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January 31, 2026
Surabhi Prasad, Business Today
Print Edition: 01 Feb, 2026
The last two years—2024 and, more notably, 2025—saw a wave of protests by a new generation of students and young professionals looking for political change, better economic conditions and more climate awareness across countries, including Bangladesh, Nepal, Indonesia and the Maldives.
But beyond these uprisings, Gen Z, the term used to describe those born in late 1990s to the early part of the 2010s and currently aged around 13-29 years, are not only questioning but also bringing forth changes in societal norms and economic behaviour. It’s not just a generation gap!
Gen Z are digital natives. They are tech savvy, have grown up with Internet in their homes, iPads as their support system, social media as a constant companion and take digital payments, online and quick commerce for granted. They tend to be night owls, the real gigsters, at home with artificial intelligence (AI) and machine learning, and with a lingo—cap, salty, suss and tea—that make others scratch their heads.
They also have newer challenges—rising unemployment, an uncertain economic environment, the rise of AI that has put a question mark on the future of work, climate change that is turning more real by the day, and skyrocketing real estate prices that mean a dream home could remain just a dream. Still, they are the rising consumer force who, over the next decade, are poised to become the largest chunk of the labour force and the focus of most companies.
For a country like India that is still young, Gen Z will soon be the economic force to reckon with. A recent report by not-for-profit think tank People Research on India’s Consumer Economy (PRICE) estimates that as of 2025, nearly one in five young individuals globally lives in India. “This is a formidable 420-million strong force, constituting approximately 29% of the nation’s total population, and made up of individuals aged between 15 and 29 as defined by India’s National Youth Policy (2014),” it said.
Labour sociologist Ellina Samantroy, Fellow at the V.V. Giri National Labour Institute, says India’s expanding Gen Z or youth workforce offers a significant opportunity for the country to reap the demographic dividend. As per the recent Periodic Labour Force Survey 2023-24, around 46.5% of the labour force is in the 15-29 age group. “There has been an increase in labour force participation in this age group from 42% during 2021-22. One can see the economic growth potential of this cohort,” she says.
However, with transitions and emerging opportunities in the world of work, it is important to harness the potential of this population cohort with adequate access to education and skilling, she says.
Devangshu Dutta, founder and chief executive of Third Eyesight, a boutique management consulting firm focused on the retail and consumer products ecosystem, says Indian Gen Z consumers are not a uniform cohort.
“A critical issue in India is the coexistence of aspiration and constraint, and India’s Gen Z are shaped by a mix of high digital exposure and wide economic disparity. While they are ambitious and globally aware, their purchasing power varies sharply across segments and locations,” he says.
Further, urban, higher-income Gen Z display global consumption behaviours such as brand experimentation, social commerce and premium aspiration, whereas a large proportion of Gen Z in Tier II, Tier III and rural India is highly value-driven and necessity-led, while drawing their inspiration from global and national sources. He also points out that unlike Millennials, Indian Gen Z are also entering the workforce in a more uncertain economic environment, making price sensitivity, smaller pack sizes and flexible payment options important. “Employment patterns such as informal jobs, gig work and delayed income stability are influencing consumption cycles and brand loyalty,” he says. There is a strong preference for digital discovery, vernacular content and peer-led recommendations, with trust built through community and relevance rather than legacy brand status.
Rising aspirations of Indian households and changes in consumption pattern with a marked move from essentials to more premium products have been well documented, most recently in Household Consumption Expenditure Surveys. But more granular, individual-level data from PRICE shows marked changes in education levels and behaviour of Gen Z and other cohorts such as Millennials (those aged between 30 and 45), Gen X (aged 45-60) and Baby Boomers (60+). A 2024 PRICE ICE 360 Survey of 8,200 respondents (18–70 years) in 25 major cities showed that Gen Z is the most educated cohort, spends the most time browsing the Internet and is more engaged with e-commerce and paid digital services.
