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ITC is the market leader in cigarettes in India.

With its wide range of invaluable brands, it has a leadership


position in every segment of the market. 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.

All initiatives are therefore worked upon with the intent to fortify
market standing in the long term. This in turns aids in designing
products which are contemporary and relevant to the changing
attitudes and evolving socio economic profile of the country. This
strategic focus on the consumer has paid ITC handsome
dividends.

ITC's pursuit of international competitiveness is reflected in its initiatives in the overseas markets. In the
extremely competitive US market, ITC offers high-quality, value-priced cigarettes and Roll-your-own
solutions. In West Asia, ITC has become a key player in the GCC markets through growing volumes of its
brands.

ITC's cigarettes are produced in its state-of-the-art factories at Bengaluru, Munger, Saharanpur and
Kolkata. These factories are known for their high levels of quality, contemporary technology and work
environment.

ITC's Cigarettes business has been winning numerous awards for its quality, environmental
management systems and product excellence:

'Best Manufacturer of Cigarettes for the year 2007' by the Tobacco Board based on last three years'
performance.

Achieved 5 Star Health and Safety Rating from the British Safety Council for its cigarette factories at
Bengaluru, Munger, Kolkata and Saharanpur and the "Sword of Honour" for Bengaluru & Saharanpur
for 2006-07.

Bengaluru, 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 honoured with the same award in 2006.

Bengaluru Factory has also received the Platinum Award for outstanding achievement in safety
management in 2006.

Bengaluru 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 2005" in the
category of Best Maintained Fire Safety System.

Bengaluru, Munger & Kolkata have won the prestigious Greentech Environment Excellence Gold
Award for the year 2006.

Munger factory won the Excellence in Water Management Award from CII-GBC for 2006.

All its factories are certified by Det Norske Veritas (DNV) for ISO 14001, for their Environment
Management Systems, OHSAS 18001 for their Occupational Health and Safety Management Systems
(OHSMS) and the ISO 9000-2000 for Quality Management Systems. The Kolkata factory is the first
cigarette factory in India to be awarded the SA 8000 Certificate for Social Accountability by Det Norske
Veritas (DNV) in June 2004.

ITC's R&D Centre at Peenya, Bengaluru has the distinction of being the first independent R&D centre
in India to get ISO 9001 accreditation and certified with ISO 14001 for Environment Management
Systems by DNV. The R&D Centre is also certified for the standard ISO/IEC17025:2005, by National
Accreditation Board for Testing and Calibration Laboratories (NABL). This certification is awarded for
"General requirement for the competence of Testing & Callibration Laboratories"

Flowing from the concept and principles of Corporate Governance adopted by the Company, leadership
within ITC is exercised at three levels. The Board of Directors at the apex, as trustee of shareholders,
carries the responsibility for strategic supervision of the Company. The strategic management of the
Company rests with the Corporate Management Committee comprising the wholetime Directors and
members drawn from senior management. The executive management of each business division is
vested with the Divisional Management Committee (DMC), headed by the Chief Executive. Each DMC is
responsible for and totally focused on the management of its assigned business.

This three-tiered interlinked leadership process creates a wholesome balance between the need for focus
and executive freedom, and the need for supervision and control.

Alagappan Arunachalam

Consistent cash flows from cigarettes and growth opportunities in biscuits and hotels
augur well for an investment opportunity at current levels
Investors looking for exposures in sectors spanning FMCG, hotels and paper can
consider ITC, utilising the current sharp declines. At current price levels, the ITC stock,
which trades at about 26 times its trailing 12-month earnings, is be a good bet in the
large-cap space.

Cigarettes: Cash cow

ITC's mainstay — cigarettes — generates cash far in excess of its capital requirements.
The recent price hikes on most of its popular brands, in both the filter and non-filter
segments, appear to have brought in additional revenues. The scope for growth in this
business, however, is limited. ITC has a 70 per cent volume market share in an industry
that appears to be in its maturity stage.

Hotels: Growth phase

ITC's hotels division outperformed most of its peers in the hospitality industry in FY-06,
registering a 35 per cent revenue growth; its earnings also registered a significant rise.
Though revenues and earnings from this division are only marginal, there appears to be
a lot of potential for growth. ITC has firmed up plans to expand its hospitality business
by setting up hotels in Chennai and Bangalore.

