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ANALYSIS OF

CIGARETTE INDUSTRY
IN INDIA
Submitted By : Prithwiraj Deb
Section: HRM
Roll No 38
Batch : SS -08-10
VS
INDIAN CIGARETTE 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 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 trade
4. leading Tobacco exporting countries in the world

Weakness
7. burden of Tobacco tax
8. 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
& Specialty Papers, Packaging, Agri-Business, Packaged
Foods & Confectionery, Information Technology, Branded
Apparel, 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 A-
list’ for 2004
Vision and Mission
 Vision  Mission
 Sustain ITC's position  To enhance the wealth
as one of India's most generating capability of
valuable corporations the enterprise in a
through world class globalizing
performance, creating environment, delivering
growing value for the superior and
Indian economy and sustainable stakeholder
the Company’s value.
stakeholders.
ITC - Business Portfolio

ITC

FMCG: Agri Business Paperboar


Cigarettes Hotels Leaf Tobacco d
Other FMCG Agri Paper &
Commodities Packaging

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Corporate Strategies
Ø Sustain multiple drivers of growth, matching
internal capabilities with emerging market
opportunities
Ø Pursue World class competitiveness in all
businesses and across the entire value chain
Ø Best-in-class in terms of:
Ÿ Internal Vitality
Ÿ Market Standing
Ÿ Profitability
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
growth 12
Headline Financials: 2007/08

Rs.
Crs.
GTO 2135 á 1
6 á 0.7
NTO 1394 1
8 á 4.7
PBT 4 1
572 á 6.4
PAT 3 1
120
1281 5.6
á 15.4
Balance Sheet
Size 7
Non Cigarettes Business 52.4% of NTO
(51.5% LY)

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ITC’s Cigarettes Business
Ø Market leadership
Ø Powerful brands across segments
Ø Leadership in all segments - geographic & price
Ø Extensive FMCG distribution network
Ÿ Direct servicing of 1,00,000 markets & 2 million retail
outlets
Ø World-class state-of-the-art technology and
products
Ÿ Investment - Rs.10 billion in six years
Ø Exciting long term growth potential

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SWOT Analysis
 Strength  Weakness
2. Biggest and the largest 2. It still has to consolidate
player in the Indian its foot in the cigar market
tobacco market with a largely dominated by
market share of 80%. Godfrey Philips.
3. Its Gold Flake tobacco
brand is the largest FMCG
brand in India - and this
single brand alone holds
70% of the tobacco
market.
 Opportunities  Threats
2. ITC is moving into new and 2. The obvious threat is from
emerging markets like competition, both
developing countries of domestic and
Eastern Europe, Africa etc. international.
3. ITC's opportunities are
likely to be opportunities
for other companies as
well
FIVE FORCES
ANALYSIS
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. 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.
 Vision
To become a leading tobacco player in India and
beyond.

ØMission
empowers all its people to think and act radically,
stretch relentlessly and generate path breaking
ideas and strategies to propel the Company. This
helps to create and build powerful brands with
unmatched service and world class processes.
FINANCIALS
MAJOR Brands
SWOT Analysis

 Strength  Weakness
2. The second biggest 2. low popularity of most of
tobacco company in India its products
3. the first and only tobacco 3. No sole authority
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
Contd….
 Opportunities  Threats
2. Already present in the 2. ITC getting into the cigar
Middle East, West Africa, market
South East Africa and 3. it has a mere 12% in
South East Asia, Godfrey market share
Phillips India can
strengthen its position as
an international player by
entering new markets
3. Even expanding market
share in the Indian tobacco
market is an opportunity
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
Ÿ 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. one tenth world average : 141
Ø Future growth depends on relative rates of growth
of per capita income and moderation in taxes
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