Introduction

"I like to think of fire held in a man's hand.  Fire, a dangerous force, tamed at

his fingertips.  I often wonder about the hours when a man sits alone, watching the

smoke of a cigarette, and thinking.  I wonder what great things have come from

such hours.  When a man thinks, there is a spot of fire alive in his mind--and it is

proper that he should have the burning point of a cigarette as his one expression."

A cigarette is a product consumed via smoking and manufactured out of cured

and finely cut tobacco leaves, which are 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 smolder for

the purpose of inhalation of its smoke from the other which is usually filtered at the

end and is usually inserted in the mouth. They are sometimes smoked with a

cigarette holder. The term cigarette as commonly used, refers to a tobacco cigarette

but can apply to similar devices containing other herbs, such as cannabis. They are

colloquially known as 'cigs', 'smokes', 'ciggies', 'straights', 'cancer sticks', 'death

sticks', 'coffin nails' and 'fags'. Cigarettes are proven to be highly addictive, as well

as a cause of multiple types of cancer, heart disease, respiratory disease, circulatory

disease and birth defects. A cigarette is distinguished from a cigar by its smaller

size, use of processed leaf, and white paper wrapping. Cigars are typically

composed entirely of whole leaf tobacco. Commercially manufactured cigarettes

are relatively simple objects consisting mainly of a tobacco blend, paper, PVA glue

to bond the outer layer of paper together, and often also a cellulose acetate based

filter.

In the beginning of the 16th century, beggars in Seville, Spain developed the

first paper-rolled cigarettes when they collected discarded cigar butts, shredded

them, and rolled them in scraps of paper. Although the Spanish elite first dismissed

them as recycled garbage, these cigarillos, or little cigars, eventually gained

popularity during the 18th century. Cigarette smoking spread to Italy and Portugal,

and eventually to the rest of Europe and into Asia. Cigarettes were largely

unknown in the English-speaking world before the Crimean War, when British

soldiers began emulating their Ottoman Turkish comrades, who resorted to rolling

their tobacco with newsprint. The cigarette was named sometime in the 18th

century.

During World War I and World War II, cigarettes were rationed to soldiers.

During the second half of the 20th century, the adverse health effects of cigarettes

started to become widely known and text-only health warnings became

commonplace on cigarette packets. The United States has not yet implemented

graphics-based cigarette warning labels, which is considered a more effective

method to communicate to the public the dangers of cigarette smoking. Canada and

Australia, however, have both textual warnings and graphic visual images

displaying, among other things, the damaging effects tobacco use has on the

human body. The cigarette has evolved much since its conception; for example, the

thin bands that travel transverse to the "axis of smoking" (thus forming circles

along the length of the cigarette) are alternate sections of thin and thick paper to

facilitate effective burning when being drawn, and retard burning when at rest.

Synthetic particulate filters remove some of the tar before it reaches the smoker.

Companies like Marlboro a brand of Cigarette made by Altria which started

manufacturing cigarettes in 1924 gave advertisements that Marlboro is a ‘women’s

cigarette’ based on the slogan “Mild as May”. It became the most popular brand of

United States in 2001. Marlboro became so popular that its sales never came down

in the States and earned huge revenues. It started giving sponsorship to motor

sports and racing cars. It was the main sponsor for Ferrari Formula One car and

Yamaha in Super Bike Racing. It became famous globally till 2003 through Ferrari

when it won the world championship of Formula One Racing. In mid-2006, special

"racing editions" of Marlboro Red were sold in the UK, with a Ferrari-inspired

design, although the Ferrari name and badge were not used.

Mostly people smoke cigarettes for pleasure or because of frustration or

problem. Once they start they get addicted to it. It is very difficult to overcome the

habit of smoking till one becomes used to it. In foreign countries most of the

people started smoking cigarettes because of celebrities smoking in films and

serials. This gave a boost to the cigarette manufacturing companies by increase in

their sales and also promotion of the product as the demand increased. Most

countries in the world have a legal smoking age of 18. Seven exceptions are

Austria, Belgium, Denmark, Germany, Portugal, the United Kingdom, and The

Netherlands, where the age is 16.

Since January 1, 2007 all cigarette machines in public places in Germany must

attempt to verify the customers age by requiring the insertion of a debit card.

