Winter Project Report

MARKET SURVEY AND ANALYSIS FOR THE TWO

NEWLY LAUNCHED CIGARETTE BRANDS BY ITC

NAMELY

FLAKE EXCEL AND NAVY CUT(RSFT)

Submitted By:

Saurabh Saini

SJMSOM,IIT Bombay

Table of Contents

1. About Cigarette industry in India and ITC

2. (a) Hierarchy

(b) Methodology

3. (a) Company’s cigarette Portfolio

(b) Margin table of all cigarette brand of ITC

(c) Classification of brands under Luxury ,Middle level and economic segment

(d) Performance analysis of all ITC cigarettes

5. Target segment for Flake Excel and Navy Cut (rsft)

6. Performance analysis of cigarettes in RSFT segment

7. Survey:

(a) Questionnaire for Retailers

(b) Questionnaire for consumers

(c) Results and observations

(d) Characteristics of the target segment

8. SWOT analysis

9. Causes of low sales

10. Recommendations

Project

Market research for the two newly launched cigarette brands Flake excel and NC rsft.

Introduction

Cigarette is a product which is harmful for health, in spite of this feeble; its sales are

increasing globally. The product has been ban from advertisement and promotional

activities. It is a challenge for the companies to sale this product and build its brand.

The Cigarette Industry is one of the oldest industries in India. India is the second

largest producer of tobacco in the world after China. It produced 572 million

kilograms of tobacco in 2002-2003. Approximately 5.5 trillion cigarettes are

produced globally each year by the tobacco industry, smoked by over 1.1 billion

people, which is more than 1/6 of the world's total population.

ITC is the market leader in cigarettes in India. It's highly popular portfolio of brands

includes Insignia, India Kings, Classic, Gold Flake, Navy Cut capstan etc.

Gold Flake is the top brand of cigarettes in India. It was launched by ITC in the

seventies. It is a well-positioned brand in India and is the market leader in its

segment. Major amount of the revenue of ITC are earned through the sales of

cigarettes. The company today is facing competition from International players.

Today the cigarette industry of India is booming in the market. The sales of

cigarettes are increasing day-by-day. In future the company may face many challenges

from competitors and government, but it is very difficult to change the aspirations of

the consumers. Due to this the company is benefited. It has been predicted by the

company the sale of Gold Flake will grow at the rate of 8% annually.

Hierarchy

Asst. Manager

Area Executive Area Executive (Vivek Jain) Area Executive

WD1 WD2 WD3

(Rural) (City) (Town)

Supervisor1(Neeraj) Supervisor 2 (Rashid) Supervisor3(Sanjay)

Vinod Yashpal Rohit

Gulshan Govind Firoz

Rajesh Virender Ramchand

Romy Naushad Sharwan

Dayashankar

Methodology

The project was carried under the guidance of Area executive Mr. Vivek Jain and

Supervisor named Rashid who introduced with all the activities carried out at the

distributor centre.

The Primary Data Collection Method Survey was carries out in which consumers

and retailers were asked to give their responses in the questionnaire.

To find out the performance the two newly launched brand , survey was carried out.

Separate questionnaire were prepared for the retailers and the consumers.

Based on their response the reasons for low sale were found out and

recommendations were made.

Since it was impossible to interview each and every person , a sample size of 33 was

chosen i.e. 33 consumers were interviewed. The consumers interviewed were

basically middle class or low class people.

Overview of Brand Portfolio:

Brand Name DS Rate per

M

Retail Rate

per M

M.R.P. No. of Sticks

Insignia 6042 6090 Rs. 140 20 stick pack

India Kings 4741 4779 Rs. 110 ``

B & H(Lts/spl) 4661.51 4699 Rs. 105 ``

Gold King 3968 4000 Rs. 44 10 stick pack

NC (Long) 3100 3125 Rs. 34 ``

Gold Flake(Pr) 2658 2680 Rs. 29 ``

Nc Rsft 2132 2150 Rs. 24 ``

Flake Excel 1686 1700 Rs. 20 ``

Capstan 1746 1760 Rs. 19 ``

Margin Table

Brand Name DS Rate

per M

Retail

Rate

per M

M.R.P. No.

of

Stick

s

Price for

Consumer

Margin of

Salesman(%

)

