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CIGARETTE INDUSTRY IN INDIA

1.  INTRODUCTION

The tobacco industry is one of the most profitable industries in the world. Tobacco

companies use their enormous wealth and influence both locally and globally to market their 

deadly products. Even as advocacy groups and policy makers work to combat the tobacco

industry’s influence, new and manipulative tactics are used by tobacco companies and their 

allies to circumvent tobacco control efforts. It is important for tobacco control advocates to

know which companies are present in their country, how and where they operate, the types

and quantity of products sold, and marketing tactics used to sell tobacco products. By being

informed about all aspects of the tobacco industry within a country, advocates are better 

equipped to fight for effective tobacco control policies.

It is important to note that the tobacco companies typically report market data annually at

least several months after the end of the fiscal year. By its nature, annual market data reported

 by analysts and tobacco companies are one or two years old. It is also important to note that

information about the tobacco industry in India is not always readily available. This is particularly true for the loosely regulated bidi and smokeless sectors. Therefore, general

trends, forecast data, and tobacco industry positioning within the market contained here are

the most recent we are able to obtain from tobacco analysts, Euromonitor International, and

other sources.

In India, the tobacco industry is divided into three distinct and powerful sectors: bidis

(smoking products hand-rolled in tendu leaves), smokeless tobacco (mainly chewing tobacco)

and cigarettes. Bidis are the most popular tobacco products consumed in India- 48% of the

market. Smokeless tobacco makes up 38% and cigarettes only 14% of the market.4 Some

aspect of the tobacco industry,whether it be tobacco farming, manufacturing, or distribution,

is present in every Indian state, making tobacco control a truly national effort. This report,

like the tobacco industry in India, has sections on each of the tobacco sectors as well as

examples of tobacco promotion, sponsorship and corporate social responsibility efforts

designed to increase consumption and industry profits.

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2.  The Bidi Industry 

Bidis are slim hand-rolled, unfiltered cigarettes that are rolled in brown tendu or temburni

leaves and held together by a string. The product is often flavoured, and in general bidis arestronger tasting than regular cigarettes. Bidis are cheaper than cigarettes which makes them

very popular in rural areas and among the poor.5-6 While bidis are the number one tobacco

 product used in India, very little is actually known about the organization of the bidi industry.

Bidi production is fragmented and because most brands are hand-rolled in individual homes

on a small scale, the bidi industry is considered to be a cottage industry.5

  In 1995 the Ministry of Statistics and Programme Implementation estimated there

were over 6,600 bidi manufacturers in India, compared to 40 cigarette factories and

55 smokeless tobacco factories.4 While recent numbers are not available, it is still

clear that bidi manufacturers greatly outnumber other types of product manufacturers.

  A woman sitting at home rolling 100 sticks a day qualifies as a bidi factory.

The bidi manufacturing industry is divided into two different sectors: organized and

unorganized. The organized sector is factory based and production is increasingly

mechanized; and the unorganized sector is made up of home-based production and small

cooperatives. Most production and hand-rolling is done at home by women and children.

  Tobacco industry analyst, Euromonitor International, estimates that 20% of bidis are

 produced in the organized sector and 80% in the unorganized sector.

  Even organized factories tend to outsource production to individual homes.

Because the bidi industry is fragmented there are no specific figures on how many bidis are

sold or produced. It is estimated that 750 billion to 1.2 trillion sticks are produced annually.

  According to Euromonitor International, the bidi industry in India is worth Rs200

 billion ($4.1 billion USD).

  Bidis are much cheaper than cigarettes and smokeless tobacco products due mainly to

unequal levels of taxation on the different products. Bidis cost between Rs2.50-5.00

for 25 sticks (less than one Rs per stick)9 whereas the leading brand of gukta costs

Rs3-4 per unit.10 The leading brand of cigarettes costs Rs 80-88 for 20 sticks (Rs4-

4.4 per stick).

  In 2009, Euromonitor reported that bidi volume sales were down 5% from the

 previous year because of a ban on smoking in public places.

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Despite being fragmented, the bidi industry still has a powerful voice in Indian politics which

keeps taxes on bidi products low and regulations lax. The major lobbying organization for 

 bidis is the All India Bidi Federation which represents the entire bidi industry. Other 

organizations that lobby nationally and regionally for the bidi industry include:

All India Beedi, Cigar & Tobacco Workers Federation (New Delhi)

Karnataka State Beedi Wor kers’ Federation

S.K.Beedi Workers Federation

Karnataka Beedi Industry Association

Mumbai Beedi Workers Union (Maharashtra)

All Bengali Beedi Workers’ and Employees Federation (Calcutta)

According to Euromonitor International, no single bidi company or brand has more than a 5%

market claim.