Other FMCG

ITC's FMCG Division (Others), which includes safety-matches, agarbathis, biscuits,


lifestyle retailing, stationery and greeting cards, is on a growth path. The Division has
been recording stupendous growth; it registered a revenue growth of about 75 per cent
during the fourth quarter. Though this Division has been a drag on its earnings, there is
potential for a turnaround.

Biscuits will be among the core areas of earnings growth for ITC. The commissioning of
its plant in Uttaranchal and Karnataka will help it improve margins on this front. ITC,
which has been garnering market share at a fast clip, is likely to pose a threat to other
industry majors. ITC's plans to expand its footprint in the lifestyle retail business by
setting up new stores. Scale and the rising popularity of the John Players brand are
likely to help ITC on the earnings front. The other businesses appear to be doing well;
ITC is among the major players in safety-matches, greeting cards and agarbathis.

Other businesses

Agri-business, which consists of the e-Choupal network and the leaf tobacco division,
continued to maintain its revenue growth of about 50 per cent. ITC, which is among the
larger exporters of agri-commodities, is on an expansion spree in this area. Capital
employed in this division has grown rapidly by about 43 per cent.

Its paper business has been performing well. The higher value-add elemental chlorine
free (ECF) paperboards have helped it widen margins.

While revenues have grown at a steady 15 per cent in the fourth quarter, earnings have
registered a 46 per cent growth. ITC has lined up investments worth Rs 2,500 crore in
the higher value add ECF paper business

In marketing, positioning has come to mean the process by which marketers try to create an
image or identity in the minds of their target market for its product, brand, or organization. It is
the 'relative competitive comparison' their product occupies in a given market as perceived by
the target market.

Re-positioning involves changing the identity of a product, relative to the identity of competing
products, in the collective minds of the target market.

De-positioning involves attempting to change the identity of competing products, relative to the
identity of your own product, in the collective minds of the target market

Although there are different definitions of Positioning, probably the most common is:
"A product's position is how potential buyers see the product", and is expressed
relative to the position of competitors

http://en.wikipedia.org/wiki/Positioning_(marketing)

ITC Limited, a cigarettes to hospitality major, according to an ET report, has decided to expand
its retail presence across the country. ITC carries out its retail business under Wills Lifestyle,
John Players and Miss Players brands.

Under the expansion programme, ITC has planned to scale up the number of its retail store by
60%, from 250 to 400, within a year (2008-09).

ITC has also begun strengthening its retail identity and is repositioning ‘Wills Lifestyle’ as an
aspirational, international brand.

In an image makeover exercise, ITC has roped in services of international professional agencies
like FRCH Design (US), Elemental Design (UK), and The Friedman Group (US), who among
others will help the retailer in designing stores, product presentation, visual merchandising and
retail training.

In fact, the company has already launched three concept stores in Mumbai (2)and Delhi (1).
Design of these stores has been done after taking into account various aspects, like the cultural
context, customer profile, etc.

All new stores will be based on the ‘concept’ store design.

http://www.indiaretailbiz.com/blog/2008/03/04/itc-undertakes-retail-expansion-
ropes-in-experts-to-help-reposition-brand/

REPOSITIONING ITC FOR COMPETITIVENESS

i) Restructuring and Rationalising

The first task which has been substantially accomplished is the rationalisation and restructuring of your
Company's portfolio of businesses and investments. The decision to exit from the Financial Services and
Edible Oils businesses was based on the need to focus on such businesses where the Company
possessed a credible track record, and where it had the relative capacity to strengthen and nurture core
capabilities over time to sustain a leadership position in the Indian global market of tomorrow. A careful
analysis made it readily evident that ITC was not well positioned to add long term value in these areas. In
fact, persisting with these businesses over the years had caused a substantial drain of corporate energy
and shareholder value. A hard-nosed, determined and responsible exit was the only answer. As the
Directors' Report makes explicit, in the case of Classic Finance it involved an outlay of nearly Rs. 800
crores of cash, closely on the heels of the pre-deposit of Rs. 350 crores relating to the excise case for the
period 1983-87, completed in the preceding year. The task, required to be accomplished during the most
turbulent period of your Company's history, was indeed daunting. This seemingly impossible feat was
accomplished by generating internal resources through an unprecedented doubling of operating cash
flows in the preceding year, supplemented by an additional Rs.240 crores last year on the one hand, and
mobilising long term loan finance on the other.

