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In Depth Study of Tobacco Industry In India with Specific Focus On Cigarette
SECTION 1
RESEARCH METHODOLOGY
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1. Research Methodology
Project title
In Depth Study of Tobacco Industry in India with Specific Focus on Cigarette
1.1 Objectives
To Study the Global Scenario of cigarette Industry
To Study the Indian Scenario of cigarette Industry
To Study the Trends in cigarette in India
To Understand the key drivers cigarette industry
To Study various formats under the organized cigarette industry
To Study the effect of Political, Economical, Socio-Cultural and Technological
factors on the organized cigarette industry.
To implement an Opportunities and Threat analysis to critically analyze cigarette
industry within India
1.2 Information needed
Statistics of Global Organized cigarette Industry
Indian Scenario of Organized cigarette Market
Profiles of Major Industry Players indulged in organized cigarette Business.
All India, region wise market situation in cigarette Businesses.
Factors affecting to cigarette business in India.
Future prospects of Indian organized cigarette industry.
Government Policy on Organized cigarette Business.
Indian cigarette Industry Structure
Major Trends observed in Indian cigarette Industry.
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1.3 Data collection source
For the purpose of the study we have collected the secondary data.
Secondary Data:-
Journals
Newspaper
Magazines
Reference books
Web sites Research papers
1.4 Limitation of Study
Only limitation is the research is based on the secondary information and data but
all the included aspect are correct and relevant as per our best knowledge and study.
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2. TOBBACCO- INTRODUCTION
2.1 Introduction
This is not just about any crop. Tobacco is an agricultural product processed from the
leaves of plants in the genus nicotine. It can be consumed, used as an organic pesticide
it is used in some medicines. In consumption it most commonly appears in the forms of
smoking, chewing, snuffing, ordipping tobacco. Tobacco business is a centuries old
business. It has a very high growth rate and has seen many ups and downs. It has also
been controversial over the period of time and has been subject to many types of
criticisms. But apart from all these things people do smoke and people want to keep on
smoking.
2.2 History of Tobacco1
EARLY TOBACCO USE
1,000 BC Ancient temple carvings depict Mayan priests in Central America
smoking tobacco through a pipe. Tobacco leaves become widespread in medicine
for use on wounds as a means of reducing pain. Later the Aztecs incorporate smoke
inhalation into religious rituals. Two castes of smokers emerge: the pipe smokers at
the court of Montezuma and lesser Aztecs who roll the leaves into crude cigars.
470 - 630AD Mayan tribes begin to scatter - and tobacco travels with them. The
leaf moves southwards to South America where it is wrapped in maize and palm
leaves and smoked - and north where it is introduced to the native Americans in the
Mississippi area. In North America pipes are made from clay, marble or lobster
claws. Some pipes, with two stems, are used for inhaling through the nostrils.
Tobacco chewing is common, especially in South America where the leaf is mixed
with lime.
1 http://en.wikipedia.org/wiki/Tobacco
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1492 Arawak people in the Bahamas, on an island Christopher Columbus christens
San Salvador, offer the explorer-dried leaves. Not understanding their significance,
Columbus discards them. A month later Rodrigo de Jerez and Luis Torres
returning from a trip into the interior of Cuba - stumble on villagers inhaling the
smoke from burning dried tobacco leaves through a hollow Y-shaped piece of cane
called a tobago or tobaca. Jerez is thought to be the first smoker outside the
Americas. When Jerez returns to his home town of Ayamonte, during the Spanish
Inquisition, the holy inquisitors accuse him of "consorting with the devil" when
they see smoke coming from his mouth. He is imprisoned for seven years. By the
time he is released, smoking is a custom in Spain. Jerez perhaps sets a precedent for
the plant's controversial future.
1492: Arawak people in the Bahamans North America give Christopher Columbus
burning leaves, pipes are made from clay, marble or lobster claws.
USE OF TOBACCO IN 20th CENTURY2
1900 The Anti Cigarette League publishes a pamphlet claiming links between
cigarette smoking and brain disease.
1902 The Imperial Tobacco Company of the United Kingdom and The American
Tobacco Company of the United States agree to end a trade war by forming a joint
venture, the 'British-American Tobacco Company LTD'. James B. Duke, becomes
the venture's first chairman.
1908 The New York City authority bans women from smoking in public. Two
weeks later Katie Mulcahey is arrested for violating the rule. As she is led away she
declares, "No man shall dictate to me". Cigarette smoking was often seen as a
symbol of women's emancipation.
1914 Outbreak of World War I. General John J. Pershing, commander-in-chief of
the American forces in France in 1917 calls tobacco "indispensable to the daily
ration". In Europe troops use cigarettes to pass time and to try to calm their nerves.
The popularity of cigarettes in the armed forces associates tobacco with patriotism.
2 k.srinath reddy & prakash c. gupta, tobacco control in India, Ministry of Health & Family Welfare, Government
of India
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1925 Despite the bans, cigarette sales continue to increase. The American Mercury
reports, "The more violently it has been banned, the more popular it has become."
1941 Roosevelt makes tobacco a protected crop as part of the World War II war
effort. His wife Eleanor was dubbed "the first lady to smoke in public".
1945 During World War II, smoking increases. By the middle of the next decade,
more than a quarter of American women and more than half of American men
smoked cigarettes.
1952 Two British researchers, Richard Doll and A. Bradford Hill report the results
of a four-year study comparing 1,465 lung cancer patients to an equal number of
patients with other diseases, matched for age, sex and region. They conclude that
lung cancer patients are considerably more likely to be smokers and much more
likely to be heavy smokers.
1960s Public health warnings emerge.
1964The American Surgeon General publishes a 387-page report stating, "Cigarette
smoking is a health hazard of sufficient importance in the United States to warrant
appropriate remedial action." For the first time smoking is banned in the State
Department auditorium
1980s The tobacco industry sees substantial annual duty increases which result in
cigarette taxation increasing by 85 per cent or more in several countries including
the UK.
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2.3 Types of Tobacco3
1. Smokeless tobacco
Smokeless tobacco is usually consumed orally or nasally, without burning orcombustion. There are two main types of smokeless tobacco: snuff and chewing
tobacco.
DRY SNUFF
Dry snuff is powdered tobacco that is
inhaled through the nose and absorbed
through the nasal mucosa or taken orally.
Once widespread, particularly in Europe,
the use of dry snuff is in decline.
Most Prevalent: Europe
MOIST SNUFF
Moist snuff is a small amount of ground
tobacco held in the mouth between the
cheek and gum. Manufacturers are
increasingly prepackaging moist snuff
into small paper or cloth packets to make
the product more convenient. Other moist
snuff products are known as khaini, snus,shammaah, nass, or naswa .
Most
Prevalent: Worldwide
3 http://tobaccoatlas.org/tobaccoatlas/data.html
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CHEWING TOBACCO
Oral smokeless tobacco products are
placed in the mouth, cheek, or inner lip
and sucked (dipped) or chewed. Tobacco
pastes or powders are similarly used,
placed on the gums or teeth. Sometimes
referred to as spit tobacco because
users spit out the built-up tobacco juices and saliva, this mode of tobacco consumption
became associated with American baseball players during the twentieth century. The
tobacco industry exploited these sports heroes to market their tobacco products to
youth. Smokeless tobacco causes cancer in humans and leads to nicotine addiction
similar to that produced by cigarette smoking. There are many varieties of smokeless
tobacco, including plug, loose-leaf, chimo, toombak, gutkha, and twist. Pan masala or
betel quid consists of tobacco, areca nuts (Areca catechu), slaked lime (calcium
hydroxide), sweeteners, and flavoring agents wrapped in a betel leaf (Piper betel).
There are endless varieties of pan masala, including kaddipudi, hogesoppu, gundi,
kadapam, zarda, pattiwala, kiwam, and mishri.