  Large bidi producers have their own territory (state or district) where they dominate

the market with little competition from other bidi companies.

  There are a few regional players that sell their bidi brands in more than one state or 

district, including Ganesh Beedi Works, Kajah Beedi Co and Bharat Bidi Works.

  There is no national bidi brand and at one time it was estimated that there were over 

300 different brands across India.4 Some notable brands include:

  While bidi production is concentrated in the west and south of India,9 it has also been

estimated that each state has around 200 bidi manufactures.

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3.  The Cigarette Industry 

Cigarette consumption makes up a small portion of the tobacco market in India, only 14% of 

tobacco products sold are cigarettes.4 Retail volume sales have decreased by 9% in the last

ten years from 99.6 billion sticks in 1999 to 90.3 billion sticks in 2009.11 Recent declines in

cigarette volumes are mainly due to a 2008 increase in the tax on unfiltered cigarettes. The

tax increase has also led to many unfiltered brands being removed from the market.30-31 ITC

Ltd stopped unfiltered cigarette production entirely and some companies have launched filter 

versions of their most popular unfiltered brands to maintain their customers.

Historic India Cigarette Market Size- Retail Volume (billion sticks) 

Despite recent declines in sales, it is expected that cigarette use will increase overtime as

disposable incomes increase in India. Euromonitor International predicted in 2008 that if the

smokers who currently smoke bidis switched to factory made cigarettes, then India’s cigarette

consumption would increase to around 640 billion sticks. This increase would make India the

second largest volume cigarette consumer in the world behind China.

1999 2000 2001 2002 2003  2004  2005  2006  2007  2008 2009 99.6 98.7 89.3 91.9 94.5 96.5 100 101.1 99.8 91.2 90.3

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The cigarette market in India is controlled by four locally established companies, but

most companies also have close ties to international tobacco companies. The leading

transnational tobacco companies (TTC) have recently attempted to increase their shares of the

Indian cigarette market but have had little success. The ability of TTCs to increase their 

 presence in India has in part been limited because of restrictions on foreign direct investment

(FDI) in cigarette manufacturing.

ITC Group-  ITC was established in 1910 under the name Imperial Tobacco Company of 

 India. The company changed its name to ITC in 2001 to reflect its diverse interest in products

outside of tobacco.36 

  ITC is the leading cigarette manufacturer in India with 73% of the market in 2009.

Since 2001, ITC has steadily increased its market share in India and has increased

cigarette production by 15% from 57.1 billion sticks in 2001 to 65.8 billion sticks in

2009.11

  Reportedly, the Indian government has a stake in ITC. While ITC claims that the state

does not have any direct shares, the company does report that a large number of ITC

shares are held by financial institutions which are majority state owned such as the

Life Assurance Corporation of India and Unit Trust of India.

  The TTC British American Tobacco (BAT) has also has a 32% share.

  ITC generated RS 262.6 billion ($US 28.9 million) in revenue in 2009 through its

interest in cigarettes, hotels, cosmetics and toiletries, packaged food, apparel,

 paperboards and packaging, and agriculture.

  ITC’s cigarette industry contributed to 66% of the company’s total revenue for the

fiscal year ending March 2010.

  ITC has five cigarette factories in Bangalore, Kolkata, Munger, Ranjangaon, and

Saharanpur.

  In addition to its operations in India, ITC also has cigarette subsidiary Surya Nepal,

which is a joint venture with British American Tobacco.

Website: http://www.itcportal.com/default.aspx

Godfrey Phillips India-  Established in India in 1936 as an import company for Godfrey

 Phillips, UK. The company has since established itself as a major local manufacture of 

cigarettes in India. 

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  Godfrey Phillips is the second largest cigarette company in India with 14% of the

market. Since 2001, the company has seen continuous growth in market share and has

increased its cigarette production by 43% from 8.7 billion sticks in 2001 to 12.5

 billion sticks in 2009.

  Godfrey Phillips India has two major stake holders - the KK Modi Group, an

industrial conglomerate based in Mumbai, and the international tobacco company

Philip Morris International (PMI) which together hold a total of 71% of the company.

In May 2009, KK Modi acquired an additional 10.8% stake in Godfrey Phillips from

PMI, bringing its total share to 47% and PMI’s to 25%. 

  Godfrey Phillips India has a leaf division that provided tobacco leaf for production in-

country and for export. The company also sells tea.

  The cigarette segment accounted for 92% of Godfrey Phillips India revenue for the

financial year ending March 2010.

