The document provides an analysis of the tobacco sector in India. It includes industry statistics, market share of major players like ITC Ltd, Godfrey Phillips India and VST Industries, government initiatives to regulate tobacco, and ratio analyses of the key companies. SWOT, Porter's Five Forces, and BCG matrix analyses are also presented to evaluate the industry.
2. Contents
• Sector Analysis
I. Surveys and Statistics
II. Government Initiatives
III. Market Share
IV. SWOT Analysis
V. Porter’s Five Forces Model
VI. BCG Matrix
VII.Lifecycle Analysis
VIII.Ratio Analysis
5. Sector at a Glance
• One of the most profitable industries in the
world.
• Industry worth INR 58730 crores in 2009.
• CAGR-8.5%
• By 2014 CAGR will be 6.9% and the forecasted
worth is INR 81790 crores.
6. Global Adult Tobacco Survey – India’
In 2009 ‘Global Adult Tobacco Survey – India’, was conducted
across urban and rural regions of 29 states in India to
understand the tobacco consumption trends in the country. The
following were the results observed in the Indian scenario:
Education Proportion of Tobacco users (%)
Secondary Education and higher 21%
Primary Education 33%
Less than Primary Education 45%
No formal schooling 44%
7. Tobacco use among males by age
category
12-18 19-30 31-40 41-50 51-60
Years Years Years Years Years
Sample 8587 13216 7805 5920 5168
Tobacco 1860 7026 5186 4193 3638
users
Prevalence 22 54.9 67.6 72.0 71.5
8. Indian Tobacco Market: Share of top five players vs other players,
by category, 2009
120
Market
100 share in
Percentage
80
Others
60
Market Share of Top 5
Companies
40
20
0
Chewing Tobacco Cigarrettes Cigars
10. The Cigarette Industry
• India’s total cigarette production is valued at
'22,000 crore, of which 12 per cent is exported.
• The cigarette market is dominated four key players
— ITC, Godfrey Phillips, VST and GTC.
• Cigarette sales in the country saw a drop in 2009
over 2008 due to high excise duties and other taxes.
• The government has banned foreign direct
investment in cigarette manufacturing for domestic
consumption or exports, closing the doors for
companies like Japan Tobacco, BAT and so on.
12. Leading Cigarette Brands Promoted
in India
Brand Company name 2009
Gold Flake ITC Group 31.2
Wills ITC Group 18.2
Scissors ITC Group 8.4
Four Square Godfrey Phillips India Ltd 7.9
Capstan ITC Group 7.4
Bristol ITC Group 6.9
Charminar VST Industries Ltd 4
Red & White Godfrey Phillips India Ltd 3
Charms VST Industries Ltd 3
Cavenders Godfrey Phillips India Ltd 2.5
13. Government Initatives
• 1975: The Cigarettes Act 1975 made a statutory
health warning mandatory on all cigarette packets.
• 1980: The central and several state governments
imposed restrictions on tobacco trade and initiated
efforts for comprehensive legislation for tobacco
control.
• 1990: The Central government issued a directive for
prohibiting smoking in public places, banned
tobacco advertising on national radio and TV and
made display of statutory health warnings on
chewing tobacco products mandatory.
14. • 1991: The Central government directed the
Central Board of Film Certificate to comply with
the Cinematography Act 1952.
• 1995: The Parliamentary Committee on
Subordinate Legislation examined the existing
Cigarette Act and made specific suggestions for
stronger provisions..
• 1999: Ministry of Railways banned sale of
cigarettes and bidis on railway platforms and
inside trains.
• 2000: Central Government banned tobacco
advertisements on cable TV.
15. • 2001:Ministry of Railways imposed ban on sale of gutka
at railway stations, concourses, reservation centres and
inside trains. The National Commission on Human
Rights at the S.E. Asia regional consultation meeting,
advocated for tobacco control as an essential measure to
protect human rights
• 2001-03: The states of Tamil Nadu, Kerala, Andhra
Pradesh, Maharashtra, Bihar, Goa and Madhya Pradesh
banned the production and sale of gutka and pan masala
under the Prevention of Food Adulteration Act.
• 2008:A nationwide ban on smoking at the workplace
and in restaurants, hotels, pubs, public transport (buses,
trains and metros), airports and railway stations,
educational institutions, cafes, theatres and other public
places came into effect from 2 October 2008.
• 2o11:Govt bans FDI in cigarette manufacturing
18. SWOT Analysis
Strengths
• India one of the largest manufacturer of
Tobacco.
• Export Potential.
• Amounts for 5.8% of the international trade and
ranks 5thafter Brazil, U.S.A. Turkey and
Zimbabwe.
20. SWOT contd.
Opportunity
• Research for development of alternative uses of
Tobacco in view of anti-smoking campaign.
• Significant opportunity for exports.
21. SWOT contd.
Threats
• Total ban on direct and indirect advertisements
of all tobacco products.
• Prohibition on sponsorship of sports and
cultural events which encourage tobacco use;
ban on smoking in public places.
Ban on smoking in public place.
• Eroding social acceptability of smoking
23. PEST contd.
Economic Factors
• India among top three producers in the world.
• Among top 10 exporter.
