Tobacco in India

Euromonitor International July 2011

Tobacco

India

List of Contents and Tables

Executive Summary ................................................................................................................................................ 1 Tobacco Continues To Grow in Both Volume and Value Terms During 2010.......................................................... 1 Proposal for New Pictorial Warnings on Packaging Stirs Up Tobacco Industry ..................................................... 1 Ban on FDI in Indias Tobacco Industry Receives Mixed Responses ....................................................................... 1 Traditional Retail Outlets Remain the Principal Distribution Channel for Tobacco ................................................ 1 Cigarettes Is Set To Increase at A Higher Rate Than Other Tobacco Products ....................................................... 1 Operating Environment ......................................................................................................................................... 1 Legislative Overview/ Fctc Ratification .................................................................................................................... 1 Summary 1 Legislation Summary at a Glance ...................................................................................... 2 Country-specific Legislation .................................................................................................................................. 2 Minimum Legal Smoking Age ................................................................................................................................... 2 Smoking Prevalence .................................................................................................................................................. 2 Table 1 Smoking Prevalence in Adult Population 2005-2010 ........................................................ 4 Table 2 Number of Smokers by Gender 2005-2010 ....................................................................... 4 Tar Levels ................................................................................................................................................................. 4 Health Warnings ....................................................................................................................................................... 4 Advertising and Sponsorship..................................................................................................................................... 5 Smoking in Public Places .......................................................................................................................................... 6 Low Ignition Propensity (lip) Regulation .................................................................................................................. 6 Litigation................................................................................................................................................................... 7 Death by Cause ......................................................................................................................................................... 7 Table 3 Death by Cause 2005-2010................................................................................................ 7 Taxation and Pricing .............................................................................................................................................. 7 Duty Paid Packet Marks ........................................................................................................................................... 7 Taxation Rates .......................................................................................................................................................... 7 Table 4 Cigarettes Taxation 2005-2010.......................................................................................... 9 Average Cigarette Pack Price Breakdown ................................................................................................................ 9 Table 5 Average Cigarette Pack Price Breakdown: Brand Examples 2010 ...................................10 Production/imports/exports ..................................................................................................................................10 Table 6 Production/Imports/Exports 2005-2010............................................................................11 Table 7 Trade Statistics Flue Cured Virginia Tobacco Auction 2004-2009 ...............................11 Table 8 Trade Statistics Tobacco 2005-2010...............................................................................11 Illicit Trade in Cigarettes .........................................................................................................................................11 Beedis.......................................................................................................................................................................12 Market Indicators ..................................................................................................................................................13 Table 9 Illicit Trade Estimate of Cigarettes by Volume 2005-2010 ..............................................13 Market Data ...........................................................................................................................................................14 Table 10 Sales of Tobacco by Category: Volume 2005-2010 .........................................................14 Table 11 Sales of Tobacco by Category: Value 2005-2010 ............................................................14 Table 12 Sales of Tobacco by Category: % Volume Growth 2005-2010 ........................................14 Table 13 Sales of Tobacco by Category: % Value Growth 2005-2010 ...........................................14 Table 14 Forecast Sales of Tobacco by Category: Volume 2010-2015 ...........................................15 Table 15 Forecast Sales of Tobacco by Category: Value 2010-2015 ..............................................15 Table 16 Forecast Sales of Tobacco by Category: % Volume Growth 2010-2015..........................15 Table 17 Forecast Sales of Tobacco by Category: % Value Growth 2010-2015 .............................15

Euromonitor International

Page

Tobacco

India

Definitions ...............................................................................................................................................................16 Summary 2 Research Sources ..............................................................................................................16

Euromonitor International

Page

ii

Tobacco

India

TOBACCO IN INDIA
EXECUTIVE SUMMARY
Tobacco Continues To Grow in Both Volume and Value Terms During 2010
Tobacco in India continued to increase in value during 2010. Growth in value sales was supported by the ongoing volume growth in cigarettes and smokeless tobacco, which are the two biggest contributors to sales of tobacco in India. Furthermore, the rising taxation levied on smokeless tobacco and, in particular, cigarettes, pushed value growth into double-digit territory during 2010.