  Godfrey Phillips is headquartered in New Delhi and has factories in Ghaziabad (near 

Delhi) and Andheri (near Mumbai). Currently, a new factory is being built in Rabale.

The company has a strong presence in North and West India, and in an attempt to increase the

company’s reach in India, Godfrey Phillips is aggressively expanding distribution into the

states of Tamil Nadu and Orissa.

Website: http://www.godfreyphillips.com/

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4.  Corporate Social Responsibility (CSR)

Tobacco companies maintain CSR programs in an effort to counter negative attention

regarding their deadly business. This practice is particularly prevalent in India. By donating

funds to noble causes, the perception of cigarette companies by the public and policy makers

improves. The true goals of industry-sponsored programs have been revealed through internal

tobacco industry memos released to the public by U.S. legal settlements. CSR programs:

Serve the industry’s political interests by preventing effective tobacco control

legislation.

Marginalize public health advocates.

Preserve the industry’s access to youth.Create allies and preserve influence among policymaking and regulatory bodies.

Defuse opposition from parents and educators.

Bolster industry credibility.

In India, cigarette companies integrate themselves into local communities that they operate in

through CSR activities. They also work nationally to create goodwill with the public and

 policy makers in an attempt to protect their profits.

  Since 1990 Godfrey Phillips India has sponsored the Bravery Awards (first under the

 brand name Red and White and now under the company name). The Bravery Awards

annually honors citizens that perform physical and social acts of bravery. Indian film

actress Preity Zinta acted as an ambassador of the awards from 2006-08. The awards

have also launched blood drives and the Amodini-Women's Empowerment initiative.

  In 2000, the ITC launched e-Choupal, an IT training program for Indian framers. The

 program claims to reach over 4 million farming families, connecting them to a digital

infrastructure that enables them to link to a more formal market. ITC also supports

 primary education, women empowerment and environmental initiatives.

Smokeless tobacco companies are also known to use CSR tactics in the communities that

they operate in.

  The DS Group, which includes Dharampal Satyapal, contributes to a wide range of 

social issues in Assam and Tripura. Activities include the renovation of Pallimangal

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H.S. School and contributions to economic development projects of ethnic and tribal

groups in North Eastern States.

The tobacco industry in India is complex and powerful. Knowing where and how the

industry operates is essential to creating and advocating for strong tobacco control

 policies. Unless strong tobacco control regulations are put in place and enforced in India,

the tobacco industry will continue to expand and profit from addicting consumers to its

deadly products.

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ITC LIMITED 

ITC Limited (BSE: 500875) or ITC is an Indian public conglomerate company (25.4% owned

 by British corporation, British American Tobacco) headquartered in Kolkata, West Bengal, 

India.[2] Its diversified business includes four segments: Fast Moving Consumer Goods

(FMCG), Hotels, Paperboards, Paper & Packaging and Agri Business. ITC's annual turnover 

stood at $7 billion and market capitalization of over $34 billion. The company has its

registered office in Kolkata. It started off as the Imperial Tobacco Company, and shares

ancestry with Imperial Tobacco of the United Kingdom, but it is now fully independent, and

was rechristened to India Tobacco Company in 1970 and then to I.T.C. Limited in 1974.

The company is currently headed by Yogesh Chander Deveshwar . It employs over 29,000

 people at more than 60 locations across India and is listed on Forbes 2000. ITC Limited

completed 100 years on 24 August 2010.

ITC has a diversified presence in FMCG (Fast Moving Consumer Goods), Hotels,

Paperboards & Specialty Papers, Packaging, Agri-Business and Information Technology.

While ITC is an outstanding market leader in its traditional businesses of Hotels,

Paperboards, Packaging, Agri-Exports and Cigarettes, it is rapidly gaining market share even

in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal

Care and Stationery. Meera Shankar joined the board of ITC Ltd as the first women director 

in its history. She is an additional non-executive director of the cigarettes-FMCG-hotel major.

HISTORY

ITC was formed on August 24, 1910 under the name Imperial Tobacco Company of 

India Limited. Later the name of the Company was changed from Imperial Tobacco

Company of India Limited to India Tobacco Company Limited in 1970 and then to I.T.C.

Limited in 1974. ITC contains a wide range of businesses - Cigarettes & Tobacco, Hotels,

Information Technology, Packaging, Paperboards & Specialty Papers, Agri-business, Foods,

Lifestyle Retailing, Education & Stationery and Personal Care . Finally the company changed

its name to 'ITC Limited’ on September 2001. 

The earlier decades of the Company's existence were mainly depending on growth and

consolidation of the Cigarettes and Leaf Tobacco businesses, In the Seventies it started to

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transform into a corporate. In 1975 the Company launched its Hotels business with the

acquisition of a hotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'.