Multinational and domestic companies are also now waking up to the Gen Z wave and are realising that they need to review strategies to gain the attention and loyalty of Gen Z as consumers and workers.
“Fashion, beauty and personal care, food and beverages, and mobile and consumer electronics are at the forefront of change in India,” says Dutta. Responding to Gen Z requirements, companies are designing products at accessible price points, expanding entry-level ranges and leveraging sachetisation and subscription models. Brands are investing more in regional languages, local influencers and platforms such as short-video and social commerce channels that resonate with young Indian consumers, he says.
But this process is still at a nascent stage, and many companies and analysts are still trying to assess this generation.
For the 34th Anniversary Issue, we at Business Today decided to decode what Gen Z is truly about, what influences them the most, what they aspire to purchase, what they can afford and what this means for India Inc. Over the course of the last few months, our newsroom saw animated discussions as senior editors sat down with younger colleagues to discuss lifestyle choices, brand loyalties and career ambitions, as we drafted an issue brief and a potential survey.
We then got in touch with PRICE, which worked with us on our survey objectives and tweaked the questionnaire. The result—a first-of-its-kind exercise where PRICE surveyed 4,311 Gen Z respondents, who are now entering the workforce with an income of their own, residing in metros and Tier II cities. The survey covered gender, education, employment status, personal income and household income classes. The main focus was urban, educated Gen-Z who has the income to be a strong consumer.
The research examined consumption behaviour across discretionary and essential categories, savings and credit attitudes, digital influence, brand loyalty, aspirations, and future spending intent.
And the results are indeed, surprising! The survey reveals that traditional consumption models that were built around age-based life stages, linear career progression and early credit adoption no longer hold for Gen Z. “This cohort’s behaviour reflects early exposure to economic shocks, greater career volatility and a redefinition of success away from speed toward resilience,” it underlines.
For businesses, misreading delayed demand as permanent weakness risks underinvestment just as Gen Z approaches its next consumption inflection, it warns. For financial services, premature credit push without trust-building will underperform. For consumer brands, price-led acquisition without quality consistency will fail to convert into lifetime value.
Delve into this issue where BT brings to you the in-depth findings of the survey and explains what this means for companies as they vie for a share of this growing consumer segment. Gen Z is not just about rizz and drip, it is giving the main character energy as they come of age.
(Published in Business Today, issue dated 1 February 2026)
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July 16, 2025
Prabhanu Kumar Das, Medianama
16 July 2025
E-commerce logistics platform Shiprocket announced the launch of Shunya.ai, a sovereign AI model developed in India to support the country’s Micro, Small and Medium Enterprises (MSMEs), on July 11. The company claims that it is India’s first multimodal AI stack, built in partnership with US-based Ultrasafe Inc.
This announcement comes at the heels of Shiprocket filing a confidential draft red herring prospectus (DHRP) with the Securities and Exchange Board of India (SEBI) in May 2025 for their Initial Public Offering (IPO). The company is expected to raise around Rs 2500 crore in its IPO.
What does the AI model offer?
As per Shiprocket’s website, Shunya.ai is built on a freemium model, with unlimited access priced at Rs 499 a month for MSMEs. It is directly integrated into the Shiprocket platform and offers AI agents across multiple languages. According to the company, the agents can perform the following tasks:
Shiprocket CEO Saahil Goel stated, “We’ve adapted Shunya.ai from the ground up for Indian languages, commerce workflows, and MSME needs. By embedding it directly into our platform, we’re giving over 1,50,000 sellers instant access to tools that are intelligent, local, and scalable, levelling the playing field for businesses across Bharat.” Notably, Larsen and Toubro’s AI cloud arm, Cloudfiniti is reportedly providing the underlying GPU infrastructure, ensuring that all data processing and storage remains within India.
This AI model does offer multiple benefits but it will not level the playing field against big players, as per Devangshu Dutta who is the founder of specialist consulting firm, Third Eyesight.
