Académique Documents
Professionnel Documents
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Tobacco Sector
Abha Mahapatra
BFIA (75003)
SSCBS
Contents
Sector Analysis
I. Surveys and Statistics
II. Government Initiatives
III. Market Share
IV. SWOT Analysis
V. Porters Five Forces Model
VI. BCG Matrix
VII.Lifecycle Analysis
VIII.Ratio Analysis
Companies studied
ITC Limited
Godfrey Phillips India
VST Industries Limited
Sector at a Glance
One of the most profitable industries in the
world.
Industry worth INR 58730 crores in 2009.
CAGR-8.5%
By 2014 CAGR will be 6.9% and the forecasted
worth is INR 81790 crores.
Education
Proportion
users (%)
and 21%
Secondary
Education
higher
Primary Education
Less than Primary Education
No formal schooling
33%
45%
44%
of
Tobacco
12-18
Years
19-30
Years
31-40
Years
41-50
Years
51-60
Years
Sample
8587
13216
7805
5920
5168
Tobacco
users
1860
7026
5186
4193
3638
Prevalence
22
54.9
67.6
72.0
71.5
Market
share in
Percentage
100
80
Column1
Market Share of Top 5
Companies
60
40
20
0
Chewing Tobacco
Cigarrettes
Cigars
Smokeless Tobacco
Compa
ny
Dhariw
al
Industri
es Ltd
Dhara
mpal
Satyap
al Ltd
Som
Sugand
h
Industri
es Ltd
Shree
Meena
kshi
Food
Product
s Pvt
Ltd
Kothari
2001
2002
2003
2004
2005
2006
2007
2008
2009
11.5
11.8
11.8
12
12
12.3
12.3
12.5
12.5
7.8
8.2
8.8
9.3
9.5
8.8
7.8
7.2
3.7
3.8
4.3
4.2
4.7
5.5
2.3
2.5
2.5
2.8
2.8
3.2
3.5
4.5
4.5
4.2
4.3
4.3
3.5
2.8
Retai
l
Volu
me
(billi
on
stick
s)
200
0
200
1
200
2
199
9
99.6 98.7 89.3 91.9
200
3
200
4
94.5 96.5
200
5
200
6
200
7
200
8
200
9
90.3
Company name
ITC Group
ITC Group
ITC Group
Godfrey Phillips India
Ltd
ITC Group
ITC Group
VST Industries Ltd
Godfrey Phillips India
Ltd
VST Industries Ltd
Godfrey Phillips India
Ltd
2009
31.2
18.2
8.4
7.9
7.4
6.9
4
3
3
2.5
Government Initatives
1975: The Cigarettes Act 1975 made a statutory health
warning mandatory on all cigarette packets.
1980: The central and several state governments
imposed restrictions on tobacco trade and initiated
efforts for comprehensive legislation for tobacco
control.
1990: The Central government issued a directive for
prohibiting smoking in public places, banned tobacco
advertising on national radio and TV and made display
of statutory health warnings on chewing tobacco
products mandatory.
Growth Potential
Market Share
Market Share
Indian Cigarette pie
Market share
ITC 72%
GTC 8%
VST 8%
GPI 22%
SWOT Analysis
Strengths
India one of the largest manufacturer of
Tobacco.
Export Potential.
Amounts for 5.8% of the international trade and
ranks 5thafter Brazil, U.S.A. Turkey and
Zimbabwe.
SWOT contd.
Weaknesses
Increased taxation
Badly developed relations between producer and
buyer.
SWOT contd.
Opportunity
Research for development of alternative uses of
Tobacco in view of anti-smoking campaign.
Significant opportunity for exports.
SWOT contd.
Threats
Total ban on direct and indirect advertisements
of all tobacco products.
Prohibition on sponsorship of sports and
cultural events which encourage tobacco use;
ban on smoking in public places.
Ban on smoking in public place.
Eroding social acceptability of smoking
PEST Analysis
Political Factors
Challenging environment with respect to
government regulation.
Taxation.
PEST contd.
Economic Factors
India among top three producers in the world.
Among top 10 exporter.
2.3 million persons depended on this sector for
livelihood.
Total net value added by all enterprises averaged
Rs 15000 million.
PEST contd.
Social Analysis
Growing public concern against increasing
consumption of tobacco.
Restrictions by government has made the
promotion of tobacco brands almost impossible.
PEST contd.
Technological analysis
Great inventory control.
Logistic Support.
I. Hardware investment(high shelves, large
storehouses etc.)
II. Software investment(GPS monitoring circuits,
long-distance clients landing enquiries, GIS
circuit optimization, and online method of
electronic clearing, etc.)
BCG Matrix
ITC - CIGARETTES
GTCI
VST
?