The objective of ITC's entry into the hotels business was rooted in the concept of creating

value for the nation In 1979, ITC entered the Paperboard business by promoting ITC

Bhadrachalam Paperboards Limited, which today has become the market leader in India.

In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture.

Since inception, its shares have been held by ITC, British American Tobacco and various

independent shareholders in Nepal. In August 2002, Surya Tobacco became a subsidiary of 

ITC Limited and its name was changed to Surya Nepal Private Limited (Surya Nepal). Also

in 1990, leveraging its tends to 10 states covering over 4 million farmers. ITC's first rural

mall, christened 'Choupal Saagar' was inaugurated in August 2004 at Sehore. On the ruralretail front, 24 'Choupal Saagars' are now operational in the 3 states of Madhya Pradesh,

Maharashtra and Uttar Pradesh.

In 2000, ITC forayed into the Greeting, Gifting and Stationery products business with the

launch of Expressions range of greeting cards. A line of premium range of notebooks under 

 brand “Paperkraft” was launched in 2002. To augment its offering and to reach a wider 

student population, the popular range of notebooks was launched under brand “Classmate” in

2003. “Classmate” over the years has grown to become India’s largest notebook brand andhas also increased its portfolio to occupy a greater share of the school bag. Years 2007- 2009

saw the launch of Children Books, Slam Books, Geometry Boxes, Pens and Pencils under the

“Classmate” brand. In 2008, ITC repositioned the business as the Education and Stationery

Products Business and launched India's first environment friendly premium business paper 

under the “Paperkraft” Brand. “Paperkraft” offers a diverse portfolio in the premium

executive stationery and office consumables segment. Paperkraft entered new categories in

the office consumable segment with the launch of Textliners, Permanent Ink Markers and

White Board Markers in 2009.

ITC also entered the Lifestyle Retailing business with the Wills Sport range of international

quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive

stores later expanded its range to include Wills Classic formal wear (2002) and Wills Clublife

evening wear (2003).

In 2000, ITC spun off its information technology business into a wholly owned subsidiary,

ITC Infotech India Limited, to more aggressively pursue emerging opportunities in this area.

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Today ITC Infotech is one of India’s fastest growing global IT and IT-enabled services

companies and has established itself as a key player in offshore outsourcing, providing

outsourced IT solutions and services to leading global customers across key focus verticals -

Manufacturing, BFSI (Banking, Financial Services & Insurance), CPG&R (Consumer 

Packaged Goods & Retail), THT (Travel, Hospitality and Transportation) and Media &

Entertainment.

ITC's foray into the Foods business is an outstanding example of successfully blending

multiple internal competencies to create a new driver of business growth. It began in August

2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002,

ITC entered the confectionery and staples segments with the launch of the brands mint-o and

Candyman confectionery and Aashirvaad atta (wheat flour). 2003 witnessed the introductionof Sunfeast as the Company entered the biscuits segment. ITC's entered the fast growing

 branded snacks category with Bingo! in 2007. In just over a decade, the Foods business has

grown to a significant size with over 200 differentiated products under six distinctive brands,

with an enviable distribution reach, a rapidly growing market share and a solid market

standing.

In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire

value chain found yet another expression in the Safety Matches initiative. ITC now markets popular safety matches brands like iKno, Mangaldeep, Aim, Aim Mega and Aim Metro.

ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the

manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands

include Spriha and Mangaldeep across a range of fragrances like Rose, Jasmine, Bouquet,

Sandalwood, Madhur, Sambrani and Nagchampa.

ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & body care

 products for men and women in July 2005. Continuing with its tradition of bringing world

class products to Indian consumers the Company launched 'Fiama Di Wills', a premium range

of Shampoos, Shower Gels and Soaps in September, October and December 2007

respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in the

mass-market segment at select markets in October 2007 and Vivel De Wills & Vivel range of 

soaps in February and Vivel range of shampoos in June 2008.

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List of Products & Brands

In FMCG, ITC has a strong presence in :

 Cigarettes: W.D. & H.O. Wills, Gold Flake Kings, Gold Flake Premium,Gold FlakeSuper Star ,  Navy Cut ,  Insignia, India Kings, Classic (Verve, Menthol, Menthol Rush,

 Regular,Citric Twist, Mild & Ultra Mild), 555,  Benson & Hedges, Silk 

Cut , Scissors, Capstan,  Berkeley, Bristol , Lucky Strike, Players and Flake.

