The WHO International Conference on
Global Tobacco Control Law:
Towards a WHO Framework Convention on Tobacco Control
7 to 9 January 2000, New Delhi, India
Paper
The Role and Responsibility of Media in
Global Tobacco Control
Author
Ambika Srivastava
L-18/2, DLF, Phase II, Gurgaon Haryana -122002
India
Tel : 91 124 355821
Email : <ambikasrivastava@hotmail.com>
This paper is commissioned by, and produced for the World Health Organization, Geneva
Executive Summary :
Across the world, the tobacco industry has made aggressive use of media in their
communication strategies in order to make people want to buy more and more of their
products. Despite restrictments on the use of advertising, the industry has found crafty
ways of circumventing laws by adopting the use of sponsorship and public relation
programmes. Worldwide, the campaigns of the tobacco industry have spent billions of
dollars to achieve increased consumption of their products and to silence and sedate the
tobacco critics. A review of themarketing and advertising practices used by the tobacco
industry across the globe indicates a close pattern that is being unversally followed to
spread the tobacco menace. Examples of this can be found in the methods used to target
the youth, or the way in which the concept of tolerance is promoted in hotels and
restaurants by the courtesy of ‘Choice’ campaign, or how the farmers lobby and the
economic arguments are mobilised to prevent governments from raising taxes and
restricting sales and advertising. Strategies and tactics that have worked in the more
mature western markets are now being used in the developing countries of Asia, Central
America and Eastern Europe, Africa and Latin America. With smoking rates declining
and the ever increasingly regulatory and legel pressures in the west, the tobacco
transnationals are looking to expand their operations to the emerging markets, especially
China and India.
The developing world which will account for 70 % of the estimated 10 million deaths
caused by tobacco in the year 2030 needs to become the focus of the Global Tobacco
Control Movement. Given the few legal barriers to sales and promotion, fewer legal
restrictions and large scale ignorance about the health hazards of tobacco consumption,
the tobacco industry resorts to targetting the youth, women and power sections of
societies by portraying cigarette brands as a badge of social status offering instant access
to freedom, glamour and success. It is therefore necessary that the harmful and deceptive
practices of the tobacco companies are inhibited by a legal and morally binding
international instrument such as the proposed Framework Convention on Tobacco
Control (FCTC). The process of developing and adopting the FCTC and related protocols
will mobilize and accelerate support from a national and global perspective against
tobacco.
There is overwhelming evidence across many countries that the media can contribute
significantly towards curbing the tobacco epidemic . Key to this is the imposition of
comprehensive ad bans which cover all media. Studies across different countries have
concluded that banning advertising resulted in reductions in consumption of 4 - 9 %. In
addition to the imposition of bans, it is imperative that the media be mobilised to
advocate the public health and economic argument against tobacco. The challenge
therefore, is to make the media a partner and a champion of the tobacco control
programme.
1
This would involve the following :
a) Action on a global basis with key media companies and organisations that provide
access to audiences across borders through sateliite transmission .
b) Running a multi-media campaign that increases the awareness of the health
benefits of non-smoking ,both active and passive .
c) Countering the lobbying efforts of the tobacco industry through effective media
advocacy.
d) Monitoring and auditing the use of media by tobacco industry to ensure
enforcement and compliance with existing and new laws.
Finally, it is clear that the tobacco war is a long and a tough one. The media is a powerful
weapon that can be used by international organisations like the WHO, national
governments and the public health community to uncover, expose, inhibit and delegitimize not only tobacco consumption but also the tobacco industry.
The following paper presents the Indian case and recommends an approach that draws
heavily from learnings of successful tobacco control programmes of countries like the
US,Canada ,South Africa ,Thailand and Singapore .Even though cigarettes only account
for 20% of the tobacco consumption ,this paper focusses on the activities of cigarette
companies because of two fundamental reasons ,one they account for over 85 % of the
expenditure in Media by tobacco products and two they set the trends in circumventing
the law as well as using vehicles like sponsorship and direct marketing to reach out to
new and gullible consumers .
2
Introduction :
The key to managing future success of global brands lies in the ability to master new
media opportunities. Despite restrictions and ad bans the tobacco companies have found
a way of leveraging and using media to build strong brand imagery to attract new users or
get existing users to smoke more . The tobacco companies always deny this ,however the
fact remains that they are in constant search of looking for new ways to reach their
consumers with even greater impact .The use of media ranges from explicit promotion in
the form of regular brand advertising to the use of surrogate or trademark extension
advertising. (See exhibit 1-a and 1-b) Trademarks are advertised in tried and tested ways
for example in Malaysia Benson and Hedges has extended its activity to Bistros ,Salem
uses the “Cool Planet” and “Power Station”. While the former rides the dual platform of
travel and music, the latter is dedicated top music .The Salem Power Station has opened
music retail shops in key shopping areas and promotes big performing artists both
domestic and international .In India ITC a BAT affiliate promotes brand Wills through
Holiday packages and Yearbooks, brand Classic through garment accessories .
Sponsorship of teams and tournaments like the Wills World Cup for Cricket ,The Dunhill
sponsorship of soccer leagues gives them unparalleled access to media like TV and
Print.It is estimated that more than 5 bn (?) US $ is spent on promotion of cigarette and
tobacco products .
As avenues for overt advertisisng close for tobacco companies, they seek to influence
consumers through endorsements and sponsorships. Use of role models such as sports
and movie stars have always been a preferred mode of appealing to youngsters and
glamourizing cigarettes. In the developing world, smoking is still associated with
attributes of “masculine, rugged, sexy and hip”. American youth may no longer fall for
the overt masculinity of the Marlboro cowboy, but Asian youth are still susceptible to
Cowboy Charms.
A syudy conducted under the aegis of the Research for International Tobacco Control
(RITC) by Debra Efromyson, a PATH Canada advisor, in Vietnam lists the following
commonly mentioned reasons given by youngsters for smoking:
•
•
•
“One of the most common reasons men give for smoking is to be masculine,”
states the report. “In one group discussion, six out of ten young women agreed
that if a man smokes, it makes him look more manly.” By contrast, female
smokers are generally considered unladylike.
“The former prevailing attitude in North America - that it is rude yo tell someone
not to smoke – is still the prevailing feeling here in Vietnam,” says the report.
