Summer Internship Project

Understanding key Challenges in the Wholesale

Market for ITC Food & in general FMCG.

(A Project with ITC LIMITED)

Submitted in partial fulfillment of the requirements for

Post Graduate Diploma in Management (PGDM)
Academic Year: 2021

Submitted By
Siddharth Nagi
Division: M2
Roll No.31
PGDM (M)/ Batch: 2020-22

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 Chetana’s Institute of Management and Research, Bandra (E),
Mumbai 400 051

DECLARATION

I hereby declare that this report submitted in partial fulfillment of the requirement of the award for
the Post Graduate Diploma in Management to Chetana’s Institute of Management and Research,
is my original work and not submitted for award of any degree or diploma fellowship or for similar
titles or prizes.

I further certify that I have no objection and grant the rights to Chetana’s Institute of Management
and Research to publish any chapter/ project if they deem fit in Journals/Magazines and
newspapers etc. without my permission.

Place : Mumbai

Date : 30/08/2021

Name : Siddharth Nagi

Division : M2

Roll No. : 31

Signature :

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 CERTIFICATE

This is to certify that the project submitted in partial fulfillment for the award of Post Graduate
Diploma in Management of Chetana’s Institute of Management and Research is a result of the
bonafide research work carried out by Mr. Siddharth Nagi Dr. Hufrish Majra under my supervision
and guidance, no part of this report has been submitted for award of any other degree, diploma,
fellowship or other similar titles or prizes. The work has also not been published in any
Journals/Magazines.

Date: 30/08/2021
Place: Mumbai

Name of the Faculty Guide: Dr. Madhumita Patil

DR. Hufrish Majra I/C Director
CIMR

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 ACKNOWLEDGEMENTS
The success and final outcome of this project required a lot of guidance and assistance from many
people and I am extremely privileged to have got this all along the completion of my monthly
project. All that I have done is only due to such supervision and assistance and I would not forget
to thank them.

I respect, thank, and owe a gratitude to my project guide Mr. Param Patel for their
encouragement and more over for their timely support and guidance till the completion of our
project work. Also, I would like to express my gratitude to all the CIMR & CIMR faculties for
providing me this opportunity & assisting me to understand the fundamentals of the subject
matter.

I am thankful to and fortunate enough to get constant encouragement, support and guidance from
Mr. Gufran Sir Area Executive of ITC who helped me in successfully completing my monthly
project work. Also, I would like to extend our sincere esteems to all others for their timely support.

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 TABLE OF CONTENT

CHAPTERS SUB- TOPICS PAGE NO.

CHAPTERS

1. EXECUTIVE SUMMARY 6
2. INTRODUCTION
2.1 About the Company 7
(All about ITC, ITC Market share, Key financials of
ITC, SWOT Analysis for ITC & KPI’s for ITC)
2.2 About the Sector 16
(Growth drivers for FMCG sector, Competition
Analysis, Analysis of Macro-Economic factors,
regulatory bodies governing FMCG & Contribution of
the sector to GDP)
3. PROJECT/TASK DETAILS
3.1 Objectives of the Study 23
3.2 Methodology 24
4. ANALYSIS & FINDINGS
4.1 Detection of Wholesale Business 26
4.2 Distribution Process of Channel based business 27
4.3 Price & Scheme Charts to Wholesalers 28
4.4 Major Challenges in Wholesale Business 31
5. SUGGESTIONS 34
6. BIBLIOGRAPHY 37
7. TURNITIN REPORT 38

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 EXECUTIVE SUMMARY

The stated project report was undertaken & accomplished under ITC Limited, Mumbai, a
diversified conglomerate & operating across various businesses. The report endeavors to propose
& deliver various challenges faced by ITC (pre & post COVID scenario) for ITC packaged food
segment in the wholesale category of the Channel based business.

The project not only aims at identifying & analyzing challenges but also provides a holistic view
of the entire wholesale category, their operations, strategies, pricing & other marketing practices.
The main agenda of the report is to analyze the challenges & provide valuable suggestions &
feedbacks to overcome those challenges & maintain a healthy & long- lasting relationships
between ITC & its wholesalers.

Understanding the wholesale business, various programmes, promotional tie-ups, pricing

methods utilised by ITC for wholesalers, distribution process, and analysing and resolving issues
faced by ITC were all major objectives of the study.

During the course of study diverse primary & secondary data were collected in the form of
structured questionnaire through interviews with western Mumbai region wholesalers & same
was analyzed to identify the key challenges & problem areas that ITC could have faced while
dealing with them.

After doctoring & investigating the data collected, major challenges were identified where in
wholesalers were unhappy of the fact that ITC is directly reaching out to retailers & consumers
through multiple channels which has thereby threatened its presence. Apart of this, various
competitors have emerged in the market, who supply ITC brands at much better prices then the
official ITC distributors, along with the above said various other challenges were also identified,
wherein some have been emerged because of the COVID pandemic.

Key takeaway from the project was that the wholesale segment is merely losing its presence
because of the emergence of well-established distributors, big retailers, modern trade players &
various online players who directly reach out to customers & provide the benefit which were
earlier provided by the wholesaler but I think still they are required & they provide a substantial
support in the channel based business.

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 INTRODUCTION

ALL ABOUT ITC

Established in 1910, ITC Limited is a diversified conglomerate with businesses across Fast
Moving Consumer Goods consisting of Foods, Personal Care, Cigarettes and Cigars, Branded
Apparel, Education & Stationery Products, Incense Sticks and Safety Matches; Hotels,
Paperboards and Packaging, Agri Business and Information Technology. The Company was
inaugurated & incorporated on August 24, 1910 under the name Imperial Tobacco Company of
India Limited. As the Company's ownership successively Indianite, the name of the Company was
revoked to India Tobacco Company Limited in 1970 and then to I.T.C. Limited in 1974. In recall
& recognition of the ITC's multi-business portfolio encompassing a wide range of businesses, the
acronym in the form of Company’s name was removed effectively on September 18, 2001. The
Company now stands rechristened as 'ITC Limited,' where 'ITC' is today no longer an acronym or
an initialized form.
Current financials marks ITC market cap at 27.90 billion US dollars with 10.74 billion US dollars
of Gross value sales as on 31.03.2020.