Proposal for New Pictorial Warnings on Packaging Stirs Up Tobacco Industry

After the implementation of pictorial warnings on all tobacco packaging in India during 2009, the current crop of pictorial warnings, which depict X-rays of cancerous lungs and the image of a scorpion, are perceived not to constitute a sufficiently strong warning by many government agencies. Thus, the Ministry of Health and Family Welfare issued a notification during May 2010 that the new proposed pictorial warnings of a cancer-stricken mouth must be implemented on all tobacco packaging from 1 December 2010. Somewhat predictably, this notification was met with a negative response from industry players such as ITC and Godfrey Phillips India Ltd, which resulted in a stop being put on production of tobacco products until such time as the government decided to review its policy of beefing up the pictorial warnings on tobacco packaging again in December 2011.

Ban on FDI in Indias Tobacco Industry Receives Mixed Responses

During 2010, the Indian government took the step of issuing a blanket ban on foreign direct investment (FDI) in the countrys tobacco industry. The responses to this policy among key tobacco industry players have been mixed, particularly among cigarette producers. According to some key tobacco industry players, the ban on FDI will create a less competitive operating environment as the move will benefit completely local players such as ITC whilst being potentially negative for international players such as Godfrey Philips India and Japan Tobacco International in terms of making it more difficult for them to obtain external financial support.

Traditional Retail Outlets Remain the Principal Distribution Channel for Tobacco
Paan shops, which are categorised under other grocery retailers, remained the most important distribution channel for tobacco in India during 2010, particularly cigarettes, smokeless tobacco and, increasingly, cigars and cigarillos. Convenience is the key factor in the dominance of paan shops, which are located on corners in the majority of high streets across India. Moreover, the possibility of purchasing single sticks also encourages Indian consumers to purchase their cigarettes from paan outlets. Nonetheless, with the presence of modern grocery retailers such as supermarkets/hypermarkets expanding rapidly across India, the volume share of total tobacco distribution accounted for by paan shops is set to fall slightly over the forecast period.

Cigarettes Is Set To Increase at A Higher Rate Than Other Tobacco Products

Constant value growth in tobacco in India is projected to be positive during the forecast period due to anticipated positive growth in both cigarettes and smokeless tobacco, the two major contributors to volume sales of tobacco in India. Furthermore, the increases in excise tax expected after 2011 will also contribute to value growth. Cigarettes is expected to continue increasing in constant value throughout the forecast period, retaining its position as the largest contributor to total tobacco value sales in India, ahead of smokeless tobacco.

OPERATING ENVIRONMENT
Legislative Overview/ Fctc Ratification

Euromonitor International

Page

Tobacco

India

The Indian government maintains some of the toughest anti-smoking policies and regulations in the world. At the time that it became one of the first countries to ratify the global FCTC framework in 2004, India was already one step ahead, having already enacted and passed the Tobacco Control Act 2003 and the Cigarettes and Other Tobacco Products Act on 18 May 2003 (COTPA 2003). However, Indian policies and regulations are difficult to enforce due to the countrys huge population and the overall lax enforcement culture. With the exception of the mandated increase in tobacco taxation, the adoption of FCTC measures failed to have a significantly negative effect on volume sales of cigarettes in 2010, despite the introduction of pictorial health warnings on all tobacco packaging. This was again due to the lack of enforcement and implementation of the law. Nonetheless, the implementation of Indias public smoking ban has had some impact, albeit not on volume sales of cigarettes. Instead, a negative effect has been felt in terms of falling volume sales of large premium cigars, which are normally smoked in hotels and restaurants. However, the increases in tobacco tax, which have had the heaviest impact on the volume consumption of tobacco in India, have had a greater impact on cigarettes than other forms of tobacco due to the high number of companies in India which manage to evade paying tax and the fact that cigars attract more affluent consumers who are less concerned about the unit price rises which flow from taxation increases. There are quite a number of anti-smoking bodies in India such as the National Organisation for Tobacco Eradication (NOTE), the Indian Society against Smoking (ISAS), the International Coalition against Tobacco (ICAT) and the National Tobacco Control Cell (NTCC), among others. The National Organisation for Tobacco Eradication and the Indian Society against Smoking are the most vocal anti-smoking bodies currently active in India and scrutinise the implementation of tobacco regulations across the country. The impact of such organisations was, however, insufficient to effect any meaningful reduction in volume sales of tobacco in India over the review period as consumers continued to smoke despite the increasing prevalence of anti-smoking campaigns. India has implemented most of the measures required under the FCTC such as printing verbal and graphic health warnings on all tobacco packaging, banning the advertising and promotion of tobacco, implementing restrictions on retail points of sale to some extent and banning smoking in public places and workplaces. Currently, there is little or no speculation as to the introduction of new regulations over the forecast period.
Summary 1 A FCTC ratificatio n B Minimum smoking age Legislation Summary at a Glance C Tar cap D Verbal pack health warning Yes E Graphic pack health warning Yes F Advertisin g ban or restriction G Retail point-ofsale restriction s Yes H Public smoking ban I Restaura nt/ bars public smoking ban Yes

