India’s ITC (ITC.NS) posted a lower-than-expected increase in its second-quarter earnings on Thursday due to the company’s struggles with fierce competition from smaller competitors and rising commodity prices.
In order to more effectively compete with larger, more financially stable companies like Hindustan Unilever (HLL.NS) and ITC, smaller businesses benefited from a decline in the price of some raw materials utilized in the consumer goods industry, including as milk, barley, and tea.
“When raw material prices are falling, it becomes a level playing field for both unorganised and organised competition,” said Shirish Pardeshi, research analyst at Centrum Broking.
ITC, home to household brands such as Aashirvaad, Bingo and Yippie, said its biscuits, snacks, noodles and soaps businesses faced increasing competition, including from regional players.
Dove-soapmaker Hindustan Unilever said earlier in the day it lost some market share in its mass segment – comprising lower-priced products – due to competition.
However, prices of certain commodities such as wheat and sugar are still high, which pushed up ITC’s total expenses 3% to 120.87 billion rupees for the three months ended Sept. 30.
The tobacco-to-hotels conglomerate’s profit still rose 10% to 49.27 billion rupees ($592.81 million), but missed analysts’ average estimate of 49.54 billion rupees, according to data from LSEG.
Revenue from operations rose 3% to 177.05 billion rupees, helped by a 10% surge in its cigarettes business.