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 ITC FMCG SEGMENT

ITC has considerably increased its position in the FMCG sector, notably in its newest
companies, in order to keep up with the rapid growth of the Indian FMCG industry. Branded
Packaged Foods, Personal Care Products, Cigarettes, Lifestyle Retailing, Education and
Stationery Products, and Safety Matches and Incense Sticks are among the company's
remarkable offerings (Agarbatti). ITC has built several strong consumer brands in the Indian
FMCG sector in a relatively short period of time.
ITC FMCG Portfolio
FMCG PRODUCTS BRANDS

CIGARETTE • DOMESTIC MARKET - INDIA KINGS, GOLD FLAKE, NAVY CUT,

SCISSORS, CAPSTAN, BERKELEY AND BRISTOL
• USA - CHECKERS, HI-VAL, ROYALE CLASSIC AND GOLD CREST
• MIDDLE EAST - ROYALE CLASSIC, GOLD CUT AND SCISSORS
FILTER KING
READY TO EAT • KITCHENS OF INDIA, YIPEE
FOODS
STAPLES • AASHIRVAAD

CONFECTIONERY • MINT-O, CANDYMAN

SNACK FOODS • SUNFEAST, BINGO

LIFESTYLE • RELAXED WEAR - WILLS SPORT

RETAILING • FORMAL WEAR - WILLS CLASSIC
• EVENING WEAR AND DESIGNER ACCESSORIES - WILLS
CLUBLIFE
• BRANDED MEN’S APPAREL - JOHN PLAYERS

GREETING CARDS • ENGLISH CARDS - EXPRESSIONS

• VERNACULAR CARDS - MATRUBHASHA

NOTEBOOKS • SCHOOL NOTEBOOKS - CLASSMATE

• COLLEGE AND OFFICE NOTEBOOKS - PAPERKRAFT

SAFETY MATCHES • IKNO, MANGAL DEEP,VAXLIT, DELITE, AIM

INCENSE STICKS • MANGALDEEP

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9
 Market Share
MARKET SHARE Company’s Name (%)
ITC 14%
With that goal in mind, ITC continues to expand all of its Hindustan
FMCG businesses. The focus is on gaining market share 12%
Unilever (HUL)
and profitability while building up our enterprises. Despite Nestlé 3%
increased marketing expenses, gestation and start-up costs
Britannia 3%
of new categories, as well as new facilities, the new FMCG
divisions have showed steady improvement in profitability Patanjali Ayurved 4%
over the last couple of years, with EBITDA rising 2.6. as
despite the increase in marketing investments, gestation Dabur 2%
and start-up costs of new categories as well as new Godrej Group 2%
facilities and increase in input costs. This growth trajectory Marico 5
has been sustained in the current year with EBIT.
GlaxoSmithKline (GSK) 1%
ITC is a market leader in organized cigarettes industry in
India. ITC stands at 79% market share in cigarettes Colgate-Palmolive 1%
segment in volume terms. Secondly, Godfrey Phillips India
Ltd secures 11% share & VST Industries Ltd at 8%.
Over last 10 years the revenue contribution from other FMCG business increased from 12% to
22%. FMCG Brands of ITC have created significant market place with quality preference as well
as popularity. Even though there were large brands already securing consumer preference. But
ITC brands secured vast market holding.
Despite the intense competitive environment, ITC brands created a significant market
positioning.
Moreover, ITC brands represent annual consumer spends of Rs 18,000 crore in aggregate.
‘Bingo!’ snacks, ‘Aashirvaad’ Atta, ‘YiPPee!’ noodles and ‘Dark Fantasy Choco Fills’ super-
premium cream biscuits were the key drivers of growth in the Branded Packaged Foods
Businesses.
On the other hand, ‘Engage’ deodorants, ‘Vivel’/‘Fiama’ shower gels & body wash and ‘Savlon’
hand wash reported robust growth in the Personal Care Products Business.
ITC finds product expansion opportunity in the noteworthy consumer trends including
emergence of health & wellness products.
Secondly, increasing preference for products rooted to ‘Indiamen’s’ & with regional/cultural
connects.
Growth in demand for ‘on-the-go’ consumption formats in low-unit packs.
Also, influence of social media & digitalization on consumer preference & consumer behavior.
Moreover, ITC Life Sciences and Technology Centre is now working on various dimensions of
health that will enable ITC to roll out products that help improve cognition, immunity, manage
cholesterol, retention of calcium, among others.
So, a pipeline of products on the health vector is currently a work in progress.
In addition, ITC has a steep target to meet. By 2030, the aim is to realize Rs 1,00,000 crore (US$
14.30 billion) of revenues from the branded consumer goods. Therefore, roughly a 16-17% year-
on-year growth.

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 KEY FINANCIALS

ITC is a leading private sector company in India, having a market capitalization of over US
$35 billion as of June 30, 2020.
ITC’s Gross Sales Value as on 31/03/2020 is US $ 10.74 billion.

