ANALYSIS OF CIGARETTE INDUSTRY Submitted By : Prithwiraj Deb Section: HRM Roll No 38 Batch : SS -08-10
VS
INDIAN CIGARETTE CIGARET TE INDUSTRY INDUSTRY
•India
is the second largest producer of tobacco in the world. • Tobacco occupies a prime place in the Indian economy on account of its considerable contribution to the agricultural, industrial and export sectors. •India is one of the leading Tobacco exporting countries in the world
Evolution • The
oldest cigarette manufacturing firm was established around 1887 • by 1930 the industry had spread across across the country • Initially under British East India Company and there after British Raj • First private company to set up was Imperial Tobacco now Indian Tobacco Company(ITC).
Market share
Sales
SWOT on the INDUSTRY Strength 2. one the largest manufacturers of tobacco in terms of production 3. traditional item of India's foreign f oreign trade 4. leading Tobacco exporting countries in the world
Weakness 7. 8.
burden of Tobacco tax Prohibition Prohibition of Direct advertising
SWOT (CONTD…) Opportunities 2. significant opportunity for cigarette industry to extent and consolidate its position in intentional market due to some recent trend like withdrawal/reduction of agricultural subsidy and escalating cost in the traditional cigarette exporting countries.
Threats 4. Various N.G.O’s and Forums against the use and consumption of tobacco 5. Smuggled foreign cigarettes
ITC Limited one of India's biggest and best-known private sector companies incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company of India Limited‘ has a diversified presence in Cigarettes, Hotels, Paperboards Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Personal Care, Stationery, Safety Matches and other FMCG products Its Gold Flake tobacco brand is the largest FMCG brand in India - and this single brand alone holds 70% of the tobacco market. One of the 8 Indian Companies to feature in ‘Forbes Alist’ for 2004
Vision and Mission
Vision Sustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Company’s stakeholders.
Mission To To enhance enh ance the wealth w ealth generating capability of the enterprise in a globalizing environment, delivering superior and sustainable stakeholder stakeholder value.
ITC - Business Portfolio ITC
FMCG: Cigarettes Other FMCG
Hotels
Agri Business Leaf Tobacco obac co Agri Commodities
Paperboar d Paper & Packaging
Corporate Strategies Ø
Sustain multiple drivers of growth, matching internal capabilities with emerging market opportunities
Ø
Pursue World class competitiveness in businesses and across the entire value chain
Ø
Best-in-class in terms of:
Internal Vitality
Market Standing
Profitability
all
Ø
Strategy of Organisation and Governance processes geared to manage multiple businesses
Ø
Blend core competencies and leverage ITC umbrella strengths to create new avenues of
Headline Financials: 2007/08 Rs.
GTO
2135
1
NTO
1394
1
P BT
4
1
PAT
3
1
Balance Sheet Non Cigarettes Business
1281
15.4
52.4% of NTO (51.5% LY)
ITC’s Cigarettes Business Ø Ø Ø Ø
Ø
Ø
Market leadership Powerful brands across segments Leadership in all segments - geographic & price Extensive FMCG distribution network Direct servicing of 1,00,000 markets & 2 million retail outlets World-class state-of-the-art technology and products Investment - Rs.10 billion in six years Exciting long term growth potential
SWOT Analysis
Strength
2. Biggest and the largest player in the Indian tobacco market with a market share of 80%. 3. Its Gold Flake tobacco brand is the largest FMCG brand in India - and this single brand alone holds 70% of the tobacco market.
Weakness
2. It still has to consolidate its foot in the cigar market largely dominated by Godfrey Philips.
Opportunities
2. ITC is moving into new and emerging markets like developing countries of Eastern Europe, Africa etc.
Threats
2. The obvious threat is from competition, both domestic and international. 3. ITC's opportunities are likely likely to be opportunities for other companies as well
FIVE FOR FORCES CES Entry Barriers Supplier Bargaining Power Buyer's Bargaining Power Industry Rivalry Substitutes
GODFREY PHILIPS the second largest player in the Indian cigarette industry annual turnover exceeds INR 1800 crores (approx. (approx. US $369.6 million) has two major stakeholders, one of India's Indi a's leading industrial houses - the K. K. Modi Group and one of the world's largest tobacco companies, Philip Morris.
Vision
To become a leading tobacco player in India and beyond. ØMission
empowers all its people to think and act radically, stretch stretch relentlessly and generate path breaking ideas and strategies to propel the Company. This helps to create and build powerful brands with w ith unmatched service and world class processes.
FINANCIALS
MAJOR Brands
SWOT Analysis
Strength
2. The second biggest tobacco company in India 3. the first and only tobacco company to organize the fragmented cigar market in India and secure its position as the market leader in the cigar distribution. 4. partnering with some of the top most players in the international tobacco industry
Weakness
2. low popularity of most of its products 3. No sole authority
Contd….
Opportunities
2. Already present in the Middle East, West Africa, South East Africa and South East Asia, Godfrey Phillips India can strengthen its position as an international player by entering new markets 3. Even expanding market share in the Indian tobacco market market is an opportunity
Threats
2. ITC ITC getting into the cigar market 3. it has a mere 12% in market share
Five Forces Entry Of New Competitors in Market Suppliers as an Integral Part Competition Demand of Buyers Available Substitutes
Cigarettes: Growth potential
Cigarettes: Growth potential Ø
Cigarettes
account
for
only
15%
of
tobacco
consumed in India unlike world pattern of 85% due to prolonged punitive taxation
Cigarettes (15% of tobacco consumption) contribute nearly 85% of Revenue to the Exchequer from tobacco sector
Ø
Of the 58% of adult Indian males who consume tobacco, barely 15% can afford cigarettes
Ø
Biri : Cigarettes ratio = 10 : 1
Ø
Annual per capita adult cigarette consumption in India is appx. appx. one tenth world average average : 141
Ø
Future growth depends on relative rates of growth of per capita income and moderation in taxes