Most Prevalent: India
2. Smoking tobacco
Tobacco smoking is the act of burning dried or cured leaves of the tobacco plant and
inhaling the smoke. Combustion releases biochemicaly active compounds in tobacco,
such as nicotine and allows them to be absorbed through the lungs.
ROLL-YOUR-OWN
Roll-your-own (RYO) cigarettes are
cigarettes hand-filled by the smoker from
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fine-cut, loose tobacco rolled in a cigarette paper. RYO cigarette smokers are exposed
to high concentrations of tobacco particulates, tar, nicotine, and tobacco-specific
nitrosamines and are at increased risk for developing cancers of the mouth, pharynx,
larynx, lung, and esophagus. Most Prevalent: Europe and New Zealand
MANUFACTURED CIGARETTES
Manufactured cigarettes are the most
commonly consumed tobacco products
worldwide. They consist of shredded or
reconstituted tobacco, processed with
hundreds of chemicals and rolled into a
paper-wrapped cylinder. Usually tipped
with a cellulose acetate filter, they are lit at
one end and inhaled through the other.
Most Prevalent: Worldwide
2.4 Tobacco Leaf Production 4
Tobacco Leaf
Production ( '000
tones)
Actual
2000
Projected
2010
World 6137.7 7160
China 2298.7 2972.5
India 595.4 685.4
Brazil 520.7 584.7USA 408.2 526.8
EU (15) 314.5 300.9
Zimbabwe 204.9 232.8
Turkey 193.9 268.8
Indonesia 166.6 119.6
USSR( Former Area) 116.8 70
Malawi 108 137.9
4http://www.tobaccoatlas.org/comparecountries.html?countries=india#
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2.5 Tobacco export
101
2.6 Tobacco market size in India5
2.7 Major players in tobacco markets
1. ITC (Indian tobacco Company)
2. Goldfrey Philips India Ltd
3. GTC Industries
4. VST Industries Ltd.
5. Dalmia Consumer Care
6. Kothari product Ltd.
5 Tobacco board of india
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SECTION 3
CIGARETTE- INTRODUCTION
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3. CIGARETTE- INTRODUCTION
3.1 The product
A cigarette is a product consumed through smoking and
manufactured out of cured and finely cut tobacco leaves
and reconstituted tobacco, often combined with other
additives, then rolled or stuffed into a paper-wrapped
cylinder(generally less than 120 mm in length and 10 mm
in diameter). The cigarette is ignited at one end and allowed to smoulder for the
purpose of inhalation of its smoke from the other (usually filtered) end, which is
inserted in the mouth. They are sometimes smoked with a cigarette holder.6
Rates of cigarette smoking vary widely. While rates of smoking have leveled off or
declined in the developed world, they continue to rise in developing nations.
A cigarette is distinguished from a cigar by its smaller size, use of processed leaf, and
paper wrapping, which is usually white, though other colors are available. Cigars are
typically composed entirely of whole-leaf tobacco.
3.2 History of product
The earliest forms of cigarettes have been attested in
Central America around the 9th century in the form
of reeds and smoking tubes. The Maya and later the
Aztecs smoked tobacco and various psychoactive
drugs in religious rituals and frequently depicted
priests and deities smoking on pottery and temple
engravings. The cigarette and the cigar were the most
6http://www.wpro.who.int/media_centre/fact_sheets/fs_20020528.htm. Retrieved 13/11/2009.
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http://en.wikipedia.org/wiki/Smokinghttp://en.wikipedia.org/wiki/Curinghttp://en.wikipedia.org/wiki/Tobaccohttp://en.wikipedia.org/wiki/List_of_additives_in_cigaretteshttp://en.wikipedia.org/wiki/Cylinder_(geometry)http://en.wikipedia.org/wiki/Smoulderhttp://en.wikipedia.org/wiki/Inhalationhttp://en.wikipedia.org/wiki/Cigarette_filterhttp://en.wikipedia.org/wiki/Cigarette_holderhttp://en.wikipedia.org/wiki/Developed_Worldhttp://en.wikipedia.org/wiki/Developing_Worldhttp://en.wikipedia.org/wiki/Maya_civilizationhttp://en.wikipedia.org/wiki/Aztechttp://www.wpro.who.int/media_centre/fact_sheets/fs_20020528.htmhttp://www.wpro.who.int/media_centre/fact_sheets/fs_20020528.htmhttp://en.wikipedia.org/wiki/Smokinghttp://en.wikipedia.org/wiki/Curinghttp://en.wikipedia.org/wiki/Tobaccohttp://en.wikipedia.org/wiki/List_of_additives_in_cigaretteshttp://en.wikipedia.org/wiki/Cylinder_(geometry)http://en.wikipedia.org/wiki/Smoulderhttp://en.wikipedia.org/wiki/Inhalationhttp://en.wikipedia.org/wiki/Cigarette_filterhttp://en.wikipedia.org/wiki/Cigarette_holderhttp://en.wikipedia.org/wiki/Developed_Worldhttp://en.wikipedia.org/wiki/Developing_Worldhttp://en.wikipedia.org/wiki/Maya_civilizationhttp://en.wikipedia.org/wiki/Aztec8/14/2019 body of mrp(5)
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common method of smoking in the Caribbean, Mexico and Central and South America
until recent times. 7
By 1830, the cigarette had crossed into France, where it received the name cigarette;
and in 1845, the French state tobacco monopoly began manufacturing them.
In the George Bizet opera Carmen, which was set in Spain in the 1830s, the title
character Carmen was at first a worker in a cigarette factory.
In the English-speaking world, the use of tobacco in cigarette form became increasingly
popular during and after the Crimean War, when British soldiers began emulating their
Ottoman Turkish and Russian comrades. This was helped by the development of
tobaccos that are suitable for cigarette use, and by the development of the Egyptian
cigarette export industry.
During World War I and World War II, cigarettes were rationed to soldiers. The
widespread smoking of cigarettes in the Western world is largely a 20th century
phenomenon at the start of the century the per capita annual consumption in the USA
was 54 cigarettes (equivalent to less than 0.5% of the population smoking more than
100 cigarettes per year), and consumption there peaked at 4,259 per capita in 1965. At
that time about 50% of men and 33% of women smoked (defined as smoking more than
100 cigarettes per year). By 2000, consumption had fallen to 2,092 per capita,
corresponding to about 30% of men and 22% of women smoking more than 100
cigarettes per year, and by 2006 per capita consumption had declined to 1,691;
implying that about 21% of the population smoked 100 cigarettes or more per year.
3.3 Seed to stick journey
Seed
The tobacco plant is a member of the same botanical family as tomatoes, potatoes,
peppers or eggplants. An adaptive species, it can be grown economically from 50
Northern to 40 Southern latitude. More than 100 countries grow tobacco. China is the
largest producer, followed by the United States, Brazil, India, Zimbabwe and Turkey.
7 Robicsek, Francis Smoke Ritual Smoking in Central America pp. 3037 bmj article press
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Tobacco thrives in poorer soils, providing farmers with a welcome alternative crop. In
many cases, it provides a higher income than any other smallholder crop. As a crop, it
integrates well into environmentally friendly rotations, and its inclusion benefits
subsequent crops like maize. A typical farmer in rural Uganda, for example, with two
to three hectares of land can earn a good income from only a small part of that land
being planted with tobacco. British American Tobacco can help the farmer by
providing seeds and fertilizer and by giving advice on planting, growing, harvesting
and curing tobacco and other crops.
There are some 13,000 seeds in a gram -looking rather like powdery instant
coffee. The seeds are so small that they must be nurtured in specially prepared and
protected seedbeds for 60 days before transplanting to the field. After a couple of
weeks, soil is banked up around the seedlings to protect them and to allow them to
develop a good root system. Two months later, the plants' flowers and some of the
upper leaves are 'topped' in order to concentrate growth in the remaining leaves (in the
same way that tomato are 'pinched out'). All the time, the farmer needs to provide the
appropriate nutrition for the plant and watch out for pests as the crop grows towards the
harvesting stage.