2004
Source:

18

No

Yes

Yes

Euromonitor International

COUNTRY-SPECIFIC LEGISLATION
Minimum Legal Smoking Age
Under COTPA 2003, it is illegal in India to sell tobacco to those aged under 18. According to a University Grants Commission (UGC) directive, selling tobacco products within a 100 yard radius of their campuses is also illegal. A fine of Rs200 can be imposed for selling tobacco to those aged under 18. However, despite the existence of these strict regulations, enforcement remains very weak. The majority of retailers in India do not ask for age verification, while vigilance and inspection by the authorities remains weak. There is little likelihood that the minimum legal smoking age will increase in India over the forecast period.

Smoking Prevalence

Euromonitor International

Page

Tobacco

India

Male smoking prevalence in India was 24% in 2010, while female smoking prevalence was very low at 4%. This equates to a smoking population of around 110 million people, or some 15% of the overall Indian population. Men accounted for over 85% of smokers in India during 2010. The much smaller proportion of female smokers was due to cultural issues as smoking among women is very much frowned upon in India. Furthermore, Indian women are much more likely to consume chewing tobacco than smoke cigarettes. The advent of health warnings on tobacco packaging, especially graphic pictorial warnings, and the ban on the advertising and promotion of tobacco have had an impact in terms of reducing the number of new smokers in India as health awareness increases among the general population, particularly in Indias urban areas. Nonetheless, smoking is still considered a lifestyle choice among Indias younger generation as the majority of smokers in India had taken up the smoking habit before reaching the age of 18. Thus, although smoking prevalence in India declined slightly in 2010, the number of smokers overall continued to rise. It is therefore expected that volume sales of cigarettes will also rise over the forecast period. The public smoking ban, which was implemented in India during October 2008, had an immediate impact on the smoking population as the authorities were initially fairly stringent in enforcing the ban. From the end of 2009 however, enforcement of the smoking became more lax. Furthermore, foodservice outlets such as hotels, bars and pubs merely created smoking rooms so as to accommodate their smoking customers. Thus, the ban had little impact on smoking prevalence in India. Ongoing increases in the tax levied on cigarettes and tobacco may have had an impact on smoking prevalence in India as it forces smokers to reduce their volume consumption of cigarettes, although many Indian smokers merely shifted to more affordable beedis, the ubiquitous South Asian cigarettes made of tobacco flake wrapped in tendu leaves and tied with string at one end. Generally, it is only Indias more educated urban consumers who have any awareness of the negative effects of tobacco. However, following the introduction of pictorial health warnings, a growing number of rural consumers are becoming increasingly aware of the damage which can be caused by the use of tobacco. Public health campaigns remained highly visible in India during the tenure of the previous Health Minister Anbumani Ramadoss. However, during the first half of 2009, Anbumani Ramadoss resigned and was replaced by Shri Ghulam Nabi Azad, who has adopted a less visible anti-tobacco stance. Smoking has always been acceptable in India due to the long history of smoking unbranded tobacco products through hookahs, not to mention the popularity of beedis and, latterly, cigarettes. As rapid urbanisation takes over and Indians are subject to increasingly hectic and stressful lifestyles, smoking is widely seen as an ideal way of relieving stress. Furthermore, cigarettes have become a fashionable lifestyle choice for ambitious young executives looking to fit in with their upwardly mobile peers. In line with ongoing urbanisation and higher levels of disposable income, Indian women are increasingly taking up smoking as well, despite the fact that smoking among women is culturally frowned across much of India, especially in more remote rural areas. Thus, the size of the female smoking population in India is expected to continue growing over the forecast period, particularly in urban areas. Nicotine replacement therapy (NRT) is available over the counter in India. Popular NRT products include Nulife Chewettes from Ceejay Healthcare Ltd, which were priced at around Rs125 for 10 units during 2010 and are available in two flavour variants: Eucomint and Good Kha, which is flavoured to mimic the taste of gutka, a form of chewing tobacco which is popular in rural India. Nonetheless, due to the limited availability of these products, NRT smoking cessation aids did not have any significant effect on smoking prevalence in India during the review period. Prescription products are also available, including Pfizer Ltds Champix and Sun Pharmaceuticals Ltds Smoquit. However, these are not, strictly speaking, NRT products and treatment can be very expensive. For example, a 12-week course of treatment can cost up to Rs12,000. These non-NRT products remain unpopular among Indian smokers who wish to kick their habits. Johnson & Johnsons Nicorette NRT chewing gum was launched in India December of 2010, although the high pricing for Nicorette placed it outside the reach of the majority of Indias mass consumers. Nicorette is available in India in two pack sizes: 10 pieces of gum for Rs48 and four pieces of gum for Rs22. Each piece of Nicorette gum contains 2mg of nicotine content over-the-counter and 4mg through prescription. The price of a pack of Nicorette is similar to the price a box of domestically manufactured king size cigarettes, which makes it affordable for middle income and upper income consumers only. Unless and until Nicorette becomes available in single unit purchases, potential sales will remain limited to a small proportion of Indias smokers.