• Glimpse of ITC Financial Results for the Quarter ended 30th June 2020. (in crores)
3 Months Corresponding Preceding 3
Ended 3 Months ended months ended Year ended
PARTICULARS 30/06/2020 30/06/2019 31/03/2020 31/03/2020
Gross Revenue from Sale of
Products & services 9435.61 11361.35 11300.05 46323.72
Other Operating Revenue 66.14 141.47 119.99 483.62
Total Revenue 9501.75 11502.82 11420.04 46807.34
Other Income 896.82 620.17 755.54 3013.66
Total Income 10398.57 12122.99 12175.58 49821.00
Total Expenses -7270.14 -7311.25 -7663.74 -30522.08
Profits 3128.43 4811.74 4511.84 19298.92
Exceptional Items -132.11
Profits Before Tax (PBT) 3128.43 4811.74 4511.84 19166.81
Tax -1553.62 -3201.63 -1567.46 -8472.73
Profit After Tax (PAT) 2342.76 3173.94 3797.08 15136.05

TC Ltd., consolidated in the year 1910, is a Large Cap organization (having a market top of Rs
241419.42 Crore) Operating in Multiple segments.
ITC Ltd. key Products/Revenue Segments incorporate Packaged Food Item which contributed Rs
9668.71 Crore to Sales Value (21.11 % of Total Sales), Agricultural Products which contributed
Rs 4345.84 Crore to Sales Value (9.49 % of Total Sales), Paper and Paper Boards which
contributed Rs 3718.79 Crore to Sales Value (8.12 % of Total Sales), Others which contributed
Rs 2819.13 Crore to Sales Value (6.15 % of Total Sales), Tobacco Unmanufactured which
contributed Rs 1721.15 Crore to Sales Value (3.75 % of Total Sales), Service (Hotel) which
contributed Rs 1648.20 Crore to Sales Value (3.59 % of Total Sales), Printed Materials which
contributed Rs 586.64 Crore to Sales Value (1.28 % of Total Sales), Other Operating Revenue
which contributed Rs 562.98 Crore to Sales Value (1.22 % of Total Sales)for the year finishing
31-Mar-2019.
For the quarter finished 30-06-2020, the organization has detailed a Consolidated deals of Rs
9722.04 Crore, down - 16.75 % from last quarter Sales of Rs 11677.97 Crore and down - 22.42
% from a year ago same quarter Sales of Rs 12532.31 Crore Company has revealed net benefit
after expense of Rs 2567.07 Crore in most recent quarter.

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 • Key Ratios for last 3 years.

KEY RATIOS 2019 2018 2017

Net Worth Per share 47.27 42.12 37.33
Debt-Equity Ratio 0.0001:1 0.0002:1 0.0004:1
Return On Equity 22.80% 23.20% 23.45%
Return On Average Capital Employed 32.61% 32.86% 34.20%
Earnings Per Share (EPS) 10.17 9.2 8.4

Notes:-
Net Worth (Shareholders' Funds) = Equity Share Capital + Other Equity
Capital Employed = Net Worth + Long-term Borrowings + Short-term Borrowings + Current
maturities of Long-term Debt + Deferred Tax Liabilities (Net)
Debt-Equity Ratio = Long-term borrowings/Net Worth
Return on Equity = PAT/Average Net Worth
Earnings per Share = PAT/ No. of Shares at the year end.

• Share-Holding Pattern for ITC-

Category of Shareholders No. of shares Percentage

Promoters 0 0

Foreign Institutions 1,79,26,06,245 14.58

NBFC and Mutual Funds 1,16,07,23,528 9.44

Others 4,00,59,22,622 32.59

General Public 1,31,12,73,257 10.67

Financial Institutions 4,00,64,83,730 32.59

GDR 1,52,21,859 0.12

Total 12,29,22,31,241

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 SWOT ANALYSIS - ITC

STRENGTHS WEAKNESSES
Great presence across all Huge Dependence on Tobacco
segments (Diversified Products and this attracts a lot of negative
& Services) connections.
Effective Social Business Hotel Industry by ITC hasn’t
Initiatives taken by ITC (CSR been able to create a huge
Activities) market impact and a higher
Excellent Research & market share.
Development facilities Hike in excise duty, the tobacco
Strong Distribution Network industry under pressure.
and Brand Image
Direct connections with farmers
through E-choupal

OPPORTUNITIES THREATS
ITC can tap more opportunities Increasing taxation on
created in the rural markets cigarettes
More strategic mergers & Government Regulations and
acquisitions can take place Policies
Rising demand in the FMCG Huge competition from other
Sector and increasing standard FMCG companies and hotel
of living of consumers chains
Growing Hotel & tourism FDI in retail thereby allowing
industry in India International brands

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 KEY PERFORMANCE INDICATORS
Key Performance Indicators (KPIs) refer to a set of quantitative estimates that are used to assess a company's
overall long-term performance. In comparison to its counterparts, KPIs expressly assist in determining an
organization's strategic, economic, and operational accomplishments.

Sales and Growth

*Source: ITC Annual Report 2020

Sales and profits

*Source: ITC Annual Report 2020

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 Net worth and Return on Investment

*Source: ITC Annual Report 2020

Sustainable and Inclusive Growth

The concept that a corporation must serve a greater societal purpose while keeping national
interests in mind drives ITC's sustainability initiatives. The Company's dedication to building
economic, social, and environmental capital at the same time has orchestrated a symphony of
attempts to address some of the most difficult societal concerns, such as pervasive poverty. The
Company's fundamental conviction that businesses have the transformative power to create
significantly greater societal benefit by utilising their entrepreneurial vigour, creativity, and
inventive capacity drives the Triple Bottom Line strategy.
The Company’s pioneering work in empowering rural India is a global example. The Company
has also spearheaded several initiatives towards achieving new benchmarks in environmental
excellence. Recognizing that climate change is a threat that particularly makes rural communities
extremely vulnerable, the Company has adopted a low carbon growth strategy that encompasses
large scale afforestation, increasing use of renewable energy and a continuous quest to maximize
natural resource efficiencies across its operations. ITC is the only company of comparable
dimensions in the world to be carbon positive for 15 years, water positive for 18 years and solid
waste recycling positive for 13 years.
ITC along with ITC Education and Healthcare Trust and ITC Rural Development Trust have set
up a Rupee 215crore COVID-19 contingency fund which is being used to provide relief and
assistance to the most vulnerable sections of society. ITC took several initiatives to provide
packaged and cooked food to the economically deprived besides distributing products for
sanitizing and hygiene requirements. Several items of personal protective equipment have also
been distributed to medical and paramedical workers.