Profit % of

Retailer

per M

Profit Per

pack to

Retailer

Insignia 6042 6090 Rs. 140 20 Rs. 7,000 0.794439 14.94253 Rs. 18.20

India Kings 4741 4779 Rs. 110 20 Rs. 5,500 0.801519 15.08684 Rs. 14.42

B&H(Lts/spl) 4661.5 4699 Rs. 105 20 Rs. 5,250 0.804246 11.7259 Rs. 11.02

GoldFlake(Ksft 3968 4000 Rs. 44 10 Rs. 4,400 0.806452 10 Rs. 4.00

NC(LSFT) 3100 3125 Rs. 34 10 Rs. 3,400 0.806452 8.8 Rs. 2.75

Gold Flake(Pr) 2658 2680 Rs. 29 10 Rs. 2,900 0.82769 8.208955 Rs. 2.20

Nc Rsft 2132 2150 Rs. 24 10 Rs. 2,400 0.844278 11.62791 Rs. 2.50

Flake Excel 1686 1700 Rs. 20 10 Rs. 2,000 0.830368 17.64706 Rs. 3.00

Capstan 1746 1760 Rs. 19 10 Rs. 1,900 0.801833 7.954545 Rs. 1.40

Margin of Salesman : 0.80 %

Margin of Distributors : 1.45 %

Classification of Brands as Luxury, middle and Economic

segment brands

Brand Name Price per stick

Insignia Rs. 7.00

India Kings Rs. 6.00

B & H (Lts/ Spl) Rs. 5.50

Classic(Reg. , U Mild ,Menthol) Rs. 5.00

Goldflake (KSFT) Rs. 5.00

Navy Cut (LSFT) Rs. 3.50

Gold Flake Premium Rs. 3.00

Navy Cut(RSFT) Rs. 2.50

Flake excel Rs. 2.00

Capstan Rs. 2.00

Luxury

Segmen

t

Middle

Level

Segmen

t

Economi

c

Segment

Target segment for Flake excel and NC Rsft:

The target consumers for Flake excel and NC Rsft is the people lying in the lower

income group roughly around 1 to 3 lc per annum. Saharanpur city has got a good

number of smokers and majority of population comes under lower income level.

1.The city is surrounded by a large number of villages and rural areas.

2. There is an ample number of workers engaged in the small scale business.

3. The city enjoys a large crowd coming from villages( be it, for shopping for their

small business at their homes or be it selling their crops) and getting back by night.

4.Even the small shopkeepers and businessmen likes to stick to the price range of 1-

3 Rs. Per stick.

5. Majority of students in degree colleges are from the rural areas in and around the

city. They prefer to stick to the low cost cigarette segment.

6. People are less heath conscious and hence don’t prefer the cigarettes having large

filters and more refined tobacco cigarettes i.e. cigarettes from KSFT segment.

Performance of ITC products:

Saharanpur city is surrounded by a large number of villages. And the standard of

living of the people in city is low .

KSFT: The sales figure of luxury brands like insignia and India kings is very low.

LSFT :Medium Level Classic, gold flake (LSFT) and Navy Cut are performing

comparatively better.

RSFT :In the lower cost segment Gold Flake (RSFT) and Capstan are performing

excellent but on the flipside the performance of Flake Excel and NC rsft is quiet

poor.

Sales (number of cigarettes sold per month):

23

6

100

500

500

3300

3636

3300

Sales(x M)

Insignia

India Kings

B & H (Lts/ Spl)

Classic

Goldflake King Size

Navy Cut Large size

Gold Flake Premium

Navy Cut(RSFT)

Flake excel

Capstan

Competitors in RSFT segment:

Four Square

Red and white

Moments

Canevders

Some local players like number 10,dolphin,paris,golden elephant etc.

providing the retailers a very heavy margins of around Rs. 7 on a cigg. Packet

of rs. 10.

Performance of the five brands:

Four square

Red and White

Moments

NC Rsft

Cavenders

Flake Excel

14

14

211

15

15

Sales(packs sold per say basis)

R n W

Four Square

Moments

Flake Excel

NC rsft

Capstan

Goldflake Premium

Questionnaire for consumers

Survey is conducted at various places in the city from crowded ones like Railway

station , bus stands to various colonies.

Observe Age Group: Profession:

1.Do you know under which company the brand you smoke comes?

