Tobacco

MANVIR SINGH DHILLON MEGHA SHARMA MEGHA GOEL MEENAKSHI MEENAKSHI SHARMA

OVERVIEW

Tobacco plays economically important role in Brazil, China, India, Malawi, Turkey and Zimbabwe. §Positive Effects §Negative Effects

CONTRIBUTION OF TOBACCO IN INDIA •

Income-20 billion

•Employment-8,50,000 growers & 6 million workers •Revenues- excise duty 59.4 billion+18 billion+ 2 billion(10.6%) •Foreign Exchange-7790 million(5%)

ARRANGEMENTS TO ENCOURAGE •Crop Insurance •Assured Market •Prompt payment of sale proceeds through Tobacco Board •Auction System •CTRI, improve varieties, irrigation, fertilizers

SOME FACTS •Wide variety of tobacco grown in 16 states. •Most of variety grown is non- cigarette type. •Economics of tobacco versus alternative crops. •FCV, Burley & Oriental

Types of Tobacco Smoking Tobacco

•

Beedi

•

Hooka

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Cigarette

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Cigar

Smokeless Tobacco: •Gutka •Natu •Chewing •Cheroot

MARKETING CHANNELS AND PRICE DETERMINATION • Bidi Tobacco Market – largely unregulated.

• No effective institutional arrangements for the regulation or marketing of Bidi Tobacco exist, due to strong opposition of bidi tobacco traders. • The Indian market for cigarettes and other tobacco products is highly price sensitive.

DEMAND TRENDS AND FACTORS •Indian Market – highly price sensitive- price elasticity is 0.66 •Excise duty accounts for 61% of the retail price. •Technology and equipment – improved processing, reduce component prices, improved quality & efficiency, reduced tar and nicotine eg- 750 gm vs 1000 gms

CONSUMPTION TRENDS: •Cigarette – urban – 80% •Bidi- rural – 80 % •Factors responsible for consumption (cigarettes) per capita income, population, changing tastes, prices and government policies •Factors responsible for consumption (bidi) lower tax, traditional habits, low income, rural masses, increased use by women(in certain states)

EXPORTS 

EXPORT INCOME EXEMPTED FROM TAXES

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CREDIT AT SUBSIDIZED RATES

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RAW LEAF ACCOUNTS FOR 80% OF THE TOTAL EXPORTS FROM WHICH FCV FORMS BULK OF THE EXPORTS

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INDIA ACCOUNTS FOR ONLY 4% OF THE WORLD EXPORTS OF RAW TOBACCO

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AMONG MANUFACTURED PRODUCTS HOOKAH PASTE ACCOUNTS FOR 80% IN VOLUME BUT 40% IN VALUE

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RUSSIA HAS BEEN THE LARGEST IMPORTER OF INDIAN MADE CIGARETTES

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TO GROW INDIA HAS TO GROW MORE CIGARETTE TYPE TOBACCO

REASONS 

ABSENCE OF INTERNATIONALLY ACCEPTABLE BRAND NAME

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NON CONFORMITY WITH INTERNATIONAL STANDARDS

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OVERSEAS MARKETING LIMITATIONS IMPOSED BY FOREIGN COLLABORATORS

INDIAN BIDI INDUSTRY •BIDI – TOBACCO + TENDU LEAF •BIDIS ACCOUNT FOR OVER 50% OF TOTAL TOBACCO USE. CIGARETTES ACCOUNT FOR LESS THAN 20%. •TENDU LEAF GROWN ON GOVT. OWNED FORESTLAND •2 MILLION PEOPLE ENGAGED IN LEAF COLLECTION, 4.4 MILLION ARE EMPLOYED FOR BIDI ROLLING •MANUFACTURED IN SMALL SCALE & COTTAGE INDUSTRIES

SMOKELESS TOBACCO 

Smokeless tobacco is used to describe tobacco that is consumed without heating or burning at the time of use

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Smokeless tobacco can be used either orally or nasally

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In South East Asia, smokeless tobacco product are commonly handmade but commercial products are also available and widely marketed. The oral use of smokeless tobacco is widely prevalent in India.

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Different methods of consumption include: chewing, sucking and applying tobacco preparations to the teeth and gums

SMOKELESS TOBACCO PRODUCT : GUTKHA

Ø Ø

Gutkhais a tobacco product industrially manufactured and used mainly in India. It is used by constantly chewing without letting the juice go in and subsequently spitting the juice and contains sweeteners and flavourings.

The international tobacco industry •

Philip morris-PM (altria) marlboro,chesterfield,morris

• British american tobacco-BAT state express 555,lucky strike,etc • Japan tobacco international-JTI MILD SEVEN,SALEM • GODFREY PHILLIPS INDIA(Part- Philip Morris)

MAJOR INDIAN PLAYERS

BAT BAT 

17.1% world market share

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Active business in 180 countries

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Leadership in over 50 countries

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52 cigarette factories in 44 countries

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Over 55,000 employees

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Winning and Leading in Industry Challenges

GOAL To grow brands and the value of the business, to improve productivity and to embed the principles of corporate responsibility around the Group.