Harvest
With the exception of some countries such as the United States (where the crop is
mechanically harvested), the farmer will typically harvest by hand, sequentially taking
off 2-4 leaves per plant as the leaves ripen from bottom to top, which stretches the
harvesting period from over 2 to 4 months. The typical Ugandan farmer will harvest
about 15,000 plants, each with 22 leaves.
Processing
The cured leaf is then processed through a Green Leaf Threshing Plant. The main
purpose of the processing is to remove sand, dust, scraps and foreign matter. Separate
the lamina from the stem (threshing). Drive down the tobacco to a safe keeping
moisture' content. Processed tobacco is packed into 200kg cardboard boxes, for
shipping to manufacturing sites.
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Manufacturing
At the factory, the matured tobacco is checked for quality and then carefully blended
with other ingredients which the brand recipe may call for, such as flavorings or pre-
processed tobacco. Keeping track of the various types of tobacco and blend
components is key and computers are increasingly used to track production runs.
Moisture content is crucial. Too dry and the tobacco leaf will crumble; too moist and it
may spoil during storage. The blended tobacco is treated with just the right amount of
steam and water to make it supple, and then cut into the form in which it appears in the
cigarette. Excess moisture is then removed so that the cut tobacco can be given a final
blending and quality check.
Cigarette making, once done entirely by hand, is today almost fully automated
with the cut tobacco, cigarette paper and filters continuously fed into the cigarette-
making machines. The technology has advanced dramatically over the years, but
quality is not forgotten; each cigarette is automatically quality controlled to ensure that
it meets every aspect of its specification. As packing machines put them into the
familiar brand packs, wrap the packs in protective film, and group them into cartons
and cases, further testing takes place at each stage to make sure the cigarettes are
properly protected. The completed cases, time-dated to ensure the freshest product
possible, are then ready for distribution.
3.4 Cigarette Components and Their Functions
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1. TOBACCO BLEND
Purpose
Delivering taste
Delivering psychological satisfaction
Composition
Fuel cured tobacco
Air cured tobacco
Burley tobacco
Stem
Top flavors
2. CIGARETTE PAPER
Purpose
To contain tobacco blend
To control air dilution
To control burning rate
Composition
Largely cellulose
Contain fiber such as calcium carbonate
3. FILTER
Purpose
Cigarette filter reduce tar/nicotine
Act as a mouth pipe keeping tobacco away from smokers mouth.
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Composition
Mostly cellulose acetate
4. PLUG WRAP
Porous and non porous
5 TIPPING PAPER
Ventilated and none ventilated.
3.5 Cigarette Parameters That Can Affect Quality
1) Length
2) Circumferences3) Moisture
4) Cigarette paper
5) Pressure drop
6) Tip leakage
7) End loss
8) Firmness
9) Blend chemistry
3.6 CLASSIFICATION OF CIGARETTES
Some brands are classified according to length and sizes. Brands of LTC classified
according to size and length are as follows;
KSFT King size filter
RSFT Regular Size Filter
LSFT Long size filter
The Packing is also given different names according to their classification and their
variety.
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3.7Comparison of Countries in terms of cigarette consumption8
Country
Cigarettes
Consumed
(millions)
2007 Population
(15 and older)
Per Capita
ConsumptionINDIA 108000 1095351964 99
AUSTRALIA 22900 20264062.4 1130
BANGLADESH 25380 147365319 172
BRAZIL 109000 188078201 580
CANADA 29695 33098914.4 897
CHINA 2162800 1313973692 1646
INDONESIA 239000 245452710 974
JAPAN 258500 127463597 2028
PAKISTAN 64830 165803521 391SRI LANKA 4150 20222215.9 205
UNITED STATES OFAMERICA 357000 298444195 1196
UNITED KINGDOM 47900 60609135.5 790
3.8 Product substitute
1. Beedi
A beedi is a thin, Indian cigarette made
of 0.2-0.3 grams of tobacco flake
wrapped in a tendu (or temburini;
Diospyros melonoxylon) leaf and secured
with colored thread at both ends. The
beedi accounted for over 30% of Indian
tobacco consumption and were more
popular than cigarettes, although they
deliver more nicotine, carbon monoxide,
and tarthan conventional cigarettes. 9
8Cigarette consumption: ERC. (2007).
World Cigarettes the 2007 Report. ERC Statistics Intl PIc.Population: Central Intelligence Agency. (2007).9 http://en.wikipedia.org/wiki/Bedi
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Beedi-rolling is a cottage industry in India and is typically done by women in their
homes. Due to the relatively low cost of beedies compared with regular cigarettes, they
have long been popular among the poor in India, Bangladesh, Pakistan, Sri Lanka,
Cambodia and are called the "poor man's cigarette".
Beedi production encompasses a number of distinct activities. Before the beedi-rolling
can commence, the tendu leaves must be prepared by cleaning, cutting and soaking,
then the beedies themselves are rolled, and the ends tucked in and secured by thread.
The finished beedies are bundled and checked for quality before being roasted in
furnaces and then packed for sale.
Beginning in the 1900s the Indian beedi industry saw rapid growth during the 1930s
probably driven by the expansion of tobacco cultivation during the same time.
Increased demand saw the creation of a number of new beedi manufacturing companies
as well as beedi factories employing upwards of one hundred beedi rollers. The beedi-
rolling workforce was predominately male, but with the promulgation of the Factories
Act, 1948, and Beedi and Cigar Act, 1961 & 1966 etc. factory-based beedi production
declined and the mode of work shifted to a putting-out system, with a home-based
women workforce, which are predominantly employed only in the beedi-rolling. In
contrast, males continue to be employed in all aspects of beedi production. Today the
production of beedies is "unorganized" and employers take "devious means" to
"disguise employer-employee relationships", probably in order to deny benefits that
workers, by law, are to be afford
2. Electronic cigarette
An electronic cigarette, otherwise known as a personal
vaporizer, is abattery-powered device that provides inhaled
doses of nicotine by way of a vaporized solution. It is an
alternative to smoked tobacco products, such as cigarettes,
cigars, orpipes. In addition to nicotine delivery, this vapor also provides a flavorand
physical sensation similar to that of inhaled tobacco smoke, while no tobacco, smoke,
orcombustion is actually involved in its operation.
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An electronic cigarette usually takes the form of some manner of elongated tube,
though many are designed to resemble the outward appearance of real smoking
products, like cigarettes, cigars, and pipes. A common design is also the "pen-style", so
named for its visual resemblance to a ballpoint pen. Most electronic cigarettes are
reusable devices with replaceable and refillable parts. A number of disposable
electronic cigarettes have also been developed.
The electronic cigarette was first developed in Beijing, China, by SBT Co. in 2003, a
company now controlled by the Ruyan Group Ltd. (formerly Golden Dragon Group
Ltd.)10
The health effects of using electronic cigarettes are currently unknown. Some electronic
cigarette companies claim that the harmful material produced by the combustion of
tobacco in traditional cigarettes is not present in the atomized liquid of electronic
cigarettes. Some have also marketed electronic cigarettes as a way to curtail an
addiction to nicotine, although international health organizations have stated they may
not be marketed as a cessation device.
3. Herbal cigarette
Herbal cigarettes (also called tobacco-free cigarettes or
nicotine-free cigarettes) are cigarettes that do not contain any
tobacco or nicotine. There are several popular brands of such
cigarettes, usually containing a mixture of different herbs and/or
other plant material. Like herbal smokeless tobacco, they are
often used as a substitute for standard tobacco products (primarily cigarettes), and
many times as a tobacco cessation aid. They are also used in acting scenes by non-
smokers.
Herbal cigarettes are most often made using standard-issue rolling papers and filters.