Turkey, which has one of the highest percentages of smokers in its population, has

a legal age of 18. Another curiosity is Japan, one of the highest tobacco consuming

nations, which requires purchasers to be 20 years of age. However, due to the

prevalence of cigarette vending machines in the most public of places the

effectiveness of an underage ban is in doubt.

In other countries, such as Egypt or India (especially Kerala) it is legal to use

and purchase tobacco products regardless of age. 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.

Many governments impose restrictions on smoking tobacco, especially in

public areas. The primary justification has been the negative health effects of

secondhand smoke. Laws vary by country and locality. In India the ban on tobacco

and cigarettes has been implied since 2002, but still the companies continue to

manufacture cigarettes as the smoking habits of the consumers do not change.

Through sponsorship these companies try to publish their brand name and

promotion of their product. Cigarette advertisement is also done through movies

where the celebrities smoke cigarettes in the film. This also helps in brand and

sales promotion. The Indian government is trying hard to impose strict actions

against these advertisements and promotion. Even though by imposing strict tax

rate these companies are able to continue their business as 1.1 billion people of the

world consume cigarettes. In many parts of the world tobacco advertising and even

sponsorship of sporting events has been outlawed. The ban on tobacco advertising

and sponsorship in the EU in 2005 has prompted Formula One Management to

look for races in areas that allow the tobacco sponsored teams to display their

livery. As of 2007, only Ferrari retains tobacco sponsorship, continuing their

relationship with Marlboro until 2011. In spite of the ill effects and health hazards

people continue to smoke cigarettes for pleasure or because of habit. This habitual

of the people helps the companies to overcome the ban and advertisement on

cigarettes and tobacco.

About the cigarettes Industry of India

The Cigarette Industry is one of the oldest industries in India. It is an important

agro-based industry. It is highly labour intensive and provides livelihood to about

five 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.

The cigarette industry has always been on the receiving end when it comes to

imposition of taxes and duties in the financial budget of the country. The industry

has been reeling under ever-increasing excise duties and innovative form of taxes

like luxury tax. Also, due to the high taxes in the country, the competitiveness of

the Indian cigarette manufacture is adversely affected in the global market. Its

growth is being further stifled by the imposition of ban on smoking at public

places and ban on advertisements. In addition to this, increasing awareness about

harmful effect of smoking and lawsuits in western countries has made the entire

scenario pretty gloomy for the industry. This leads to increased government

regulation and public litigation and a reduced ability to promote the product. In

such a scenario, cigarette companies in India are going in for unrelated

diversification. Also, with the increasing threat to the tobacco industry as a whole

and decreased consumption levels of cigarettes, need gaps in the market are

being met by new products like non-tobacco beedi, paan- (betel leaf) flavored

tobacco-free gum lets , and substitutes and tobacco patches like ‘Click’ which are

targeted at the traditional cigarette consumer base.

At present, there are 19 units in the organized sector engaged in the

manufacture of cigarettes with a total installed capacity of about 147.377 billion

pieces per annum. The production of cigarettes during 2001-02 was 60577 million

sticks. During the current year i.e. 2002-03 (April 2002 to December, 2002) the

production has been 43198.20 million sticks. In terms of volume, bids dominate

the Indian market for tobacco products.

India is the second largest producer of tobacco in the world after China. It

produced 572 million kilograms of tobacco in 2002-2003. India only holds a

meager 0.7% share of the US$30 billion global Import-Export trade in Tobacco,

with cigarettes/cigarette tobaccos accounting for 85% of the Country's total

tobacco exports.

The tobacco industry holds tremendous potential for India. For the government,

it means excise duties and export revenues, and for the Country in general, it

translates into huge employment opportunities. Despite being the second largest

producer, India is only the ninth largest exporter of tobacco and tobacco products

in the world. Out of the total tobacco produced in India, only one-third is flue-

cured tobacco suitable for cigarette manufacturing. Most of the tobacco produce is

suitable for the manufacture of chewing tobacco, bidis and other cheap tobacco

products, which have no demand outside the country. There is only an export

demand for flue-cured tobacco, which is used for cigarette manufacturing.

