ITC Foods, the foods division of ITC Limited has built many brands and sub brands through aggressive advertising and marketing moves. This year the foods division is expected to add about Rs 10 billion to ITC's annual turnover. ITC has recently announced the launch of their sub brand of biscuits – Sunfeast Sachin's Fit Kit under their flagship and umbrella brand Sunfeast to coincide with the World Cup that will be played over the next few weeks in the West Indies.

ITC Foods Division CEO Ravi Naware shared some insights into the various aspects of the business with Indian Television Dot Com's Tarachand Wanvari. Excerpts from the interview.

Excerpts:

The promotion spends in the World Cup, what would be the proportion for them vis-à-vis your annual spends? You must have a separate budget for the World Cup. Could you share the figures?
Of course, we have budgeted a specific amount for the World Cup. The World Cup is expensive so it's a fairly decent percentage.

You have said that a major portion of the World Cup spends budget will be towards promotion of Sachin's Fit Kit, could you speak some more on this?
I think if we don't put money behind this brand, we'll be doing a disservice to ourselves. We have launched the brand with Sachin's name associated with it. On its own it's going to be high profile from the reception point of view. I don't mean that we are doing a razzmatazz kind of a launch. Sachin's Fit Kit and the World Cup, the whole thing matches.

How big is the ready to eat market?
I really don't have a number, because I find that the ready to eat market is not very well defined. You get tinned rasgollas. Will you include them in ready to eat? Some people do, because that is ready to eat, processed, cooked and packed. The definition is not very clear on that segment. If we stick to ‘so to say’ dinner table items, but then rasgollas can also be a part of the dinner table item, we're talking primarily about vegetable curries, paneer, chicken, birayanis, dals, this is the kind of market we construct, then we have close to 48 per cent market share. But then you go and ask someone else, they are very likely to say that claim is too high.

By your definition, who would be number two and three in the ready to eat market?
No 2 would be MTR Foods, next would be Kohinoor. But then there could be disputes too, because I also make halwas like gajjar ka halwa, moong dal ka halwa, we include those. Comparatively, biscuits or soft drinks have become well defined markets. So you won't include potato chips in the biscuit segment. You don't include fruit juices with soft drinks. Its undefined, but not a huge category.

What about your Kitchens of India brand of ready to eat? How does it compare with Aashirvaad ready to eat?
Both would be about equal in size. Plus, we have a fairly large export market, which add a fairly large proportion to our sales. Only Kitchens of India are exported.

So what is the size of the ready to eat market?
It's approximately Rs 600-700 million, the way we look at it.

How are your Pastas doing?
We've got some very, very loyal customers who are quite happy with the performance. We've launched Benne Vita. Many people know how to make good pasta sauce, but the pasta is difficult to make. Earlier one had to buy imported pasta, now they can buy our Benne Vita 400 gm pack.

You are competing with Nestle's Maggi in terms of noodles with your pasta? Has it reached anywhere near that stage?
Well I suppose in terms of the mental space we are competing with Maggi. But we are small and Maggi is large. It is a different product, which by now is a fairly standard one. There are lots of unbranded noodles also available in the market, maybe a similar genre, because that's become a very popular item. Others are also getting into it.

Compared to the existing players, you are new, just four or five years into foods Aren't you spreading yourself with so many products?
In 2002, when we entered the food business, if you wanted to enter almost any food product you would have competition that had already established itself. Nestle had a fairly large range of products, they have been in India about 60 years, Parle is about 60-70 years old, Britannia has been around for almost a 100 years. Then take tea or coffee, you had Tata, HLL or instant mixes, there was MTR and Gitz.

Pasta has been introduced by us for the first time in India. If you say that we compete with noodles, then noodles have been around for 25 years or more. We are late entrants which is a fact of life. And as a late entrant you don't want to get into chocolates. Cadbury and Nestle are already there in that space. You name any category, dairy products - you have Amul and several others already there. In that sense, there was hardly any totally new "New category" where we could enter.

We decided to enter into those categories where we felt that we had some inherent competitive advantage. For example, when we entered atta (wheat flour), we said that we'd leverage our entire e-choupal connection. Having entered into atta and this area, we thought that we would enter into the wheat vertical space. So we got into biscuits, we got into pastas, and there are other products ideas based on wheat which would be relevant.

Through e-choupal we buy larger and larger quantities of wheat, and at that stage, there are scale economies which give us benefits, selectivity, we can choose the right kind of wheat for the right kind of product and so on. Secondly we got into confectionaries because India has 3 million cigarette selling shops. ITC was present in those shops for the last several decades. Most of these cigarette selling shops also sell candy. So we thought that we'd have that advantage in distribution.

This is how we chose the broad categories that we would enter where we felt that we had some competence, some in-house capabilities.

For Kitchens of India, we had all the great recipes from our hotels. So we could make a Dal Bukhara, we could make a Chicken Chettinad, we could make a Paneer dish and so on. That was how we selected the products, otherwise, for me it was impossible to find a completely new line that we could get into.

Do you have advantages because of your e-choupal initiative?
We do have some advantages, we are able to source wheat through e-choupal for our atta (wheat four). We are market leaders with 15 per cent market share in the branded atta segment, which is upwards of Rs 30 billion in India. The market size `is across all brands, not just the ones that advertise. This means regional brands too.

So what about bread, that too is a wheat vertical, isn't it?
Bread is a very, very difficult industry. It also requires specialized distribution. Just having a distribution network is not enough. You need to have trucks that need to got out at 3 in the morning, then you go distribute the bread, on the return you collect money. There are spoilages in bread, maybe 10-12 per cent of the bread gets spoilt, the manufacturer has to take it back. It requires a completely different distribution channel and method.

Pepsi and Coke were already into handling bottles and liquids, they have given out coolers to their retailers, for them it was a natural entry into drinking water. Their distribution and the storage at the retail end fitted in well with their existing setup so they could launch the Aqua Fina and the Kinleys drinking waters. We didn't find that kind of synergy with what we had for bread. I think it's a multi local industry or a national brand industry. Each locality has its own famous bakery.

Over the five years that you have been here, are you satisfied with all genre's of products, or do you feel that you could have done better somewhere?
I am very happy and very satisfied with the progress. Of course some things move much faster, some move slower. I think in Sunfeast we have had a very good run so far. Today we're clearly the number 3 player and there is a very apparent and a visible gap between no. 3 and no. 4. A year ago that gap wasn't so very visible. Apart from a size of 8 per cent, I think Sunfeast as a brand has acquired a good standing, a good stature in the market and in the consumers mind. And that to me is a prerequisite for building a business. If you are building a branded business, the brand must acquire power, stature and then you can generate the consumer pool from that.