Instead of tobacco as a filling, however, a wide range of consumable products may be
10 http://www.reuters.com/article/idUSSP23039020070509
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used. Cornsilk as well as a number of flavorful herbs such as mint, cinnamon or
lemongrass have been utilized by a wide number of herbal cigarette producers.
Herbal cigarettes are sometimes perceived as safer than regular cigarettes. Tobacco-free
herbal cigarettes will not produce nicotine dependence; however, inhaled smoke of any
kind is dangerous. Carbon monoxide, carbon dioxide and tarenter the mouth and/or
lungs with the inhalation of all smoke, and are absorbed into the body. These
substances are all harmful and considered toxic to humans. Arkopharma ,
Benjamins ,Ecstasy (Melrose) ,Guocao ,Herbal Gold ,Herbala (Carica) ,Honey rose,
Honeysuckle ,Jambi ,Jieyanling ,Magic ,Nirdosh are the popular brands of herbal
cigarettes.11
4. Hookah or water pipe
A hookah or water pipe is a single or multi-
stemmed (often glass-based) instrument
forsmokingtobaccoin which the smoke
is cooled and filtered by passing throughwater. Originally from India, hookah has
gained popularity, especially in the
Middle East and is gaining popularity in
North America,Europe andAustralia.
The Hookah was invented in India in the court of the Mughal emperorAkbar (1542 -
1605 AD) Following the European introduction of tobacco to India, Hakim Abul
Fateh Gilani a descendant of Abdul Qadir Al-Gilani came from Baghdad to India
who was later a physician in the court of Mughal raised concerns after smoking
tobacco became popular among Indian noblemen, and subsequently envisaged a
system which allowed smoke to be passed through water in order to be 'purified'.
Gilani introduced the hookah after Asad Beg, then ambassador ofBijapur,
encouraged Akbar to take up smoking. Following popularity among noblemen,
11 http://www.hc-sc.gc.ca/hl-vs/tobac-tabac/res/news-nouvelles/herb-eng.php
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this new device for smoking soon became a status symbol for the Indian
aristocracy and gentry.
The jar at the bottom of the hookah is filled with water sufficient to submerge a few
centimeters of the body tube, which is sealed tightly to it. Deeper water will only
increase the inhalation force needed to use it. Tobacco is placed inside the bowl at the
top of the hookah and a burning charcoal is placed on top of the tobacco. Some cultures
cover the bowl with perforated tin foil or a metal screen to separate the coal and the
tobacco, which minimizes inhalation of coal ash with the smoke. This may also reduce
the temperature the tobacco is exposed to, in order to prevent burning the tobacco
directly.
When one inhales via the hose, air is pulled through the charcoal and into the bowl
holding the tobacco. The hot air, heated by the charcoal evaporates (not burns) the
tobacco, thus producing smoke, which is passed down through the body tube that
extends into the water in the jar. It bubbles up through the water, losing heat, and fills
the top part of the jar, to which the hose is attached. When a smoker inhales from the
hose, smoke passes into the lungs, and the change in pressure in the jar pulls more air
through the charcoal, continuing the process.
If the hookah has been lit and smoked but has not been inhaled for an extended period,
the smoke inside the water jar may be regarded as "stale" and undesirable. Stale smoke
may be exhausted through the purge valve, if present. This one-way valve is opened by
the positive pressure created from gently blowing into the hose. It will not function on a
multiple-hose hookah unless all other hoses are plugged. Sometimes one-way valves
are put in the hose sockets to avoid the need to manually plug hoses.
Recently many cities, states and counties have implemented indoorsmoking bans. In
some jurisdictions, hookah businesses can be exempted from the policies through
special permits. Some permits however, have requirements such as the business
earning a certain minimum percentage of their revenue from alcohol or tobacco.
New business for water pipe, hookah bar that rapidly growing in Indian metro and
mega cities. In recent culture of India spread these hookahs bar specially youngster
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of India prefer these bars to smoke and use this new avtaar of hookah. The
smoking of hookahs is available in many flavors like chocolate, vanilla etc.12
5. Pipe
Pipes are made of briar, slate, clay, or other substances. Tobacco is placed in the bowl,
and the smoke is inhaled through the stem. In Southeast Asia, clay pipes known as
sulpa, chillum, and hookli are widely used. In rural part of India it is one of the popular
medium to smoke tobacco.
6. CigarsCigars are made of air-cured, fermented tobacco, usually in factories, and are generally
expensive. Cigar smoking is predominantly an urban practice.
Cigars are made of air-cured and fermented tobaccos with a tobacco-leaf wrapper. The
long aging and fermentation process produces high concentrations of carcinogenic
compounds that are released on combustion. The concentrations of toxins and irritants
12WHO Study Group on Tobacco Product Regulation (TobReg) an advisory note "Waterpipe tobaccosmoking:health effects, research needs and recommended actions by regulators", 2005
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in cigars are higher than in cigarettes. Cigars come in many shapes and sizes, from
cigarette-sized cigarillos to double coronas.
7. Chuttas
A hand-rolled cigar smoked in reverse with the lit end inside the mouth. The name
chutta in Telugu (spoken in Andhra Pradesh) may have come from the Tamil (spoken
in Tamil Nadu) word shruttu, meaning to roll. Chuttas are coarsely prepared cheroots.
They are usually the products of cottage and small-scale industries, or are made at
home. Nearly 9% of the tobacco produced in India is used for making chuttas. It is
estimated that about 3000 million pieces of chutta are made annually in India. Chutta
smoking is widespread in the coastal areas of Andhra Pradesh, Tamil Nadu and
Orissa.13
8. Chillum
Chillum smoking is an exclusively male practice; it is limited to the northern states of
India, Predominantly in rural areas. The chillum is a straight, conical pipe made of clay,
10.14 cm long, held vertically. Chillum smoking requires a deep pulmonary effort.
Often, one chillum is shared by a group. They are made locally, are inexpensive and
easily available. Chillum probably predates the introduction of tobacco to India and
was used for smoking opium and other narcotics.
9. Kreteks
Kreteks are clove-flavored cigarettes widely smoked in Indonesia. They may contain a
wide range of exotic flavorings and eugenol, which has an anesthetic effect,
allowing for deeper and more harmful smoke inhalation. Most Prevalent in
Indonesia.14
13
k.srinath reddy & prakash c. gupta, tobacco control in India, Ministry of Health & Family Welfare,Government of India14 http://tobaccoatlas.org/tobaccoatlas/data.html
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3.9 Product life cycle (based on past 12 years).
It is claimed that every product has a life period, it is launched, and it grows, and at
some point, may die. A fair comment is that - at least in the short term - not all products
or services die. Jeans may die, but clothes probably will not. Legal services or medical
services may die, but depending on the social and political climate, probably will not.
Even though its validity is questionable, it can offer a useful 'model' for managers to
keep at the back of their mind. Indeed, if their products are in the introductory or
growth phases, or in that of decline, it perhaps should be at the front of their mind; for
the predominant features of these phases may be those revolving around such life and
death. Between these two extremes, it is salutary for them to have that vision of
mortality in front of them.
Thus, the life cycle may be useful as a description, but not as apredictor; and usually
should be firmly under the control of the marketer. The important point is that in many
markets the product or brand life cycle is significantly longer than the planning cycle of
the organizations involved. Thus, it offers little practical value for most marketers.
Even if the PLC exists for them, their plans will be based just upon that piece of the
curve where they currently reside (most probably in the 'mature' stage); and their view
of that part of it will almost certainly be 'linear' (and limited), and will not encompass
the whole range from growth to decline.
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year 1998 1999 2000 2001 2002 2003
sales in cr. 3565.9 4481.2 4853.14 5440.86 6008.88 6913.5
year 2004 2005 2006 2007 2008 2009
sales in cr. 7569.079 8846.74 10986.51 13479.75 15362.35 16994.27
(Source: Ace Equity)
Interpretation
The Sales of the cigarette industry is in growing stage, it is growing at rate of around
10.62%. So many companies like Godfrey Philip, GTC, Raghunath Ind., RTCL etc. are
investing in the industry. There is continuous growth in the cigarette industry. In
Growing Stage companies in the industry should follow the following strategy.