Euromonitor International

Page

Tobacco

India

Table 1

Smoking Prevalence in Adult Population 2005-2010

% adult population 2005 Adult Male Population Adult Female Population Total Adult Population 25.0 3.7 14.7 2006 25.0 3.8 14.8 2007 25.1 4.2 15.0 2008 25.1 4.2 14.9 2009 24.9 4.1 14.8 2010 24.4 4.4 14.7

Source Euromonitor International from national statistics Note Definition of adult smokers: daily smokers who are older than the minimum legal smoking age in the country

Table 2 000

Number of Smokers by Gender 2005-2010

2004 Male No of Smokers Female No of Smokers Total No of Smokers

Source:

2006 88,317.6 12,806.9 101,124.5

2007 90,429.6 14,328.2 104,757.9

2008 92,584.9 14,448.4 107,033.3

2009 93,650.0 14,741.1 108,391.0

2010 93,735.1 16,126.6 109,861.7

86,249.0 12,093.3 98,342.3

Calculated using above % prevalence and Euromonitor International Country Population Data

Tar Levels
Tar levels for high tar cigarettes in India vary between 12.8mg and 21.4mg, while the tar content of low tar cigarettes ranges between 5.1mg and 5.5mg. Since 2006, according to the Cigarettes and Other Tobacco Products Act, tobacco companies have not been allowed to label cigarettes using the words light, mild, low tar, slim or safe. However, since May 2007, it has been mandatory for all tobacco manufacturers in India to mention the percentage of nicotine contained within their products. At the time of writing, there were no indications that a tar cap would be introduced in India over the forecast period. High tar cigarette brands continued to dominate cigarettes in India during 2010, accounting for 99% of total volume sales. Indian smokers traditionally prefer strong cigarettes and the popularity of high tar brands is in keeping with the widespread consumer preference for chewing tobacco, which also has a very strong taste. Mid tar and low tar cigarette brands are more expensive than high tar brands, which limits demand to the urban dwellers of Indias larger cities, where disposable income levels are considerably higher. There is a general perception that mid tar and low tar cigarette brands carry less of a health risk than high tar cigarette brands, which makes them attractive to new smokers, particularly women. There is no demand for ultra low tar cigarettes in India, and volume sales of ultra low tar cigarettes remained negligible in 2010. Indian smokers prefer high tar cigarettes due to their strong taste. A cap on maximum tar and nicotine level could therefore have a polarising effect, giving rise to two very different potential scenarios. The first of these is that higher income consumers could end up smoke more cigarettes in order to satisfy their nicotine cravings, boosting volume sales on one hand, while lower income consumers could switch to beedis or chewing tobacco, which are more affordable, limiting volume sales on the other hand.