• 2.3 million persons depended on this sector for
livelihood.
• Total net value added by all enterprises averaged
Rs 15000 million.
24. PEST contd.
• Social Analysis
• Growing public concern against increasing
consumption of tobacco.
• Restrictions by government has made the
promotion of tobacco brands almost impossible.
25. PEST contd.
• Technological analysis
• Great inventory control.
• Logistic Support.
I. Hardware investment(high shelves, large
storehouses etc.)
II. Software investment(GPS monitoring
circuits, long-distance clients landing
enquiries, GIS circuit optimization, and online
method of electronic clearing, etc.)
26. BCG Matrix
ITC - CIGARETTES GTCI
VST
?
GPI
Market attractiveness & Competitive
strength is also important.
27. porter’s Five Forces analysis
New Entries:
Buyers bargaining powers:
Oligopoly market situation.
➢ Suppliers bargaining power:
Fragmentation, consolidation
& integration.
Low switching costs
➢ Threat of substitutes:
Depends on buyer to buyer.
Some are Brand Loyalists.
➢ Competitive rivalry:
New innovative products by
rivals.
43. ITC
one oF inDia’s Most valuaBle corporations
One of India’s premier private limited groups
completing 100 years.
Large & established Distribution Networks.
Annually turnover of the co. is RS 2888 Crore
It is one of the eight Indian companies to feature in
Forbes A-list in 2004.
It has more then 21,000 employees at more then 60
location across India with 4,86,000 shareholders.
Ranks No. 4 among Indian listed Private Sector
Companies by market cap. (@ April 09)
Rated as- one of India’s Most Respected Companies
(IMRB-Business world Survey 2006)
44. SWOT Analysis
Strength Weakness
• Biggest and the largest player • It still has to consolidate its
in the Indian tobacco market foot in the cigar market largely
with a market share of 80%. dominated by Godfrey Philips.
• Its Gold Flake tobacco brand is
the largest FMCG brand in
India - and this single brand
alone holds 70% of the tobacco
market.
45. SWOT Analysis
Opportunities Threats
• ITC is moving into new • The obvious threat is
and emerging markets from competition, both
like developing countries domestic and
of Eastern Europe, Africa international.
etc. • Health hazard
• Increasing tax in
Cigarettes
46.
47. Godfrey Phillips India ltd.
The second largest player in the Indian cigarette
industry.
Annual turnover exceeds INR 1800 crore
(approx. US $369.6 million)
Has two major stakeholders, one of India's
leading industrial houses - the K. K. Modi Group
and one of the world's largest tobacco
companies, Philip Morris.
48. SWOT Analysis
Strength Weakness
• The second biggest tobacco • low popularity of most of its
company in India products
• The first and only tobacco • No sole authority
company to organize the
fragmented cigar market in
India and secure its position as
the market leader in the cigar
distribution.
• Partnering with some of the
top most players in the
international tobacco industry.
49. SWOT Analysis
Opportunities Threats
• Already present in the Middle • ITC getting into the cigar
East, West Africa, South East market
Africa and South East • It has a mere 12% in market
Asia, GPI can strengthen its share
position as an international
player by entering new
markets.
• Even expanding market share
in the Indian tobacco market
is an opportunity
50.
51. About VST Industries
• VST Industries Ltd. is
a public conglomerate company headquartered
in Hyderabad, India. The company manufactures
and distributes cigarettes. Its Market Capitalization
is 844.49, PE Value: 15.70 and Dividend: 5.49.The
company has its registered office in Hyderabad. It
started off as the formerly Vazir Sultan Tobacco
Company, commonly known as VST and shares
collobration with British American Tobacco group of
the United Kingdom. It is fully independent and
registered as VST Industries Ltd in the year 1983.
Editor's Notes
As described in the above chart, chewing tobacco segment remains largely fragmented while the cigarettes segment has a totally opposite scenario with the top five players having an absolute strangle hold of the market. This has to do with the fact that the government has not issued fresh licenses within the past decade and also placed restrictions on FDI (Foreign direct Investment) into the tobacco market, which prohibits the manufacture of ‘cigars, cheroots, cigarillos, and cigarettes, of tobacco or of tobacco substitutes’ by international manufacturers. This ban, which makes India the only country to go for such a stringent move, has restricted further investments into the Indian tobacco market by international tobacco players. These restrictions also limit the chances for newer players to emerge in the cigarettes sector, although interestingly foreign investment can still be made in the chewing tobacco category. The newly emerging sector of Cigars and Cigarillos, which currently has a low base, has seen an unprecedented growth in the past few years with heavy demand from the affluent consumer segment. The fact that the segment has seen a CAGR of around 24% during the period 2009-14 highlights the growing preference for this segment amongst the select consumer segment.
A ban on FDI in manufacturing of cigarettes will affect existing foreign players' future investment plans in the country. However, it will not affect their existing investments in Indian ventures. At present, three major global players — British American Tobacco (BAT),Japan Tobacco and the Altria Group — have large investments in India. The cabinet note also proposed to prohibit franchise operations for foreign companies to manufacture cigarettes for domestic consumption. It has proposed to allow FDI in SEZs for exports.