Such sacrifice, decisive action and capability displayed by your Company enabled the assets of these
businesses to be placed in the hands of two international players of repute, namely ICICI and ConAgra,
paving the way for their productive utilisation. The financial collapse of Classic Finance would have caused
distress and panic among lakhs of deposit holders, which would have neither been in the interest of your
Company nor in the national interest. You are aware of these occurrences as we had concluded this task
with your knowledge and approval in keeping with the standards of transparency expected of your
Company.

I would like to register a handsome tribute to you, the shareholders, for your ready comprehension and co-
operation in putting this unsavoury history behind us. What needs to be carried forward are the lessons on
how not to conduct a business, and the principles of trusteeship for which managements are accountable.
The lessons learnt are also manifest in the code of governance that is being actively refined, which I shall
address later.
ii) Strategic Focus and Challenges

The businesses that remain in your Company's portfolio are those where ITC has had a credible track
record over long periods of time, ranging from twenty five to around a hundred years. These are also the
businesses that present abundant opportunities for growth in line with the growth of the Indian economy.
More importantly, these are the businesses that can be infused with core capabilities through
modernisation, scaling up, and nurturing human skills. These businesses are already at a stage that
provides a platform from where strategic positioning can be accomplished for sustainable global
competitiveness over the medium to long term. Strategies are already in place for inculcating
internationally benchmarked operating standards, marketing orientation and the related processes to
exploit the special insight into the Indian market that arises from being close to the consumer. Consumer
loyalty flows from the speed and efficiency with which an organisation adapts and innovates in satisfying
his/her needs. Competitive advantage therefore is derived from anticipating the future and encouraging
strategic thinking capabilities in the organisation.

As stated last year, the portfolio of ITC's businesses now comprises Tobacco and Cigarettes, Hotels and
Tourism, Packaging and Printing, and Paperboard. It continues to be our objective to find a capable
international partner for the specialty paper business of Tribeni Tissues division, as the future success of
this business, in large measure, would depend upon proprietary technology more readily available with
international players. We continue to encourage Exports, not only to earn valuable foreign exchange
needed by the country, but also to interact with global markets to facilitate benchmarking and sighting
future opportunities. The Real Estate acquired I the process of disengaging from Classic Finance can be a
valuable asset, redeemable at a profit over a period of time. We are also exploring opportunities presented
by the Retailing business, that can draw upon and combine the strengths of your Company's trademarks
and the services knowledge accumulated whilst growing the Hotels business.

Each of your Company's businesses is in a different phase of development requiring distinctive focus and
level of investment for the transition from a position of dominance in the regulated market of yesteryear, to
a position of leadership in the highly competitive markets of tomorrow. Whilst possessing a conglomerate
profile, the businesses are structured such that executive management can take place in a focused
manner appropriate to the dynamics of each industry. Any buyer-supplier relationship in these businesses
occurs in a policy framework that provides freedom to the buyer to access the most appropriate from the
general market. The in-house supplier has to earn the custom through competitively superior quality and
cost. To the extent that one business is a supplier to another, it creates an opportunity for building unique
strengths through closeness of interaction and common purpose.

Having laid before you the policy framework and the nature of your Company's strategic thinking, I would
like to touch upon the challenges inherent in repositioning these businesses for sustainable
competitiveness. apart from core capabilities required to generate superior value for the consumer, in most
areas of economic activity, size would play an increasingly significant role. The largest corporations in
India are tiny in the international context. You might know that no Indian private sector corporation features
in the Top 500 Companies of the world. Besides the benefits of size, large corporations entering the Indian
market are able to take a long term investment view, because they can service their shareholders from
their established bases in other markets. In comparison, Indian business houses like your Company, do
not enjoy such an advantage. Strategic moves will therefore require larger investments, gestation periods
would be longer, and staying power and commitment to a business would be severely tested. Those who
overcome these challenges would be handsomely rewarded, albeit over a longer time dimension. It is
imperative to shed preoccupation with maximisation of tactical results and focus on investing in
technologies and capabilities for tomorrow. A wholesome balance will have to be struck for profits and
cash flows over three time horizons, namely, short, medium and long terms. As stated last year, I would
like to re-emphasise that such and approach may not be adequate by itself, without a nurturing Economic
Policy framework.