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 SECTOR PROFILE

GROWTH DRIVERS FOR FMCG SECTOR

GROWING DEMAND – OPPORTUNITIES –

Rising Income 1. Untapped rural market
Increasing youth population 2. Improved Logistics
Increasing brand consciousness 3. Global Market

TECHNOLOGY – OTHERS–
1. Emergence of Online business 1. Increased FDI
2. AR/VR 2. Government Support (MSME)
3. Better customer support
3. Growth of Organized retail

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 COMPETITOR ANALYSIS FOR ITC

Major Competitors –
1. HUL
❖ Hindustan Unilever Limited (HUL) is the largest Fast Moving Consumer Goods Company
located in India. It has a rich 80 years of legacy in this field. Nine out of ten Indian
households use our products to feel good, look good and get more out of life – giving us a
unique opportunity to build a brighter future.
❖ It has about 35 brands which span across 20 distinct categories like detergents, soaps, skin
care, deodorants, tea, coffee, ice cream, packaged food, and many more
❖ Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin,
Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent,
Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.
2. P&G
❖ The company has its business operations in five main segments, Grooming, Health Care,
Fabric & Home Care, Beauty, and Baby, Feminine & Family Care.
❖ The company sells their products in about 180 countries
❖ It is one of the major providers of hygiene and healthcare consumables.

3. Emami
❖ Emami is one of the Leading and fastest growing personal and healthcare businesses in
India
❖ It has a Portfolio of over 300 ayurvedic products. Some of them are household brand names
such as BoroPlus, Navratna, Fair and Handsome, Zandu balm, Mentho Plus balm, Fast
Relief and Kesh King.
❖ Emami has a strong distribution network of over 3200 distributors through which its
products are available over 4.5 million + retail outlets across India.

4. Dabur
❖ Dabur is today India’s most trusted name and the world’s largest Ayurvedic and Natural
Health Care Company.
❖ Dabur India is also a world leader in Ayurveda with a portfolio of over 250
Herbal/Ayurvedic products.
❖ Dabur today operates in key consumer product categories like Hair Care, Oral Care, Health
Care, Skin Care, Home Care and Foods.
❖ The ayurvedic company has a wide distribution network, covering 6.7 million retail outlets
with a high penetration in both urban and rural markets.

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 MACRO ECONOMIC FACTORS

The fast moving consumer goods (FMCG) space has been out of action for a long time in the
stock markets. Over the last two years the Indian stock markets have been dominated by stocks
from the pharma and IT sector initially. With both these sectors going out of favor on US
regulatory concerns, the action has shifted in the last one year to sectors like automobiles,
banking and capital goods. But in the entire churn, the one sector that has been extremely quiet
has been FMCG.

End of demonetization woes for FMCG:-

One of the sectors where the demonetization exercise took its toll was in FMCG. With nearly
half of its incremental demand coming from rural and semi-urban areas, these were the worst hit
by the demonetization exercise. A liquidity crunch in these non-urban centres and delays in
realization meant that FMCG companies saw a genuine contraction in demand. That appears to
be changing as the quarterly of the March quarter shows. With nearly 85 % of the demonetized
currency back in circulation, liquidity is no longer an issue. That has also meant that volume
growth has regained momentum, something that was a major challenge a couple of quarters
back.

No more internecine competitive wars:-

What we get to see in telecom industry today is what was visible in the FMCG sector about 10
years back. For example, there was a clear pricing battle between Hindustan Unilever and
Procter & Gamble in the detergents space and at the end of the day; neither could really gain
much additional share in the market. Fortunately, both the FMCG companies have given up that
strategy and it looks unlikely to be repeated. More so, with HUVR’s parent, Unilever, insisting
on the Indian subsidiary improving its net margins, we are unlikely to see price wars in this
space. That should be positive for FMCG.

A sharp fall in agricultural commodities:-

Most of the FMCG companies in the Indian markets also have a major exposure to the processed
foods space. Over the last one year, the price of most of the agricultural inputs that go into
processed foods like flour, edible oil, pulses, cereals have all gone down sharply due to a glut of
supply in the agri market. That has led to reduction in input costs for these FMCG companies.
FMCG is also a very inflation-sensitive sector as it has to do with purchasing power of people.
With the retail inflation consistently below 3 % and crude oil prices below $50/bbl, the benefits
of low inflation is getting transmitted into better economics for FMCG companies.

18
There is a big rural market and rising purchasing power:-
Over the last couple of years, there have been a few key measures that are likely to lead to a
quantum shift in the demand for FMCG products. The 7CPC and the OROP will put more
money in the hands of people who are more likely to have a higher propensity to consume. The
government, in its last two budgets, has focused on rural infrastructure and improvements in
rural income levels. Both these factors have a multiplier effect on rural and semi-urban demand
for FMCG products. The markets are currently betting that this could be a game-changer for the
FMCG companies.

Finally, GST has been quite benign and favourable for FMCG companies.
A big positive for the FMCG companies was when the GST rates were announced. Firstly, the
GST on most food inputs has been kept in the range of 0-5 %. That will keep input cost
escalation in check. Secondly, within the toiletries space the GST Council has given preferential
treatment for products of daily use like toothpaste and hair oil to encourage consumption. Both
these factors will spur demand for FMCG products.