GPI
Lifecycle Analysis
Godfrey Philips
India and VST
Industries
ITC Ltd
Ratio Analysis
Liquidity Ratio
Profitability Ratio
Efficiency Ratio
Solvency Ratio
Liquidity Ratios
Current Ratio
2.5
2
1.5
ITC
GPI
VST
1
0.5
0
2005 2006
2011
2010
ITC
GPI
VST
1.189 1.009
1.63 1.97
0.78 0.69
2007
2009
1.73
1.66
0.64
1.58
1.52
0.45
1.63
1.75
0.55
2005
1.44 1.167
1.66 1.27
0.54 0.78
1.2
1
0.8
ITC
GPI
VST
0.6
0.4
0.2
0
2005
2011
ITC
GPI
VST
2006
2010
2007
2008
2009
2009
2008
2010
2007
2006
2005
1.15 0.79
1.26 0.494
0.2
0.4
Solvency Ratios
Debt Equity Ratio
0.3
0.25
0.2
ITC
GPI
VST
0.15
0.1
0.05
0
2005 2006
2011
2010
2006
2005
ITC
0.01
0.01
0.01
0.02
0.02
0.01
0.03
GPI
0.29
0.17
0.17
0.21
0.15
0.21
0.19
VST
0.06
0.02
0.01
0.04
0.05
0.02
0.24
Profitability Ratios
Operating Profit Margin
40
35
30
25
ITC
GPI
VST
20
15
10
5
0
2005
2011
ITC
GPI
VST
2006
2010
2007
2009
2008
2009
2008
2010
2007
2006
2005
25
20
15
10
5
0
2005
2011
2010
2007
2006
2005
ITC
44.94
42.64
34.6
36.60
37.24
27.41
18.74
GPI
24.74
19.31
21.99
23.58
24.19
36.26
33.09
VST
47.47
30.50
32.87
34.87
36.37
20.95
23.28
Return on Equity
2.5
2
1.5
ITC
GPI
VST
1
0.5
0
2005
2006
2007
2008
2009
2010
2011
2010
2009
2008
2007
2006
2005
ITC
1.37
1.33
1.16
1.2
1.21
1.11
0.99
GPI
2.05
2.17
2.05
1.909
1.9
0.23
2.179
VST
2.27
2.04
1.6
1.5
1.67
1.73
1.88
60
40
20
0
2005 2006
2011
2010
2006
2005
ITC
6.49
5.34
8.66
8.29
7.19
6.08
4.91
GPI
159.67
113.84
104.73
107.73
84.73
57.82
61.16
VST
61.53
40.18
40.04
37.79
35.68
46.76
34.98
ITC
GPI
VST
15
10
5
0
2005
2006
2007
2008
2009
2010
2011
2010
2009
2008
2007
2006
2005
ITC
4.45
10
3.7
3.5
3.1
2.65
31
GPI
35
25
25
25
25
22.5
22
VST
45
30
30
20
20
2.5
P/E Ratio
45
40
35
30
ITC
GPI
VST
25
20
15
10
5
0
2005
2006
2007
2008
2009
2010
2011
2010
2009
2008
2007
2006
2005
ITC
28.2
24.7
24.9
20.9
32.1
18.2
18.2
GPI
12.5
17.8
7.2
12.5
14.2
VST
61.53
40.18
40.04
37.79
35.68
27.91
34.98
Turnover Ratios
6
5
4
ITC
GPI
VST
3
2
1
0
2005
2011
2006
2010
ITC
1.69
1.58
1.44
1.59
GPI
3.18
3.31
3.18
VST
1.85
1.73
1.49
2006
2005
2.42
2.31
2.01
3.41
6.15
4.82
4.38
1.47
1.72
3.01
6.49
ITC
GPI
VST
6
4
2
0
2005
2006
2007
2008
2009
2010
2011
2010
2009
2008
2007
2006
2005
ITC
6.05
6.04
5.26
5.51
3.76
3.82
3.91
GPI
8.76
7.52
6.43
7.96
5.18
10.15
5.47
VST
5.94
6.31
7.52
10.24
12.62
6.05
5.56
60
40
20
0
2005
2006
2007
2008
2009
2010
2011
2010
2009
2008
2007
2006
2005
ITC
23.91
24.31
21.32
20.43
20.79
18.22
20.07
GPI
33.58
35.24
41.93
45.82
56.81
95.67
90.96
VST
40.96
48.52
80.64
67.63
69.55
6.42
5.77
ITC
ONE OF INDIAS MOST VALUABLE
CORPORATIONS
One of Indias premier private limited groups
completing 100 years.
Large & established Distribution Networks.
Annually turnover of the co. is RS 2888 Crore
It is one of the eight Indian companies to feature in
Forbes A-list in 2004.
It has more then 21,000 employees at more then 60
location across India with 4,86,000 shareholders.
Ranks No. 4 among Indian listed Private Sector
Companies by market cap. (@ April 09)
Rated as- one of Indias Most Respected Companies
(IMRB-Business world Survey 2006)
SWOT Analysis
Strength
Weakness
SWOT Analysis
Opportunities
Threats
SWOT Analysis
Strength
Weakness
SWOT Analysis
Opportunities
Already present in the Middle
East, West Africa, South East
Africa and South East Asia,
GPI can strengthen its position
as an international player by
entering new markets.
Even expanding market share
in the Indian tobacco market
is an opportunity
Threats
ITC getting into the cigar
market
It has a mere 12% in market
share