“While Shunya AI can help small businesses compete better, it won’t completely level the playing field. Large companies still have greater organisational capacity and capability to respond to the insights offered, including more data and bigger budgets. The real benefit for small businesses is improving how they work and serve customers within their current markets, rather than suddenly competing with giants,” Dutta said.
The E-Commerce AI Pivot
This is not the first time that an Indian e-commerce platform has unveiled a B2B AI service through its existing platform. Zepto recently launched Zepto Atom in May 2025, a real-time tool that offers consumer brands available on the platform minute-level updates, PIN-code level performance maps, and Zepto GPT, a Natural Language Processing (NLP) assistant trained on internal data that brands can query about their stock keeping units (SKUs) and performance data.
Zomato and its e-commerce arm Blinkit have also been growing their AI capabilities. Analytics India Magazine previously reported that the company’s generative AI team has grown from 3 to 20 engineers in the time-span of a year. Zomato introduced a personalised AI food assistant for users, and also uses AI in its backend to optimise delivery times and improve consumer support. Blinkit also released the Recipe Rover AI in May 2023, an AI assistant for recipes.
Other companies like Swiggy with ‘What to Eat’ AI, Myntra’s MyFashionGPT AI shopping assistant, and Amazon’s Rufus have also adopted AI assistants on their platform as a tool for the consumer.
The issue of merchant stickiness
Dutta asserts that this shift means platforms like Zepto and Shiprocket are changing from being service providers to becoming data intelligence companies. They are generating, or are in the process of generating revenue through transactional data that flows through the company.
“While this can create better insights and automation for merchants on these platforms, it also could make the merchants more dependent on the platforms. Once a merchant builds its operations around a platform’s specific AI tools and insights, it becomes much harder to switch to a competitor – creating stronger merchant stickiness. We already see this in infrastructure and core services such as banking and financial services, enterprise cloud services, building management etc. and the same is likely to happen in AI-enabled process management”, he said.
Why this matters
As Shiprocket is preparing for an IPO, Shunya.ai becomes another means to generate revenue for the company. This app can extend Shiprocket’s reach to local physical stores and MSMEs, by offering them the opportunity to provide the same experiences and support to the consumer that larger retailers and e-commerce platforms do, while automating delivery automation, cataloguing, and customer support.
Furthermore, the launch of this model is also part of the larger trend of AI integration and automation, both within e-commerce platforms for their consumers and within the back-end for optimisation.
Competition in these sectors and merchant stickiness may also become an issue, as businesses hosted on these e-commerce services may become reliant on specific AI tools and their outputs.
Questions of data privacy are also important when it comes to service companies moving towards data intelligence: How do these AI models gather and use data? The consent of end-consumers in these B2B models, data storage, and security are all issues that need to be studied as e-commerce and retails pivots towards AI.
Some Unanswered Questions
MediaNama has reached out to Shiprocket with the following questions and will update the article when we receive a response.
(Published in Medianama)
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May 19, 2025
Aakriti Bansal, Medianama
May 19, 2025
Zepto has launched Zepto Atom, a paid analytics product for consumer brands. The tool offers live dashboards with minute-level updates, PIN-code level performance maps, and Zepto GPT, an in-house Natural Language Processing (NLP) assistant trained on internal data.
While Blinkit and Swiggy Instamart have not announced comparable offerings, Zepto is pitching Atom as a first-of-its-kind play in quick commerce data access.
The launch comes as Zepto gears up for a public offering. The company is in talks to sell $250 million in secondary shares to Indian investors to boost local ownership ahead of its IPO. With a $5 billion valuation and a presence in just 15 cities, Zepto is seeking new ways to expand both revenue and market influence.
A strategic product in the lead-up to IPO
Zepto’s push to monetise platform tools comes at a time when it is attempting to raise its domestic shareholder base to 50%, reportedly as part of regulatory preparation for a future IPO. CLSA, in its 2024 App-racadabra report, estimates Zepto holds 28% of India’s quick commerce market despite a limited presence, trailing Blinkit at 39%.
