ITC Blog

Monday, September 03, 2007

Hilton, Leela & ITC eye Raj Mahal Palace

Raj Mahal Palace in Jaipur, belonging to Maharaja Sawai Bhawani Singh, is in talks with domestic and international hotel majors to lease out the palace.

Informed sources said The Leela, ITC Welcomgroup and Hilton are in the race to manage the heritage property, which boasted of guests such as Queen Elizabeth II, Princes Charles and Lady Diana, and Jacqueline Kennedy.

Confirming the development, Raj Mahal Palace GM R D Singh said, “We are in talks with several players for a leasing agreement.” Sources said players such as Leela and ITC could look at co-owning the property as they need to invest in upgrading and significantly increasing the room inventory at the Palace, sources added.

Raj Mahal Palace spread over 13 acre with an inventory of 20 rooms was managed by the Taj hotels from 1984 to 2001. The palace was built way back in 1729 by Maharaja Sawai Jai Singh II and it was converted into a hotel by Maharaja Sawai Bhawani Singh in 1979.

Currently, it is managed by the royal family. Industry observers claimed that the property once ranked amongst most luxurious hospitality assets in the country.

Repeated attempts to contact ITC and Hilton did not evince any response. ITC operates the luxury hotel Rajputana in Jaipur. Leela confirmed that it was looking at a heritage asset in Jaipur, but declined to identify the property.

“Currently the negotiations are on and we are evaluating a palace in Jaipur,” said Hotel Leelaventure vice-chairman Vivek Nair. “Considering that we have acquired a land in Delhi and are setting up hotels in Gurgaon and Udaipur, we need to be in Jaipur to complete the circuit,” Mr Nair added.

ITC takes over Australian agri-biotech Co

Diversified major ITC Ltd has taken over Australian agri-biotech company Technico Pty Ltd for an undisclosed sum, as part of a strategy to strengthen its foods business.

The deal was executed through its subsidiary Russell Credit, ITC, which launched potato chips under the brand Bingo, informed the stock exchanges on Friday.

An ITC spokesperson said the acquisition of Technico will help improve the profile of the company's foods business, but declined to provide financial details of the takeover.

Technico is an agri-biotech company with operations in Canada, China, India and Middle East through its subsidiaries.

Technico has relocated its corporate office in Chandigarh which is responsible for the group's strategic business development initiatives, financial management and overall global operations monitoring.

Technico provides bulk potato supply chain management, and has the award winning ‘TECHNITUBER’ seed technology which it claims would revolutionise the global seed potato industry.

Technico has seed manufacturing facilities in China, Canada, and Manpura in Himachal Pradesh.

The potato company provided supply chain solutions to global customers by using proprietary technology and a technology platform to implement affordable early field generation seed potato programmes, reduce seed exposure to soil-borne pathogens and rapidly introduce new varieties.

The Technico trading division utilises its extensive global reach to source potatoes throughout the year for bulk users.

ITC buys KK Birla group firm

In order to boost its agri business, ITC Ltd on Friday has acquired Technico Pty Ltd of Australia from KK Birla group outfit Chambal Fertilisers & Chemicals Ltd. The acquisition was done through the investment arm of ITC, Russell Credit Ltd.

Technico is engaged in potato seeds and supply chain management. ITC officials was tight-lipped about the size of the deal. Sources close to KK Birla group said that Technico along with its subsidiaries has a turnover of Rs 400-500 crore.

KK Birla group used to hold 78% stake in the Australian outfit through an investment arm in Singapore called Chambal Biotech Ltd. Chambal Biotech is a wholly owned subsidiary of the group flagship Chambal Fertilisers & Chemicals Ltd.

"Chambal bought 51% stake in Technico in 2003. Later on it was raised to 78%. Technico has a major market share in $100-billion potato chain management market in the US," sources added.

Sources also said that ITC has offered a good deal for Technico but did not disclosed its size. "There is a confidentiality clause in the deal. So Chambal cannot disclose it until ITC discloses," sources said.

According to information available, the company supplies chain solutions to global customers by using proprietary technology to deliver early-generation seed potato products.

The agri division of ITC had recorded a 51% jump in revenue in 2006-07 at Rs 2646 crore and is now one of the fastest-g rowing division of the FMCG and tobacco major. "The high yielding potato seeds will be like a backward integration for Bingo, the potato chips and finger snacks," sources added.

Technico has subsidiaries in India, Canada, China and United States along with Australia. The Indian subsidiary is called Chambal Agritech Ltd. The other subsidiaries are Technico Group America Inc in the US, Technico Horticultural (Kunming) Co Ltd, China, Technico Technologies Inc, Canada. Besides, Technico has four subsidiaries in Australia.