Health Warnings
In 2006, amendments to the Cigarettes and Other Tobacco Products Act 2003 (COTPA 2003) by the Ministry of Health made it mandatory for all tobacco manufacturers to display graphic written and pictorial health warnings on the packaging of all of their products; COTPA became law in India during 2007. Packaging for all tobacco products sold in India must feature a skull and crossbones symbol or a picture showing the damage that smoking can do to the human body. The aim of printing pictures depicting morbid images such as cancerous lungs, rotting teeth and diseased throats is intended to add shock value to tobacco packaging in a bid to encourage more smokers to give up their habits. All tobacco packaging must also carry written warnings in local dialects. The messages imparted include such stark warnings as Tobacco causes a slow and painful death. These warnings must occupy at least 50% of the front and back covers of all tobacco products packets. Additionally, all cigarette packets are required to carry the statutory warning Cigarette smoking is harmful to health. The use

Euromonitor International

Page

Tobacco

India

of graphic images on tobacco packaging is explicable by reference to the fact that many tobacco users in India are illiterate, particularly the low income population and rural consumers. However, Indias tobacco lobby has repeatedly expressed to the government its displeasure concerning the implementation of these new rules regarding graphic health warnings. Cigarette manufacturers understandably fear that such gory images will simply scare smokers off their products altogether, causing a drastic decline in volume sales. As a result of this lobbying, the implementation of legal rules requiring graphic health warnings on tobacco packaging was delayed. In February 2008, the Ministry of Health amended the proposed law so as to render the required graphic warnings less vivid. According to the new directive on pictorial health warnings, all tobacco packets sold in India must carry one of two comparatively mild images to deter Indian people from smoking: a scorpion sign depicting cancer or an X-ray of a man suffering from lung cancer. The written warnings in local dialects will occupy only at least 40% of the front and back covers of cigarette packs, smaller than the previously required 50% covering. Nonetheless, the law requiring pictorial warnings was not implemented until May 2009. Furthermore, the written warnings in numerous Indian dialects are often rendered ineffective due to the fact that cigarettes are often sold to the end user in a different state to that originally intended by the manufacturer and wholesale distributor and the inability of many Indian people to understand the dialects and languages of other states and areas of India. Moreover, these pictorial health warnings have not yet had a huge impact on smoking prevalence in India as a large volume of cigarettes sold in India are sold by the stick, which means that many smokers never see the packs from which the cigarettes come and are therefore entirely oblivious to the existence of these warnings. Pictorial warnings serve mainly as a reminder for those who purchase cigarettes through chained modern grocery retailers such as supermarkets/hypermarkets, while lower income consumers who normally purchase their cigarettes from street vendors have no opportunity to be reminded of the dangers of smoking. Despite the fact that the pictorial warnings will be rotated every 12 months from the date of the implementation, both images are deemed to be extremely mild in comparison with the very graphic and morbid images used in cigarette and tobacco health warnings in other countries. Thus, despite the Indian governments efforts to introduce statutory warnings in both English and local dialects as well as graphic and thought-provoking pictorial warnings, the reality is that the compromise position which has been adopted should not be expected to have a massive impact on smoking prevalence in India during the forecast period. In 2010, the ministry of Health and Family Welfare was ordered to implement the introduction of an extremely graphic picture of a cancer stricken mouth on the packaging of all tobacco products by December 2010. However, the two largest cigarette manufacturers in India responded by temporarily ceasing cigarette production, citing as the reason for this the uncertainty over the pictorial warnings to be carried on the packaging as well as the challenges faced in terms of repackaging and remanufacturing cigarettes and the packaging for cigarettes. As a result, the government decided to retain the existing mild images of an X-ray of a cancerous lung and a scorpion, with another review of the strength of the pictorial warnings used on tobacco packaging scheduled before 1 December 2011.