In today's dynamic environment, the only constant is change. Each of your Company's businesses would
need to adapt to such change continuously. It would be the endeavour of your Board to keep the portfolio
of businesses under periodic review. We would not hesitate to invite a partner, or even to exit a business, if
it is concluded that our capabilities cannot match competitive forces in a reasonable time span. Each of
the businesses that remains in your Company's portfolio, therefore, would have to subserve the abiding
purpose of generating value. I will now share with you some of the salient features of your Company's
businesses to update your understanding.

ii) Strategic Focus and Challenges


(1) Tobacco and Cigarettes

Consumer aspirations in India are progressively globalising, following the media and information
revolution, and increased international travel. However, as a result of prolonged punitive taxation on
cigarettes, fewer than 15% of India's 200 million tobacco consumers are able to afford cigarettes. yet,
these 15% contribute more than 90% of Government revenue from the tobacco sector. Indeed, India
would probably be the only country in the world where 85% of tobacco users are virtually outside the tax
net. It is now a well established principle that sustainable tax buoyancy can be realised only from an
expanding tax base. The twin impact of moderation in tax rates and the aspiration of consumers to
upgrade tobacco consumption can multiply the size of this industry manifold, which in turn will provide a
much larger tax base to yield the resources to invest in social infrastructure. It is not so widely known that
nearly 85% of value addition in the cigarette industry accrues to the Exchequer at the local, state, and
central levels. Any moderation in the rates of tax will create a multiplier effect, the greatest beneficiary of
which will be the rural sector.

India is the third largest producer of tobacco in the world. Yet, its share of international tobacco trade is
modest. Upgradation of tobacco consumption would provide the farmers with a larger and more secure
domestic base for growing tobacco for export. The current level of foreign exchange earnings of around Rs
950 crores could be multiplied many times over.

The three major strategic thrusts of your Company are :

a) Focus on crop development to enhance quality and farm productivity. Your Company has nurtured a
pool of trained manpower for this purpose. Investments of Rs. 375 crores have been planned for leaf
processing plants and modern storage facilities to improve quality, reduce waste and enhance productivity.

b) Modernisation of cigarette plants by inducting contemporary technology, involving investments to the


tune of Rs. 900 crores over the next five years. A new, greenfield, state-of-the-art factory is being
established outside Bengaluru to match globally benchmarked standards.
c) Brands at the upper end of the market are being strengthened in anticipation of consumer aspirations.
This is an important area of investment as it takes several years to build sustainable brand equity.
THIS is one mega-repositioning. ITC is moving from a cigarette major to a farm- to- FMCG (F2F) major.
Mr. Y. C. Deveshwar, chairman, ITC Ltd, says focus in the next decade will be on the "farm and FMCG
superhighway that can be used as an effective infrastructural link to align Indian farmers with markets."
But he is quick to add: "of course, we will still be making cigarettes."

Here's a peek into Deveshwar vision… Rs 5,000 crore business (at current prices) from ITC'' F2F in the
next seven years. ITC's tobacco and cigarette business, which has a major 80% plus share in overall
sales of around Rs 10,000 crore, is likely to come down sizeably.

Little wonder that Mr. Deveshwar does not mention the "cigarette" word often these days. In fact, the ITC
chairman's 16-page theme speech at the company's annual general meeting (AGM)- Transformational
Change in Rural India- does not utter the word "cigarette" even once.

Explaining ITC's future strategy Mr. Deveshwar said it would be pivotal on three types of business- agri-
trading, two- way marketing of products and services in and out of villages and the branded FMCG
segment.

"Ultimately we hope to see a convergence or a chain link between the farm products and the branded
end," he said.
What is the business sense behind an F2F strategy? "Cut out intermediaries, reduce cost of logistics
through IT-enabled services (e-choupals), get captive product sourcing and acquire a unique access to a
trade marketing and distribution channel."
ITC is targetting "multiple crops and geographies, encompassing value chains associated with soya,
wheat, rice, acqua products, coffee, wood fibre, etc across 14 states of the country. "The aim is to create
a low-cost IT-based interactive transaction and fulfilment channel to cover 1 lakh villages representing
one-sixth of Indian villages. Today ITC has already set up 1,020 choupals or parallel IT-enabled direct
marketing and procurement terminals and we are adding 4 choupals per day," the ITC chairman added.

