ITC Blog

Monday, September 03, 2007

ITC to Increase Food Stores to 140 in Three Years

ITC Ltd., India's biggest tobacco company, plans to raise the number of its fruit and vegetable outlets to 140 in three years as it cuts dependence on cigarettes.

ITC plans to operate 50 of the Choupal Fresh stores by March in the cities of Hyderabad, Pune and Chandigarh, S. Sivakumar, who heads ITC's agriculture arm, told reporters in New Delhi today. The Kolkata-based company currently has three stores selling fresh produce.

ITC, 32 percent owned by British American Tobacco Plc, is adding new businesses, such as clothes retailing, to cut its reliance on tobacco revenue and will compete with Reliance Industries Ltd. in the fresh food industry. Sales at chain stores in India may rise more than eightfold to $97 billion by 2012, consultant Technopak Advisors Pvt. estimates.

``It's a positive move for ITC to invest more in expanding its network of stores and is in line with its plans to increase revenue from businesses other than cigarettes,'' said K.K. Mital, who helps manage the equivalent of $49 million of stocks at Escorts Asset Management in New Delhi. ``The competition in the retail business is intensifying but ITC has a unique business model.''

Reliance Industries, an energy company that opened its first retail store in November last year, is expanding its network of Reliance Fresh stores. Earlier this month, Wal-Mart Stores Inc., the world's biggest retailer, and India's Bharti Group agreed to set up wholesale stores.

ITC rose 6.2 rupees, or 4 percent, to 158.4 rupees at the 3:30 p.m. local time close on the Bombay Stock Exchange, its biggest increase since July 25.

Rural Supermarkets

ITC uses its network of Internet kiosks and rural supermarkets to buy produce from farmers. It purchases produce such as wheat directly from farms, selling it as the Ashirvaad brand of flour and using it as an ingredient for its Sunfeast range of cookies.

The company has a network of more than 6,500 ``e-Choupal'' kiosks named after the Hindi word for a village meeting place. Farmers sell their crops online, then deliver the produce to supermarkets known as Choupal Sagars run by ITC, where they can buy everything from mobile phones to pesticides. ITC operates 18 Choupal Sagars.

Cigarette sales accounted for 48 percent of the company's annual sales in the year ended March 31 from about 65 percent in the year ended March 31, 2002.

ITC plans to add stores in more towns and cities as it builds its supply chain of fresh produce across the country.

``If we are in Pune and servicing it from a catchment area, then with a little more addition we can service Mumbai as well,'' Sivakumar said. India's financial hub Mumbai is 220 kilometers (137 miles) northwest of Pune.

The company will take advantage of the supply chain to grow its fresh food business, he said, without providing details of investments planned.

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