Supply Chain Management of ITC Ltd.

Cigarettes

Group Members

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Market capitalisation : US $ 33 billion and a turnover of US $ 7 billion. Rated among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine, Diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, 4/1/12

India the second largest producer of tobacco in the world after China. The Indian cigarette industry forms 32 % value of the Rs.72000 Crores. Cigarettes account for 85 per cent of the countrys total tobacco exports. Of the total tobacco produced in the country, around 48 per cent is consumed in the form of chewing tobacco, 38 per cent as bidis, and 14 per cent as cigarettes.

4/1/12 *Business Standard June 02,2011

The per capita consumption of cigarettes in India is a tenth of the world average. In the recent past, the consumption of tobacco has been reduced by anti-tobacco drives and the ban of consumption in public areas. The biggest player in this industry is ITC with a market share of 73 per cent

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20% of bidis are produced in the organized sector and 80% in the unorganized sector. It is estimated that 750 billion to 1.2 trillion sticks are produced annually. The bidi industry in India is worth Rs200 billion ($4bn) Bidis are much cheaper than cigarettes Bidis cost between Rs2.50-5.00 for 25 sticks (less than one Rs per stick) In 2009, Euromonitor reported that bidi volume sales were down 5% from the previous year because of a ban on smoking in public places. 4/1/12

Declines in cigarette volumes are mainly due to a 2008 increase in the tax on unfiltered cigarettes. The tax increase has led to many unfiltered brands being removed ITC Ltd stopped unfiltered cigarette production entirely Despite declines in sales, it is expected that cigarette use will 4/1/12 66 increase disposable incomes

Indias total cigarette production is valued at Rs 220 billion (12%exported) According to Euromonitor International database, the retail volume sales of cigarettes have been stagnated for three-four year at around 90 billion level. Retail level of the sales have been decreased by 9% from 99.6 billion 4/1/12 77

Cigarette Industry Overview

Main players in this industry are as follows: ITC, Godfrey Phillips, VST, GTC their market shares are:

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PRICING STRATEGIES

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Retailer prices for ITC Cigarettes

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Distributor Pricing

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Gold Flake - Honey Dew

Gold Flake Kings

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Retail Pricing

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Retail Pricing
Gold Flake - Honey Dew
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Gold Flake - Kings

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