PRODUCTS

Global brands 14 113 9

10

11

12

Brands

International brands

ITC-Mission

VISION

ITC-Brands          

Insignia, India Kings, Classic Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake

Brief about the Company 

Godfrey Phillips is today the second largest player in the Indian cigarette industry with an annual turnover of over US$ 265 million

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Incorporated in India in 1936, the Company established its own manufacturing facilities in 1944

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The Company today is the proud owner of some of the most popular cigarette brands in the country like Red and White, Four Square, Jaisalmer, Cavanders, Tipper and Prince

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Its products are distributed through an extensive India wide network comprising 484 exclusive distributors and over 800,000 retail outlets

GODREY PHILIPS INDIA 

SECOND LARGEST PLAYER IN INDIAN CIGARETTE INDUSTRY

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INCORPORATED IN INDIA IN 1936

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2 MAJOR SHAREHOLDERS : KK MODI GROUP AND PHILIP MORRIS USA

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TRANSFORMATION NFROM A MANUFACTURING COUNTRY TO A FAMOUS TOBACO MARKETING BRAND

KEY BRANDS

• Premium brands- Four Square, Red & White, Jaisalmer, Cavanders & tippers. • Recent entries- Stellar, the Ist slim cigarette & Ist Gen, the first euro norm cigarette in india.

GOLDEN TOBACCO LIMITED BRANDSPANAMA CIGARETTES FLAIR CIGARETTES CHANCELLOR CIGARETTES JUST BLACK FLAVOURED LITTLE CIGARS JUNE SLIM CIGARETTES & LITTLE CIGARS ESQUIRE CIGARETTES LIPS EXOTIC FILTER CIGARS JUST BLACK ROLLING SHAG

Targeting teens- images used Boys- toughness and masculinity (images-marlboro man) Female and femininityAssociating brands with slimness, independence.

They use colorful graphics and images that catch their attention. They run in magazines that have a large teen readership. Using shelf space-In stores, cigarettes are often placed close to candy displays and other products popular with kids. Promotional giveaways and tie-ins to sports and music events

Menthols? Heavily

marketed to African Americans. Intended to make the first cigarette less unpleasant.

Theme Based Marketing Classic, a premium cigarette brand of ITC appeals to the affluent Indian who can easily identify with music genres such as Rock, Jazz and Blues.

Event sponsorship to brand stretching

• During March 2001, ITC announced a self-imposed ban on

tobacco promotion. It withdrew from sponsorship of sports events. This included withdrawing its support to the Indian cricket team, which was sponsored by Wills and switch to other forms of advertising, especially brand stretching. • Alternate products of interest to both women and men were

linked to the Wills logo: Wills Sports Wear, and Wills Club Life range of evening wear were introduced and are available at Wills Lifestyle outlets all over the country and also accessible via the internet.

Diversification by ITC . ITC Paperboards (manufacturing packaging boards)

. ITC International Business Division (the second largest exporter of agro-products in India) . Greeting cards (Expressions) and Stationery (Paper Kraft. range of stationery aimed at college and working executives and Classmate, range of notebooks for schoolchildren) . Branded and packaged food business (Aashirvaad Ready Meals, Aashirvaad flour and salt, Confectionary: .Mint-O. and, Candyman. and snacks: Sunfeast).

Reasons for Diversification • Diversification reduces the dependence on tobacco profits

where markets are uncertain, but can also be used to buttress the tobacco industry. • To protect tobacco interests against the legal action and criticism that the tobacco industry faces globally. • Massive diversification of the tobacco industry is a pragmatic ‘hedging the bets’ strategy or a means of redeeming its public image.

ITC and Life Insurance Corporation ITC collaborated with LIC and is facilitating LIC in selling their policies through the electronic network of ITC and reaching out to the rural areas.

This is another ironical association, as a companymanufacturing life-threatening products is collaborating with agencies insuring the lives of people.

Tobacco Advertising in India • In 2004, Tobacco advertising contributed Rs. 3000-4000 million to the Rs. 80,000 million Indian advertising Industry , before the ban on advertising was imposed. • Prior the enforcement of the ban, the cigarette advertising budget was close to Rs. 3000 million per year with ITC leading the spending. • 12 months after the ban was enforced, the cigarette industry would have spent around Rs. 3500 million on cigarette advertising.

Trends in tobacco advertisement before the enforcement of the Indian Tobacco Control Act

Newspapers and Magazines

Direct Advertisement in the print media

Advertisement of a gutka brand associated with a marriage ceremony

Cigarette brand linking it with youthful images

Advertisement of a gutka brand associating with a traditional popular dance

Outdoor advertising

Display advertisement of a gutka brand behind a DTC bus

Current advertising and promotional trends in India

Sponsorships of sports and cultural events

Filmfare awards sponsored by Manikchand in India

The Red & White Bravery Awards

Red & White Bravery Awards sponsored by Godfrey Philips

Surrogate advertising • The tobacco industry in India is increasingly investing in nontobacco products by the same brand name as the tobacco product and are aggressively advertising these products through all available media. • Gutka brands such as Simla, Goa 1000 and Pan Parag, skirt the ban on tobacco advertising on television channels by resorting to surrogate advertising for paan masala bearing the same brand name.

COSTS OF SMOKING 

CANCER

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CORONARY ARTERY DISEASE(CAD)

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CHRONIC OBSTRUCTIVE LUNG DISEASE(COLD

)

CONTROL MEASURES 

PRICING MEASURES

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NON-PRICE MEASURES ADVERTISING RESTRICTIONS HEALTH WARNINGS

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OTHER- BANNED IN PUBLIC PLACES

THANK YOU