Agreeing that such extension work in the farm area needs more physical attention, he stresses that the
use of IT will only make things easier. "The digital infrastructure can also be used for channelising
services related to credit, insurance, health, education and entertainment, in addition to serving as a
strong foundation for creating a vibrant futures market to facilitate farmer risk management," he added.

While F2F may not be key competency area of BAT, the single largest block stake-holder in ITC, Mr.
Deveshwar said: "BAT has also approached the power of what we are doing."

http://www.itcportal.com/newsroom/press_july27_5.htm

Cigarette advertising was ubiquitous in the environment, present in news and in film magazines, but not in women’s
magazines or the newspapers. The four major advertising campaigns all associated smoking with aspiration; the
premium brands targeting the higher socioeconomic status market utilised tangible images of westernisation and
affluence whereas the "bingo" (low priced) segment advertisements invited smokers to belong to a league of their own
and "rise to the taste" using intangible images. Women were not depicted smoking, but were present in cigarette
advertisements—for example, a woman almost always accompanied a man in "the man with the smooth edge" Four
Square campaign. Advertisements and product placements at low heights and next to candies at point of sale were
easily accessible by children. In view of the iminent enforcement of the ban on tobacco advertisements, cigarette
companies are increasing advertising for the existing brand images, launching brand extensions, and brand
stretching.

Conclusion: Cigarette companies have developed sophisticated campaigns targeting men, women, and children in
different socioeconomic groups. Many of these strategies circumvent the Indian tobacco advertising ban.
Understanding these marketing strategies is critical to mimimise the exploitation of loopholes in tobacco control
legislation.

Abbreviations: BAT, British American Tobacco; GPI, Godfrey Phillips India; GTC, Golden Tobacco Company; GYTS,
Global Youth Tobacco Survey; ITC, Indian Tobacco Company; SES, socioeconomic status; VST, Vazir Sultan Tobacco

Keywords: India; marketing; socioeconomic status; women

http://tobaccocontrol.bmj.com/cgi/content/abstract/14/3/201

MUMBAI: In its first major cigarette brand launch since it introduced Wills Classic almost 20
years ago, tobacco major ITC is launching Wills Insignia, the country’s most expensive smoke at
Rs 100 for a pack of 20.

Packaged in matt black and reminiscent of Sobranies and Davidoffs, Wills Insignia is being
slotted as the company’s luxury image brand. ITC hopes that it will be enough to counter
international luxury brands like John Player Black, Cartier, Dunhill and Sobranie, all available in
the grey market.

The new brand is a new move for ITC, which had so far positioned India Kings as its premier
tobacco brand. Despite introducing brands like 555 and Benson & Hedges, which belong to its
parent British American Tobacco Company during the last four years, the Kolkata-based firm has
never diluted the positioning of India Kings priced at Rs 75 as its top-end brand.

‘‘We take great pride in introducing a high quality, international standard luxury brand intended
for the premium brand smokers, Wills Insignia is a result of years of effort by our master
blenders to bring the finest blend of tobaccos and state-of-the-art craftsmanship together for this
unique offer,’’ said SM Ahmad, executive V-P (marketing) of ITC.

The move to launch Insignia is part of ITC’s strategy to counter the increasing influx of
international brands in the grey market in the face of the Tobacco Bill 2001 set to be cleared in
the current session of Parliament, wherein Indian companies will not be able to advertise and
promote their cigarette brands.

ITC has, in the recent past, introduced new variants like Wills Lights, India Kings Lights and
Gold Flakes Cool Mist in addition to introducing innovations in style and packaging of its
products.

In the absence of an advertising opportunity, offering more choice to consumers and veritably
capturing shelf space and mindspace with more brands and variants will be a key to retaining
market share.

The brand extension is also expected to help ITC counter the 100 billion stick per annum grey
market.

Insignia will be available only in select outlets in Mumbai and Delhi before being expanded to
other metros.

http://timesofindia.indiatimes.com/articleshow/39595050.cms

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 . This
brand is owned, manufactured and marketed by ITC Limited, the leading cigarette
maker in India.

Other popular cigarette brands owned by ITC are Wills & Scissors. Gold Flake is
ITC's middle level brand in terms of price. The single largest brand in the country in
value terms ( appox 14% of the 150 Mn USD market) is Wills navy cut which was
launched in July 1963.