  Foods: ( Kitchens of 

 India;  Aashirvaad ,Minto,Sunfeast,Candyman,Bingo,Yippee, Sunfeast Pasta  brands in

Ready to Eat, Staples, Biscuits, Confectionery, Noodles and Snack Foods);

  Apparel: (Wills Lifestyle and  John Players  brands);

  Personal care: ( Fiama di Wills; Vivel ;  Essenza di Wills; Superia; Vivel di Wills  brands of 

 products in perfumes, haircare and skincare). 

  Stationery: (Classmate and  PaperKraft   brands)

  Safety Matches and Agarbattis: [Ship (through ownership

of  WIMCO); iKno;  Mangaldeep;  Aim brands]

Other businesses include:

  Hotels: ITC's hotels (under brands including WelcomHotel ) have evolved into being

India's second largest hotel chain with over 80 hotels throughout the country. ITC is also

the exclusive franchisee in India of two brands owned by Sheraton International Inc.- The

Luxury Collection and Sheraton which ITC uses in association with its own brands in the

luxury 5 star segment. Brands in the hospitality sector owned and operated by its

subsidiaries include  Fortune and  WelcomeHeritage brands. 

  Paperboard, Specialty Paper, Graphic and other Paper;

  Packaging and Printing for diverse international and Indian clientele.

  Infotech (through its fully owned subsidiary ITC Infotech India Limited which is a SEI

CMM Level 5 company)

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Rural Initiatives

ITC's Agri-Business is India's second largest exporter of agricultural products. ITC is

one of the India's biggest foreign exchange earners (US $ 2 billion in the last decade). The

Company's 'e-Choupal' initiative is enabling Indian agriculture significantly enhance its

competitiveness by empowering Indian farmers through the power of the Internet. This

transformational strategy, which has already become the subject matter of a case study

at Harvard Business School, is expected to progressively create for ITC a huge rural

distribution infrastructure, significantly enhancing the Company's marketing reach.

The company places computers with Internet access in rural farming villages; the e-Choupals

serve as both a social gathering place for exchange of information (choupal means gathering

 place in Hindi) and an e-commerce hub. What began as an effort to re-engineer the

 procurement process for soy, tobacco, wheat, shrimp, and other cropping systems in rural

India has also created a highly profitable distribution and product design channel for the

company — an e-commerce platform that is also a low-cost fulfillment system focused on the

needs of rural India. The e-Choupal system has also catalyzed rural transformation that is

helping to alleviate rural isolation, create more transparency for farmers, and improve their 

 productivity and incomes.

Corporate Philanthropy

ITC e-choupal creatively leverages information technology to set up a meta-market in favour 

of India's small and poor farmers, who would otherwise continue to operate and transact in

'un-evolved' markets.

As of July 2010, services through 6500 Echoupal across 10 states, reach more than 4 million

farmers in about 40,000 villages. Free access to Internet is also opening windows

of  rural India to the world at large.

ITC e-choupal is now being regarded as a reliable delivery mechanism for resource

development initiatives. Its potential is being tested through pilot projects in  healthcare, 

educational services,water management and cattle health management with the help of 

several service providers including non-governmental organizations. 

Classmate notebooks were launched with the initiative of contributing 1 rupee towards the

education of poor children,from every four notebooks it sold.

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Classmate, has launched a programme called Classmate Ideas for India challenge. The

 programme would be a part of the company's centenary initiative.[6] The nation-wide

 programme would invite ideas of the youth, who have the potential to transform India.

Classmate Ideas for India challenge plans to reach out to 25 lakh students across 30 cities,

500 schools and 200 colleges across the country.

Forbes ranking

ITC features on the Forbes Global 2000 rankings for 2007 at position 1256.

ITC is the only Indian FMCG company that features on the  Forbes Global 2000 rankings for 

2009 at position 987.

ITC also featured on the Forbes World's Most reputable Companies List at position 95.

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Management – ITC

Name  Designation 

Yogesh Chander Deveshwar Chairman

Pradeep Vasant Dhobale Executive Director 

Anil Baijal Non -Executive Director 

Angara Venkata Girija Kumar Non- Executive Director 

Sunil Behari Mathur Non- Executive Director 

Hugo Geoffrey Powell Non -Executive Director 

Anthony Ruys Non -Executive Director 

Krishnamoorthy Vaidyanath Non- Executive Director 

S S H Rehman Addnl. & Non Exe-Director 

ITC Ltd Address:

Virginia House,

37, Jawaharlal Nehru Road,

Kolkatta,

West Bengal 700071

Tel: 033-22889371 033-22886426

Fax: 033-22882358

Email: isc@itc.in 

Website: http://www.itcportal.com