Itc Limited

ITC Limited

ITC

One of India’s most valuable Ø One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004 l

Featuring 400 of the World’s ‘best big companies’ with M-cap. > USD 5 bln. & are rated as the ‘most attractive companies for investors’

Ø Only Indian FMCG Company to feature in Forbes 2000 List l

A comprehensive ranking of world’s biggest companies measured by a composite of sales, profits, assets & market value

Ø Among top in : l l l

Sustained value creation (BT-Stern Stewart survey) Operating profits Cash Profits

Ø Ranks No. 8 among Indian listed Companies by market cap.(@31/03/06) l

No. 1 in FMCG Sector; 6th amongst Private Sector

Vision & Mission statements • Vision: Sustain ITC’s position as one of India’s most valuable corporations through world class performance, creating growing value for the Indian economy and the Company’s stakeholders. • Mission: To enhance the wealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder

Corporate Strategies Ø Sustain multiple drivers of growth, matching internal capabilities with emerging market opportunities Ø Pursue World class competitiveness in all businesses and across the entire value chain Ø Best-in-class in terms of: Ÿ Internal Vitality Ÿ Market Standing Ÿ Profitability Ø Strategy of Organisation and Governance processes geared to manage multiple businesses

ITC - Business Portfolio ITC

FMCG: Cigarettes Other FMCG

Hotel s

Agri Business Leaf Tobacco Agri Commodities

Paperboar d Paper & Packaging

ITC’s Cigarettes Business Ø Market leadership Ø Powerful brands across segments Ø Leadership in all segments - geographic & price Ø Extensive distribution network Ÿ Over 900 wholesale dealers serving more than 1 million retail outlets

Ø World-class state-of-the-art and products

technology

Ÿ Investment - Rs.10 billion in six years

Ø Exciting long term growth potential

Cigarettes: Growth potential Ø Cigarettes account for only 14% of tobacco consumed in India unlike world pattern of 85% due to prolonged punitive taxation Ÿ Cigarettes (14% of tobacco consumption) contribute nearly 85% of Revenue to the Exchequer from tobacco sector Ø Of the 58% of adult Indian males who consume tobacco, barely 15% can afford cigarettes Ø Bidi : Cigarettes ratio = 10 : 1 Ø Annual per capita adult cigarette consumption in India is appx. one tenth world average : 141 Ø Future growth depends on relative rates of growth of per capita income and moderation in taxes

The BCG Matrix for ITC Ltd.

COMPETITORS In India, three major cigarette players dominate the market, primarily ITC with 72% market share, Godfrey Phillips with 12% and VST with 8% share of the market.

Supply Chain Evolution v Two hundred years ago, giant mechanical machines replaced labor to complete tasks in large factories. Railroads, electricity and new communications mediums expanded markets and also made supply chains better, faster, and cheaper. v In the early 1900s, Henry Ford created the first moving assembly line, utilizing scientific management methods. This reduced the time required to build a Model T from 728 hours to 1.5 hours, and ushered in the mass production era. v But in the 1970s, U.S. manufacturing’s superiority was challenged by lower costs and higher quality products from foreign firms in many industries. 04/02/09 10

“..Supply Chain Management is Getting the right things to the right places at the right times, for profit ..” New information and communications technologies have revolutionized today’s supply chains, making them extraordinarily better, faster, 04/02/09

11

Components of supply chain The supply chain has basically four components: v Production: where businesses focus on how much to produce, where to produce it, and what suppliers to use. v Inventory: where businesses decide where to store their products, and how much to store. v Distribution: where businesses address questions about how their products should be moved and stored. v Payments: where businesses look for the best ways to pay suppliers and get paid by customers. The efficiency and effectiveness of a supply chain is contingent on the ability 04/02/09 12 to gather and analyze important information through these

Indian Tobacco Division of ITC Ltd. Supply Chain 04/02/09

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About the Company… Indian Tobacco Division (ITD) vMarket leaders in Cigarettes and Tobacco business & is among India’s most profitable companies vBrands owned by ITC Ltd are Wills Classic, Wills Navy Cut, Gold Flake, Bristol and Scissors vITD also sells two luxury filter brands of its parent company Benson & Hedges and 555 vFour

manufacturing

Bangalore, 04/02/09

units

for

cigarettes

at

Saharanpur, Kidder pore, Munger 14

Contd… vIt has 3 contract manufacturers (OCMs)

ØReliable Cigarette and Tobacco Industries Private Ltd. (RCTI) ØAsian Tobacco Company (ATC ) ØHyderabad Deccan Cigarette Industries (HDC) vHuge

distribution

network

with

19

marketing

branches and 33 Godowns across nation v04/02/09 Also caters to the exports mainly in United States 15

ITD’s Supply Chain (Before IT implementation) vCigarette manufacturing process involves processing of tobacco leaf and stem to different tobacco blends, which is called cut tobacco vCut tobacco is then converted to cigarettes using other raw materials for making cigarettes and packing them in various forms as per the trading requirements vITD receives various grades of Tobacco Leaf and Stem from Indian Leaf Tobacco Division (ILTD) 04/02/09

based mainly in Guntur, Andhra Pradesh

16

Contd… v Processed to form tobacco blends at one of the three Tobacco Processing Units at Bangalore, Saharanpur and Munger. v Tobacco Processing Unit is called PMD or Primary Manufacturing Division. v The cut tobacco is then sent to the Secondary Manufacturing Division (SMD) for making and packing cigarettes 04/02/09

17

Contd… v Three OCMs and Kidderpore factory don’t have inhouse PMD, and are supplied with tobacco from one of the three ITD PMDs v Rest of the raw material (WMS) required for making or packing cigarettes is provided to all factories from various WMS suppliers, most of which are part of ITC Ltd v At SMD, there are two processes: Making and Packing ü Making process is the rolling of cigarette sticks

04/02/09

18

Contd.. v Cigarettes are categorized in different segments based on filter or non-filter type, cigarette length, circumference,

pack

style,

filter

length

and

cigarette placement. Under each segment there are various brands. v Finished Good (Cigarettes) are supplied from the factories to godowns using mainly road and rail transportation. From marketing godowns, the FG flows to wholesale distributors and from there on to 19 retail channel. Requirement for each warehouse is

04/02/09

ITD Supply Chain Network

04/02/09

20

v Raw materials, intermediates and the final product sourcing/distribution

in

widespread

across

the

country v Few items have more than 1 supplier for the raw material e.g. filter rods can be sourced from either Mumbai, Bangalore or Devas in MP v Huge supply-demand network for cigarette business, which must operate in the cost optimal way to maximize the profits v Few 04/02/09segments are particular to factories e.g Kingsize 21

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