Contents

[hide]

 1 Co-brands

 2 Sub brands

 3 Origin of the name

 4 Launch and promotion

 5 Market today

[edit] Co-brands
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 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

[edit] Sub brands


Goldflake is widely sold brand in India and is marketed in three varieties. Goldflake
Filter King Size (84mm) Goldflake kings is the largest selling brand of cigarettes in
India in above 80 mm category, but lags behind wills navy cut across categories. It
has a mild flavour . Goldflake Filter King Size Lights (84mm) Goldflake lights are
milder than goldflake and contains comparatively less nicotine. Goldflake Filter
(small) Goldflake Filter (small) has the strongest flavour amongst the three brands.
It also contains considerably larger amounts of tar and nicotine. A pack of 10 costs
about 25 Indian rupees. Goldflake Plain (filterless) The very original Goldflake is
simply known as Gold Plain or Plain in southern markets. It is the strongest of all.
[edit] Origin of the name
Goldflake was neither a brand nor a process of manufacturing cigarettes. The word
"goldflake" 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. One pack of 10 cigarettes cost accordingly:
Gold Flake (plain, filter, regular size) Rs.28, Gold Flake King, King Light MRP is
Rs.38. Packs of 20 can cost up to Rs.80.

[edit] 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 honourable 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 elite 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.

[edit] Market today


The brand was still positioned as a premium cigarette. However, the target
consumer had changed. Gold Flake now targeted the adult as well as the youth
smokers. It extended beyond the SEC A category to the SEC B as well. The product
did not boast any USP. It still differentiated itself on the purity and quality of its
experience. The comparison with gold stayed, but the target audience the brand was
reaching out to, was supposedly larger. The brand stood for a celebratory attitude.
“Celebrate the feeling” was the new message. This was simply an extension of the
previous message “For the gracious people”
Categories: Cigarette brands

market into 4 segments as follows:

• Slobs (27%)

• Aspiring Sophisticates (20%)

• Conservatives (28%)

• Worriers (25%)

Each group was given a brief description that characterised their lifestyle and habits. Slobs were
'downmarket', likely to live with parents and would not have gone on to further education. They
were seen as being unconcerned with diet, health, appearance or company promotions but wanted
a 'strong' cigarette. Aspiring sophisticates were mainly 18-24 year old men. Less than a fifth of
them would have gone on to higher education but would view their job as a career and were
conscious of their image, enjoyed the pursuit of pleasure and viewed Marlboro as a 'trendy'
cigarette that reflected their image.

Conservatives were the least financially pressured of the segments; they were seen as being image
and fashion conscious but had no distinct demographic or attitudinal characteristics. This group
were looking for a mild tasting cigarette. Worriers were predominantly women who were health
conscious and concerned about their financial state, the environment and the future but not
concerned unduly with their image.

The second example highlights the fact that the way in which these segments are seen may
influence the type of approach to the marketing strategy the firm might adopt. When thinking of
appropriate advertising that would engage the prospective customer, a variety of strategies can be
used. But if, as was reported, you believe that the target market are 'rough, unfocussed, insecure,
brazen, inarticulate' as a group of Nottingham females were described, then the advertising needs
to be carefully considered. This is further highlighted by the view that some groups of smokers
needed to have advertising that did not go 'over their head' because they were described as 'not
rocket scientists' who get frustrated at advertising that may be thought of as 'too sophisticated' as is
emphasised by the following quote:

'L&B (Lambert and Butler) smokers are pretty down market - anything too clever will go over
their heads. The advertising needs to be kept fairly easy'
.

Tobacco auction in North Carolina, July 29, 2003 - the smallest crop ever due to lawsuits against tobacco
companies, dwindling demand, and increased availability of cheap foreign tobacco.
Title: Tobacco Auctions Open In North Carolina. Copyright: Getty Images, available from Education Image
Gallery (http://edina.ac.uk/eig)

Strategies can be devised that seek to bring the prospective consumer into the brand. In some cases
this can be carried out in what may be considered a slightly 'underhand way'. For example, the
offering of gifts, vouchers or coupons could be viewed as ways to give the brand added value and
a competitive advantage over its rivals; alternatively it could be a case of giving the impression
that the customer is actually getting more than they really are. In one case, a suggestion was made
to 'trick' cigar smokers into applying for a free pack of a brand when the intention was to provide a
new brand and in the process get the customers names for the database! Other aspects of the
documents cover the packaging, targeting female smokers in particular (the so-called 'pink
pound'), students, the use of major events and activities to get the brand noticed, peer group
endorsement, developing massive databases of consumer details and so on. In addition, the
availability, ease of purchase and awareness of the brand were suggested as being crucial in
maintaining and developing the business for cigarette manufacturers.