Smoking is believed “to prevent cold and boredom, to reach out to their friends by
offering and accepting cigarettes, because someone encouraged them, to lose
weight, to show they’re not stingy, and because their job requires it.” Similar
moivations exist in other developing markets like South Asia.
3
Annual cigarette consumption
per capita
Clearly cigarette advertisisng and promotion results in making smoking a desirable thing
to do. It is therefore important that the media be sensitised to what harm they may cause
by accepting cigarette advertisisng and portrayal of smoking as part of content. A key
debate today is whether AD bans actually impact / or reduce smoking. Since 1972, most
high-income countries have introduced stronger restrictions across more media and on
various forms of sponsorships. A recent study of 22 high income countries based on data
from 1970 – 1992 concluded that comprehensive bans on cigarette advertisisng and
promotions can reduce smoking, but more limited partial bans have limited or no effect.
If the most comprehensive restrictions were in place, the study concluded that the
consumption of tobacco would fall by more than 6 %. Modeling based on these estimates
suggests that the European Union’s ban on advertising could reduce cigarette
consumption within the European Union by nearly 7 %. In the countries with complete
bans, the download trends in consumption were much steeper (chart given below).
1750
1700
1650
1600
Ban
1550
No Ban
1500
1450
1400
1350
1981
1991
Ye a r
Source : Curbing the Epidemic ,a world bank publication
Tobacco Colonialism in the Developing World:
The Emerging Markets have been the flavour of the decade for most global corporations.
Lured by prospects of huge populations and galloping sales, most corporations are more
than willing to invest heavily in markets like China and India and wait it out for several
years to reap their profits. The wait has been well worth it for the Tobacco Giants. Sales
of cigarettes in China have rocketed making it the largest cigarettes market in the world
with sales of 1,791 billion cigarettes a year. According to the WHO, consumption of
cigarettes in China increased 260% between the early 1970s and early 1990s as US
multinationals established their brands.
4
This is welcome news for international tobacco companies for several reasons:
It translates into spectacular profits. RJR Nabisco sells tobacco in more than 170 markets
and Philip Morris is pushing its tobacco in 180 markets. International tobacco sales for
Philip Morris have risen 53 per cent since 1993 and profits have increased 73% while
RJR Nabisco’s profits from international tobacco sales have jumped 84% since 1993.”
(source: Global Aggression, INFACT’s 1998 People’s Annual Report).
While cigarette consumption in the US declines by 1.5% per year, it is growing by 1.7%
annually in the emerging markets. Moreover, emerging markets, present virgin territories
with very few legal barriers to sales and promotion, fewer legal restrictions and largescale unawareness about the health hazards of tobacco consumption. The market
potential, combined with growing anti-tobacco activism in the West, has resulted in
multinational tobacco giants resorting to aggressive marketing tactics in the developing
world. BAT's Project Battalion is geared towards increasing sales in developing
countries.
Table: Philip Morris and RJR Nabisco: Cigarette Market Shares in Selected
Countries of the Developing World
Country
Related
Philip Morris Market RJR Nabisco Market Tobacco
Share (1996)
Share (1996)
Deaths Annually
Argentina
61.00%
N.A.
14000
Brazil
15.00%
0.00%
N.A.
Czech Republic
85.00%
<5%
22700
Hungary
30.00%
<6%
34000
Malaysia
10.00%
18.00%
N/A
Mexico
17%*
N/A
Morocco
63.00%
34.00%
N/A
Philippines
25.00%
N/A
9885 (cancer only)
Romania
17.00%
15.00%
28500
Russia
34.00%
21.00%
280000
Slovak Republic
49.00%
<1%
9500
Ukraine
14.00%
16.00%
107000
Source: INFACT's 1998 Report(* share of Marlboro only)
5
The Indian Subcontinent: Market of the New Millennium
In such a scenario, India's potential as a large and growing market for cigarettes fits in
perfectly with the Tobacco Giants' shift in focus from developed markets to the
developing world.
"India is probably second (in terms of emerging markets that are making
the biggest contributions to BAT's sales) after Brazil. It is a 100 billion
sticks market and we have a 70 per cent share. India represents our second
market in volume terms. As living standards rise and people trade up from
bidis the market could be enormous."
-- BAT Chairman Martin Broughton.
BAT controls a sizeable chunk of the Indian market and also has a formidable presence in
Pakistan and Bangladesh. The other international tobacco giants too are muscling in for a
piece of the action in the region.
With India as a gateway to the subcontinent's markets, the region promises to be one of
the future growth markets for tobacco giants who are now setting up facilities in the
region.
Indian Subcontinent: Cigarette Sales (Units)
Country
Cigarette Sales
India
102 billion
Pakistan
36 billion
Nepal
8 billion
Market Overview and Growth Trends
In India, cigarette sales is in the region of 102 billion sticks a year – and a market worth
Rs 60 billion. Cigarettes account for 19% of total tobacco consumption. For every
cigarette sold, 8.5 bidis (a low-cost, leaf cigarette which is low in tobacco content but
high in tar and nicotine) are sold. While FAO has forecast a growth of 2.4% per year
growth in tobacco consumption, cigarette consumption alone is projected to grow at 5%
per year by Tobacco Institute of India (TII). By 2007-8 TII projects that cigarette and
bidi sales should touch 1,187 billion.
The southern region accounts for a disproportionate 40% of cigarette sales – roughly
about 3600 million sticks per month. Seven states – Andhra Pradesh, Tamil Nadu,
Kerala, Maharashtra, Uttar Pradesh, West Bengal and Karnataka account for nearly threefourths of the industry volumes. Between 1993-4 and 1997-8 there was a 26.5% growth
in cigarette sales.
6
Table: Cigarette Sales (million sticks per month) – by Region
Region
1997-98
1993-4
Growth %
North
1935
1506
22.1
South
3607
2592
28.1
East
1825
1345
26.3
West
1472
1052
28.5
Total
8839
6495
26.5
Consumption Pattern
Tobacco consumption in India is skewed towards bidis. Consumption of “other” or “noncigarette” tobacco products is a major cause for concern. Non-smoking tobacco usage is
widespread and more common than cigarette smoking. About eight times more bidis are
smoked compared to cigarettes in India. And in sheer volume terms, in 1998-99 858
billion bidis were sold as against 101 billion cigarettes during the same year. Bidi
volumes are projected to touch 1,031 billion by the year 2007-8.
