Description
This is a presentation explaining the cigarettes and tobacco industry.
Cigarette Industry Is it Growing or Declining?
Table of contents
• Market Definition • Market Scenario – Asia Pacific • India - Industry Structure
• Competitive Landscape – India
• Market Scenario – India
• Supply Front – India • Demand front
• • • •
Policy framework – India Other Competitive forces Export Challenges Export Opportunities
2
Market Definitions
• • • • Legal sales of cigarettes considered Loose sales of tobacco excluded Volume = numbers of cigarettes sold Value = Retail Selling Price * × Volume
* inclusive of taxes
3
Market Scenario – Asia Pacific
4
Market Scenario – Asia Pacific
• The only market growing by volume & value • Growth drivers
• Rising incomes • Emergence of the young female smoker in Asia
• Where the volume is not growing…
• Value continues to expand due to rising tobacco prices, Government is the primary beneficiary
• Strategies
• Introduction of both economy and premium-priced cigarettes to maintain customers and build revenues. • Health awareness + growing incomes led to increased demand for lower tar cigarettes
5
India - Industry Structure
6
Competitive Landscape - India
• ITC Ltd
• Wills and Gold Flake, • 69.7% market share
• Godfrey Philips India Ltd
• Red and White, Four Square • 11.4% share (West and North)
• VST Industries Ltd
• Collaboration with BAT, UK • Charminar and Gold; 8.9 % share (South and East)
• GTC Industries Ltd.
• Panama, Style, Esquire and Flair • 8.4 % market share
7
Market Scenario - India
8
Supply Front - India
• World’s 2nd largest producer of tobacco • Diverse agro climatic conditions facilitates production of wide range of tobaccos • Contrary to international trend, non-cigarette tobaccos dominates production
48% chewing tobacco + 38% Bidis + 14% cigarettes
• Industry contributes 5 percent of the budget revenue and supports about 100 million people
9
Demand front
• Largely inelastic & Loyal demand • Economic growth – Rising Income levels • Effort to look cool and beat stress • Working women women smokers
10
Policy framework - India
• Growing tobacco is heavily subsidized • Cigarettes - 14% of the total tobacco consumption, contribute over 90% of the total excise revenue from tobacco. • Bidis are encouraged by the government through excise duty and tax breaks for small-scale industry • Taxation framework ineffective for Fragmented Indian tobacco industry - Dual smokers
11
Other Competitive forces…
• Barriers to entry
• Punitive taxation policies & Complete ban on advertising and promotions • Huge investments setting up distribution network.
• Substitution
• Bidis and Cigars
• Competition
• Mainly between branded cigarettes, bidis and contraband
• Bargaining power of customers – Limited extent
• Consumption is more or less a habit
• Bargaining power of suppliers – Less
• Backward Integration and have their own supply chain
12
Export Challenges
• Domestic tobacco produce is suitable for the chewing tobacco, bidis and other cheap tobacco products, which have no demand outside the country • Heavy competition from exporters of China and Vietnam
• 39 $ per 10,000 cigarettes against 45 $ by India
• Decreased exports to Middle East due to proliferation of cigarette-manufacturing units in the free trade zone of UAE • Competition from Bangladesh in export of Bidis, coupled with 15% Increase in prices reduced export volumes • China - Strict import/export regulations as trade barriers
13
Export Opportunities
• Increasing cost of production in Brazil and the significant amount of export cess by the Govt of Zimbabwe • Low conversion costs of tobacco into cigarettes of 11 $ per 10000 pieces in India against 48 $ in UK • Low to medium nicotine’s to suit the current requirement of world markets • Anticipated decline in production in China, USA, Zimbabwe, EU in the next five years due to declining consumption in USA & EU
14
“Short, snappy, easily attempted, easily completed or just as easily discarded before completion – the cigarette is the symbol of the machine age.”
New York Times, 1925
Is it still the same in this Information Age ?
References
• ISI Analytics – ISI Emerging Markets • Euromonitor International Reports • Datamonitor Reports
Sale of Cigarettes will suddenly fall to ZERO if it is mentioned “Cigarettes contain FAT”
16
Any questions ?