Source of information and quotes: Tobacco Papers (http://www.tobaccopapers.com)

Theory

There are a number of theories related to this information - the following presentations highlight
the key issues surrounding market analysis - the process of market research, segmentation and so
on.

• Market Analysis (http://www.bized.co.uk/educators/16-


19/business/marketing/presentation/analysis.ppt)

• Market Research (http://www.bized.co.uk/educators/16-


19/business/marketing/presentation/research.ppt)
The other key issues relating to the methods of analysing such markets relate to value added and
competitive advantage.

Value Added is defined as the difference between the value placed on a product by the consumer
and the cost of the resources used in producing it. For many businesses this factor is very
important in helping them to widen their profit margins. In the case study above, tobacco
manufacturers might be able to charge higher prices, if consumers associate the brand with
higher quality, by using more appropriate packaging, i.e. packaging that reflects the image they
desire, or if they think they are getting something that other brands are not offering - gift coupons
and so on. In such cases, consumers may be prepared to pay slightly more than another brand -
even if the reality is that the two products are actually identical. The key to value added therefore
is tapping into the consumer's perception of the product and the marketing strategy may well be
vitally important in cultivating that perception. For some products, the process of building that
perception can take a great deal of money and time. In such cases, the cost of establishing the
perception of value added of a brand helps to explain why many firms jealously guard their
brand and seek to take action against those using the brand to help sell rival products.

Competitive advantage is closely linked with value added. Competitive advantage refers to
methods used by a business to improve the appeal and demand for its product in a market over
that of its rivals and how it emphasises the individuality, identity and distinctiveness of the
product or service. As a result, the firm achieves a profit level that is above the industry average.
Competitive advantage can be viewed from a cost perspective where the firm provides the same
benefits as its rivals but at a lower cost or from a resource perspective where it provides benefits
over and above those of its competitors.

There are a number of sources of competitive advantage which could include some or all of the
following:

• Use of price - this could be increasing it or reducing it in relation to its rivals

• Quality

• Technological aspects - for example Play Station 2 emphasised the opportunities to play DVDs and CDs
as well as being a games console - something that its rivals did not have at that time

• Packaging - making it distinctive in some way

• Convenience of use - for example producing washing powder in tablet form

• Atmosphere, ambience, décor, etc. - especially in the provision of services or in retail outlets

• Location - ensuring access to the product is made as easy as possible - this may involve physical
location - for example, in out of town shopping malls, through the Internet, mail order, etc.

• Perceived skill, know how or reputation - often built up over many years

• Cost - finding ways of utilising its resources to increase productivity and efficiency to lower average
costs compared to its rivals
Some of these advantages might also be viewed as potential barriers to entry to new firms and as
such help to protect the market power of the firm. Both competitive advantage and value added
can be seen as being key strategies in many businesses. For the tobacco industry the fact that the
opportunities for advertising are now so limited suggests that they have to be even more astute in
finding ways to compete and to attract customers. When faced with those who comment on the
fact that tobacco companies actually contribute to killing 50% of its customers such a task is not
easy!

Tasks

Using the case study and the information above, choose a product or service with which you are
familiar. Consider yourself in the position of marketing agency acting on behalf of the company
concerned.

• Identify the key market segments that you consider the product should be aiming at. What are the
characteristics of the segments you identify?

• Suggest some appropriate strategies that would lead to the firm increasing its competitive advantage
or adding value to its product or service.

• Evaluate the likely success of these strategies in a report to the managers of the firm you have
chosen.

Related Web sites for research

• Tobacco Papers - funded by NHS Health Scotland - contains all the documents presented to the Select
Committee - type the word 'slobs' into the search engine! (http://www.tobaccopapers.com)

• Gallaher Group PLC (http://www.gallaher-group.com)

• Philip Morris - manufacturers of Marlboro cigarettes amongst other brands


(http://www.philipmorris.com)

• TobaccoPedia - use the search engine for listings of economics related issues pertaining to the tobacco
industry (http://www.tobaccopedia.org)

• Economist article on the tobacco industry in Japan


(http://www.economist.com/displayStory.cfm?Story_ID=S')8((P!%3F%24!P%200%0A)

Mark Scheme

The aim of the task is to assess your understanding of the principle of competitive advantage and
value added and, in addition, your ability to be able to apply your knowledge and understanding
of market research, market segments and market analysis.