Tobacco Consumption
Type of Tobacco
Cigarettes
Bidis
Others
Total Volume (Weight)
% Consumption (by weight)
19
54
27
406 mn Kg
% Contribution to Revenue
87
6
7
Rs 58 billion
During last few decades bidi smoking has shown a large increase, and according to
Prakash Gupta of the Tata Institute of Fundamental Research, “the estimated per capita
consumption, among adults, has gone up by 60% even after taking the rapid population
growth into account.”
It is estimated that 65% of all men use some form of tobacco, (about 35% smoking, 22%
smokeless tobacco, 8% both). Prevalence rates for women differed widely, from 15% in
Bhavnagar to 67% in Andhra Pradesh. However, overall prevalence of bidi and cigarette
smoking among women is about 3%. The use of smokeless tobacco is similar among
women and men. Smoking rates tend to be higher in rural areas than urban areas.
Smoking is a status symbol among urban educated youths, but most appear to be unaware
of the hazards of smoking.
The Pan Masala Addiction: Since the 80s, a new sunrise industry has emerged. This is
7
the pan masala/gutka and other tobacco products industry which is growing at a
phenomenal pace. This domestic industry has adopted some of the smart consumer
marketing practices employed by multinationals to crack open a Rs 50 billion market.
Garlands of pan masala sachets can be found hanging on store fronts of every corner
shop in the remotest of villages in India. These are aggressively advertised and marketed
– and some of the bigger brands (like Pan Parag and Baba Zarda) have been endorsed by
popular film stars.
For several years, these products – unlike cigarettes – were free to advertise on
television, despite the fact that these tobacco products are known to cause all kinds of
oral ailments . The John Hopkins University of Baltimore, USA, found that 36 of 37 pan
masala brands tested were carcinogenic. However, banning the industry is proving to be
a contentious issue as it would jeopardise the employment of over 100,000 workers. And
there are fears that a ban would only drive the industry underground – and controlling
product quality would become impossible.
Despite the fact that both bidis and pan masalas are as injurious to health – if not more
than cigarettes – these products attract a far lower excise duty rate than cigarettes.
Key Players
The industry is dominated by four players who account for 99% of the volumes. BAT
affiliate, ITC, the leading player with a 70% share of the market and the balance shared
by Godfrey Philips, VST (also a BAT affiliate) and GTC. The
cigarette industry faces competition mainly from the unorganized sector bidi
manufacturers, who are protected from high duties due to small-scale industry status. The
cigarette industry affected by steep duty hikes has been facing stagnant volume growth in
the last 2-3 years.
Table: Financial Highlights of the Three Major Players
Company
Net Sales Net Profit
EPS (Rs)
Equity
ITC
35154
6234
25.4
2454
GPI
4546
388
37.4
104
VST
2417
65
4.2
154
All figures in Rs million
ITC
A large chunk of ITC's profits are accounted for by the cigarettes business. However, it
also has interests in the paper, packaging and hospitality industries. ITC's sales in the
first quarter of FY2000 declined by 0.8% year-on-year, while net profit recorded 14%
year-on-year growth. Some of the financial highlights of the company include:
•
Net sales recorded a CAGR of 10.2% and 24.2% respectively over the past 5 years.
8
•
•
•
•
Net profit grew by 18.5% year-on-year growth in FY99 after a robust 52% year-onyear growth recorded in FY98.
ITC has earmarked an investment of over Rs 7 billion in brand building,
modernization and upgradation of tobacco and leaf tea processing facilities over the
next five years in the Indian market.
The company proposes to enlarge its cigarette manufacturing capacity at Calcutta by
three times and its production will rise from 4.8 billion cigarettes to 12.25 billion
units.
Advertising spend has grown from Rs 1 billion in 1995 to Rs 2 billion in 1999. ITC is
the No. 2 advertiser – second only to Unilever subsidiary, Hindustan Lever.
ITC sold 67 billion sticks in FY99 as against 68 billion sticks in FY98. Despite
declining sales – largely due to rising prices as a result of increasing taxes – it
continues to make profits because its brands in virtually every segment of the market
have managed to gain positions of market leadership.
ITC's Scissors is the highest selling brand in the ITC portfolio and the Wills Gold Flake
trademark has emerged as the single largest consumer product trademark in India,
according to Probity Research & Services.
The company has entered into licensing arrangements with BAT for the manufacture and
sale of the international brands, Benson & Hedges and State Express 555.
Godfrey Philips India (GPI)
GPI is the second largest player in the cigarette industry in value terms, and the third
largest in volume terms. It sold 13 billion cigarettes in FY98. Volume growth was a
nominal 1% yoy in FY98. It has a market share of 12%. The company has been making
efforts to penetrate rural areas to expand volumes. While industry growth continues to be
sluggish, excise duty hikes have put pressure on margins. Operating profit margin (after
excluding other income) has declined from 7.2% in the first quarter of FY99 to 4% in the
second quarter of FY99.
GPI’s popular brands include Jaisalmer, Four square, Red & White, Commando,
Originals and Cavanders. GPI’s Cavanders has a strong franchise in the rural market,
whereas Four Square and Red & White are strong in the urban market. Four Square
brand has a strong market in the North and the West. A large chunk (about 70%) of the
company’s cigarette sales consist of 70mm filter cigarettes. The company also markets
international brands like Rothmans and Chesterfield. GPI also manufactures Marlboro,
Philip Morris’s leading international brand,
which is marketed by Philip Morris India through GPI’s distribution network.
The company’s cigarette manufacturing plant is located at Thane. GPI has a license to
produce 15
billion cigarettes annually. Besides, its wholly owned subsidiary
9
International Tobacco Company Ltd ((ITCL) also manufactures cigarettes for GPI.
ITCL's plant is located at Ghaziabad. ITCL was allowed to double its licensed capacity to
10 billion sticks in FY98. ITCL manufactured 5.4 billion cigarettes for GPI in FY98.