With Zepto Atom, the company appears to turn its data infrastructure into a service layer for brands. This raises questions about how user behaviour transforms into brand-facing insight.
Zepto’s Multi-Lever Margin Play
Zepto’s cost structure is divided into warehouse transport, dark store operations, last-mile delivery, and corporate overheads. According to CLSA’s App-racadabra report, the company has achieved measurable efficiency gains across each of these categories. For instance, long-haul warehouse transport costs fell from Rs 1.7 per order in March 2022 to Rs 0.8 in February 2024. Handling costs inside dark stores declined from Rs 11 per order in June 2023 to under Rs 10 by January 2024. Last-mile delivery expenses dropped 20% between December 2023 and February 2024, from Rs 50 to Rs 40 per order.
HDFC Securities highlights three key levers for e-commerce profitability: raising average order values via premium or bundled products, improving take rates through ads and private labels, and reducing last-mile costs through better routing. Zepto has pursued these through initiatives like Zepto Café, Relish (in-house food and meat brands), the Zepto Pass loyalty program, and now Zepto Atom—signaling a multi-pronged approach to expand margins beyond logistics.
Whether brands will act on the data that Atom delivers, remains an open question.
Granular offtake data is rarely made available to brands, whether it is by offline retailers or by online platforms; so far brands have been largely flying blind, especially when it comes to marketplaces. In that sense, Zepto’s Atom can be a huge enabler and gamechanger,” Devangshu Dutta, Founder, Third Eyesight, told MediaNama.
Not All Brands May Be Ready
Zepto Atom lets brands monitor impressions, conversions, share of voice, and customer retention in near real-time.
“While having access to real-time geographical and time-stamped sales data is potentially an absolute goldmine for any brand, how useful it is will depend much more on how ready or capable the brand is to use the analysis and make adjustments to its strategy,” said Dutta.
Brands can use Zepto GPT, the NLP assistant embedded in Atom, to query platform data conversationally—for instance, to identify under-indexed Stock Keeping Units (SKUs) in a specific PIN code or analyse what’s driving category sales. However, it remains unclear how brands interpret or act on these insights in practice.
The company has not disclosed Atom’s pricing model. It also hasn’t confirmed whether access will be open to all brands or restricted to high-volume partners. These details will likely determine adoption.
How Atom Fits into the Margin Strategy
Zepto Atom’s real-time sales metrics, SKU-level performance data, and customer retention patterns align closely with the margin levers identified by HDFC Securities. By providing granular insights, Atom enables brands to fine-tune pricing, reposition products, and run targeted campaigns, potentially increasing order values, improving take rates, and optimizing delivery routes. Such adjustments could boost volumes and conversions, benefiting Zepto through higher commissions and ad revenues.
“For Zepto it is certainly a differentiator and could be a driver for additional revenue not just in terms of the subscription fees that they would charge but the incremental impact it could make on the brand partners’ sales and, by extension, on Zepto’s own overall fees/revenues,” said Dutta.
Still, widespread adoption may depend on how well Zepto supports brand onboarding and data literacy. “It may make sense for Zepto to even assist brand-side personnel in understanding how best to use the new tools and also help them create tangible operational changes on their side using the insights.”
Search behaviour and profiling concerns remain unresolved
Earlier this month, Zepto used search behaviour to curate mood-specific product categories such as “Crampy” and “Hangry,” in response to searches related to premenstrual syndrome (PMS)—a recurring condition affecting many women before menstruation. Critics told MediaNama that this kind of emotional profiling could occur without user awareness or consent.
Zepto’s privacy policy states that it collects lifestyle, health, and behavioural data for personalisation and internal analysis. However, the company does not explain whether it stores inferred data, shares it with brands, or applies it to pricing and promotions.
Whether Atom makes any of this data visible to brands remains unclear.