But the biggest advantage for FMCG companies from GST could be a lot more structural in
nature. Currently, every FMCG company designs its logistics, warehousing and distribution
infrastructure based on the state level taxes. With GST taking India towards one-India one-tax,
this should no longer be the issue. FMCG companies can now ensure that their logistics and
distribution infrastructure is more optimal from a business point of view rather than a regulatory
point of view. That could be the big structural boost for FMCG companies from the GST
implementation

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 REGULATORY BODIES GOVERNING FMCG SECTOR

• Food Safety & Standards Authority of India (FSSAI) -

FSSAI formulated in the year 2006, is a consolidating statue dealing with regulations in
relation to the protection & promotion of public health with regards to food safety.
It’s an umbrella act which covers prevention of food
adulteration, fruit & meat food product order,
vegetable oil & edible oil product & packaging; &
milk products order.
Food safety & Standards Labeling & Display
Regulations 2018 regulates various display &
labeling norms on FMCG foods.

• Advertising Standard Council of India (ASCI) –

The ASCI, established in 1985 was formed for the purpose of self-
regulation in advertising & ensuring the protection of the interests of
consumers.
Consumers Complaints is the heart & soul of ASCI for undertaking
actions against false claims & improper disclaimers promoted by
organizations through their direct & indirect advertisements &
promotions.
It ensures truthfulness & honesty of claims made by advertisements;
make sure that advertisements are not offensive to generally accepted
standards of public decency; safeguarding promotions of products which are hazardous or
harmful to the society & fairness in competition.

• Intellectual Property Rights Commission –

IP rights are basic in the FMCG business since organizations working in this area depend
vigorously on brand acknowledgment and brand reliability for their prosperity.
IP through patents helps organizations to reserve their rights, associated goodwill & the
connotation of quality thereby ensuring brand recognition & awareness.
However, IP has somewhere found it difficult to tackle against the problems of counterfeiting
& parallel imports.
FMCG sector comprises of world’s 15% counterfeited products.

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• Government Initiatives -

A portion of the significant activities taken by the Government to advance the FMCG
segment in India are as per the following:

The Government of India has affirmed 100% FDI in the money and convey fragment and
in single-brand retail along with 51 percent FDI in multi-brand retail.

The Government has drafted another Consumer Protection Bill with extraordinary
accentuation on setting up a broad mechanism to guarantee basic, fast, affordable,
moderate and ideal conveyance of justice to buyers.

The Goods and Services Tax (GST) is gainful for the FMCG business as many FMCG
items, for example, cleanser, toothpaste and hair oil currently go under the 18 percent
charge section against the previous tax slab of 23-24 percent. Additionally, GST on food
items and cleanliness items has been diminished to 0-5 percent and 12-18 percent
individually.
GST is required to change coordination’s in the FMCG segment into a cutting edge and
productive model as every single significant partnership are redesigning their activities
into bigger coordination’s and warehousing.

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 CONTRIBUTION TO GDP

As we know ITC is India’s one of the foremost private sector companies and have a diversified
conglomerate in many sectors. It is India’s one of the most valuable business corporations with a
market capitalization of nearly 35billion dollars (approx. 250000 crore). The company’s gross
sales are around 10 billion dollars annually (approx. 75000 crore). It’s consolidated annual
revenue and profits have grown by 7% in the last 5 financial year. ITC directly employees 34000
people and there are many who are indirectly employed by ITC.
Contribution to the National Exchequer
The Company's contribution amounts to around 7.1 percent of the Government of India's overall excise revenue. The
Company is the greatest tax payer in eastern India and among the top tax payers in the country when it comes to
income tax.
Contribution to Exchequer

ITC is ranked among the world's best big companies; it is ranked in Asia's 'Fab 50' and the
world's most reputable companies by Forbes magazine. It is also rated as 'India's Most Admired
Company' in a survey conducted by Fortune India magazine and Hay Group. ITC also features as
one of the world's largest sustainable value creator in the consumer goods industry in a study by
the Boston Consulting Group. ITC has been listed among India's most valuable companies by
Business Today magazine. It is among India's ‘10 most valuable brands' according to a study
conducted by Brand Finance and published by the Economic Times. ITC also ranks among Asia's 50
best performing companies compiled by Business Week.

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 OBEJCTIVES OF THE STUDY

The Bread & Butter objective of the summer internship project is to ensure that I as a
management student develop, understand & experience real life applications of the
knowledge that I have gained in my first year of post-graduation & also develop all
understanding of assorted management activities in the area of marketing specialization. This
opportunity has provided me with substantial corporate exposure & also interacts with
various corporate personnel.

Objectives of the Study -

• Comprehending ITC’s packaged food portfolio & its SKU’s as well as its Distribution
process.

• To Study & Understand ITC foods Wholesale market, its operations & its
contribution to the overall channel business.

• To identify challenges faced by the company in the wholesale segment and suggest
strategies to mitigate the challenges.

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 METHODOLOGY

❖ Research Problem –

Main purpose of conducting the research was to identify & analyze the major challenges faced
by ITC in the Wholesale category of General Trade segment.

❖ Need of the Study –

1. General Trade business is the most critical segment of Channel based business, as it helps
organizations to reach out to the masses & gain higher market share & provide better brand
experience & hence, in order to thrive the above said , it is important that we ensures
organizations & channel partners work in sync
2. Impacting Sales: As we all know , sales is the function which drives major revenue to the
organization, (major sales revenue in FMCG sector in India is derived through Channel based
business) & therefore lacking on the same, will result into muddling issue for ITC.
3. Identifying gaps between ITC & Wholesalers which results into business challenges.

❖ Sources of Data –

1. Primary Data – First hand data for the research was collected through a structured
questionnaire, wherein 30 wholesalers were interviewed & were asked to share their feedbacks
using open-ended questions.

2. Secondary Data – Online Database & data provided by ITC were used as a secondary source
of data. Analysis of secondary data was crucial as it helped me to craft the questionnaire & to
determine the parameters on which wholesalers to be examined.
Analysis of wholesaler data i.e. frequency of orders, most ordered brand, schemes & pricing to
the wholesalers etc. helped me understood about the particulars of each & every wholesale &
hence, enhanced my quality of primary research.