Advertising and Sponsorship

Advertising through media (television, radio, billboards, consumer press, trade press, cinema, etc) India has some of the toughest legislative measures concerning the advertising of tobacco products in the world. These measures form a key plank of the governments ongoing efforts to reduce tobacco consumption. According to COTPA 2003, all forms of tobacco advertising in all forms of media, including television, radio, outdoor media and the press, have been banned since 1 May 2004. These restrictions on promotional measures became even tighter during the review period. Since 2 October 2005, it has no longer been possible for any person, individual or character in films or on television to be depicted using cigarettes or other tobacco products, except for certain exemptions provided under COPTA 2003. Indirect advertising also remains prohibited. In addition, Indian law strictly prohibits the use of the brand names and images of any tobacco products for the purposes of the marketing, promotion or advertisement of any other goods, services and events. According to this directive, Godfrey Phillips India Ltd was forced to rename its Red & White Bravery Awards, which were named after one of its most prominent brands, Red & White, as the Godfrey Phillips Bravery Awards.

Euromonitor International

Page

Tobacco

India

Furthermore, ITC Ltd was forced to withdraw the Wills brand name from its cigarettes portfolio as the Wills brand had ventured into apparel retailing and had been repositioned as a general lifestyle brand. This was perceived as an alternative attempt to promote cigarettes and tobacco, and was subsequently prohibited. The clampdown on tobacco advertising in India prompted numerous tobacco companies to develop more creative marketing strategies. Golden Tobacco Ltd, for example, launched Chancellor XP in 2005, a cigarette brand positioned as the choice of Indias information technology workers. While the XP in the brand name ostensibly refers to its extra premium status, it is also intended as a subtle reference to the well-known Microsoft operating system, Windows XP. In order to reinforce this association with Indias information technology professionals, the company added the tagline Luxury blend for the finest minds in India to its packaging. Advertising through retail point-of-sale Under FCTC rules, tobacco products can only be advertised through point-of-sale locations and, even here, there are restrictions in India relating to the size, content and number of advertisements allowed in each retail outlet. Only two advertising boards measuring 90cm x 60cm can be displayed at point-of-sale locations and these boards must not be backlit or illuminated in any way. Mandatory warnings such as Cigarettes will not be sold to persons below 18 years of age and Usage of tobacco products is harmful to health must be displayed at all point-of-sale locations for tobacco products. These restrictions allow retailers to command premiums from tobacco companies in exchange for the limited advertising space being provided. Retail shelf space is also sold at premium prices in both retail outlets and the small kiosks operated by street vendors. A number of Indian tobacco companies hold exclusive contracts with chained and independent retailers so as to ensure that their brands are allocated the most visible shelf positions and stacked so that the front of the pack and the allimportant brand name is facing outwards rather than sideways and in full view of customers. Sponsorship of sporting/music events Under COTPA 2003, the sponsorship of sporting and cultural events (including music concerts) is strictly prohibited. Distribution of tobacco branded gifts (eg cigarette branded lighters, pens, etc) No companies or persons may distribute cigarette branded gifts such as lighters, as this is considered surrogate advertising under COTPA 2003.

Smoking in Public Places

Smoking in public places was first banned in India in May 2004. The ban covered smoking in auditoriums, hospitals and other healthcare institutions, amusement centres, restaurants, public offices, educational institutions, libraries and other buildings visited by the general public. However, the rule was commonly flouted and the ban had virtually no effect on sales of cigarettes and other tobacco products. In October 2008, the government re-enforced the ban to include a wider range of non-smoking places such as nightclubs and aimed to ensure that it was better enforced. Responsibility for adhering to the ban is not only placed on smokers themselves, but also on the owners and managers of the establishments in which smoking is banned; messages must be prominently displayed stating that smoking within the building in question is an offence for which the management is responsible. Hotels and restaurants with more than 30 rooms or with seating capacity exceeding 30 people are obliged to provide separate smoking and non-smoking zones. Offenders face fines of up to Rs200. The only places where Indian people are now allowed to smoke are inside their own homes and in open spaces. After the smoking ban was implemented in October 2008, many hotel and foodservice outlet owners constructed smoking rooms so as to accommodate he smokers who patronise their outlets. Furthermore, the size of Indias smoking population has not been significantly impacted by the governments smoking ban due to the absence of enforcement of the regulations.

