EdelFlash: Consumer Goods
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Transcript of EdelFlash: Consumer Goods
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7/30/2019 EdelFlash: Consumer Goods
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1 EdelweissSecuritiesLimited
Indiansarefarbehindwhen itcomesto lightingtheCigarettestick.ThishasbeenthefindingofthethirdeditionoftheCigarettePackageHealthWarnings: International Status. As per the data, Indias per capitacigarette consumption is the lowest in the world at 99 cigarettes perannum.Thisiswaylowerthanneighbouringcountrieswithasimilarsocioeconomicprofile likePakistan (391),Nepal (274)andBangladesh (172).Moreover, the country has pipped developed countries like Germany,Italy,SpainandJapanin'displaying'pictorialwarningsontobaccoproductpackets. In India, tobacco usage is dominated by products like bidi,chewingtobaccoandgutkha(85%oftobaccoconsumption).The lowpercapitaconsumptioncoupledwithinitiativestobangutkhapresentahugeopportunity
for
cigarettes
in
India.
Pictureperfect:Indiashines,butwarningimpacttobenegligibleInIndia,20%ofacigarettepackiscoveredbywarningpictures(40%frontandnoneat
back),placingit123outof198countries.Intermsofstrictlyimplementingthepictorial
warning,Australia isNo.1with75%frontand90%backpicturewarning,making itan
average of 82.5% of the pack. Also,while pictorialwarnings in India have changed
thrice(2009,2011and2013),manycountrieshave failedonthiscount.However,we
believe the impact of pictorial warnings on cigarette consumption will be low as
smokinginIndiaispredominantlyvialoosebuying(~70%ofsales)ratherthanpacks.
Gutkhaban:OpportunitytouptradeFourteenstatesandoneUnionTerritory in IndiahavebannedgutkhaundertheFood
SafetyandStandardsRegulations(2011)regulationthatprohibitssaleoffoodproducts
containingtobacco;fivemoreplantofollowsuit.However,wedonotexpectthebanto
beextendedtocigaretteasitisamajorsourceofrevenueforthegovernment.Infact,
we expect the gutkha ban to spur up trading to cigarettes.Over the years, several
measures such as stringent warnings on cigarette packs, ban on advertising and
smoking in public places have failed to deter its consumption. Also, Indian smokers
have a lowquit ratio (less than20%),which iswaybelow thatofUK,US,Brazil and
Uruguay(35%).
Outlook:PositiveforcigaretteplayersInternational
developments
in
the
tobacco
industry
like
plain
packaging
norms
may
impactregulationsinIndiafromalongtermperspective.However,weexpectcigarette
consumption to risedue to its lowpercapitaconsumption, launchof64mmvariants
andpremiumisation (shift frombidi,guthka).Also,over theyears, regulatoryactions
(smoking ban in public places, pictorial warnings etc) have had limited impact on
consumption.WeremainpositiveoncigaretteplayerslikeITC,VSTandGodfreyPhillips.
AbneeshRoy+912266203141
HemangGandhi+912266203148
PoojaLath+912266203075
December12,2012
EdelweissResearchisalsoavailableonwww.edelresearch.com,
BloombergEDEL,ThomsonFirstCall,ReutersandFactset.EdelweissSecuritiesLimited
CONSUMERGOODSCigarettes:LightinguptheopportunitiesIndiaEquityResearch|ConsumerGoods
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