ITC identified high-end nicotine and its derivative products as a new lucrative business. Photo credit: abvrockgroup, PixaBay
ITC has identified the export of high-end nicotine and its derivative products as another US$500 million potential tobacco business with a potential 50% demand supply gap in the coming years, according to The Economic Times.
Disclosing this news at a recent investor meeting, ITC management said the growing popularity of vapes and nicotine pouches globally has led to a growing demand for high-end nicotine products, and Indian tobacco, known for its high nicotine content, is in a favorable position to capitalize on this trend.
Jefferies analyst Vivek Maheshwari said, "The product is high margin since processing is quite complex and has high entry barriers. ITC has a farm-to-flask/pouch model here given its strong sourcing capabilities. It can also provide complete traceability which is a key customer requirement. Management sees a 50% gap between demand and supply of nicotine going forward, making it a lucrative opportunity. It has set up a processing facility with a capex of INR3.4 billion (US$40.9 million), which is the largest such facility in India.”
"ITC will leverage on the institutional capabilities of its leaf tobacco business and aims to manufacture the purest form of nicotine following the stringent norms of US and European countries,” said an analyst at brokerage firm Sharekhan. “It’s a high-margin business with 50% contribution margins and can provide strong profitability support to ITC’s agribusiness.