VST
VST has a 13% market share in its main business of cigarettes. BAT's attempt to hike its
stake in VST has not succeeded so far as the company's proposed rights
issue did not receive approval from the Foreign Investment Promotion Board (FIPB). The
steep excise hikes coupled with higher state levies have affected demand growth of
VST's brands.
VST's 3 major umbrella brands Charminar, Charms, and Gold Premium, have several
brand extensions. VST brands are particularly strong in low and medium price segments
but its premium kingsize filter brands haven't met with much success. Sales of the micro
segment (Charminar Standard and Charms Standard) which had witnessed strong growth
in FY95 and FY96 due to lower excise duties and bidi smokers switching to low-priced
cigarette brands, continues to stagnate as excise duties have been hiked subsequently. In
FY98, while Charms
brand volumes increased by 10% year-on-year, Charminar sales declined by 9.4% yearon-year with an overall shrinkage in the marketsize for plain cigarettes. VST has
launched a new brand Charms Blues, in kingsize and regular size filter segments.
Marketing
Today, tobacco products are among the most aggressively marketed consumer products
in India. A&M magazine reports that advertising spend on tobacco products was Rs 2.3
billion (a decline of 2% over the previous year). However, marketing spend on tobacco
brands grew by 28% to Rs 130 million. The trend of the marketing spends is illustrative
of the greater reliance on sponsoships ,restaurant and hotel programmes ,public relations
and direct marketing programmes . ITC was the second highest advertising spender after
Hindustan Lever in year 1997-8 with a spend of Rs 1710 million.
For cigarette marketers, brands are the most important tool for growing the market.
Why are brands important to consumers? Because they represent an assurance of quality
– both functional and emotional – to consumers. To brand owners they are even more
important because while functional benefits can and most often are imitated, emotional
attributes, such as the image or the personality that is unique to a brand and are etched
into the consumer's mind, are difficult to duplicate.
The cigarette market is one such product category where the four P’s of marketing are
very carefully planned in view of the tax structures and the restrictions that they have to
cope with .These are product, price, place and promotion.
1. Product
10
The cigarette market is segmented into five categories – micros, plains, regular filters,
longs and king-size filters—targeted at consumers with varying income levels.
Length
Under 60 mm (Micro)
60-70 mm (Plain)
Under 70 mm (Regular)
70-75 mm (Long)
75-85 mm (Kingsize)
Type
Non-filter
Non-filter
Filter
Filter
Filter
Share of Market
18%
25.00%
42%
9%
5.00%
Marketing of cigarette brands in each of these segments focus on a combination of
emotional and aspirational needs of the target consumer. To understand how branding
transforms a product into a bundle of emotional and functional attributes, let's consider
the case of Hero, an ITC brand.
Case Study: The Micro Segment Hero
The micro segment (or non-filter cigarette that is less than 60 mm in length) is at the
bottom-most rung of the price ladder. Pricing-wise it is a notch above bidis. It is
estimated that for every cigarette smoker, there are 8.5 bidi smokers. Cigarette
manufacturers, therefore, have a great stake in converting them into cigarrette smokers.
However, until 1994, the huge gap in prices of bidis and cigarettes (primarily due to the
heavier excise duty component on cigarettes) prevented cigarette makers from offering
bidi smokers a cheap cigarette. In 1994 all that changed when the excise duty rate was
slashed from 12 paise per stick to 6 paise on "micros". This helped cigarette companies to
offer micro cigarettes at 15 paise a stick, which was just 5 paise more than bidis.
ITC which owns the largest selling cigarette brand – Scissors – is an offering in the 60-70
mm length category and is therefore slightly more expensive than the micro segment.
However, instead of introducing an extension of Scissors in micro segment, ITC chose to
launch a new brand – Hero – with a unique personality that would appeal to bidi
smokers, in small-town and rural India.
The inspiration for the brand's personality came from the "hero" of Indian movies, which
are universally popular in all parts of the country. The bilingual pack had the words
"Hero: 10 super hit cigarettes" splashed in bold graphics just like those found in movie
posters. And the advertising for the brand was screened in semi-urban and rural cinema
halls. The storyboard of these commercials consisted of take-offs from the then latest
Hindi box office hits like Khalnayak. The filmi image for the brand was a hook to lure
the tea-stall boy and the rickshaw-puller of small town India into trying out the new
smoke. The combination of product, price and brand image were vital to establishing
Hero as a blockbuster brand.
2. Price
11
Pricing of cigarettes is determined to a large extent by the excise duties levied on them.
Until 1987, excise duty was levied on ad-valorem basis. As this would take away a large
part of the company’s revenue, there was no incentive for the company to build up the
premium segement of the market or to increase prices. Most cigarette companies,
therefore, concentrated on the lower-end of the market. Post-1987, specific duty rates
have been introduced. Following the change in tax structure, the leading players in the
tobacco industry have started building up their premium brands.
In FY94 budget, excise duty on non-filter cigarette upto length of 60mm was reduced
from Rs 120 per thousand to Rs 60 per thousand. This led to a significant activity in the
lower end of the market. Cigarettes priced at Re 0.20, competing with bidis, were
introduced, leading to a surge in volumes in FY95 and FY96 after a long phase of
decline. However the duty rates were again raised in the subsequent budgets and is
currently at Rs 110 per thousand. This has led to decline in cigarette volumes. The budget
for FY 1999-2000 did not raise excise on any segment except the under 60mm category.
Cigarette Prices and Excise Duty Component
Brand
Price/Stick (Pack ) in Price/Stick
Rs.
in Rs
(Loose) Excise Duty FY 98 in
Rs.
India Kings
2.8
3
1.1
Classic Filter Kings
2.15
2.25
1.1
2
1.1
1.5
0.82
Gold
Flake 1.1
Filter/Premium
1.25
0.5
Bristol Filter
0.93
1
0.5
Scissors Filter
0.9
1
0.5
Scissors Plain
0.65
0.75
0.35
Gold Flake
Kings
Wills Filter
Filter 1.85
1.4
Certain segments like micros and plains are extremely price-sensitive. Sales volumes of
micro cigarettes shot up from 0.6 billion sticks in 1993-4 to 18 billion sticks in 1995-6.
But following the excise duty hike in 1996-97 the segment witnessed a slowdown in
growth – growing just by 1 billion sticks in the period between 1995-6 to 1998-9.
