprise in a globalizing

environment
• Deliver superior and sustainable stakeholder value.

ITC's Core Values

The company’s Core Values are aimed at developing a performance-oriented

organization that is highly customer focused and also creates value for those holding
stake in it. It fully understands that it has a commitment to its stakeholders to act as a
guardian of the company from stakeholder’s point of view and deliver results in a manner
that actualizes stakeholder’s interest on a long-term basis.

It also delivers on the commitment to its customers by consistently addressing their needs
on product quality, value and overall satisfaction. It respects the values of people and also
encourages individuals to pursue their dreams, values their differences and helps them to
experiment in the pursuit of various opportunities.

ITC firmly believes in the concept of Excellence with their mantra being, “we do what is
right, do it well and win. We will strive for excellence in whatever we do”. It is
constantly in the pursuit of better and newer products, processes, services and
management practices. Apart from the interest of shareholders they also address their
commitment to the nation to generate economic value, at the same time ensuring that in
achieving these goals no compromises are made whatsoever in complying with rules and
regulations as specified by law.

ITC’s Philosophy

ITC believes in practicing ethical behavior among the corporate citizen. The company
follows an HR policy that is regulated by Teamwork, Trust, Collaboration, Mutuality,
Meritocracy, Objectivity, Collaboration, Self-respect and Human-dignity. It is also
deeply committed to make the company a gender friendly place for each individual while
also ensuring enhancement of equal opportunities for men and women, preventing sexual
harassment of any form and the adherence to good employment practices. It is ensured

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that the interest of the company is foremost and in this context acceptance of any kind of
gifts or payments from suppliers or customers is viewed as a serious breach of company
discipline. And such acts are also considered as damaging to the reputation of the
company.

High standards of house keeping and hygiene are followed to ensure excellent physical
working conditions. It is understood that all the directors, senior management and
employees shall conduct themselves in an honest manner and avoid any conflict of
interest.

The top officials and employees of ITC believe that ITC provides them freedom at work
and resources to experiment. Employees take pride in working for ITC for its work
culture, environment, and the way people are treated. They are consulted before a new
project\system is introduced and their concerns and suggestions addressed. ITC also gives
a lot of input to develop their skill and career. They give utmost importance to equal
opportunities, better work environment.

DESIGN

Looking at the structure and culture of ITC, we can say that its design is based more or
less on the Divisional Structure. ITC has a diversified presence in different industries
and each of its businesses act as an autonomous unit which are coordinated by the top
level, i.e. the board and corporate management committee. The divisional managers are
responsible for performance and hold complete strategic and operating decision-making
authority. The top management provides support services to the divisions. It acts as an
external overseer, evaluating and controlling performance. Hence the top management is
free from being concerned with the day-to-day operating details so they can pay attention
to the long term. Big picture, strategic decision making is done at the top level

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Effectiveness

Organizational
Effectiveness criteria Rating Remarks
Entered into food business because of the various
constraints in cigarette industry.
1 Flexibility 9
Launch of various new products in diverse categories in
accordance to the demand of the consumer market.
Outsourcing manufacturing of confectionary items,
acquisition of an Australian firm for new improved
2 Acquisition of resources 8 seeds, set up new plant in Haridwar, where there is no
tax for first 5 years.
Expanding size of work force by expanding target
market
Goals are clear and well understood as they are clear
3 Planning 7 about the markets they want to enter in and the markets
they do not want to enter.(they didn’t enter into
chocolates, milk products)
Combining various facilities to improve efficiency
(manufacturing along with printing and packaging)

Prices of almost all the products are at par with the

Productivity and
4 8 competitors. Also their selling has increased
efficiency
considerably at an average rate of 20-25% in last 6 yrs.
In 2007, At their Haridwar plant they are able to get the
more production with the limited technology and
machine utility which they had in 2006.
Availability of Employees are always consulted before a new
5 8
information project/system is introduced.
6 Stability 9 Timely operations are carried out to maintain freshness
of the inputs (Transporters are fined in case of delay)
ITC leverage human capital for competitiveness by
nurturing knowledge, entrepreneurship and creativity
7 Skilled work force 9 It has a no. of training programs which helps the
employees gain exposure to the latest technologies and
developments.

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Competing Values Framework

Environment Culture Design Structure Leadership Leader’s role

Uncertainty Intensity

High High Developmental Adhocracy Idealistic Prime mover

Market-
Rational oriented Rational Expert

Current Framework

Favorable Framework

Environment in which ITC foods division is operating is highly uncertain because of the
immense competition that they are facing in each category and due to the launch of new
products and flavors in each category every other day. It is also highly intense as the
organization’s main strategy to achieve their goals is through extensive marketing and for
that they need to know how their products are received in the market. To do this, they are
conducting various surveys and also they are launching their products only after a brief
research of the market and trials.

ITC Foods’ aggressive effort to capture market share and heavy investments in
manufacturing and infrastructure suggests that they are focusing mainly on both of their
short and mid term goals. Thus, the current design of their organization is rational but as
the environment is highly uncertain and intense, they need to move towards a
‘Developmental’ design. The structure of the ITC Foods’ division is ‘market oriented’
because of the same reason that they are focusing into the market deeply; but again as the
environment is highly uncertain and intense, they need high flexibility within the
organization and hence should move towards an adhocratic structure. Leadership in ITC
foods division is rational as the leader is functioning logically in accordance to the market
forces. Also, he is an expert as he has made optimal use of ITC Ltd’s resources in ITC
Foods’ division. For example, ITC’s distribution network.

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 Bibliography:

• www.itcportal.com
• www.wikipedia.org
• www.moneycontrol.com
• www.economictimes.indiatimes.com
• www.moneycontrol.com
• www.google.com
• www.bseindia.com
• www.perfettivanmelle.in
• www.cadburyindia.com
• www.nestle.in
• www.rediff.com
• www.thehindubusinessline.com
• www.kitchensofindia.com
• www.aashirvaad.com
• www.bingeonbingo.com
• www.mycandymanclub.com
• www.sunfeastharabanao.co

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