The Contradiction at the Heart of ITC’s FMCG Strategy

ITC’s FMCG business is becoming more specialised even as it needs to become much larger. That contradiction sits at the centre of the company’s latest strategy, and management’s answer is that scale no longer comes from selling the same product to everyone but from serving different consumers differently while sharing the same infrastructure underneath.

In an interview with The Economic Times, ITC Chairman and Managing Director Sanjiv Puri spoke about protein‑deficient consumers, GLP‑1 users, Gen Z, Gen Alpha, healthy ageing and organic food buyers as the company’s focus. The company’s recent deals point in the same direction, from Yoga Bar and 24 Mantra in health and organic foods to Mother Sparsh in natural baby care and Prasuma in convenience snacks.

Yet despite years of expansion, cigarettes still generated about 82% of EBITDA in 2025-26 while contributing roughly 41% of turnover. The growth engine ITC is building therefore looks increasingly different from the one that funds it. ITC says its digital‑first and organic businesses grew about 60% in 2025-26 and now operate at an annual revenue run rate above ₹13.50 billion, which at ITC’s scale shows traction but not transformation, yet.

The company’s new four‑speed marketing structure offers a clue to the management’s approach to scale. Direct‑to‑consumer, modern trade, traditional trade and rural channels are no longer variants of the same route. Quick‑commerce shoppers, supermarket buyers, kirana patrons and rural households are increasingly treated as separate markets with distinct economics and behaviour. 

This is as much an organisational shift as a commercial one because it forces the company to match stock policies, price ladders, marketing spend and launch tempo to each route rather than assume that one framework fits all.

Shared Scale 
For a company that has lifted FMCG margins by roughly 740 basis points since 2016-17 and wants more, these categories promise both growth and richer unit economics. A protein wafer can earn more per unit than a packet of atta. Yet the question for ITC is whether enough consumers want protein wafers and similar products.

Historically, the largest FMCG businesses grew by selling fairly similar products to millions of households. At a company of ITC’s size, a new product has to feel dramatically better, not just slightly healthier or more convenient. A protein wafer one notch better than a biscuit may win a niche, but it will not clear the threshold needed to matter at ITC’s scale.

This matters because ITC wants FMCG to contribute much more to earnings. Each new brand and each additional cohort add complexity as well as opportunity, and the four‑speed framework quietly admits that one operating model can no longer serve the entire consumer base. Different channels will demand different inventory choices, pricing structures, brand budgets and innovation rhythms. Catering to them can lift returns, but it also demands more systems, more experienced people and more capital.

Consumer companies globally are now chasing narrower cohorts as broad category growth slows, and the winners tend to be those that pair specialised products with sourcing, factories and distribution that can still run at scale.

ITC places unusual emphasis on those backbone assets, repeatedly highlighting farmer networks, manufacturing sites, digital insight tools and reach across outlets as strengths. Those assets will decide whether its collection of health, organic and convenience brands remains a set of separate bets or becomes part of a system that can share procurement, plants and shelf space.

ITC’s future earnings mix will depend less on spotting the next theme than on stitching together the ones it already owns. The real capital test is whether these categories can generate profits large enough to change the economics of a business still funded mainly by cigarettes.

More deals and more launches will keep the story busy, but they will matter only if the existing portfolio starts to carry a larger share of the earnings load. ITC investors should spend less time tracking the next acquisition and more time watching how much profit comes from the businesses the company already owns. If that share does not move meaningfully, then the FMCG narrative that now supports the stock may already be fully priced in.