Yes: 17

No: 16

2. Which is your favorite brand?

3. Since how long you have been smoking this brand?

4. How frequently it gets changed?

Ans. 0 -3 months

3-7 months

1-2 years

2-5 years

5. Health conscious : Do you give importance to filter while selecting the cigarette?

Consider 10

Never given a thought 23

0

1

2

3

4

5

6

6. Brand selection means

by trial 10

By Advertisement 5

By word of mouth. 18

7. Brand loyalty Vs. Visibility

Give a chance to new brand 8

Don’t bother 25

8. Effect of price hike on buying pattern..

Change: 23

Don’t change 10

9. What would you prefer A full packet of open.

Full packet of favorite brand : 14

Open : 19

10. What is basis for selecting a particular brand?

Ans. Taste and Price

Questionnaire for Pan Vendors and Tea Stalls

o Observe visibility

How much cigarette packs of every brand do you sell each day?

Their opinion regarding low sales of Flake excel and NC rsft

Most sold brands and their price range..

Are customers aware of the launch of these two brands.

Any availability or supply issues?

Effect of schemes (retailers know it better ) on brand loyal customers

Observe which brands are getting sold in boxes and which are getting sold

open(especially flake excel and NC)

Are people liking NC as they loved the NC Lsft.

0

10

20

30

40

50

1-4 cigg per day 1 packet

Flake Excel

0

10

20

30

40

50

1-4 cigg per day 1 packet

NC rsft

Type of people visiting students(which brand),professionals(Brand) Middle

class(Brand)

Characteristics of consumers pertaining to this segment

Usually less health consciousness

Probably stick to low priced sticks.

Not ready to experiment until and unless pushed retailers or tempted

with an scheme

Taste and price are the two topmost criterions.

Passive to online publicity.

Highly effected by promotion through TV, Cinemas, flexes and posters(

banned by government)

Not eager to try new brands i.e. less impulsive.

Don’t believe in show off.

Prefer to buy open rather than whole packets.

SWOT analysis

Strength

Very strong and wide spread

distribution network.

Well established brand name.

Computerized operations at

distributor’s point.

Weakness:

Brand is spoiling the youth of our

country.

Government tax policies and excise

duty is very harsh as far as tobacco is

concerned.

Ban on advertisements and

promotional activities.

Opportunity:

Smokers are addictive hence the

demand is stable most of the time.

Threats:

Improving infrastructure and

distribution system of the competitors.

Increasing health awareness among the

people.

Hoarding of distributors, wholesellers

and retailers at the time of budget

declaration.

Harsh Government rules like creation

of no smoking zones.

Causes of failure Cannibalization: Capstan is already well established player at the price of Rs. 2 per

stick. Launching a product at the same price level was unable to drag more crowd to

its basket. Excel and NC are themselves facing a fierce competition from the other

products of ITC

Clash with more attractive scheme of R and W (SLIDE SCHEME): Taste

plays a very important role in selecting a cigarette, trying cigarette with totally new

taste is always distasteful .The schemes offered by Flake Excel almost failed as Red

and White and Four square are well accepted brands speaking in terms of taste and

the schemes offered by them is more liked the retailers and it was pretty easy for

them to push already set brands like R & W and Four Square.

(b)When compared to the schemes offered by Flake excel and Navy Cut(rsft), R &

W and four square offered more tempting schemes .

Flake excel offered (EMPTY PACKET REDEMPTION SCHEME) from 26th Aug 09

to 7th Dec 09.

Navy Cut offered OFF TAKE scheme 8 + 1 Gold Flake (rsft)

Whereas R & W is offering SLIDE SCHEME

(c)Regarding the visibility efforts , ITC lost at some prominent places like railway

station where companies like GPI have acquired the front display at all the pan

vendors and tea stalls.

Competition offered by local brands that provide a good amount of margin to

the retailers. In the crowded areas like railways station and Bus stands ,where the

target crowd in plenty, the stalls prefer to push the local brands as they getting a

handsome amount of profit per pack for instance, they sell a pack for Rs. 10 which

cost them around Rs. 3.Hence they earn Rs. 7 per pack in comparison to Rs. 1 or 2

they earn on a packet of RSFT cigarettes.

Acceptance level of change: Majority of people in this segment are 35 or above.

90% of people refused to try new brands until pushed by retailers or until they find

any profit buying these cigarettes.

Recommendations: 1. The schemes offered should benefit consumers as well as retailers. Till now the

schemes were limited to just retailers only, where ITC faces a tough competition by

more profitable schemes of R & W and four square. Since cigarettes take some time

to become one’s favorite as taste is a very important factor. It takes some time for

the consumer to like the taste of a cigarette.

2. ITC should use the established brand like gold flake (rsft) in the schemes to push

flake excel and NC.