❖ Nature of Research Design –

The stated research is an Exploratory Qualitative research design undertaken to investigate

problems & challenges for ITC food category.

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 ❖ Sample Size –

Unit of Analysis – 30 wholesalers dealing in ITC products from the western region of Mumbai.

❖ Sampling Technique –

Convenient Sampling Technique was used to determine the samples for study.

❖ Data Collection Tool –

Data was collected by using Personal Interview technique.
In-depth Interviews of 30 wholesalers was conducted for the purpose of exploratory research &
data collection.
It was a Non-disguised telephonic interview, conducted with the help of a Structured
Questionnaire.

❖ Limitations of the Study –

1. Physical Barriers – Due to the Outbreak of COVID pandemic & imposition of lockdown by
government regulatory, market operations were temporarily seized & hence, face to face
interaction & real time market experience was a major limitation of the study & hence, it had
significant impact on the holistic analysis of the research study.

2. Limited unit of Analysis – Research was conducted & responses of only 30 wholesalers who
are currently dealing with ITC were recorded, this limitation may have narrowed the response
analysis & also wholesalers who are eschewed by ITC & its distributors & not covered during
the research.

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 ANALYSIS/ FINDINGS

WHOLESALE CATEGORY - ITC FOOD

For brands to gain market share, general trade is an important channel. It is the most appropriate
channel for end-to-end customer engagement and a high level of brand experience. This channel
has been identified as one of the most promising for brands to capture market share. Retail
footprints and reach are key needs for this channel in order to improve the consumer experience
and make it more accessible to enquirers.

Wholesale Business is the business of buying goods in large quantities from manufacturers or
producers and selling smaller quantities to retailers, who will then sell smaller quantities to their
customers at wholesale.

Considering ITC wholesale food business, the market coverage in terms of wholesale business is
around 15 to 20% with regards to the entire General Trade business. However, even though
being a niche holder, it works on the 80/20 rule i.e. in terms of revenue, ITC wholesale category
contributes major chunk.

Working with Wholesalers:-

❖ In case of wholesale business, the salesmen doesn’t have a choice to offer variants or
SKU’s of a particular brand, the decision lies in the hands of wholesaler, he/she will
order only those quantity that currently triggers demand, which is not the case in retail.

❖ Operating majorly on Cash basis

(However, credit period is allowed to wholesalers depending on factors such as number
of orders, density of orders (volume) etc.)

❖ Margin for Wholesalers –

1. General Margin depends on the brand & SKU’s which is offered to all partners
across the Channel which is available to the Wholesaler.
2. Additional Margin ranging from (1% to 3%) is also available to the wholesaler.
(Additional Margin is proportionate to the quantity ordered.

(However, there is a CAP price, i.e. irrespective of any quantity purchase it will be the final
price, in the above stated example, and 51.00 can be the CAP price & is the final price for any
quantity purchased)

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 DISTRIBUTION PROCESS - ITC FOOD

MANUFACTURING MOTHER BRANCH

HUB WAREHOUSE WAREHOUSE

DISTRIBUTORS

STOCKISTS

WHOLESALERS
RETAILERS

CUSTOMERS

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 PRICE TO CHANNEL PARTNERS

BISCUITS MRP PTR BISCUITS MRP PTR

DARK FANTASY SNACKY
Dark Fantasy 10 8.76 Salted cracker 5 4.5
Dark Fantasy 30 26.28 Salted cracker 10 9
Dark Fantasy 60 52.56 SNACKY
Dark Fantasy 120 105.73 Sweet And Salty 5 4.5
Sweet And Salty 10 9
BOURBON SNACKY
Bourbon 10 9.16 Salted Chilly
Bourbon 20 18.32 Salted Chilly 10 9

BOUNCE FARMALITE
Dream Cream protein, oats- chocolate, almonds ,raisin 25 22.49
Dream Cream 10 9 protein, oats- chocolate, almonds, raisin 50 44.98
Dream Cream 20 17.99
BOUNCE
Cream 5 4.58 GLUCOSE 2 1.83
Cream 10 9.16 Glucose 5 4.58
Glucose 10 9.16
MARIE Glucose
Marie Light 5 4.5
Marie Light 10 8.98 MOM'S MAGIC
Marie Light 23 20.90 cashew & almond / Butter
Marie Light 30 26.99 cashew & almond / Butter 5 4.5
Marie Light 60 53.98 cashew & almond / Butter 10 9
MARIE cashew & almond / Butter 20 18
Vita Marie 10 9 cashew & almond / Butter 40 36
Vita Marie 20 17.99
Vita Marie 38 34.18

NICE
Nice 10 9
Nice 20 17.99
Nice 25 22.49

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 SNACKS MRP PTR SNACKS MRP PTR
MAD ANGLE THEDHE MEDHE
Achari Masti Masala tadka , Achari masti
5 4.57 5 4.57
10 9.14 10 9.14
20 18.29
50 45.71 NO RULZ
Tomato Madness Masala, Cheese, Tomato
5 4.57 5 4.57
10 9.14
20 18.29 BINGO TANGLES
Salted, Masala
5 4.56
Chaat Masti
5 4.57 STARTERS
10 9.14 Peppery, Masala, Chatpata
20 18.29 10 8.45
YUMITOS
Salted, Cream & Onion, Masala, Tomato
Masala Madness 5 4.57
5 4.57 10 9.14
10 9.14 20 18.28
20 18.29 YUMITOS
salt, chilli sprinkled
Fillos 10 9.14 10 9.14
20 18.28

NOODLES MRP PTR

Yippe Magic Masala Noodles 5 4.68
Yippe Magic Masala Noodles 10 9.18
Yippe Magic Masala Noodles 67 61.58
Yippe Magic Masala Noodles 45 41.36