However, the growth during the five year period has been a stupendous 97%.
The plains segment has been the hardest hit by the rise in excise duties. The lower price
differential in the excise rates between plains and regular filters resulted in more
competitively priced regular filter cigarette brands. Consequently, a lot of smokers traded
12
up from plains to filter brands resulting in a decline of 49% in sales of the plains segment
during the five-year period and a growth of 26% for regular filter cigarettes. Similarly,
growth of the kingsize filter segment has been at the expense of the long-filter segment,
resulting in a 1.5% growth between 1993-94 and 1998-99 for longs versus a 33% growth
for kingsize filters.
Table: Growth in sales of different cigarette segments
Segments
Under 60 mm (Micro)
60-70 mm (Plain)
Under 70 mm (Regular)
70-75 mm (Long)
75-85 mm (Kingsize)
Units
Sold Units Sold
(1993-4)
in (1998-9)
millions
millions
619
19568
28410
19044
35573
48027
9145
9289
4188.00%
6238.00%
Growth (%)
in
97
-49
26
1.5
33.00%
The premium-price cigarette brands, however, are relatively more price inelastic and are
able to absorb the frequent price rises. In fact, with the introduction of international
brands into the Indian market – primarily Marlboro, State Express 555 and Benson &
Hedges – the Big Tobacco companies might not feel the need to discourage the growth of
the grey channel. Currently, State Express 555 has a 40% share of the brands which is
available in the grey market for Rs 65 against Rs 53 for those made locally. The
smuggled brands market is estimated to be about 900 million sticks.
Given the wide disparity in excise duty structures in the Indian subconinent, the
smuggled cigarettes market may yet become a substantial revenue earner for international
tobacco giants. India has the highest excise duty component in the Asia-Pacific region.
So, if a 20s pack costs for Rs 42 in India, it will cost Rs 49 if legally imported from
Nepal but only Rs 25 if smuggled from Nepal.
Add to this the disparity in rates of customs duties and the grey market looks even more
promising. In Nepal, an imported brand comes in at a duty rate of Nepalese Rs 675 per
1000 sticks (or Rs 425 Indian Rupees) whereas in India, the customs duty payable on the
same brand is Rs 1500 per 1000 sticks. Given the rate structure in India, there is a
likelihood that the grey market would become a convenient channel for tobacco giants to
dump their brands in the Indian grey market. In fact, China is faced with just such a
problem where, according to a Wall Street Journal report of 25 December 1996, 38
billion BAT cigarettes were smuggled into China shoring up BAT's revenues by an
estimated $300 million.
3. Place
Distribution is a key to marketing success. Tobacco companies need to cover the length
13
and breadth of the country and reach out to consumers in urban as well as rural areas.
According to the latest census of retail outlets in India by ORG-Marg, out of 1.8 million
outlets in urban India, 17% are paan-bidi outlets. These are little roadside shacks which
sell cigarettes, prepared betel leaves, chewing tobacco, pan masala and assorted knick
knacks including shampoo sachets. The percentage of paan-bidi shops would be much
higher in rural India where the total universe of retail outlets is 3.3 million.
Case: ITC’s distribution reach
ITC today services around 1.1 million outlets that sell ITC brands in urban India. Of
these 95% of outlets are paan-bidi outlets. With a product like cigarettes, the frequency at
which an outlet has to be serviced is very high. Nearly 35% of outlets are serviced daily
by ITC and the rest at least once a week.
This is because paan-bidi outlets have limited space for stocking inventory. Apart from
this, these outlets which once would sell just chewable and smoking tobacco products
today sell everything from packaged tea to batteries, soaps and detergents, shampoo
sachets and beverages. This has forced tobacco companies like ITC to strengthen their
distribution network.
Moreover, the average lower-to-middle income cigarette smoker does not buy cigarette
packs. As much as 65% of cigarette sales occurs from single cigarettes sold by paan-bidi
outlets. The average smoker visits an outlet at least five times a day. And therefore, ITC
has to make sure that its brands are available throughout the day. This has forced ITC to
increase the frequency of visits to outlets. Some outlets are serviced as often as twice a
day.
Point of sale advertising for products such as cigarettes is an important part of the
marketing mix. Since sales are impulse-driven, cigarette companies make it a point of
reinforcing their brands at the point of sale. Given the restrictions on cigarette
advertising, point-of-sale signages and kiosks with cigarette brands splashed boldly on
them offer a tremendous advertising opportunity. In fact, for ITC, the paan-bidi outlets
offer free advertising space as most of these outlets are run by small entrepreneurs who
are only too glad to have their little kiosks brightly painted free of cost.
Promotion
For tobacco companies, advertising is an indispensable marketing tool. The spectacular
success that tobacco companies worldwide have had in appealing to consumers lies in the
manner they have taken cues from consumer behaviour and used these to position
cigarette brands as status symbols and objects of desire . In fact tobacco companies have
increasingly become more innovative in the manner in which they have used the media
to
get their advertising message across. A look at the trends in spend estimates on tobacco
14
products shows an in increase from 43 mn $in 96-97 to 49 mn $ in 98-99 .The key
messages are rooted in deep sociological insights that are obtained hough market research
. The entry of international tobacco brands into the Indian Subcontinent will also see
import of advertising and promotion techniques perfected by tobacco companies in the
West and other parts of Asia.
In addition to doing direct advertising the industry spends huge amounts on…
Major India Brands & Advertising Strategy
Brand
India Kings
Market Strategy
Lead
the
premium Slot
Dominate
the
premium segment
Volume
Take the max.
volume from high
segment
Make
it
the
largest
volume
filter cigarette
Positioning
India’s
Best,
Worlds finest
High quality for
the connoisseur
Media Strategy
Premium
Media,
Business
mags,India Today Plus
Classic
Selective
premium
perodicals/Billboards/Sponsorshi
p of Golf Tounaments
Gold Flake
Enduring quality Dominate high circulation, high
image perodicals/Sponsorship of
Tennis/Billboards
Wills
The
perfect Dominate
high
circulation
match
perodicals and dailies. Extensive
cinema usage and Surrogate
advertising
Four Square Gain
volumes For adventurous High circulation perodicals and
from Wills- the Outdoor male
dailies. Extensive cinema usage
dominant brand
and Surrogate advertising
Red
and Offer King size in Macho
Exposure
through
regional
White
medium segement
dailies and extensive use of
cinema
Scissors
Retain maximum Satisfying smoke Extensive
exposure
through
volume among all
regional perodicals and dailies
cigarettes
Charms
Win
young Mildness
Exposure through perodicals and
smokers
dallies
Charminar
Maintain
loyal Strong
/ Cinema /Video and Outdoor
user franchise
Individualistic
Hero
Attract
Bidi
Mobile vans / Video n wheels and
smokers
cinema
15
Media Mix for the Category
The total spend (1998) on the tobacco category was 56 Mn USD. Of this 49 Mn USD
was accounted for by cigerttes , 4 Mn by bidis and 2 Mn by tobacco companies.