Distribution
In this stage, companies should expand their market to the other cities of INDIA. Their
distribution channels are the same as in the initial stages of the product.
Promotion
In the growth stage, the company should also use the different promotion strategies to
attract the new and the existing customers.
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3.10 Application area of the product-past, present and end
user industry:
Smoking became a popular leisure activity in Europe
during the early seventeenth century .By 1830, the
cigarette had crossed into France, where it received the
name cigarette; and in 1845, the French state tobacco
monopoly began manufacturing them In the English-
speaking world, the use of tobacco in cigarette form
became increasingly popular during and after the Crimean War. This was helped by the
development of tobaccos that are suitable for cigarette use, and by the development ofthe Egyptian cigarette export industry .The widespread smoking of cigarettes in the
Western world is largely in 20th century During World War I and World War II,
cigarettes were rationed to soldiers.15
Introduced initially in India as a product to be smoked, tobacco gradually began to be
used in several other forms. Paan (betel quid) chewing became a widely prevalent form
of smokeless tobacco use. Cigarettes thrived everywhere in the world despite social
(and some religious) disapproval. Historically, tobacco consumption has been linked
with social status and commensality.
When tobacco was introduced as a smoking substance, it was naturally considered a
medicinal herb the belief that cigarettes are a pain killer is widely prevalent in many
parts of rural India. Use of tobacco products as a dentifrice among adolescents in India
has recently been reported, highlighting the continuation of the misconception till date
It is said to facilitate smooth intestinal functioning and motion, prevent toothache by
killing germs, cure itching on the skin, control wind in the body, and is also said to be
useful in the treatment of scorpion bites. It is worth noting that even now, in some rural
areas of India, people use cigarettes for these purposes. In urban cultures, young
professionals (who have their own yuppie culture.) are often characterized by specific
rituals of bonding and sharing. These include visiting pubs; meeting particular groups
of friends, sharing a few drinks and smokes cigarettes, and generally unwinding. Such
15 http://www.wikipedia.org/tobacco
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rituals, for example, have become part of the group identity of young professionals
from the information technology industry which is burgeoning in India.
Cigarettes which is more popular among the local Hindus
and project a modern image. During the end of the 20th
century, the adverse health effects of cigarettes started to
become widely known. Consumption is basically a
demonstration of the ability to come up to the collective
mark, be it in case of fashion, jewelery, or display on social occasions. In this case,
therefore, the construction of identity through consumption is not to be different, but to
be same. Hence, both men and women consume cigarettes, not as a mark of distinction,
or indulgence, but as a part of the tradition of commensality.
3.11 Market structure (share of local brands, unorganized
market, substitute and counterfeits)
Of the total amount of tobacco produced in the country, around 48% is in the form of
chewing tobacco, 38% as bidis, and only 14% as cigarettes. Thus, bidis, snuff and
chewing tobacco (such as gutka, khaini and zarda) form the bulk (86%) of India's total
tobacco production. In the rest of the world, production of cigarettes is 90% of total
production of tobacco related products.16
The Indian cigarette industry can be broadly classified into three segments: The King
size segment, The Regular size segment and The Micro segment. Out of the 8.4 bn
sticks consumed per month the king size segments accounts for 5% of overall sales.
With monthly sales of 5.7 bn sticks, the regular size segment accounts for 68% of the
market. Out of this nearly 4.4 bn sticks are in the regular size filter segment which
accounts for more than 50% of total cigarettes sales in India. Faced with a negative
excise duty impact, the micro segment is stagnating at 1.4 bn cigarette sales per month,
which is nearly 16% of overall sales.
Catering to a vast population such as India's, there are only 4 main cigarette
manufacturers on the domestic scenario, viz., ITC, Godfrey Phillip (GPIL), VST and16 http://www.tobacco-facts.net/2009/11/tobaccoproduction
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GTC. Of these, ITC and VST belong to the same group. ITC is the unchallenged leader,
backed by its parent company BAT, UK; it has managed to stay ahead of its
competitors by sheer market penetration, volume and brands that cater to the varied
tastes of Indian population. GTC (Golden Tobacco Company), a part of the Dalmia
group, has consistently been posting losses. Although the company holds some known
brands in the lower segments, it has not managed to rope in any major brands from its
foreign partner - Rothmanns.
In the Unbranded segment, there are number of manufacturers. Typically the cigarettes
of these manufacturers are priced between Rs. 0.5 Rs. 2 per stick. most of them being
priced at Re. 1. Due to its low price its sales are more prevalent in the rural market.
Also, the retailers have higher margins in unbranded cigarettes than in brandedcigarettes, thus they prefer to stock and sell them more. One important characteristic of
unbranded cigarettes is the low Brand Loyalty and Brand recognition. When customers
buy an unbranded cigarette they are more conscious of the price than the brand, the
decision of the brand is more dependent on the retailer. Such cigarette manufacturers
are regional in nature. There sales coverage is over a certain region, and they usually
dominate their low price segment in that region. Golden Elephant, Clock 100, Lucky
10, Davidoff, Classy, Popa, No. 10, Kartoos are the few local brand of India.
Market penetration is determined to some extent by the advertisement budget. While
the urban market is tapped easily and has already reached its saturation level, a vast
rural market lies untapped. As mentioned above, cigarettes account for a small portion
of the tobacco consumed.
Substitutes
Beedis are tobacco wrapped in tendoo leaves. Unlike cigarettes, they are taxed at a very
low rate. Beedis consume nearly 55% of the total tobacco produced as against 15-20%
for cigarettes. Their sales volume in India is estimated to be over 10 times that of
cigarettes.
The market for beedis is growing at a faster rate than that for cigarettes. Excise duty
hikes on cigarettes have resulted in a shift in demand from non-filter cigarettes to
beedis as the demand for cigarettes in the lower segment is price sensitive.
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A shift in demand from beedis to micro cigarettes is expected due to the increasing
price competitiveness of cigarettes as well as the growing urbanization and health
consciousness regarding the high nicotine content in beedis, compared to cigarettes.17
Counterfeits
The share of Counterfeits in cigarette industry is very low around 2% of total sales of
industry. Because of restriction by government Counterfeits are not available in the
urban area and they are not available in urban market because of it the sales are vary
low.18
17 http://en.wikipedia.org/beedis18 http://www.tobacco-facts.net/2009/11/counter -new-approach
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SECTION 4
STUDY OF GLOBAL CIGARETTE
INDUSTRY
4. STUDY OF GLOBAL CIGARETTE INDUSTRY
4.1 Introduction
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Tobacco products are being chewed, snuffed, and (mostly) smoked all around the
world. People have been consuming tobacco products for centuries. Tobacco is also
grown in many places. Originally from the Americas, since 1492 it has spread far and
wide. Today, tobacco is grown in over 100 countries.
No other product has stimulated demand for tobacco as much as the cigarette. Until the
1870s, cigarettes were mainly rolled by hand. Today, they are made by machines.
Thanks to these machines, which can produce hundreds if not thousands of sticks per
minute, cigarettes have become an article of mass consumption.