ATTA MRP PTR

24030 Aashirvaad Atta Multigrains - 5KG 305 273
24220 Aashirvaad Superior MP Atta 2KG 102 88.72
24210Aashirvaad Superior MP Atta 1KG 52 44.88
24720 Aashirvaad Atta-1KG Select 62 54
24740 Aashirvaad Atta-5KG Select 295 250.13
24240 Aashirvaad Superior MP Atta 5KG 245 207.36

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 SCHEME CHART FOR WHOLESALERS

BRANCH CATEGORY SUB CAT/MSKU/REMARKS SWD

WMUM Atta Popular 1CFC- 1%, 5 CFC-2%,10 CFC-
2.75%,20 CFC- 3.5%
WMUM Biscuits Except DFC ,Glucose, Bourbon,Veda Marie

WMUM Noodles Overall 800 Rs- 1 %

WMUM Snacks Overall 1 CFC-4%. 3 CFC- 6.3%

WMUM Confectionery CL Candy,Crunchy,Fruitee Delight,Tadka,Jelimals
Frootz,CM Tadka VO
WMUM Confectionery CM_Chocosticks,Cofitino,Eclairs 50P,Eclairs Rs.1,HBC
Popular,Jelimals,Lacto Rs. 1,Gum,Tadka
Time,Toffichoo,Minto Fresh,Minto Chews

WMUM Confectionery VO PB (Additional), Tadka Time

WMUM Confectionery Overall 1200Rs - 1 CCDR PB FREE, 5000 RS -
5 CCDE PB FREE
WMUM Confectionery VO PB (Additional) 1 Pcs- 15%
WMUM Confectionery ALL PJ Except Stick & Rs 1 Éclair PJ
WMUM Confectionery ALL JJ
WMUM Confectionery Stick & Rs 1 Éclair PJ
WMUM Confectionery All Minus Stick & Rs 1 Éclair (Additional)
WMUM Biscuits Bounce Cake Rs 5 120 Pcs- 4rs, 240 Pcs- 3.75
WMUM Biscuits Bounce Cake Rs 10 288 Pcs- 5+1, 576 Pcs- 4+1
WMUM Juice 300 ML 3Pcs-5%,6Pcs-8%,12Pcs-11.70%,24Pcs-
17%
WMUM Juice 750 ML 6Pcs-10%,12Pcs-11%,36Pcs-14%
WMUM Juice 200 Ml 1 cfc- 15%
WMUM Juice 1 Ltr 6 Pcs-10%
WMUM Biscuits DFC 600-2%,
WMUM Biscuits MOMS +MP Cream 600-2%,1800-3%
WMUM Noodles Mood Masala 6 Pcs-2%,12 Pcs- 4%
WMUM Biscuits Veda Marie 1 CFC- 5%

30
 CHALLENGES IN WHOLESALE BUSINESS - ITC FOOD

DATA INTERPRETATION –

1. Wholesalers willing to stock Variants/ SKU’s of ITC brand –

Willing to stock Variants/

SKU's

Ye
No s
57 43
%

2. Promotional Tie-up with ITC –

31
On the basis of responses received through qualitative research, major challenges are identified & stated
below:-

❖ DIFFICULT TO SELL (SUPPLY WHAT IS DEMANDED)

It is difficult to convince wholesalers to stock up new variants of the brand, they are willing
to stock only those products which are in demand in the market, and this restricts ITC’s
infusion of SKU’s in the wholesale business & ultimately in the general trade channel.

❖ DILUTING RETAILERS

Wholesalers at times try to convince retailers to go for local or those products where higher
margin is available to them. Despite of ITC portfolio being made available to the
wholesalers, they try to attacks ITC’s retailer base by offering them competitors’ products.

❖ E-COMMERCE B2B COMPETITORS

A trend has emerged towards online wholesale ordering. Competitors such as Udaan,
IndiaMart, and Metro etc. act as a direct competitors to ITC. Wholesalers now prefer these
B2B virtual players as they provide various perks in the form of long term credit facilities,
variety of products, better prices etc. This disrupts the General trade output ratio of ITC &
wholesalers easily switch to competitors only for the purpose of better margins.

❖ DEMANDING SUPPLEMENTARY OFFERS & SCHEMES

Wholesalers demand more offers & schemes in addition to the additional margin offered to
them. ITC has also launched Shubh-labh brand promotion project which ties with general
trade players, with in which trade players are under contract such as advertisement &
quantity tie-up for promoting ITC products but still they tend to ask for more & if not
delivered try to move to competitors.

❖ SINGLE BRAND STOCKISTS

We find that there are many single brand stockists in the main market which at times offer
brands cheaper than the official distributor of ITC. These stockists have an advantage of
price because of bulk purchase of a single product, thereby resulting into greater economies
of scale.

32
CHALLENGES DURING LOCKDOWN –

India has seen a 3 major month’s lockdown due to which many business are affected and we
are in one of them. Due to the lockdown following possible issues are faced:

❖ The Wholesale shops are closed temporary for a while due to High volume of cases in the
area, so as they are closed there is no business we can do with them.

❖ There are many Wholesale shops whose owners left the city and went to their hometown
due to COVID-19, so there shops are closed.

❖ If particular shops are open they have a timeframe in which they can operate and then
they have to close the shops so working business time is limited which are affecting us.
As many shops are opening for 5-6 hours in a day, there business is limited.

❖ Many Wholesalers are unwilling to accept home delivery of products even if safe &
secure deliver of products is possible.

❖ In this adversity of COVID-19 pandemic, making the product available at all outlets has
become tedious because of non-availability of transporting utilities at the distributor as
well as wholesalers end.