If India adopted a rational tax policy for the tobacco industry that encouraged

the growing of export tobacco, tobacco farmer income would increase and export

revenue would grow. If India adopted China's tax policy on tobacco, tax revenue

could rise from the current Rs 6,031 crores to Rs 54,000 crores. China's economy-

oriented tax policies have given cigarettes 100% share of domestic tobacco

consumption. This strong domestic base has proved to be conducive to exports as

well as revenue generation. The Indian tobacco industry makes a very substantial

contribution to employment. 35 million people are directly or indirectly engaged in

the production and selling of tobacco & tobacco products as shown in the table

below.

In terms of volume, bidis dominate the Indian market for tobacco products.

This traditional Indian smoke has shown steady growth during the review period,

although manufacturers report that sales are not as high as in the 1980s.

Cigarettes dominate the manufactured tobacco products market. This invaluable

study analyses the market for cigarettes in India over the time period 1998-2002

and provides forecasts to the year 2007. This title investigates key trends and

developments and can be used to evaluate competitive threats; identify strategic

partners and acquisition targets; analyse market and brand share trends and

forecast growth opportunities.

About the Company

ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco

Company of India Limited'. The Company's ownership progressively Indianised

and the name of the Company was changed to I.T.C. Limited in 1974. In

recognition of the Company's multi-business portfolio encompassing a wide range

of businesses of Cigarettes & Tobacco, Hotels, Information Technology,

Packaging, Paperboards & Specialty Papers, Agri-Exports, Foods, Lifestyle

Retailing and Greeting Gifting & Stationery - the full stops in the Company's name

were removed effective September 18, 2001. The Company now stands

rechristened 'ITC Limited'.

ITC is one of India's foremost private sector companies with a market

capitalization of nearly US $ 15 billion and a turnover of over US $ 4.75 billion.

ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and the

World's Most Reputable Companies by Forbes magazine, among India's Most

Respected Companies by Business World and among India's Most Valuable

Companies by Business Today. ITC also ranks among India's top 10 `Most

Valuable Company Brands', in a study conducted by Brand Finance and was also

published by the Economic Times. ITC employs over 21,000 people at more than

60 locations across India. The Company continuously endeavors to enhance its

wealth generating capabilities in a globalizing environment to consistently reward

more than 4,65,000 shareholders, fulfill the aspirations of its stakeholders and meet

societal expectations.

ITC pioneered the cultivation and development of Leaf Tobaccos in India.

ITC has helped the Indian farmer grow quality leaf tobaccos and linked him to

global markets. ITC is the largest buyer, processor and exporter of leaf tobaccos in

India - creating a global benchmark as the single largest integrated source of

quality tobaccos. ITC serves in 48 countries across more than 69 destinations. ITC

buys nearly 50 per cent of all tobacco types grown in India. ITC's Green Leaf

Processing plants at Chirala and Anaparti in Andhra Pradesh, the tobacco hub of

India, are benchmarked with the best in the world. ITC process and deliver 120

million kilo grams of high quality tobaccos annually. ITC's collaboration with

related Government agencies has helped develop new varieties of tobaccos and

explore new areas for tobacco cultivation.

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

brands includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut,

Scissors, Capstan, Berkeley, Bristol and Flake. The Company has been able to

build on its leadership position because of its single minded focus on value

creation for the consumer through significant investments in product design,

innovation, manufacturing technology, quality, marketing and distribution. In the

extremely competitive US market, ITC offers high-quality, value-priced cigarettes.

ITC's cigarettes are produced in its state-of-the-art factories at Bangalore, Munger,

Saharanpur and Kolkata. These factories are known for their high levels of quality,

contemporary technology and work environment.

ITC is the leading player in domestic cigarette market. The company

commands over 60% market share both in value and volume terms. The company

has some of the leading brands of cigarettes like Wills, Gold Flake etc in its

portfolio. The cigarette business forms the bread & butter business of the company.

It gets more than 85% of revenues. The company has slowly and steadily nurtured

its brands over the years to secure this position. With margins as high as 40% in

cigarette business the company has generated huge amount of cash from its

operations and is thus facing the problem of plenty. The problem is not just

restricted to ITC it is through for other tobacco companies also. Though ITC's

management has good track record in managing its cigarette business, its report

card on diversification and success of these unrelated business has not been good.

