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Discuss INDIAN TOBACCO INDUSTRY within the Service Sector Management (S.S.M) forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Introduction A part of (Fast moving consumer goods) FMCG the tobacco industry is already is attracting a lot of market ...



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INDIAN TOBACCO INDUSTRY - September 18th, 2010


A part of (Fast moving consumer goods) FMCG the tobacco industry is already is attracting a lot of market attention. It has been in the limelight for one reason or another.

While developed countries are facing negative growth due to increased health awareness and ban on smoking in public places, India is facing a boom in this sector. Frequent revision of excise duty, big excise cases and dispute are integral part of this industry.

The major advantage of this sector is strong entry barrier due to huge investments needed on promotions and also the large brand loyalty. Large MNCs are also on the verge of entering into India.
In India, this sector provides about 26 million jobs in agricultural operations including cultivation, nurseries, curing, processing, manufacturing and distribution.
India is the 3rd largest producer of tobacco in the world and the 6th largest exporter generating a FOREX of around USD 175-225 m and excise revenue of around Rs. 4,200 crores which is about 10% of the total excise revenue. Tobacco is the 4th leading revenue earner for the Union government.

Pricing of this product was majorly on the demand and supply forces. Because of the farmers had to suffer if there is a bumper crop but the demand is less. Therefore, in 1976 government of India established the Tobacco Board for development of the tobacco industry under the control of central government.
India is dominated by local brands but a few MNCs like Benson And Hedges and 555 have started manufacturing and distribution.

India’s main company in this sector is Indian Tobacco Company (ITC) partly held by British Tobacco Company (BAT) has 66% of the market share by volume. Other Players in this sector are Vazir sultan Tobacco Company (VST), in which BAT has minority stake, Godfrey Philip that is linked with Philip Morris of USA and GTC. GPI and VST each have apporx 12.5% of the market share by volume.

It has been found that 65% of all men in India use tobacco (apporx 35% smoking, 22% smokeless, 8% both). Smoking rates tend to be higher in rural areas than urban areas. It is seen as a status symbol among the urban youth.

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