Competitor Analysis

Cigarettes in India remained dominated by three leading players during 2010: ITC Ltd; Godfrey Phillips India Ltd (GPI); and VST Industries Ltd. These three leaders accounted for 97% of total cigarettes volume sales in India during 2010. ITC Ltd remained the undisputed leader in cigarettes during 2010 with a 75% volume share, while GPI and VST held volume shares of 14% and 8% respectively. Thus there are only two major competitors to ITC Ltd, GPI and VST. We will analyze the current market position and the strategy of both of them.

Godfrey Phillips India Ltd (GPI)

Godfrey Phillips India Ltd. (GPI Ltd.) is India's second largest cigarette maker. It is the number one cigarette company in North India and India's number one cigar marketing organisation. It has an annual turnover of over Rs 3000 crore, or $620 million. Incorporated in 1936, the company has two major shareholders: the KK Modi Group, which holds the largest share, and the American tobacco giant Philip Morris. The company s core business is manufacturing and marketing cigarettes for the Indian market, and it has in its portfolio some of the most popular cigarette brands in the country. Godfrey Phillips India has an arrangement with Philip Morris to manufacture and distribute its brands, including the iconic Marlboro cigarettes, available from around 65,000 retail outlets across India. GPI's headquarter is in New Delhi. GPI has five sales branches in India namely Ahmedabad branch, Mumbai branch, Chandigarh branch, Delhi branch and Hyderabad branch. It has three major manufacturing facilities, two at Mumbai and at one at Ghaziabad (New Delhi). Major Brands y FS1 - FS1 is the premium line of cigarettes launched by Four Square. Each Turkish Blend cigarette in the FS1 pack attributes its distinct taste and aroma to Luxury Long Leaf blended with the finest Indian handpicked tobaccos. It is designed to give the Ultimate Taste Experience. FS1 comes in 3 variants Full Flavour, Extra Smooth and Regular. Four Square - Four Square is a well established and leading cigarette brand in India. Launched way back in 1964, the brand commands trust and reputation amongst its consumers and is known for its innovative ways to meet the changing consumer preferences. The Four Square franchise has a wide portfolio of variants that are available in both King-size and Regular-size segments, namely - Four Square Kings, Four Square Special, Four Square Premier, Four Square Fine Blend and Four Square Rich Gold. The brand has many firsts to its credit like introducing innovative pack designs with a tactile look and feel, and applying digital means to communicate with and delight consumers. Marlboro - Godfrey Phillips India has an arrangement with Philip Morris to manufacture and distribute their brands, including the iconic Marlboro brand of cigarettes. Available at select cities in India at approximately 65,000 retail outlets, the brand has 7 variants including the recently launched Marlboro Gold Advance.

y y

Red & White - Enjoying an iconic stature and a strong emotional bond with its loyal consumers, Red & White is one of the fastest growing regular filter brands. With a presence in markets such as those of Punjab, Haryana and Delhi, it is available as a R&W Filter, R&W Plain, R&W Super and R&W Premium. The brand continues to retain its iconic popularity as Red & White peene walon ki baat hi kuch aur hai still resonates strongly with consumers and is one of the most memorable ad-lines in India. North Pole - An innovative brand from the stable of Godfrey Phillips India, it is the largest selling menthol cigarette in India. Cavanders Cavanders is one of the oldest and most trusted brands from the house of Godfrey Phillips India. Associated with a unique taste and value proposition, Cavanders has always enjoyed a strong emotional connect with consumers owing to its unique positioning of "Friendship". The brand is available in a host of variants ranging from Cavanders Gold Leaf and Magna in the plain segment to Cavanders Gold, Cavanders Special and Cavanders Magnum filter in the Regular size filter and Cavanders Magna filter in the Micro filter segment. Through the variants stated, Cavanders has a foothold across the length and breadth of India. Tipper - Tipper is a brand driven by innovation, superiority of imagery and offering. The new Tipper Filter variant has been able to attract a significant share of Tipper's erstwhile micro consumers.