Today, over 80 per cent of tobacco grown is used for cigarettes. The world market for
cigarettes is dominated by a low and steadily diminishing number of suppliers.19
4.2 Global Cigarette Consumption (in Billion Sticks)20
YearConsumptio
n Medium High
1880 10
1890 20
1900 50
1910 100
1920 300
1930 600
1940 1,000
1950 1,686
1960 2,150
1970 3,262
1980 4,453
1990 5,328
2000 5,711
2010(EX) 6,319
2020(EX) 6,717 6769 6819
19Joy de Beyer Tobacco Control Coordinator Health,tobacco in world Nutrition and Population World Bank20TA 3 summit -2007 Guindon & Boisclair
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4.3 Top 5 cigarette consuming countries 200721
Country Cigarettes (in millions)
China 2,162,800
United States 357,000
Russian Federation 331,440Japan 258,500
Indonesia 239,000
4.4 Different types of cigarettes use different types of tobacco in
world
There are basically four types of cigarettes: Virginia (flue-cured); American blend;
dark; and oriental cigarettes. The latter two, dark (traditionally popular in French-,
Spanish-, and Portuguese-speaking countries) and oriental (traditionally popular in the
Eastern Mediterranean, Eastern Europe and the (former) USSR) have lost ground to the
first two. Virginia (or English) cigarettes are made almost entirely from flue-cured
Virginia tobaccos. They are popular in the UK and in its former colonies. The
American blend is currently the most popular type of cigarettes. Its world market share
continues to grow. The main tobacco components of the American blend are flue-cured
21
ERC. (2007). World Cigarettes 1: The 2007 Report. ERC Statistics Intl PIc.
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Virginia (approx. 50 per cent), Burley and Oriental (around 12 per cent). In addition,
each cigarette brand uses a specific mix of tobaccos (and other ingredients such as
sugar and aromatic substances) to give it its characteristic taste and to set it apart from
its competitors.22
4.5 Major Importing and Exporting Nations of cigarette
Overall Trade Leader: U.S.
United States
United States: The United States is not only the second biggest exporter of cigarette
but it is also ranked second in tobacco production, tobacco imports, and it is the leaderin cigarette export. The United States, like Brazil, also focuses on the production and
export of burley and flue-cured tobacco. The main types of importing tobacco are
oriental, flue-cured, and burley. Flue-cured, and burley tobacco come mainly from
Brazil, and oriental tobacco comes mainly from Turkey and Malawi.
Importing as well as exporting has faced a decrease in the 2007 season. Exporting
decrease is due to overproduction of cigarette in the world market. The cigarette
import industry suffered more during this last season, decreasing 7 percent in quantity
and 12 percent in value. These numbers are showing the effects of three factors. First
is the large stock of tobacco in the country, second is the fall of cigarette consumption
in the world market, and third is the problematic issue of the United States cigarette
settlements.23
Export Leaders, non-U.S.
22Joy de Beyer Tobacco Control Coordinator Health,tobacco in world Nutrition and Population World Bank23U.S. Department of Agriculture, Foreign Agriculture Service
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1. Brazil
Brazil has been at the top of the chart as the biggest cigarette exporter in the past five
years. In Brazil, tobacco is grown mostly in the south; especially in one town called
Santa Cruz do Sul. Brazil is known for its production of flue-cured tobacco and burley
tobacco. Unlike its competitors, Turkey and Zimbabwe, overproduction of cigarette in
the past three years has not affected Brazil.24
2. Turkey
Turkey cigarette production is focused on oriental tobacco. Like China and many other
countries, the Turkish Government has been trying to decrease production, but such an
effort has not been very successful except in the last two years (2006-2007). The
increase of production from 2002 until 20077 was due to the high increase in the
demand of quality oriental tobacco based cigarette in the market.
As in China, the Turkish cigarette industry is regulated by the government, and because
of the high inflation in 2006 and 2007, the government decided to raise the price of
cigarette. Not only that, exporting also suffered due to the decrease of tobacco
consumption in the United States and also due to the economic problems in Russia, two
of the main countries to which Turkey is a supplier.25
3. Zimbabwe
24 http://www.soc.duke.edu/~s142tm12/Brazil\Importers.html25 http://www.soc.duke.edu/~s142tm12/TurkeyExportinfo.html
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Zimbabwe is cigarette exporting industry suffered from 1995 until 1998. Zimbabwe
focuses its production mainly on flue-cured and burley tobacco. Burley tobacco
production has been decreasing in Zimbabwe due to the lack of investments in the
small crops managed by farmers but still they are export leader. 26
Import Leaders, non-U.S.
1. Germany
Germany over the past five years has led the world in importing unmanufactured
tobacco and is also one of the top cigarette consumers and exporters. Germany, unlike
other countries in the European Union, has not developed a great anti-smoking
campaign and its consumption continues to increase. Another factor that has also
influenced the consumption of cigarettes in Germany is the migration of Eastern
Europeans, many of whom have a smoking habit. Germany is leading importing
tobacco is flue-cured, followed by burley, and oriental. The main suppliers to Germany
are the United States, Brazil, Zimbabwe, and Malawi. In the export of cigarettes,
Germany is main buyers are the European Union members, Eastern Europe, the
Commonwealth of Independent States, and the Middle East.27
2. Japan
Japan is not only one of the top importing tobacco countries in the world but is also the
one of the biggest importers of cigarettes in the world. Japan Is increase in imports ofraw tobacco and cigarettes are due to the big domestic market that has developed in the
past decade. In a poll in 2007, Japan was estimated to have 59 percent of adult men
and 15 percent of adult women smoking.
The main supplier for the Japanese market is the United States, who supplies Japan
with flue-cured and burley tobacco. Japan is second supplier is Brazil, followed by
Zimbabwe. The United States not only supplies unmanufactured tobacco but also
26 http://www.soc.duke.edu/~s142tm12/ZimbabaweExportinfo.html27 http://www.soc.duke.edu/~s142tm12/Germanyimportinfo.html
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supplies Japan with manufactured cigarettes, which in 2006 held 95 percent of the
Japanese market.28
Major Player: China
China
Although China does not appear in the World Trade Analyzer chart as being one of the
leaders in either importing or exporting of cigarettes, it is one of the major countries in
the cigarette industry. In the 1990s, China has produced more than twice the amount of
the next cigarette producer, the United States. This huge amount of cigarette
production is due to hundreds of millions of smokers in China.. The next largest
tobacco-producing country is India with only one fourth of Chinas production. China
produces mainly flue-cured tobacco, which in 2006 came up to 92 percent of the total
production.
In the past years China has been trying to better the quality of its tobacco. In order to
do so the government has been investing money into new stocks, improving the qualityand usage of fertilizers, and adopting more effective pest control measures. China is
also trying to move production away from the Yellow River area.
Although Chinese tobacco production grew from 2007 to 2008 by 12 percent. 29
4.6 World Cigarette Consumption by Region, 200730
28 http://www.soc.duke.edu/~s142tm12/Japanimportinfo.html29
http://ffas.usda.gov/cigarette
30 ERC, 2007
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Region Pieces
(million)
Percent of
total
Asia & Australia 3291429 57
Eastern Europe & Former SovietUnion
774573 14
The Americas 687583 12
Western Europe 513771 9
Middle East & Africa 481146 8
Total 5748502 100
Pieces smoked per day 2008= 15749 millionPieces smoked per minute 2008= 10.93 million
4.7 Top 10 Global Cigarette players by Revenue31
1. Philip Morris USA Inc.
31 http://biz.yzhoo.com/ic/profile/tobaco_1203.html
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2. R.J. Reynolds Tobacco Holdings, Inc.
3. Brown & Williamson Tobacco Corporation
4. Carolina Group (CG)
5. Altria Group, Inc. (MO)
6. British American Tobacco p.l.c. (BTI)7. Japan Tobacco Inc.
8. Gallaher Group Plc
9. Altadis, S.A.
10. Imperial Tobacco Group PLC (ITY)
1. Philip Morris USA Inc.
Many Americans who smoke end up flicking the butt of this company's premium
product when they're done. Philip Morris USA, a subsidiary of cigarette giant Altria
Group, is the #1 cigarette maker in the US and controls half the nation's cigarette
market. Its Marlboro brand, alone, accounts for about 40% of cigarette retail sales in
the country. Its 15 other brands include Virginia Slims and Parliament, as well as
discount brand Basic. Like others in the industry, Philip Morris faces rising state and
federal excise taxes that continue to boost the cost of lighting up. Rising prices have
some smokers turning away from their name brands in favor of discount smokes.