Achievements

Achieved five star Health and Safety Rating from the British Safety

Council for its cigarette factories at Bangalore, Munger, Kolkata and

Saharanpur and the "Sword of Honor" for Bangalore & Saharanpur for

2006-07.

Bangalore, Kolkata and Saharanpur cigarette factories won the

prestigious Greentech Safety Gold Award for the year 2007 in the

manufacturing sector. These awards are in recognition of the high level

of performance that the units have achieved in Environment Health and

Safety (EHS). Saharanpur along with Kolkata and Munger factories were

honored with the same award in 2006.

Bangalore Factory has also received the Platinum Award for outstanding

achievement in safety management in 2006.

Bangalore Factory has won the "Safety Innovation Award 2006" for

Innovative Safety Management System from the Safety & Quality Forum

(Institution of Engineers) and also Unnatha Suraksha Puraskara Award

from NSC Karnataka Chapter.

The cigarette factory at Kolkata was awarded the "1st National Security

Today Award 2007" in the category of Best Maintained Fire Safety

System.

Bangalore, Munger & Kolkata have won the prestigious Greentech

Environment Excellence Gold Award for the year 2008.

Munger factory won the Excellence in Water Management Award from

CII-GBC for 2010.

GOLD FLAKE

Gold Flake is a widely-sold cigarette brand in India and Pakistan. It is

sold in various varieties, including Gold Flake Kings (84mm), Gold Flake

Lights, Gold Flake Filter (Filter tipped) and Gold Flake (plain). It is a well-

positioned brand in India and is the market leader in its segment. This

brand is owned, manufactured and marketed by ITC which is leader in

cigarette industry in India. Other popular cigarette brands owned by ITC

are Wills, Scissors. It is sold in three varieties. Gold Flake Kings is the

largest selling brand of cigarettes in India. It has a mild flavour. Goldflake

Filter King Size Lights (84mm) Goldflake lights is milder than Gold Flake

and contains comparatively less nicotine. Goldflake Filter (Small)

Goldflake Filter (small) has the strongest flavour amongst the three

brands.. A pack of 10 costs about 34 Indian rupees. Goldflake Plain

(Filter less). The very original Goldflake is simply known as Gold Plain or

Plain in southern markets. It is the strongest of all.

The cigarette market in India has 4 players ITC, a British American

Tobacco (BAT) affiliate, is the largest cigarette manufacturer with 66% of

the market share. Godfrey Phillips India (GPI), a Phillip Morris affiliate,

and Vazir Sultan Tobacco (VST), a BAT affiliate, each have 13% of the

total market share. Golden Tobacco Company (GTC) has 8% of the

market share. There are lots of popular brands which are present in the

Indian market. They are divided into 3 segments which are super

premium, premium, and bingo segments. Few of the brands in these

categories are: - Super premium - Wills Insignia Premium- Wills

Classic/Milds Wills Navy Cut, Wills Silk Cut, Gold Flake/Lights, four

square Bingo– Bristol, Red and White.

Origin of the Name

Goldflake was neither a brand nor a process of manufacturing

cigarettes. The word "Gold Flake" refers to cigarettes made using 'bright

rich golden tobacco'. Brands other than wills gold flake are Bacons' Gold

Flake, Hignett's Golden Flaked Honey Dew, Salmon and Gulckstein's

Gold Flake.

Launch and Promotion

ITC launched the brand Gold flake in India in the seventies. The

source of the positioning of Gold Flake can be traced back to its early

days. In the Seventies, India was a country of the genteel rich. People

aspired to be honorable and genteel. The lifestyle of the upper class was

what the customers aspired for. The initial ads said, “Wherever you go

they are good”,” Having fun wish you were there” “Worth its length in

gold”, then came the Gracious People Campaigns “For the Gracious

People” as the headline followed by, “A touch of Gold”, with the

headline "A tribute to the Gracious People".

Gold Flake had been traditionally positioned as a premium

cigarette. It targeted adult, male SEC A category smokers. It was meant

to be a cigarette for the best and the rich – the gracious people of India.

It did not differentiate itself specifically from other brands. The brand

was compared with Gold for the quality and purity of experience.