Why This Matters
Zepto Atom signals a shift in how quick commerce platforms are looking to generate value—not just from delivery, but from the data their ecosystems produce. With tools like real-time dashboards and search-linked behavioural insights, Zepto is turning user interactions into assets for brand partnerships.
The move raises larger questions about where platform growth is coming from. Is the business of quick commerce becoming the business of behavioural data? As brands gain new visibility through Atom, the balance between consumer experience and commercial analytics becomes harder to separate.
MediaNama has reached out to Zepto with these questions:
What specific types of consumer behaviour and purchase data are made available to brands through Atom?
Does Zepto Atom include inferred metrics such as user intent, repeat behaviour, or emotional tagging in its brand-facing dashboard?
Are brands shown real-time access to individual-level trends, or only aggregated cohort-level insights?
Are users informed that their platform activity may be used to generate commercial insights for brands?
Can users opt out of this data being shared with third parties via Atom?As of publication, Zepto has not responded. We will update the story when we receive a response.
(Published in Medianama)
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April 15, 2024
Sagar Malviya, Economic Times
Mumbai, 15 April 2024
Spanish fashion company Inditex said it will launch youth clothing brand Bershka and Zara Home in India this year.
“Bershka will open its first store in Mumbai Palladium, and Zara Home will open in Bangalore,” it said in its latest annual report.
Inditex had launched fast fashion brand Zara in 2010 and premium clothing brand Massimo Dutti eight years ago. Its new offering, Bershka, will pitch it directly against Reliance Retail’s Yousta, which too targets the younger consumer segment.
Being the world’s second most-populous country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing Western-style clothing. Fast fashion brands such as Zara and H&M became runaway successes soon after they entered the country.
Experts said Bershka’s target consumer profile is mostly teens to mid-20s, slightly younger than that of Zara, which is pitched at 20-40-year-old fashion-driven customers.
“The product assortment is different, with a higher share of knits, fewer dresses and more casual overall compared to Zara, keeping in line with the lifestyles of the customer group. So in that sense it wouldn’t cannibalise Zara in any serious way, though some of the younger set among Zara buyers could migrate some of their purchases to Bershka,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “The biggest question is, can they hit the price points that young Indian fashion consumers want as with domestic brands such as Zudio, Yousta and others, or will consumers overlook higher prices for the style mix and a European brand pull in significant numbers to make the brand viable.”
According to a recent report by Motilal Oswal, the ₹2.5 lakh crore value fashion segment accounts for 57% of the total apparel market and is one of the largest and fastest-growing segments. A substantial untapped opportunity beyond the metros and tier-1 cities, driven by better demographics, higher incomes and greater customer aspiration, has compelled several big players to enter a market that was previously dominated by regional and local operators.
Since its inception in 2016-17, Zudio has seen considerable expansion and reached nearly 400 standalone stores, outpacing most apparel brands primarily due to its competitively priced products with an average selling price of ₹300. Following the success of Zudio, a unit of the Tata Group’s Trent, the segment has seen the entry of national retailers in the affordable youth clothing segment such as Yousta by Reliance Retail, Style-Up by Aditya Birla Fashion and Retail and Shoppers Stop’s InTune.
(Published in Economic Times)
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October 13, 2023
Anand JC, Economic Times
13 October 2023
Once the butt of jokes in Dalal Street circles, 113-year-old ITC has turned a new leaf in recent years, as its strategy to derive higher revenue from its consumer business is bearing fruit, bit by bit.
Registered in Calcutta as the Imperial Tobacco Company, the FMCG major has always relied on its cigarettes and leaf tobacco business for a major chunk of its revenues. ITC’s true diversification move might have begun with the launch of its hotel in Chennai in 1975, including a failed attempt at the financial services business, but it wasn’t until August 2001 that the tale of the FMCG behemoth came to be.