USD Mn
Press
10
Television
9.8
Outdoor
9.3
Cinema
2.3
Sponsorships
7.0
Point of Sale
4.7
Others
5.8
Total
48.8
Spends on sponsorships goes up when major sports events are held in India. Example, the
spend by Wills for branding the world cup for cricket held in 1996 is estimated to have
been in the region of 12 Mn USD. The forgoing relates to only meassured media and if
you were to look at an audit the picture that would imerge in terms of media vehicals
used would be quite different.
Case: The Wills Made for Each Other Campaign
The single largest brand in the country in value terms ( appox 14% of the 150 Mn USD
market) Wills navy cut was launched in July 1963. The case of wills has been presented
in many marketing forums to demonstrate on how advertising and media can be
effectively used to build brand image and increse sales. At the time of launch filter
ciggarettes comprised only 2% of the market – today they have a share of over 60% and
account for appox. 5000 Mn sticks a month.
The emphasis of the initial strategy was on developing the filter market rather than on
promoting the brand itself. There was a general feeling of scepticism that a filter
detracted from the quality of the smoke so the need was for generic promotion of all
filters. Wills plains already existed and the company belived that the Wills brand equity
would be strong enough for the task. The first ad showed a pair of identical twins and two
(nearly) identical packs. One of Wills filter cigarettes and the other of Wills plain. The ad
line: “They’re both good – they’re Wills”. Obviously , the filter cigaritte was depending
on the popularity of the plains to get accepted.
By the following year, ITC started promoting the brand with a clear proposition : a filter
cigarette where the filter and tobacco was perfectely matched, and what better than
showing a couple who were made for each other ? The ad line was: “Made for each other
16
- filter and tobacco perfectely matched.” The positioning has been retained ever since.
In 1969, ITC introduced the Wills made for each other Contest to select the most
perfectely matched couple. This was essentially an extension of the theme. Couples from
metros and mini metros registered their manes. From the entries received the company
the selected a specific number of couples who were then judged ofn basis of
compatibility, poise, mutual understnding and appearences. A panel of eminent
personalities from different fields quizzed them. After a preliminary round of zonal
finals, the national fiinals were held at Calcutta. The winning couple received a car, cash
and gifts and a holiday abroad. In 1986 a consumer intrest litigation forced the company
to discontinue the contest.
Since the 60’s the Wills couple has been used in different situations ,over the years the
brand has been contemprorised by portraying younger couples in different situations .The
couple today is a powerful metaphor for the brand that symbolises …
Music and Sport Sponsorships
In recent times, music and sporting events offer new opportunities for tobacco companies
to push their brands. Some like ITC have made a concerted effort to associate the
company and its brands with the performing arts. The effort which has been nurtured
over several years have established ITC as a patron of classical Indian music, and the
arts. So much so that for several years, ITC sponsored classical dance events which were
telecast live by the national broadcaster, Doordarshan.
As cricket emerges as the Superbowl of South Asia, ITC has emerged as one of the
leading sponsors of the game that is telecast through satellite channels to the entire
region. The Wills World Cup 99 which was a mega-event and was watched by an
estimated 300 million TV viewers in the region had Wills (an ITC brand) as one of the
co-sponsors. .
Sponsorship rights to cricket events don’t come cheap. But ITC had realized the potential
of cricket sponsorships and had started sponsoring the game as far back as the 1977. The
Board of Cricket Control of India charges sponsors an estimated Rs 3 million per
tournament day. In 1995-96, the BCCI netted a profit of Rs 230 million, largely due to
the Wills World Cup, which was hosted jointly by India, Pakistan and Sri Lanka – the
main markets for ITC brands.
Branding of tournaments, endorsements by cricket stars, team sponsorship and sports
gear endorsements are the major sponsorship vehicles being used by ITC. The company
has created the umbrella brand of Wills Sport to associate the brand more strongly with
cricket. For Classic and Gold Flake, associations are sought with golf and tennis
respectively. Not surprisingly, Gold Flake sponsors the ATP Tennis championships in
India and has signed on Indian tennis sensation, Leander Paes, to endorse the brand .
Case: Wills – Cashing in on the Cricket Passion
17
After ITC bought sponsorship rights of the Indian cricket team, it decided to enhance its
TV presence – through gear endorsements and turf branding – by creating a TV spot that
ran several times during every India match. The spot focuses on the passion and frenzy
that the game evokes among Indian cricket fans. Cricket balls turn into balls of fire,
blazing trails down the pitch, and the bowling action is metaphorically linked to that of a
train towards its destination. The fast-paced 60-second ad ends with the home team
celebrating a spectacular victory on the cricket field that has the Wills Indian Team
sprawled across it. The spot ends with the voiceover: “Just right for India, just right for
Wills”.
The agency that made the ad film, Hindustan Thompson Associates sought to justify the
commercial as a “tribute to the game of cricket” by portraying the excitement that the
game generates among millions of Indians when their home team plays against rival
teams. While HTA denies any intent to “nurture the smoking habit”, a study done by the
Goa-based NGO, National Organisation for Tobacco Eradication (NOTE) to asssess the
impact of tobacco-sponsored cricket matches among students found that:
•
•
15 - 20 per cent of students surveyed felt that smoking and chewing tobacco
improved memory.'
Some students also felt that smoking helped players score better at cricket – “these
students were five times more likely to be smoking than others,'' says Dr. Sharad
Vaidya, chairman of NOTE and a surgeon.