Strategies y Recently launched Cigaroma The Cigar Shop . The first of its kind, exclusive shop for, Cigars, Cigarettes and Cigar Smoking Accessories, at the renowned luxury mall, UB City, Bengaluru. Cigaroma s objective is to create awareness amongst the discerning consumers about Premium Cigars, and Cigarettes available in the market as well as to provide an opportunity to the consumers to interact and understand the products better. y Godfrey Phillips India has announced the launch of four "Godfrey Phillips Bravery Awards" for Jammu and Kashmir. This will create brand awareness about it since all other forms of advertising are banned y GPI is increasing is product portfolio in India with many launches in last year. It also offering products across a wider price range which brings it in direct competition with ITC. y It follows similar distribution strategies such as ITC with Point-Of-Sales advertisements and offering incentives and financial benefits to shops carrying its products y GPI is brining PMI s international brands into India e.g. Marlboro

Threats for ITC y Increased competition from GPI across many categories of cigarettes y International Brands will have wider recognition which might hamper the sales of ITC s own products as majority of them depend on their brand value for sales.

VST Ltd
The Vazir Sultan Tobacco Company Limited was incorporated on 10th November, 1930, under the Hyderabad Companies Act No. IV of 1320 Fasli and now governed under the Companies Act, 1956. The name of the Company was subsequently changed to VST Industries Limited on 30th April, 1983. The Company has its Registered Office at Azamabad, Hyderabad. The Company has a manufacturing facility at Hyderabad (A.P) and its principal activities are manufacture & sale of cigarettes and unmanufactured tobacco. Major Brands Manufactured by VST Industries Ltdy y y y y y y y Charminar Charminar Special Filter Charms Mini Kings Charms Virginia Filter Charminar Plain Charminar Standard XL Filter Shaan

Strategies y VST is amongst the smaller players in the industry and mainly competes on price with ITC and GPI y Its input costs are lower than ITC and thus it has a competitive advantage of pricing its cigarettes lower than the usual ones of ITC y But at the same time its distribution network is not that exhaustive leading to sales which concentrated in a few regions

Threats to ITC y Low prices and hence can undercut ITC in few categories y If it expands its distribution network its pricing might create a problem y Low brand awareness and hence may not be a major threat even if increases it distribution or product portfolio.

Complementors, Shapers & Influencers

Completmentors Firm level
y ITC forces its distributors to sell its other products such sunfeast biscuits or bingo cheaps or classmates stationary along with its cigarettes. Almost 405 of retailers who did not carry these products started carrying them after ITC forced them to. ITC uses contract farming to produce tobacco. In tobacco fields it uses potato as a complementary crop. This potato is then used to produce chips for BINGO.

Complementors Buyer level

y y y Alchohol Alcohol is a very big complementor for cigarettes. Cigarettes are normally sold in or around all the shops selling alcohol. Tea India is a land of peculiar habits and one of them is having tea along with a cigarette. Because of this a majority of small tea stores stock cigarettes. Pan or Mint Paan stores are one of the biggest point of sales for cigarettes. The major reason for selling paan or mint along with cigarettes is to mask the stench of smoking.

Shapers (both firm & Buyer)

y y Rising disposable Incomes: More income leads to more expenditure addictive materials of consumptions such as cigarettes and alcohol. Stress level Cigarette smoking in general increases when a person is in stress. Services dominate a large part of Indian industry. They include industries such as IT and BPO which operate in shifts and work for long hours. This increases stress level and thus increases consumption of cigarettes. Changing Demographics: Majority of India is under the age of 40 and thus provides a very large base of consumers.

Influencers Buyer level

y Peer group The peer group around an individual is the biggest influencer in adopting cigarettes. Be it college or the corporate world, a lot of people take on the habit of smoking to find acceptance amongst different peer groups. Celebrities A lot of people are influenced by the use of cigarettes by their role models which mostly are actors, sportpersons or politicians. Movies Movies are something which have a wide audience base and hence they are a huge influencers

y y

Influencers- Company level

y y A peer group sometimes acts as a negative influencer. Smoking is looked down in society and hence people actively discourage smoking. NGO have special campaigns and drives against smoking which might reduce cigarette smoking.