Advertising emphasised this comparison to gold. The statement – “For

the gracious people” summed the core of the brand. The gracious

people as defined by the brand were the premium class they were

successful, elegant, and responsible, and had a sense of purpose.

The consumer was bounded in the Indian ethos and roots. He was

perceived to be unapproachable and sociable only in his high class. ITC's

share of filter cigarettes in the country is more than 70%. In pursuit of

international competitiveness, ITC has launched four brands - Checkers,

Hi-Val, Royale Classic and Gold Crest - in the extremely competitive US

market. Recently ITC has launched Royale Classic, Gold Cut and Scissors

Filter Kings cigarettes in the Middle East. The response to these brands

has been encouraging.

The Scenario :

18%

59%

24%

DEMOGRAPHICS-AGE18-24 25-30 31-35 36-45 46+

18%

61%

22%

DEMOGRAPHICS-SALARY<10K 10K-25K >25K

SEX MALE82%

SEX FEMALE18%

DEMOGRAPHICS-SEX

BRAND COMPANY PRICE TASTE LOOKS AVAILABILITY PACKING0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

3.31372549019608

3

3.49019607843137

4.50980392156863

2.803921568627453.431372549019613.27450980392157

Factors Determining Purchase Decisions (Mean) On A Scale Of 5

BRAND COMPANY PRICE TASTE LOOKS AVAILABILITYPACKAGING0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

MALEFEMALE

BRAND18%

COMPANY8%

PRICE12%

TASTE34%

LOOKS4%

AVAILABILITY19%

PACKAGING6%

FACTORS INFLUNECING PURCHASE %

FACTORS INFLUENCING PURCHASE DECISSION ACCORDING TO SEX

GOLD FLAKE NAVY CUT CLASSIC MARLBORO BENSON STELLER OTHERSBRAND PREFERENCE

0

5

10

15

20

25

30 30

7 6 50 0 3

gold flake(kings)-scorecard :

QUALITY PACKING VARIANCE PRICING AVAILABILITY SMOOTHNESS LOOKS0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

3.833333333333333.7

3.066666666666673.26666666666667

4.3 4.26666666666667

3.63333333333333

MEAN RATING OF GOLD FLAKE ON A SCALE OF 5

SMOKERS DIVIDED BY BRANDS

REGULAR

LIGHTS

0 5 10 15 20 25

23

4

0.0

3.0

FEMALEMALE

CHANGE43%

RECOMMENDATION20%

DRIVE AWAY23%

BORROW13%

BRAND LOYALTYCHANGE RECOMMENDATION DRIVE AWAY BORROW

PREFERENCE OF VARIATION OF GOLD FLAKE ACCORDING TO SEX

LOOKS PACKING PRICE SMOOTH DON’T LIKE THE TASTE

DON’T KNOW

POOR TOBACCO

0

1

2

3

4

5

6

7

8

9

10

4

0

10

4

7

0

2

BRAND16%

COMPANY16%

PRICE11%

TASTE21%

LOOKS12%

AVAILABILITY10%

PACKAGING14%

WHY NOT GOLDFLAKE?

FACTORS INFLUENCING PURCHASE DECISSION OF NON SMOKERS

BRAND

COMPANY

PRICE

TAST

E

LOOKS

AVAILABILIT

Y

PACKAGING

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

MALEFEMALE

3.3 3.3

2.9

4.9

1.9

2.52.9

4.5 4.5

1.83333

5

4.5

2.333

4

MALEFEMALE

FACTORS INFLUENCING PURCHASE DECISSION OF NON SMOKERS VS. SEX

Benefits of the Products

People smoke cigarettes for many reasons as it helps in losing weight, release from stress, if anyone has a stuffy nose, and smoking will help the respiratory tract unobstructed. It also aids in relaxation and reducing boredom. Smoking a filter cigarette causes lesser harm to health than non filter cigarettes. The benefits of the product have been divided into two categories.

Primary Benefits. Secondary Benefits.

Superior quality.

Consistent quality.

Smoothness.

Mildness.

Refreshing.

Less Tar level.

Improves concentration.

Reduces stress.

Helps lose weight.

Helps to relax and reduce

boredom.

Helps to socialize.