Low Ignition Propensity (lip) Regulation

At the time of writing, there was no news about regulations for LIP cigarettes due to the fact that low ignition propensity cigarettes are virtually non-existent in India.

Euromonitor International

Page

Tobacco

India

Litigation
In April 2008, the National Organisation for Tobacco Eradication (NOTE) filed a suit in the High Court of Bombay against actor Amitabh Bachchan for smoking onscreen in one of his films. The actor was shown smoking a cigar in the movie Family, in gross violation of the rule prohibiting on-screen smoking. Billboards and posters used for the films promotion also showed the actor smoking. Following the litigation, the producers of the film promptly responded by pulling down the offending billboards and replacing them with new ones. Also in 2008, there was a public outcry against Shah Rukh Khan, another prominent film actor, for being caught smoking on national television during a cricket match. The incident occurred during the Indian Premier League cricket tournament, when Shah Rukh Khan was clearly caught by cameras smoking in the stands. Following this, the previous Union Health Minister, Dr A Ramadoss, publicly appealed to all film personalities to refrain from smoking while in public.

Death by Cause
During 2010, the death rate from smoking-related diseases in India exceeded 236 per 100,000 inhabitants. This number was lower than the 2009 figure of 240. Moreover, the falling rate of smoking-related deaths in India is not in line with the growing number of smokers overall. Thus, the lower number of deaths caused by smokingrelated diseases could be due to greater health awareness among the Indian population and improvements in medical treatment. The significant presence of smokeless tobacco such as chewing tobacco in India did not have any impact in terms of lower rates of respiratory diseases over the review period due to the wide availability of beedis, which are affordable for lower-income consumers, particularly in rural areas. However, the significant presence of smokeless tobacco leads to the prevalence of other diseases such as oral cancer. According to industry sources, it is estimated that approximately 75% of cancer deaths in India each year are attributable to oral cancer alone. Moreover, India accounts for 90% of all oral cancer cases in the world, reaffirming the fact that the majority of tobacco consumption in India can be accounted for by chewing tobacco.
Table 3 Death by Cause 2005-2010

Deaths per 100,000 inhabitants 2005 Death by diseases of the respiratory system Deaths from heart disease Deaths from lung cancer Causes of death for smoking related diseases (total)
Source: Official statistics

2006

2007

2008

2009

2010

123.2 119.3 43.2

112.9 110.7 40.7

109.9 108.2 39.9

106.7 104.5 38.7

104.8 102.8 38.2

100.9 98.4 37.0

285.7

264.3

258.0

249.9

245.8

236.2

TAXATION AND PRICING

Duty Paid Packet Marks
It is mandatory for the packaging of all tobacco products sold in India to carry information stating the maximum retail price as well as a duty-paid packet mark.

Taxation Rates
All cigarettes in India are subject to a basic excise duty (BED) as well as an additional excise duty (AED), which is calculated on every 1,000 sticks produced. The Indian government raised the excise duties levied on