Financial Highlights
Fiscal Year End: December
Revenue (2008): 18753.00 M
Revenue Growth (1 yr): 1.40%
Fiscal Year End: December
2. R.J. Reynolds Tobacco Holdings, Inc.
Together, no one can stop us. No doubt that is what R.J. Reynolds Tobacco Holdings
and Brown & Williamson were thinking when the two merged to create Reynolds
American Inc. (RAI). R.J. Reynolds has been smoking for more than 120 years, but
increasing competition and the need to cut costs convinced the #2 US tobacco company
to merge with #3 Brown & Williamson. However, RAI still trails the Altria Group
(owner of Philip Morris), which steers about half of the US tobacco market. Still, RAI's
RJR Tobacco unit boasts five of the 10 best-selling brands of cigarettes in the US:
Camel, Kool, Pall Mall, Doral, and Winston. Brown & Williamson's former parent
British American Tobacco owns about 42% of RAI.
Financial Highlights
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Fiscal Year End: December
Revenue (2008): 8845.00 M
Revenue Growth (1 yr): (-2.00%)
Employees (2008): 6,600
Employee Growth (1 yr): (-9.60%)
3. Brown & Williamson Tobacco Corporation
If Brown & Williamson Tobacco can't convince you that smoking is Kool, it's not for a
lack of trying. Led by its Kool brand, the British American Tobacco unit makes more
than a dozen brands, from bargain smoke GPC to the classic Lucky Strike. Other
brands include Pall Mall and Capri. Brown & Williamson is #3 in the US (behind
Philip Morris USA and R.J. Reynolds), with about 10% of the cigarette market. The
company operates a R&D center in Macon, Georgia. In October 2003 Brown &
Williamson announced plans to merge with R.J. Reynolds' US tobacco business (RJRT)
to form a new public company.
Financial Highlights
Fiscal Year End: December
Revenue (2003): 3550.00 M
Revenue Growth (1 yr): (-0.60%)
Employees (2003): 5,000
Employee Growth (1 yr): 0.00%
4. Carolina Group (CG)
Newport news provides the best read on Lorillard, the #3 cigarette maker in the US
(behind Philip Morris USA and Reynolds American). Newport, Lorillard's flagship
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brand, is the best-selling menthol cigarette and second-largest cigarette brand in the US.
It generates about 90% of Lorillard's sales by volume. Other brands include the
premium and discount lines of Kent, Max, Old Gold, Satin, True, and Maverick. The
company sells its products primarily to wholesale distributors. Lorillard was named the
Carolina Group until 2008, when it split from former parent Loews. Founded in 1760
by French immigrant Pierre Lorillard, it is the nation's oldest continuously operating
tobacco firm.
Financial Highlights
Fiscal Year End: December
Revenue (2008): 4204.00 M
Revenue Growth (1 yr): 5.90%
Employees (2008): 2,800
Employee Growth (1 yr): 0.00%
5. Altria Group, Inc. (MO)
The house the Marlboro Man built, Altria Group, is the largest cigarette company in the
US. Altria operates its cigarette business through subsidiary Philip Morris USA, which
sells Marlboro -- the world's best-selling cigarette brand since 1972. Altria controls
about half of the US tobacco market. It manufactures cigarettes under the Parliament,
Virginia Slims, and Basic cigarette brands. While still firmly hooked on cigarettes,
Altria is transitioning from primarily a cigarette manufacturer to a purveyor of a variety
of tobacco products, including cigars and smokeless tobacco products. To that end, it
has made a number of strategic acquisitions, including smokeless tobacco maker UST
in 2009.
Financial Highlights
Fiscal Year End: December Revenue (2008): 19356.00 M
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Revenue Growth (1 yr): (-49.10%)
Employees (2008): 10,400
Employee Growth (1 yr): (-87.60%)
6. British American Tobacco p.l.c. (BTI)
When people pick up smoking, British American Tobacco (BAT) picks up steam. Spun
off in the reorganization of B.A.T. Industries, BAT is the world's #2 tobacco company
(behind Marlboro maker Altria Group). The firm makes about 715 billion cigarettes
each year and sells them in more than 150 countries. BAT's global cigarette brands
include Dunhill, Kent, Lucky Strike, and Pall Mall -- just four in a portfolio of some
300. The company also makes loose tobacco and regional cigarette brands. Its former
US unit, Brown & Williamson (Kool and GPC cigarettes), merged with R.J. Reynolds
Tobacco (RJRT) in 2004.
Financial Highlights
Fiscal Year End: December
Revenue (2008): 17544.20 M
Revenue Growth (1 yr): (-12.30%)
Employees (2008): 56,170Employee Growth (1 yr): 6.00%
7. Japan Tobacco Inc.
Japan Tobacco has plenty to puff about. The company controls more than 70% of the
cigarette market in a country where about half of the male population smokes. Japan
Tobacco is the world's #3 tobacco firm, trailing Altria and British American Tobacco.
The company's JT International unit makes and markets Camel, Salem, and Winston
brands outside the US. Japan Tobacco also operates in the food, pharmaceuticals,
agribusiness, engineering, and real estate industries. A state-owned monopoly until
1985, the Japanese Finance Ministry now owns about half the firm. Japan Tobacco
bought Britain's Gallaher Group for some $15 billion in April 2007. In 2009 it agreed
to acquire the UK's Tribac Leaf and two Brazilian firms.
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Financial Highlights
Fiscal Year End: March
Revenue (2009): 70229.30 M
Revenue Growth (1 yr): 8.80%
Employees (2009): 47,977Employee Growth (1 yr): 1.00%
8. Gallaher Group Plc
When the smoke finally settles over London, Gallaher Group helps kick it up again.
The #2 UK cigarette company -- with about half of the country's cigarette market --
Gallaher makes tobacco products and sells them in Asia, continental Europe, Ireland,
Russia and other former Soviet republics, and the UK. The manufacturer's premium
cigarettes include top UK brands Benson & Hedges and Silk Cut; mid-priced brands
such as Sovereign; and low-priced brands include Dorchester and Mayfair. Gallaher
also makes and markets Hamlet cigars, Amber Leaf hand-rolled tobacco, and Condor
pipe tobacco. Japan Tobacco acquired the company in April 2007 for about $15 billion.
9. Altadis, S.A.
The Pyrenees Mountains may divide France and Spain, but Altadis unites the countries
for a smoke. Born of the 1999 merger of Spain's Tabacalera and France's Societe
Nationale d'Exploitation Industrielle des Tabacs et Allumettes (Seita), Altadis is one of
the world's largest tobacco firms. Altadis brands include Ducados, Fortuna, Gauloises,
and Gitanes. Its cigar operation (the top worldwide) produces Antonio y Cleopatra,
Farias, Hav-A-Tampa, and Montecristo and controls a quarter of the world's cigarmarket (mostly from its Altadis USA unit). Altadis was acquired by Imperial Tobacco
in February 2008 and sold its about 50% stake in Aldeasa, a top operator of Spain's
duty-free shops, to Autogrill in April 2008.
Financial Highlights
Fiscal Year End: December
Revenue (2008): 1026.00 M
Employees (2008): 2,500
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10. Imperial Tobacco Group PLC (ITY)
The UK's #1 cigarette maker, Imperial Tobacco Group has traded up to an even bigger
throne. Its acquisition of Spain's Altadis in 2008 added the Montecristo and Ducados
brands. Its purchase of German tobacco firm Reemtsma (Davidoff and West cigarettes)
doubled its size and made it one of the world's top tobacco firms. Imperial's other
brands include Lambert & Butler, the UK's #1 cigarette, as well as Castella cigars, and
Amphora and St Bruno pipe tobacco. Its Drum brand is the #1 hand-rolling tobacco
worldwide, and Rizla is a top cigarette paper. Acquisitions in Australia and New
Zealand have assured Imperial's presence in emerging markets. It bought
Commonwealth Brands, the #4 US tobacco company, in 2007.