Chambal Agritech Ltd is a joint venture between Technico and Chambal Fertiliser. It produces high quality potato seed, which is known as technituber in India. The facility in Himachal Pradesh is one of the largest technituber producers in world. The group had invested over Rs 60 crore in the project.

ITC hiking capacity at Bolaram facility

Seeing a huge opportunity for environmental-friendly paper-based food packaging material in the West, the Paperboards and Specialty Papers Division of ITC has decided to invest Rs 35 crore by the year end at its Bolaram facility to increase capacity.

Post expansion, the capacity of the facility would go up to 42,000 tonnes a year from the present 18,000 tonnes, according to Mr Pradeep Dhobale, Chief Executive of the division.

BRC Certification

“We have received the BRC (British Retail Consortium) certificate for the unique product,” he told Business Line.

BRC, a lead association of retailers in the UK, prepared a set of global standards in food, packaging, consumer products and non-GM (genetically modified) food segments.

These norms require the retailers to procure products from suppliers, who are certified for these set standards.

The certificate from the European agency would help the company tap the huge opportunity in the retail industry.

Frito Lay loses snack mkt share to ITC's Bingo

ITC's Bingo is giving Pepsi a run for its money. While figures are not official, industry estimates that both companies agree with, that Pepsi’s share in the Rs 2000 crore-snack market has dropped from 60-45% since the launch of Bingo. ITC's retail success has forced Pepsi to renegotiate commercial terms with the Future Group, which runs Big Bazaar.

Retail tie-ups, regional flavours and distribution muscle, have helped ITC hit a bull’s eye with its snack Bingo. In less than 6 months, ITC's Bingo has managed to grab 16% market share and it hopes to touch 50% in a year. Not an easy feat when your battling Frito Lay for shelf space. ITC's tie-up with Biyani's Future Group hurt Pepsi hard by forcing the company to look at a revision of its commercial terms with the retail giant. While it’s been a flyer of a start, Pepsi still leads the overall Rs 2000 crore branded snack market with over 45% market share.

Where ITC scores on distribution, Pepsi rides high on brand recall with Lays and Kurkure. But ITC says is confident of bridging the gap. Arch rival Pepsi on the other hand will increase focus on Lehar namkeen, a category where ITC is yet to bite into. Pepsi is looking to invest heavily on distribution. Apart from Rs 3 packs, to penetrate further, the company is looking at new retail points like STD booths and cyber cafes as well. The company is also looking is upping spends to make inroads into the southern market, which continues to be dominated by regional players.

Both players are now looking at cashing in on the festive buzz with new advertising and product offerings. Where ITC has 12-14 new flavours in the pipeline, Pepsi hopes to launch 8-10 different flavours this year. As competition picks up, consumers are going to be spoilt for choice.

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.

ITC stepping up rural push via Choupal stores

ITC, the country’s biggest tobacco company, today said that it would set up small-format stores in rural areas, on the lines of its existing hypermarket chain Choupal Sagar, by early next year.

The Kolkata-based company also plans to raise the number of its fruit and vegetable outlets to about 200 in three years, as it cuts dependence on cigarettes.

“The idea is to penetrate the rural areas where the income levels are even lesser, through smaller Choupal Sagar stores, each on an area of about one acre,” S Sivakumar, chief executive officer of ITC’s agri business, told journalists on the sidelines of the CII Marketing Summit here.

These stores, which would each cost Rs 2 crore, would be set up in small towns and rural areas of Uttar Pradesh, Madhya Pradesh, Rajasthan and Maharashtra, Sivakumar said.

ITC also plans to operate 50 of the Choupal Fresh stores by March in the cities of Hyderabad, Pune and Chandigarh. The company currently has three stores (one each in these three cities) selling fresh produce. In the second phase, ITC would set up 140 new stores in other cities including Kolkata, Delhi and Mumbai.

Sivakumar said that the company was also looking at a multi-fold increase in the number of its internet kiosks, or e-Choupals (named after the Hindi word for a village meeting place) where villagers can access the internet.

“We will increase the number of e-Choupals from the current 6,400 in 130 districts, to 20,000 across 350 districts, in the next 5-6 years,” Sivakumar said.

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.

Farmers sell their crops online, then deliver the produce to supermarkets called Choupal Sagars run by ITC, where they can buy everything from mobile phones to pesticides. ITC operates 18 Choupal Sagars. The company is also focusing on strengthening health services in rural India.

“Having looked at poor health facilities in rural areas, ITC is scaling up the health services and we have already experimented in Madhya Pradesh and would be soon expanding to Uttar Pradesh and Maharashtra,” Sivakumar said.

