FMCG to Hotel Conglomerate ITC Limited has now moved into Direct to Consumer space as well through acquiring a 16% stake in D2C brand “Mother Sparsh’.
Let’s know more about this deal, some recent steps of ITC Limited for strengthening its presence in FMCG-Others brands, and therefore the possible impacts of this acquisition on the company.
Acquisition of D2C Brand ‘Mother Sparsh’:
- On Friday 26th November 2021, ITC Limited announced the acquisition of a 16% stake in Mother Sparsh Baby Care Private Limited (Mother Sparsh).
- Mother Sparsh is a premium ayurvedic and natural personal care brand in the Direct to Consumer (D2C) space which is primarily active in the mother and baby care segment. Mother Sparsh has registered over 85% of its sales through online channels and in the past 12 months, the D2C brand has diversified its product portfolio by over 25%.
- ITC will be acquiring a 16% stake in the D2C brand ‘Mother Sparsh’ for Rs. 20 Cr. through a share subscription agreement on a fully diluted basis. This share acquisition is anticipated to be completed in two tranches, within 8 months. This will be the first investment of ITC in D2C space.
Financial Snapshot and Future Plans of ‘Mother Sparsh’:
With the amount raised in the Series A funding round, Mother Sparsh will be utilizing it towards the research enhancement, development initiatives, grading up digital capabilities, and enabling new product launches. Further, the Ayurvedic brand will be focusing on scale-up revenues to Rs. 300 crores over the following three to five years.
How will this Acquisition benefit ITC Limited:
- This investment is in line with the ‘ITC Next’ strategy which aims to build a future-ready organization with a digital-first culture.
- Accelerating digital transformation by developing digital-first FMCG brands.
- Strengthening D2C platforms of distribution. Recently, ITC has also started ‘ITC eStore’ to directly connect to consumers, which has a presence in 15 cities in the country.
- Strategic Steps towards the Naturals and Ayurveda Segment.
- Will add value to FMCG-Others segment of ITC, where the company focuses highly.
Recent Step of ITC Limited:
- Besides this acquisition of Mother Sparsh, the company has also forayed into Breakfast Category via ready-to-eat and ready-to-cook products. These products will be offered under the brand name of ‘Aashirvaad’ which is the largest brand of ITC in the FMCG-others segment with consumer spend of over Rs. 6,000 Cr.
- Under the ready-to-cook category, the company has launched idli sambhar, upma, instant poha, instant suji halwa, dosa instant mixes, Dalia, besan, and multi-millet cereals.
- Further, the ITC has also made a partnership with QSR player McDonals for McDonald’s Happy Meal. This Happy Meal will comprise of a burger, a hot corn cup, ITCs B Natural beverage, and a toy. This partnership will be a favorable situation for both ITC and McDonals (Westlife Development) from the viewpoint of differentiation, higher sampling, higher youth engagement, and rising out-of-home consumption for ITC.
- Moving ahead, Inox Leisure has also tied up with ITCs Kitchen of India which is an ITCs ready-to-eat gourmet brand to introduce vegetable pulao, Hyderabadi vegetable biryani, dal makhana, rajma masala, and pindi chana. These products will be available across cinemas or through apps.
- From an industry angle, the Breakfast staples market has a size of over Rs. 10,000 Cr. and which is growing at the decent double-digit figure of 12% YoY.
Is this acquisition of Mother Sparsh and foraying into the breakfast category good for the ITC?
With the acquisition of the D2C brand Mother Sparsh which is an active player in the mother and baby care segment, the company has not only invested in the D2C space but has also strengthened its position in the Personal Care segment. Moreover, the Aashirvaad brand, with the expansion in the breakfast category, ready-to-eat, and ready-to-cook products has dived deeper into the value-added segment, which can help the brand premiumization. Also, the tie-ups with McDonald’s and INOX Leisure is an interesting development, which could positively impact the company.