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 SUGGESTIONS/ RECOMMENDATIONS

❖ WHOLESALERS BRACKET –

One of the fundamental reasons for wholesalers being unhappy with ITC is that the ITC
personnel has commenced to directly reach out to retailers & other small outlets , which are
the core customers for the wholesalers players. This action undertaken by ITC is seamlessly
threatening wholesalers for their survival in the market, thereby resulting into negative
correlation with ITC.
In order to tackle the above scenario & to develop wealthy relationships with our wholesale
partners, ITC can ask wholesalers to create a bucket of retailers & other small outlets to
which they cater to & hence, ITC will not intervene to directly approach those retailers.
However, number of T&C is indeed applicable to this bracket & benefits can be drawn–
1. ITC’s load to reach out to number of retailers will reduce & inventory load of distributor
can be easily passed on to the wholesalers thereby resulting into win-win outcome for the
parties.
2. If Wholesaler agrees to this bracket, he/she will have to accept not only the products he
demands but also variants & make sure that he pushes the ITC portfolio into his retailer’s
bracket.
3. However, as a check mark ITC personnel will still continue to visit the retail outlets
(which are in the wholesalers bracket) to make sure that ITC products are available at all
times in their shelf.
4. In addition to this, ITC can also continue to deal with {wholesalers – retailers (directly)}
but only for those products which are unavailable at wholesaler’s outlets.
5. {Wholesalers – as Channel Advocates}; With the help of above stated scenario, ITC can
ask wholesalers to widen its market reach by relegating additional offers & margins to
wholesalers , if they increase the number of retailers in their bracket it will result into more
profits to wholesalers as well as ITC.

34
❖ PERFORMANCE-LINKED MARGIN –

Considering the current scenario, wholesalers partnered with ITC are offered margins &
additional margins based on to the proportion of quantity they purchased. Additional margin
is calculated on PTR which is the profit margin for wholesalers.
Adequate amount of margin is made available to wholesaler but still they strike for more, so
in order to tackle this situation, we can analyse wholesalers performance & ask them to
improve on the same if they wish for better margins.

Following points should be taken into consideration:-

1. Quantity Criteria still exists.

2. If earlier, wholesaler was able to stock & sell 10 lakhs rupees of our company’s portfolio,
ask him to push for 12 lakhs for the next week.
3. Alternative to the 2 can be, if wholesaler finds tough to increase the holding portfolio then
ask him to sell 10 lakhs rupees of ITC portfolio in 5 days rather than a week
(The outcome in all the 3 scenario is same that is to push the product but it can help ITC to
psychological deal with the wholesaler if asks for better margins)

In addition to the above point, if we successfully implement the above margin criteria for
wholesalers, he/she will surely push ITC’s product, especially to those customers who come
to their shop stating (for instance, hand me 5 rupees biscuit packet rather than mentioning the
exact brand & also for those orders where non-availability of competitors products can be
leveraged by ITC products (as products in the market are perfect substitutes for each other)

❖ OVERALL PORTFOLIO MARGIN -

Offers & Schemes are available to the wholesalers with respect to the quantity that he/she
purchases from the available ITC category. In addition to this we can provide margins to
wholesalers on the entire portfolio they purchase from our company’s bracket, so that they
prefer us over & above to our competitors.

For this, Wholesalers can be divided into categories; for instance – silver, Gold & Platinum,
depending on the overall value of ITC products they sell.

This will help us to encourage wholesalers to stock up different ITC portfolio products &
push them at a better pace in the market.

35
❖ LEVERAGING I.T. FOR BETTERMENT OF CHANNEL PARTNERS –

ITC can make use of technology to ensure better & smooth functioning of its operations in
the normal as well as new normal course of business.
A platform should be developed wherein channel partners can directly communicate with
each other for placing orders, scheduling delivery, generating bills etc.

The platform should consist of (wholesale category):-

1. Products available with distributor for assisting wholesalers to initiate an order.
2. Scheme chart to help wholesalers place better order.
3. Delivery lapse should be of 24 hours i.e. Wholesalers should place an order a day prior to
he/she assumes to receive the goods.
4. Different category of goods available under sampling. Which can act as trial & error for
wholesaler (moreover, ITC can decide to deliver this goods for free or at a 50% cost to the
wholesaler)
This will help us to develop better relations with Channel partners, as the platform will act on
proactive rather than on reactive basis.

36
 QUESTIONNAIRE –

SR. QUESTIONS TO THE RESPONDENTS

NO.
1. What is your market reach & to how many retailers do you cater to?

2. Are you willing to stock Variants/ SKU’s of ITC products?

3. What are the sources do you approach to purchase ITC products, rather than
purchasing from distributors & why?

4. Have you enrolled for Shubh-labh promotional project with ITC?

5. Are competitors offering you better margins via-a-via ITC & if yes, then on
which products do you know think ITC should offer more?

6. If ITC increases your margin share, what promises are you ready to fulfill in
order to generate synergy for ITC?
7. Please Comment, “On ITC & other competitors reaching out directly to
retailers”

8. Do you want ITC to develop an electronic platform for better communication?

37
 BIBLIOGRAPHY

Following websites, research papers & articles were referred for secondary research analysis
& to support findings-

❖ https://www.itcportal.com/about-itc/profile/index.aspx

❖ https://www.capitalmarket.com/Company-Information/Information/About-

Company/ITC-Ltd/301

❖ https://www.emamigroup.com/emami-fmcg

❖ https://www.ibef.org/industry/fmcg/showcase

❖ www.dabur.com/in/en-us/about/aboutus/dabur-ayurvedic-company

❖ https://www.hul.co.in/about/who-we-are/introduction-to-hindustan-unilever/

❖ https://www.motilaloswal.com/blog-details/Is-there-a-sweet-spot-for-FMCG-stocks-in-

India/1256?/

❖ https://www.justdial.com/Mumbai/Grocery-Wholesalers/nct-10237950

❖ https://www.moneycontrol.com/financials/itc/balance-sheet/itc

❖ https://www.ibef.org/industry/Fmcg-presentation

❖ http://thedistributorchannel.blogspot.com/2016/07/50-questions-for-distributors.html

❖ https://en.wikipedia.org/wiki/List_of_regulators_in_India

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TURNITIN REPORT

39
THANK YOU

40