Having relied on its cigarette business since 1910, ITC has increasingly sought to earn more from its ‘cleaner’ consumer goods products. In a 2018 interview, CEO Sanjiv Puri admitted that while the journey to diversify the company started a long time ago, it only got traction around 2008. Under Puri’s first term as the ITC chairman, the company embarked on the ‘ITC Next’ strategy. The first decade was focused on preparing the company for the transition, he said. ITC now can innovate products, create brands and allow “pro-neurs” or professional entrepreneurs to build businesses in FMCG.
The plan has worked
ITC, a darling of dividend-led investing lovers, has always been a long-term growth story in the making. Nearly two decades after entering the food business, the company holds a leadership position across categories.
As per the company’s latest annual report, it holds the leadership spot in the branded Atta market through Aashirvaad, cream biscuits segment via Sunfeast, bridges segment of snack foods via Bingo!, notebooks via Classmate and dhoop segment via Mangaldeep. Its Yippee noodles trails Nestle’s Maggi, as the latter continues to lead in a highly consolidated market. However, Yippee has managed to gobble up Maggi’s share at an enviable pace. Capturing these positions, this quickly is no easy feat either.
One of the things that worked for ITC is their understanding of the distribution of products, stemming from their strength in the tobacco business. ITC started exploring aggressively diversifying away from the tobacco business around the 90s, says Devangshu Dutta, head of retail consultancy Third Eyesight.
ITC’s foray into the food business was supported by its presence in the hotel business. “Some of the marquee products that used to be served in their hotel restaurants, packaged dal and so on, they packaged and sold but it was not a humungous success. It was marginal at best.”
“But they started understanding the distribution aspect because those were sold through traditional distribution channels,” Dutta says.
ITC also put in a lot of financial muscle behind the brand building, given no dearth of resources, Dutta says. This helped them grow rapidly in product categories in which they didn’t have a presence earlier on.
“Starting from scratch, particularly on the foods side, ITC has been one of the most successful companies in the last 15-20 years. Their overall revenue this year has been roughly Rs 19,000 crore, out of which Rs 15,000-16,000 is purely from foods segment,” Amnish Aggarwal, Head of Research, Prabhudas Lilladher told ET Online.
“For a company which started this business, maybe, say, two decades back, this is a very big achievement,” he says.
Unlike its commanding position in its cigarette business, ITC’s ‘other-FMCG’ ambitions faced stiff competition from local and national companies in categories including soaps, shampoos, atta, snacks, biscuits, noodles and confectioneries.
Supporting ITC’s ‘other-FMCG’ ambitions is its core competency, the cigarette business. ITC’s consumer business’ growth has weathered storms, in part, thanks to the cash flows generated by its cigarette business which has helped it create stronger brands, an essential part of any consumer-centric business. Through its cigarette business, ITC also gets unparalleled access to a network of brick-and-mortar stores that have a diverse presence across India.
Also complimenting its growth is ITC’s agri-business, a segment which has also grown in strength over the years. From 10 per cent in FY14, the agri-business in FY23 contributed around 24 per cent to the company’s revenue from operations, as per ET Online’s calculations. ITC over the years has invested in building a competitive agri-commodity sourcing expertise. Some of these structural advantages have facilitated the company’s sourcing of agri raw materials for ITC’s branded packaged foods businesses, be it towards its atta, dairy or spices.
Like its peers, ITC too has given a fair deal of importance to its digital push, with more and more companies launching their D2C platforms. These platforms help customers buy products directly from the company website without the hassle of dealing with channel partners, and at the same time, the companies get their hands on first-party data. Such access can help the company market its offerings better. ITC, like some of its other peers, has also been investing in start-ups to diversify its product portfolio. It recently invested in Yoga Bar and Mother Sparsh.
The numbers behind ITC’s consumer business behemoth
Built to engage in the tobacco business, ITC got into cigarette packaging nearly 100 years ago. Another intent in recent decades has been to focus more on the non-cigarette business.
Puri saw it coming.