It is suggested that you choose a product or service that is easily available and relatively high
profile as it will make life easier for you. At first sight, your product might appeal to a wide
range of different people and of course will not be bought by only one group! Consider that in
the case study, the marketing company were not assuming that only 18-24 year olds smoke Silk
Cut. However, it did identify that this particular brand was popular amongst that group. The
analysis that you conduct as to the nature of the segments and the characteristics of that segment
will obviously depend on the product you have chosen. Reference to the Tobacco Papers
documents will give you a number of clues as to the type of behavioural characteristics and
attitudes that marketing companies might be interested in identifying as a means of targeting
particular groups. In short you are looking for lifestyle, attitudes about themselves and their
peers, how they dress, how they live, where they live, how they spend their time, how they spend
their money, how often they go out, where they shop, what they drink, eat and so on.

Your next task is to take your knowledge of competitive advantage and value added and think
about how these could be applied to the product or service you have chosen. The sources of
competitive advantage in the theory section above should provide you with a number of clues but
you will have to apply them appropriately to the product or service chosen. Not all of them are
likely to be relevant therefore.

Once you have decided on the source of competitive advantage you are in a position to pen a
report to your client company's managers seeking to assess the success of the strategies you
propose. The higher order skills being assessed here imply that you need to make judgements
about the circumstances under which the strategies will work and what the limiting factors might
be. To give an example to highlight the skills necessary, take the 'worriers' segment in the case
study. This group tended to be female and live predominantly in Wales and the South West of
England. Developing your products packaging to appeal to the female market or re-designing the
product to appeal to that market (for example make the cigarette, in this example, slimmer,
longer, have a pink filter or whatever) and you might have some success in tapping into this
market. The limiting factors are that this group is concerned about health, the environment and
finance. You might need to consider price therefore and how you could counter the welter of
negative information about your product and its effects on health and how the company itself
might neglect its environmental responsibilities! Such factors are going to have a counter force to
the positive aspect of your strategy but you need to make a comment about how strong this
counter force is in terms of the likely success of the business strategy. This is the process of
evaluation and is where you are going to score high marks in such a task.

ITC is also whipping out a slew of new packs. It is reaching out to the well-heeled smoker with Wills
Insignia which costs Rs 100 for a pack of 20. ITC hopes that Insignia will take on both Godfrey Philips and
a clutch of foreign brands that are being freely smuggled into the country.

But Godfrey Philips is also hoping that it can score at ITC's expense. Jaisalmer is being launched in Delhi
where ITC's Classic sells around 15 million sticks. That's almost 45 per cent of Classic's annual sales of
45 million sticks.

Major competitor goldfrey Philips

ABSTRACT
Objectives: To gain an understanding of the role of pack design in tobacco marketing.

Methods: A search of tobacco company document sites using a list of specified search terms was undertaken during
November 2000 to July 2001.
Results: Documents show that, especially in the context of tighter restrictions on conventional avenues for tobacco
marketing, tobacco companies view cigarette packaging as an integral component of marketing strategy and a vehicle
for (a) creating significant in-store presence at the point of purchase, and (b) communicating brand image. Market
testing results indicate that such imagery is so strong as to influence smoker's taste ratings of the same cigarettes
when packaged differently. Documents also reveal the careful balancing act that companies have employed in using
pack design and colour to communicate the impression of lower tar or milder cigarettes, while preserving perceived
taste and "satisfaction". Systematic and extensive research is carried out by tobacco companies to ensure that
cigarette packaging appeals to selected target groups, including young adults and women.

Conclusions: Cigarette pack design is an important communication device for cigarette brands and acts as an
advertising medium. Many smokers are misled by pack design into thinking that cigarettes may be "safer". There is a
need to consider regulation of cigarette packaging.

Keywords: marketing; advertising restrictions; imagery

http://www.scribd.com/doc/2347671/Notes-Marketing-Management-MBA-200809-?
query2=consumer%20behavior+dvd%20players+stp%20analysis