Acts as appetite suppressant.

A companion when lonely.

Private indulgence for women.

Branding of Gold Flake1) Building the brand image:

To create a brand image of Gold Flake the company started branding of the product since it was launched in 1970. In those days India was a country of the genteel rich. The product offered the user the sense of belonging to the upper class. For creating a brand image; the advertisements of Gold Flake launched by the company in the seventies was as per the consumers taste and preference. The first advertisement was the balcony ad “For the Gracious people”, “A touch of Gold”and “A tribute to the gracious people”.But after few years this advertisement became stale as average age of the consumer of Gold Flake had fallen and it also affected the sales of the company because the young smokers did not emphasis with the brand. The brand did not stand for success and respectability because the liberalization and globalization had changed the consumer needs and mindset.To overcome this problem the company followed a brand repositioningstrategy. The brand was still positioned as a premium cigarette but the targetconsumer had changed. Gold Flake then targeted adult as well as young smokers. Itextended beyond SEC ‘A’ and included SEC ‘B’ as well. The product still differentiated itself on purity and quality of its experience. The advertisement “for the Gracious People” was continued with another slogan added to it “Celebrate the Feeling” to encourage the young smokers.

2) Branding Strategies:

Two brand strategies were applied by the company. The first brand strategy is morequalitative in nature and is concentrated on increasing market share and loyaltywhile the second strategy refers to the more quantitative aspects of increasing bottom line profits. The brand extension strategy has also been mentioned.

A)

“

Honeydew smooth” campaign

At a time when sales were stagnating, the tangible and identifiable USP of being honeydew smooth was associated with Gold Flake by revolving all ad campaigns around it. It was meant to be unique and durable. It attempted to reignite loyalty among its consumers. The honey drop icon in everything connected with the brand which signified the identifiable characteristic of the brand. Unlike the previous campaigns, the USP was not derived—it was a tangible offering to the consumer. The honey drop icon was designed to be recognizable, simple and powerful. With this, the campaigns also focused on slogan “The world of Gold flake. Always mellow, Always smooth.”With this, the brand was positioned as a premium cigarette targeting young and adult male smokers from the SEC A & B categories in the twenties. The consumers were projected to be young, upwardly mobile and contemporary and had achieved a smooth balance between the various facets of their lives. The results were visible within a single quarter. Sales had increased. The Indian male identified with the brand and Gold Flake was on the path to success. In 2002,the

No. 1 spot in Brand Equity’s first listing of India’s 100 biggest FMCG brandswent to Gold Flake. Gold Flake remains India’s biggest FMCG brand for the year 2003. It continues to be twice as big as its nearest competitor (in terms of sales) and has even grown by almost 8% in the year 2002-03.

B) “Price hikes”

In the month of October 2001, the company (ITC) increased prices of its cigarettes by 10-18%. The move was welcomed in the market and there was a 14% jump in the stock price (from Rs.718 on Oct 10 to Rs. 819 on Nov 2). The jump was solely on the reason that ITC is so strong in the market that such a hike will not affect its volumes or market share. Gold Flake (20 stick filter) price was increased from Rs. 46 to Rs. 48 (4.3%increase). In addition to this, the government imposed a 15% natural calamity on all cigarettes. The entire domestic cigarette industry was also suffering from robust grey market of smuggled cigarettes (growth rate 20% p.a. based on price differentials). There was also a removal of quantity restrictions on importing cigarettes which would make all international brands more easily available in the market. In such a scenario brands again (this time in the range of 10-30%). Price of Gold Flake(20 stick filter) now increased from, the company took another bold step by increasing the price of all its filter

S.W.O.T Analysis of Gold Flake

STRENGTHS

1) The main strength of the company is the brand Image of Gold Flake. In spite of ban on the

advertisement the product was at No.1 position in FMCG products in 2003-2004 and its sales were

up to Rs 3900 crores.

2) The attributes of the product is as per the consumer aspirations, specifications and taste. It has high

perceived quality; it is affordable by the consumers. This factor has helped the company to keep

steady margin of its sales volume.

3) The company has an excellent distribution channel of network which has enabled the availability of

products in different regions as per the consumer demand and supply for the product.