ITC, 32 per cent owned by British American Tobacco, is adding new businesses, such as clothes retailing, to cut its reliance on tobacco revenue and will compete with Reliance Industries in the fresh food industry.

Sales at chain stores in India may rise more than eight-fold to $97 billion (Rs 397,700 crore ) by 2012, consultant Technopak Advisors 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 revenues 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, previously an energy company, is opening Reliance Fresh stores. Earlier this month, Wal-Mart Stores, the world’s biggest retailer, and India’s Bharti Group agreed to set up wholesale stores.

ITC to foray into soaps

The buzz about ITC plunging into the highly penetrated toilet soap market is getting louder by the day.
It is learnt that the cigarette-to-hotels major is eyeing the mass segment of the soap category, which is why some existing players are said to be sitting on old stock and holding on to the price line.

Sources said ITC plans to unveil its soap brand in the next two-three months. The name of the brand is being kept closely under wraps, and, it is not going to be the same brand, Superia, which the company was test marketing over a year ago in some rural areas, sources added.

A senior industry official told TOI: "Companies are holding on to the price line for the moment, despite pressure building on the raw material price front. We don't want to get caught in a situation where we raise prices and ITC launches its soap brand at a lower price."

Palm oil prices are currently ruling at around $650 per tonne. Industry analysts are skeptical whether I TC should enter the market at such high raw material prices.

Dealers of fast-moving consumer goods (FMCG) companies said that the last price increase that took place in the soap segment was initiated by Hindustan Unilever (HUL) in July this year.

HUL had taken a mid-year price increase on various products across categories. Prices of Pears soap and Lux were revised upwards. In the case of its popular soap brand Lifebuoy, HUL had reduced the grammage, keeping the price intact.

HUL is the leading soap maker in the country, with a market share of 54%.

As for Godrej Consumer Products (GCPL), the second largest soap maker with a market share of 10%, the company had recently said that prices would be raised in October-November.

Industry analysts said ITC's entry is bound to create excitement in the Rs 4,400 crore toilet soap category.
Decible levels on the advertising and promotion front are set to soar in the next few months. Besides, the Rs 12,369 crore ITC has made a significant splash in the packaged foods category, with Sunfeast and Aashirvaad.

Under Wills Lifestyle specialty stores of lifestyle retailing, ITC offers a range of Wills Classic work wear, Wills Clublife evening wear and Essenza Di Wills range of fine fragrances and body care products.

ITC set to get 3 acres for cigarette unit expansion

ITC’s plans to kick off a Rs 300-crore expansion at its cigarette factory in the city are on track. At the instance of the Union shipping ministry, Kolkata Port Trust (KoPT) is about to issue the crucial offer letter to ITC that will pave the way for allotment of a prime 3 acre slot adjacent to the company’s existing cigarette facility in Kidderpore.

But actual land allotment on a 99-year long-term lease will transpire after ITC shells out an upfront premium to Kolkata port, which owns the land. The upfront premium will be based on the land value computed by the state.

Land value of the 3 acres at Kidderpore has been pegged at roughly Rs 6.4 lakh per cottah by the state finance department. Accordingly, at 60 cottahs per acre, total land value would work out at a shade over Rs 11.5 crore. Final upfront premium payable by ITC will include statutory municipal and service taxes.

Confirming the development, a senior KoPT official told ET: “We have just received a communication from the West Bengal government that the 3 acres in Kidderpore proposed to be allotted to ITC (on a 99-year long-term lease) has been valued at roughly Rs 6.4 lakh per cottah.”

“While the Union shipping ministry has cleared ITC’s application, actual land allotment is conditional on ITC’s payment of upfront premium that is based on the land value computed by the state finance department. We will shortly send the offer letter to ITC,” the official added.

An ITC spokesperson said: “Our existing cigarette factory at Kidderpore is being upgraded with new investment and technology. For the proposed Rs 300-crore expansion, we require more space. We are awaiting a confirmation on the valuation of the 3 acres from the state government and a communication from KoPT.” Details of the upcoming expansion exercise and its impact on ITC’s cigarettes business remain under wraps.

In ITC’s case, the Union shipping ministry clearance was mandatory since it involves a land allotment application on a 99-year long-term lease. Over the years, the duration of all land allotments by KoPT on long-term lease basis have been capped at 30 years. Under the Major Port Trusts Act of 1963, KoPT’s board of trustees is not equipped to clear land allotment applications where the duration of a long-term lease agreement exceeds 30 years.

“Since ITC has sought land allotment from KoPT on a 99-year long-term lease, the Union shipping ministry had to step in and also involve the West Bengal government to ascertain the value of the particular 3 acres in Kidderpore,” said a Union shipping ministry source.