Financial Highlights
Fiscal Year End: September
Revenue (2008): 37297.30 M
Revenue Growth (1 yr): 47.60%
Employees (2008): 32,316
Employee Growth (1 yr): 127.20%
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SECTION 5
COMPREHENSIVE STUDY
OF
INDIAN CIGARETTE INDUSTRY
5. COMPREHENSIVE STUDY OF INDIAN
CIGARETTE INDUSTRY
5.1 Introduction
The cigarette industry is one of the oldest industries in India (almost 100 years old). Itis an important agro-based industry. It is highly labor intensive and provides livelihood
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to about thirty million people directly and indirectly. India's tobacco industry is one of
the largest in the world, with India having the second largest area planted to tobacco
leaf after China. Furthermore, India's production of leaf is only exceeded only by China
and the USA. The tobacco industry in India is quite complex when compared to the
nature of the industry in many other countries. The particular features that distinguish
the Indian industry are the existence of three district consumer markets for tobacco
products, each of which comprises approximately one third of the national market for
tobacco products. One a consumer market is formed by what is called the 'organized
sector' and is based on filter tipped cigarettes; a second consumer market exists in what
is called the 'unorganized sector' and this is for bidis; the third consumer market also
exists in the 'unorganized sector' and this includes chewing tobacco, smokeless tobacco
and a number of other forms of tobacco products.
The cigarette industry is highly labor intensive and important agro based industry
providing livelihood to about 5 million people directly and indirectly. Cigarette is an
item falling under the First Schedule to the Industries (Development & Regulation)
Act, 1951 and requires an industrial license.
5.2 major player of Indian cigarette industry
ITC Ltd.
Godfrey Phillips India Ltd.
Golden Tobacco Ltd
Sinnar Bidi Udyog Ltd
Raghunath International Ltd
Virat Crane Industries Ltd.
VST Industries Ltd. 5
RTCL Ltd.
5.3 Brands of Four Cigarette Majors
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5.4 Sales and market share of cigarette companies32
32 Ace equity
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Particulars Mar-09Market
share
ITC 15,388.11 90.5488%
God frey philip 1,132.10 6.6617%
VST 381.08 2.2424%
GTC 84.49 0.4972%
RTCL 1.2 0.0071%
Virat 0.48 0.0028%
Raghunath 6.43 0.0378%
Sinnar bidi 0.39 0.0023%
Total 16,994.28 100.0000%
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Sale15,388.1
1,132.1381.0 84.4 1 .2 0 .4 8 6 .4 3 0 .3 9
0.00
2,000.00
4,000.006,000.00
8,000.00
10,000.0012,000.00
14,000.00
16,000.00
18,000.00
ITC
Godfre
yphilip VS
TGT
C
RTC
LVi
rat
Raghu
nath
Sinnar
bidi
Compan
Salea
inc
rore
s
In Indian cigarette industry the major player ITC has the highest sales in the year mar
2009 is Rs.15388.11 corers. After that second highest sales for rs.1132.10 corers is for
god frey Phillip which is far below the ITC sale. Thats why ITC has about 90.54%
market share in cigarette industry.
market share
90.5488%
6.6617%
2.2424%0.0023%0.0378%
0.0028%
0.0071%
0.4972%ITC
God frey philip
VST
GTC
RTCL
Virat
Raghunath
Sinnar bidi
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5.5 Manufacturing Cost of cigarettes33
Process Cost % Cost %
Procurement of tobacco 39.67
Purchase 36.99
Carrying 1.46
Storage 1.22
Processing 4.94
Stemming 0.03
Plant operation 0.69
Reconstituting 3.52
Blending 0.16
Cutting 0.4
Drying 0.14
Cigarette Making 54.39
Plug making 10.64
Cigarette making 18
Packaging 25.75
Shipping 1 1
100 100
The graph shows the components relative picture of the costs involved in
manufacturing. The major portion is bored by purchase of tobacco; process in the
manufacturer produces cigarettes at its factory and then delivers them to distributors.
33Dr.s.r.singvi Pricing Strategies for consumer products
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5.6 Price range of major smoked cigarette34
34 Dr.s.r.singvi Pricing Strategies for consumer products
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5.7 export of cigarette by India35
5.8 cigarette Tax structure (RS.PER 1.000 STICKS)
In Tax Structure of cigarette (per 1000 sticks) Tax calculation comes to Rs.19 for State
Taxes , VAT at the rate of 12.5% Rs.105.4, Trade Margins for Rs.116.1, Excise Duty
for Rs. 843.6 has the highest portion in the tax structure.
35 Tobacco board of India
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SECTION - 6
SUPPORT ACTIVITIES
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6. SUPPORT ACTIVITIES
6.1Role of Supply Chain in Indian cigarette industry
The role of supply chain in the organized Cigarette industry in India should be a shelf-
centric partnership between the retailer and the manufacture for this will create supply
chains that are loss free. This will also give rise to top and bottom line growth.
It is the supply chain that ensures to the customer in all the various offerings that a
company decides for its customers, be it cost, service, or the quickness in responding to
ever changing tastes of the customer.
The infrastructure in India in terms of road, rail, and air links are not sufficient. And so
warehousing plays a major role as an aspect of supply chain operations. To overcome
these problems, the Indian Cigarette industry is trying to reduce Transportation costs
and is investing in logistics through partnership or directly.
6.2 Distribution systemFrom the factory, when the cigarette manufacturing process finished and then after
stocking period, then there is a stage when it is to be shipped and delivered to the
customers. In this whole system following parties are involved:
Area sales managers
District sales managers
Head offices
Factory managers
Godown incharges
Transporters
Distributors
Whole sellers
Retailers
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6.3 cigarette supply chain diagram
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6.4 Operation Support Systems
ERP System: Various ERP vendors have developed cigarette manufacturing
-specific systems which help in integrating all the functions from warehousing
to distribution, front and back office store systems and merchandising. An
integrated supply chain helps the retailer in maintaining his stocks, getting his
supplies on time, preventing stock-outs and thus reducing his costs, while
servicing the customer better.
CRM Systems: The rise of loyalty programs, mail order and the Internet has
provided retailers with real access to consumer data. Data warehousing &
mining technologies offers retailers the tools they need to make sense of their
consumer data and apply it to business. This, along with the various available
CRM (Customer Relationship Management) Systems, allows the cigarette
manufacturer to study the purchase behavior of consumers in detail and
grow the value of individual consumers to their businesses.
Advanced Planning and Scheduling Systems: APS systems can provide
improved control across the supply chain all the way from raw material
suppliers to the retail shelf. These APS packages complement existing (but
often limited) ERP packages. They enable consolidation of activities such as
long term budgeting, monthly forecasting, weekly factory scheduling and daily
distribution scheduling into one overall planning process using a single set of
data.
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SECTION - 7
KEY SUCCESS FACTORS
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7. KEY SUCCESS FACTORS
7.1 key success factors for cigarette industry
1. Market position
A strong market position supported by product strong brand equities is an important
factor for cigarette player to succeed. Once firm does attain market leadership in the
industry, it takes remarkable efforts and times for a new player to surpass it. The
company should also have diversified brands and\or types of products in an effort to
stimulate consumers interest in buying and ensure revenue stability and gain higher
market share.
2. Raw material procurement
Ability to procure large amount of high quality tobacco and clove is an important factor
to assure continuity of production. The company should also be able to anticipate the
volatility of raw materials costs and manage inventory at the most economical level to
minimize working capital needs.
3. Diversification
The company need diversified product types, brands and target markets to ensure
revenue stability
4. Marketing and distribution
Has a strong ability to build and maintain strong brand equity of its products through
creative and effective advert