4) The Gold Flake brand name has been promoted through vacation tours “Gold Flake Golden

Getaways”. ITC has also paid Indian tennis stars to endorse Gold Flake cigarettes.

5) In Mumbai, Goldflake from ITC holds the lion's share of the market selling 60 million sticks. Four

Square special comes second with 55 million sticks and Wills is third

WEAKNESS1) The main weakness of the company is that after the ban on advertisement it is not able to promote

the product on higher basis as it was promoted before the ban.

2) The other weakness is the manufacturing process which is very time consuming. Sometimes it is very

difficult for the company to supply the cigarettes as per the demand; it is because the demand of

Gold Flake is increasing rapidly.

3) Most the times the consumer prefers the price of the product first and then the quality and other

factors. The price of Gold Flake is Rs 34/- therefore as a high price product the quality is ignored by

the consumer and then they prefer to buy ‘bidis’ or ‘pan’.

4) The next weakness is that the company is not able to build a further brand image due to the ban on

advertisement. The branding of the company is done on small basis which is hardly ever seen.

5) ITC not only manufacturers Gold Flake but also Wills Navy Cut, Bristol, Four Square etc. It becomes

difficult for the company to differentiate and decide the quality, price and other factors of the

cigarettes while manufacturing and distributing.

OPPORTUNITIES

1) The opportunity of the company (ITC) is to reduce the price of the product and offer the same

quality. This will increase the sales volume of the company.

2) The packaging of the product should be changed and each and every attribute should be mentioned

on the packet and also the level of harmless should be mentioned. This will help in ‘Word of Mouth’

marketing.

3) As ITC is being recognized as World's Best Big Companies and the World's Most Reputable

Companies by Forbes magazine, the company can launch Gold Flake at international level through

collaboration with sports events held at international level and also with other brands.

4) In India the company can launch the product Gold Flake as mild cigarette and less harmful for

consumer attraction.

THREATS

1) The threats of the company are competition from international companies. The main competitors

are Marlboro, Marlboro Lights, and 555 cigarettes. These companies are famous at international

level and also as an imported cigarette brand with affordable price; the consumers prefer to buy

them.

2) The promotion done by the company of Gold Flake is through advertisements in magazines and

sponsorship, where as the advertisement of the international companies like Marlboro and Camel is

done on international level, like sponsorship to Ferrari team in Formula One and also to Super Bike

racing. Camel cigarettes give sponsorship to Rally Races in Africa and UK. This is the biggest threat to

the brand image of the company at national as well as international level.

3) The next threat may also be the changing habits of the consumer; they may quit smoking due to its

ill effects and hazards. This may affect the sales as well as the brand image of the product

4) In future the government may completely put ban on advertisement of cigarettes or also put a ban

on sponsorship under the consideration that cigarette is harmful for health. This will be the biggest

threat for the product as well as the company.

Conclusion

ITC is the leading player in domestic cigarette market. The company commands over 60%

market share both in value and volume terms. The company has some of the leading brands of

cigarettes like Wills, Gold Flake etc in its portfolio. The cigarette business forms the bread &

butter business of the company. It gets more than 85% of revenues. The company has slowly and

steadily nurtured its brands over the years to secure this position. With margins as high as 40% in

cigarette business the company has generated huge amount of cash from its operations and is

thus facing the problem of plenty. The problem is not just restricted to ITC it is through for other

tobacco companies also. Though ITC's organization has good track record in managing its

cigarette business, its report card on diversification and success of these unrelated business has

not been good.

Today Gold Flake is facing competition from International brands. As an Indian brand ITC is

forecasting the changing habits of the consumer, so that the manufacturing of the cigarettes could be

done as per the consumers taste and specifications. In 2005-2006 Gold Flake has not retained the No.1

spot in the sales of FMCG products. But its sale margin has increased very miniature compare to 2003-

2004. As per 2006-2007 Gold Flake has not lost its brand image; the brand is still recognized as popular

brand of cigarettes. It has been seen that the standard of living of the people is increasing day-by-day.

The standard of rural consumer is increasing. The rural areas people prefer to smoke ‘bidis’, but as per

their increasing standard they prefer smoking cigarettes. Due to this the sales growth of cigarettes in

India is boosting up rapidly.