17
STM
Thank You
doc_706357862.ppt
This is a presentation explaining the cigarettes and tobacco industry.
Cigarette Industry Is it Growing or Declining?
Table of contents
• Market Definition • Market Scenario – Asia Pacific • India - Industry Structure
• Competitive Landscape – India
• Market Scenario – India
• Supply Front – India • Demand front
• • • •
Policy framework – India Other Competitive forces Export Challenges Export Opportunities
2
Market Definitions
• • • • Legal sales of cigarettes considered Loose sales of tobacco excluded Volume = numbers of cigarettes sold Value = Retail Selling Price * × Volume
* inclusive of taxes
3
Market Scenario – Asia Pacific
4
Market Scenario – Asia Pacific
• The only market growing by volume & value • Growth drivers
• Rising incomes • Emergence of the young female smoker in Asia
• Where the volume is not growing…
• Value continues to expand due to rising tobacco prices, Government is the primary beneficiary
• Strategies
• Introduction of both economy and premium-priced cigarettes to maintain customers and build revenues. • Health awareness + growing incomes led to increased demand for lower tar cigarettes
5
India - Industry Structure
6
Competitive Landscape - India
• ITC Ltd
• Wills and Gold Flake, • 69.7% market share
• Godfrey Philips India Ltd
• Red and White, Four Square • 11.4% share (West and North)
• VST Industries Ltd
• Collaboration with BAT, UK • Charminar and Gold; 8.9 % share (South and East)
• GTC Industries Ltd.
• Panama, Style, Esquire and Flair • 8.4 % market share
7
Market Scenario - India
8
Supply Front - India
• World’s 2nd largest producer of tobacco • Diverse agro climatic conditions facilitates production of wide range of tobaccos • Contrary to international trend, non-cigarette tobaccos dominates production
48% chewing tobacco + 38% Bidis + 14% cigarettes
• Industry contributes 5 percent of the budget revenue and supports about 100 million people
9
Demand front
• Largely inelastic & Loyal demand • Economic growth – Rising Income levels • Effort to look cool and beat stress • Working women women smokers
10
Policy framework - India
• Growing tobacco is heavily subsidized • Cigarettes - 14% of the total tobacco consumption, contribute over 90% of the total excise revenue from tobacco. • Bidis are encouraged by the government through excise duty and tax breaks for small-scale industry • Taxation framework ineffective for Fragmented Indian tobacco industry - Dual smokers
11
Other Competitive forces…
• Barriers to entry
• Punitive taxation policies & Complete ban on advertising and promotions • Huge investments setting up distribution network.
• Substitution
• Bidis and Cigars
• Competition
• Mainly between branded cigarettes, bidis and contraband
• Bargaining power of customers – Limited extent
• Consumption is more or less a habit
• Bargaining power of suppliers – Less
• Backward Integration and have their own supply chain
12
Export Challenges
• Domestic tobacco produce is suitable for the chewing tobacco, bidis and other cheap tobacco products, which have no demand outside the country • Heavy competition from exporters of China and Vietnam
• 39 $ per 10,000 cigarettes against 45 $ by India
• Decreased exports to Middle East due to proliferation of cigarette-manufacturing units in the free trade zone of UAE • Competition from Bangladesh in export of Bidis, coupled with 15% Increase in prices reduced export volumes • China - Strict import/export regulations as trade barriers
13
Export Opportunities
• Increasing cost of production in Brazil and the significant amount of export cess by the Govt of Zimbabwe • Low conversion costs of tobacco into cigarettes of 11 $ per 10000 pieces in India against 48 $ in UK • Low to medium nicotine’s to suit the current requirement of world markets • Anticipated decline in production in China, USA, Zimbabwe, EU in the next five years due to declining consumption in USA & EU
14
“Short, snappy, easily attempted, easily completed or just as easily discarded before completion – the cigarette is the symbol of the machine age.”
New York Times, 1925
Is it still the same in this Information Age ?
References
• ISI Analytics – ISI Emerging Markets • Euromonitor International Reports • Datamonitor Reports
Sale of Cigarettes will suddenly fall to ZERO if it is mentioned “Cigarettes contain FAT”
16
Any questions ?
17
STM
Thank You
doc_706357862.ppt