The effect of team sponsorship of the Indian Cricket team is signicant as it allows them to
associate their brand with Sachin Tendulkar who ranks as the number one role model for
India’s youth . It also gives them unparalled access to television coverage through live
and repeat telecasts .It is estimated that everytime India plays a cricket match about 3045 mn people watch it .In average cricket day the Wills brand name . is seen at least 200
minutes ..
Media Usage and Law
To reach out to its target audience, cigarette manufacturers have been using media
innovatively to circumvent the restrictions on advertising – particularly on TV
advertising.
While there are no restrictions on print advertising for tobacco products, television has
been off-limits for cigarette brands. Doordarshan, the national broadcaster, has an
advertising code that prohibits cigarette brands from advertising on any of its national or
regional channels. However, non-smoking tobacco products – like pan masala, zarda
and gutka – are not included in this ban. Neither does the ban extend to sponsored events.
And most cigarette brands manage to get airtime by sponsoring live events like cricket
matches -- where the brandname is splashed all over on billboards, the turf and cricketing
gear – and music shows.
Complaints about promotions are heard by the Monopolies and Restrictive Trade
Practices Commission which defines unfair trade practice as one that which “for the
18
purpose of promoting the sale, use or supply of any goods or for the provision of any
services adopts any unfair method or unfair or deceptive practice including the conduct
of any contest, lottery, game of chance or skill for the purpose of promoting directly or
indirectly the sale or use of any product or any business interest.”
Case: Wills Made for Each Other Vs Voice
On 14 November 1984, ITC ran an advertisement in The Tribune for its Made for Each
Other contest. The contest required that the participants be:
• married couples of Indian nationality residing in India
• one of the partners be a cigarette smoker
• they should be able to converse in English and/or Hindi
• they should send a recent photograph (together, not individually) along with their
names, ages, occupations and address.
However, no purchase of a Wills pack was necessary for participants to enter the contest.
The Voluntary Organisation in Interest of Consumer Education (Voice) filed a public
interest litigation against ITC for:
•
•
•
•
devising the contest to “to promote cigarette smoking and to promote its business
interest”.
Promoting “the habit of cigarette smoking which is ex-facie injurious to public
health…that the format of the impugned advertisement has been so devised to show a
silhouette of a male and a female facing each other with a pack of Wills cigarette in
one corners, as to suggest that they will become more likeable to each other and to
outsiders if they smoke Wills Filter Tipped.”
Associating the words “made for each other” with the Wills Filter cigarette whose
“filter and tobacco are perfectly matched”. In so doing it is implied that Wills is the
best cigarette.
For using the contest to associate cigarette smoking with conjugal harmony,
smartness, beauty, etc. and bestowing dignity and respectability on the act of
smoking.
The MRTPC ruled in ITC’s favour claiming that “the answer given by the repsondent
(ITC) is quite convincing when it is stated that the government has not prohibited
cigarette smoking or advertisements pertaining to various brands of cigarettes except that
the same should carry the statutory warning…We hold that…no prohibitory order can be
passed because the essential pre-requisite of prejudice to the public interest or interest of
the consumer under Section 36D91) is not fulfilled. Hence the enquiry is dropped.”
Voice has appealed to the Supreme Court against this judgement. While MRTPC has
decided that ITC is “free to hold a contest during the pendency of the appeal”, Made for
Each Other has not made a comeback.
19
The Tobacco Lobby’s Campaign – Courtesy of Choice
Advertising is being used by tobacco companies not just to promote their brands but also
to combating the growing resistance towards smoking, which is being initiated by the
anti-smoking lobby.
Worldwide, the tobacco lobby has sought to justify its existence and its use of aggressive
advertising and marketing by claiming that people should not be deprived of their basic
consumer right of “choice”. In India, too, the tobacco lobby has launched a campaign
titled “Courtesy of Choice”. The print campaign, which was released in December 1998
at a cost of Rs 5 million, by the Tobacco Institute of India “sought to promote a spirit of
mutual accommodation and respect between smokers and non-smokers”.
The two-ad campaign was directed at both smokers and non-smokers with the headlines:
“Do you mind not smoking here?” and “Do you mind if I smoke here?” respectively.
Ogilvy & Mather (O&M) and Indian Market Research Bureau (IMRB) were
commissioned by TII to develop and research the campaign before releasing it to ensure
that the communication was properly understood. The TII newsletter, Tobacco News had
this to say about the campaign: “The research findings indicated the communication was
generally perceived to be beneficial for promoting harmony and co-existence between
smokers and non-smokers. The campaign was also perceived to be customer-focused
rather than industry-focused and seen as an attempt to present both sides of the story as
objectively as possible. The pre-testing of the ads revealed that both the ads effectively
conveyed that the issue under consideration was ‘smoking in public’. There has been
much appreciation of the social responsibility of TII in doing such a campaign and it
plans to continue its efforts in this direction, in the public interest.”
Clearly, the attempt was to position the campaign as a “public interest campaign” and
not as a industry-driven communication. The other objective was to make it “customerfocused” and thirdly, the TII was inspired by the success of a similar campaign in Japan.
Other TII efforts to “create public awareness” about “rights and responsibilities of
smokers” included an information campaign in May 1997 among smokers in Delhi about
the ban on smoking in public places as defined by the Delhi Prohibition of Smoking and
Non-Smokers Health Protection Act, 1996. The ‘courtesy of choice ’ campaign has been
run in many countries and is one example of how the tobacco industry applies its
learnings across the world .In India it is now being run in hotels ,resturaunts and bars and
apopular Yin and Yang symbol is being used to promote tolerance of smokers and
smoking . This is one more example of how the tobacco industry tries to obfuscate the
issues relating to the harmful effects of cigarettes.
Influencing Opinion Leaders and Decision-Makers
The Tobacco Institute of India (TII), which is an industry body funded mainly by ITC,
20
brings out promotional material that is aimed at influencing opinion leaders and decisionmakers. It has done this through a multi-pronged information campaign that focuses on
the following features of the industry.
•
As a Driver of Economic Growth: India as the third-largest producer of tobacco has
the potential of emerging as one of the top two or three players in the US $250 billion
world market. Given the fact that India is the lowest-cost grower of tobacco and also
the lowest-cost converter of tobacco into cigarettes, Indian economy could gain by
becoming a low-cost production centre for multinational corporations. Further, the
TII argues that to increase exports, there cannot be a separate policy for exports and
another one for the domestic market. Exports cannot be more than the domestic
market as it is a function of the domestic base.