Upon being asked about the FMCG business overtaking cigarettes, Puri had said “We do not give guidance. But it will certainly happen because the other businesses are growing faster.”
After contributing nearly 62 per cent to the overall revenue in FY14, the cigarettes business in FY23 contributed only around 37 per cent.
ET Online calculations show that the other-FMCG business contributed 17 per cent to the overall revenue in FY14, which grew to 25 per cent in FY23.
Data confirms the claims made in the above segment. ITC’s non-cigarettes businesses have grown over 31-fold and currently form over two-thirds of its net segmental revenues. The company’s other-FMCG business didn’t start turning consistent profits up until FY14. Since then, it has gone from strength to strength.
ITC’s Other FMCG segment (the second largest contributor to sales) is also witnessing strong earnings and growth momentum, unlike most consumer staples peers.
The segment clocked a revenue of 19 per cent YoY while Nestle and Britannia saw 21 and 11 per cent growth each. FMCG EBITDA performance was even better, with the margin expanding by 430 bps YoY to 13.3 per cent & EBITDA growing 2.1x YoY.
Laughing stock no more
For years, the cigarette business has funded the growth of ITC’s other businesses like non-cigarette FMCG products, sometimes to the ire of shareholders who weren’t happy with the slow growth in financials and scrip value.
A slower growth in scrip value meant that for years ITC was also the laughing stock among social media circles. The stock often remained elusive during market rallies in the previous decade, offering poor returns in comparison to FMCG peers. Between 2014 and July 2022, ITC rose with dividends rose 53 per cent while Nifty50 rose 200 per cent, as per moneydhan.com, a SEBI RIA. ITC’s shares trailed the Sensex for five out of eight years through 2020.
“In the last ten years, HUL has done far, far better than ITC. And if you look at other companies in the same universe, say Dabur, it has also given superior performance. ITC has actually underperformed many of the large consumer names,” Aggarwal said.
But fast forward to 2023, not only is it among the best performers within the benchmark index, ITC has even trumped it. While Nifty50 has gained around 17 per cent in the last year, ITC has grown nearly 40 per cent. The ITC scrip in July crossed a market capitalization of Rs 6 lakh crore, beating HUL to become the largest FMCG company.
Sin stock
Prompting a move away to other segments is the nature of the cigarettes business. Tobacco is toxic, and investors are increasingly recognising it as such. Sin stocks are shares of companies engaged in a business or industry that is considered unethical or immoral.
While Environment, Social, and Governance (ESG) investing may be at a nascent stage in India, it is a serious parameter for global investors. Asia’s largest cigarette maker ITC cannot ignore it.
“The company sustained its ‘AA’ rating by MSCI-ESG –the highest amongst global tobacco companies– and was also included in the Dow Jones Sustainability Emerging Markets Index,” Puri noted in the company’s 2022 sustainability report.
Cigarettes, a bitter but essential overhang
For all the accolades for its gains in its other-FMCG business, ITC is nowhere close to ending its love for cigarettes, not that we are claiming it wants to. The Gold Flake-maker currently controls nearly 80% of the cigarette market.
The numbers in recent years suggest that the segment is flourishing more than ever before.
On an annualized basis, the return on depreciated cigarette assets is approaching a staggering 240%, three times the level two decades ago, as per a Bloomberg report. The entire legal cigarette industry was bleeding in the recent past due to punitive and discriminatory taxation on cigarettes. Taxes on cigarettes in India are multiple times higher than in developed countries viz. 17x of USA, 10x of Japan, 7x of Germany and so on, data shows.
But, companies are now recovering due to stable taxation. ITC’s three four-year cigarette sales CAGR are at their best levels since FY15 despite the company not taking material price increases over the last 13-14 months, as per a Motilal Oswal report.
ITC, which accounts for three out of every four cigarettes sold in the white market in the country, is currently seeing its best growth levels in over a decade, and is far superior to the flattish volumes of the past ten and twenty years.
(Published in Economic Times)