•
As an Enhancer of Farmers’ Incomes: The TII claims that a farmer earns 2.5 to 3
times as much on farming Virginia and Burley tobaccos thereby offering best returns
on their investment. Further, being a labour-intensive crop, it provides income to an
estimated 1 million small and marginal farmers and 5 million landless farm labour.
While the farmer who grows cigarette tobacco earns Rs 13,000 per hectare, those
growing tobacco for bidis earn just Rs 6000.
•
As a Revenue Earner for the Government Exchequer: Tobacco contributes 12% of
all-India excise collections. 87% of this is contributed by the cigarette segment, while
accounting for only 19% of domestic tobacco consumption. The cigarette lobby
argues that as a result of high taxation, the demand for cigarettes has declined and
therefore the tax base has shrunk. Thus, taxation has only succeeded in “reducing the
potential of the only revenue-efficient product – i.e. cigarettes – without achieving
any tobacco control”. Actual tax collections from cigarettes are likely to fall by over
Rs 6 billion. Therefore, the industry argues, moderate rates of duty increases should
be applied and luxury taxes by state governments should be discouraged.
These three planks are regularly re-inforced through the tobacco industry’s interactions
with the press, parliamentarians, economists, bureaucrats and other decision-makers in
government. The tobacco manufacturers also have built a relationship with tobacco
growers. The director of the TII, A.C.Sarkar wrote in The Economic Times: “Domestic
(cigarette) manufacturers have a track record of providing assistance to farmers in
distress owing either to fluctuations in export demand or prices. They have been using
almost 100% of Indian leaf tobacco in their manufacture, which also accounts for nearly
50% of locally grown FCV tobacco. When exports suffered because of the lower price
ruling in Brazil and Zimbabwe, domestic manufacturers counterbalanced it by paying
higher prices to Andhra Pradesh’s tobacco farmers. They also compensated the losses
arising from cyclone damage.”
21
The Industry and Self-Regulation
As the anti-tobacco movement gathers momentum ,the tobacco industry is more than a
little anxious to project itself as a socially-responsible citizen .The tobacco country has
done two things to ensure that their interests are protected .Through the TII it has got
involved in the code developed by the Advertising Standards Council of India(ASCI) and
it has developed its own code .While the ASCI code addresses some issues relted to
indirect advertising,targeting of minors and use of celebrities ,it does not address the
issue of sponsorhips .Moreover it is not explicit enough and therefore allows some degree
of cicumvention .The TII code is a smokescreen and is the industries effort to cloud the
real issues .The success of any voluntary code is judged by the degree to which it is
adhered to. Going by the indian experience it is clear that self regulatory voluntary code
do not work .This is demonstrated by the fact that brand names of cigarette brands appear
all over the media through the sponsorship or trademark extension route ,the tobacco
companies continue to use celebrities in their advertising , sponsor music events which
have high appeal amongst the youth .The experience of other countries clearly indicates
that voluntary codes for tobacco do not work and therfore should not be relied upon .See
Annexures 2 and 3 for the TII and the ASCI code .
Even while proposing self-regulation, the chairman of ASCI, Dorab Sopariwala
commented: “At least the advertising has not been banned totally. Besides, we are in the
business of doing advertising responsibly. We cannot act, or propose to act like the
government and ban it totally.” He did admit though that most multinationals are used to
operating within similar or tougher codes. In fact they have been consistently flouting the
code with impunity.
“The US tobacco giants never intended to apply the code to their international tobacco
operations, a clear signal of the need for global tobacco control standards. In fact, the
corporations insist the code applies only in the US and that criticism of its marketing in
developing countries is paternalistic,” wrote John Glenn in Tobacco International of
August 1996.
22
Recommendations
Policy Measures:
•
•
•
.
•
A comprehensive ban on advertising covering all media and sponsorships. This could
be implemented over a one year period. In the interim a strict enforcement of the
existing code of advertising on Doordarshan, the national broadcaster and to be
extended to all other television and cable networks. The Indian Broadcasters’
Foundation (IBF), a trade body being constituted, to be mobilised to adopt an
advertising code that bans tobacco and related products’ promotion, advertising and
sponsorships. For outdoor media, as most of the contracts are controlled by
government bodies, it should be stipulated that outdoor space cannot be used by
tobacco advertisers.
Use of celebrities (sports, films and music) should not be allowed as it impacts the
young.
Censorship of content in programmes on television or feature films that display and
depict brandnames and cigarette consumption is recommended.
Statutory warning labels and signs to be displayed more prominently on packs and in
advertising. The warning to include explicit information about the harmful effects of
tobacco.
Campaign Strategy
It is important that multi-media campaign strategy be used to :
1) Educate the public about the harmful effects of tobacco ,across the world specially in
countries like Thailand ,Canada and California very effective campaigns have been
run .A great example of the kind of initiative one can take comes out of Thialand
where some of the major harmful effects of cigarettes are mentioned on the cigarette
packs themselves .
2) Educate the policy makers about the deception behind the tobacco industries
arguments
3) Involve the medical community and the entertainment industry to appeal to the youth
to support the cause of the anti-tobacco campaign
4) Run an aggressive media advocacy campaign not just to counter the arguments of
thetobacco industry but to pre-empt them .The press and television can be motivated
to run programme content and editorial that raises the awareness of the issues related
to tobacco .A print version of the tobacco death clock can be run in newspapers in
every country to remind people on aregular basis ,in television a programme on the
lines of South Africa’s Soulcity can be introduced to take on the health argument .
5) Mobilise support of NGO’S to activate ground level support for the campaign in the
manner that ASH of UK does .
23
For the media campaign to be successful each country shoud adapt a campaign that is
locally relevant yet draws on a global approach .In the case of India for example the
problem of Bidis is quite unique and therefore needs to be addressed as well .
In addition to the media and the policy measures an international organisation like the
WHO should use its moral authority with sports organisations and media companies like
the International Olympic Association and the FIFA to ensure tthat sports and its telecast
becomes tobacco free .
24