Euromonitor International

Page

Tobacco

India

cigarettes in almost every year of the review period. In contrast, beedis, gutka and other forms of chewing tobacco attract much more lenient levels of taxation, primarily due to the large number of Indians employed in their production. In 2008, through the Central Board of Excise and Customs, the Indian government introduced a lump-sum tax scheme for gutka manufacturing units. Under the scheme, payments of up to Rs1 million fall due per month from a tax levied per packaging machine, a move aimed at inhibiting tax evasion. The manufacturers of gutka are now required to pay Rs1.25 million as duty per month on every machine churning out pouches of gutka which carry a retail price of up to Rs1. Meanwhile, for gutka with a retail price of over Rs1, excise tax ranges between Rs1.4 million and Rs7 million per month for each packing machine. Manufacturers which opt to join the scheme will be exempt from inspections and searches of their factories. This initiative aims to reduce tax evasion by preventing companies from selling products at very low prices in order to increase overall consumption. Import duties for imported cigars and cigarillos remained at 60% in 2010. In addition, cigars and cigarillos are also subject to a basic excise duty of 8%, an additional excise duty of 1.6% and a 1.6% Health Cess in 2009. In 2010, this excise duty was replaced by composite rate of 10% or Rs1,227 per 1,000 sticks, whichever is higher, and 1.6% or Rs246 per 1,000 sticks, whichever is higher. Adjustments to excise tax on tobacco products generally follow the Union Budget announcement, which normally takes place annually, at the end of each February. Tax increases on tobacco, especially cigarettes, tend to have a tremendous impact on the cost and affordability of cigarettes and other tobacco products in India. The largest impact is usually felt among consumers of economy cigarettes, including unfiltered cigarettes, which are mainly targeted at lower income consumers. Filtered cigarettes are pitched to middle income and upper income consumers, who were less affected by tobacco tax increases during the review period. The major tobacco tax increases registered in India during the review period served only to reduce legitimate sales and increased the scope and penetration of the clandestine trade in illicit cigarettes and tobacco products. For example, in 2008 the excise tax on unfiltered cigarettes was increased from Rs169 to Rs819 per 1,000 sticks for cigarettes less than 60mm in length and Rs546 to Rs1,323 per 1,000 sticks of less than 70mm in length. This tax increase led to a significant drop in legitimate sales, negatively impacting unfiltered cigarette brands significantly. By contrast, the impact of the year-on-year tax increase, which was less than 10%, was not that significant in terms of reducing volume sales of legitimate cigarettes and tobacco products. There are two very different consumer segments for tobacco products in India. On one hand, the low income consumers who normally smoke unfiltered cigarettes switched to beedis or chewing tobacco in response to the implementation of such high excise tax increases for tobacco. On the other hand, the middle income and upper income consumers who normally smoke filtered cigarettes and cigars continued to smoke the same products, albeit less frequently, rather than switch to unfiltered cigarettes. In 2010, the Indian government saw fit to introduce a new tax rate of Rs669 per 1,000 sticks for filtered and unfiltered cigarettes with a length of less than 60mm. Nonetheless, the introduction of the new rate of taxation for these cigarettes is unlikely to have any impact in terms of boosting government revenues as, at Rs1.5 per stick, the retail price of duty paid cigarettes in this category remained higher than the price charged per stick for illicitly traded cigarettes, which remain priced at around Rs1 per stick, according to certain industry sources. Thus, volume sales for cigarettes shorter than 60mm in length remained minimal in India during 2010 and some companies such as ITC and GPI even went so far as to withdraw their products from in category during 2010. During the review period, some states in India raised the level of VAT for cigarettes beyond the standard 12.5% to between 16% and 20%. This tax increase forced many cigarette manufacturers to increase the retail price charged for their cigarettes even further. The Indian government is expected to end up with a fiscal deficit of some 5% of total GDP in 2011, although it must be noted that this fiscal deficit will be lower than that recorded during 2010. Based on the 2010 budget announcement for 2011, there is set to be a zero increase in excise tax and custom duty for tobacco products. This will engender a degree of stability among tobacco manufacturers, which will in turn boost volume growth in tobacco, particularly in cigarettes. Furthermore, Indias leading cigarette manufacturers, particularly ITC, are expected to increase production in order to take advantage of the zero excise tax increase anticipated for 2011.

Euromonitor International

Page

Tobacco

India

Furthermore, a Goods & Services Tax is expected to be introduced in India during the early stages of the forecast period, an eventuality which could have a negative impact on volume sales of cigarettes should the rate be higher than expected. Nonetheless, with states in India increasingly implementing 20% VAT to tobacco products, tobacco manufacturers are already incorporating price increases in anticipation of a 20% VAT rate becoming mandatory across the nation of India. Thus, should the GST for tobacco products be levied at the full 20%, then this would not necessarily have a significantly negative sudden impact on the tobacco industry, particularly not cigarettes manufacturers.
Table 4 Cigarettes Taxation 2005-2010

Excise tax, including AED (Rs per 1,000 sticks) Unfiltered < 60 mm 60-70 mm Filtered < 60 mm 60-70 mm 70-75 mm 75-85 mm >85 mm
Source: Note:

2005

2006

2007

2008

2009

2010

150 495

160 520

168 546

819 1,323

819 1,323

669 1,473 669 969 1,473 1,959 2,363

740 1,200 1,595 1,960

780 1,260 1,675 2,060

819 1,323 1,759 2,163

819 1,323 1,759 2,163

819 1,323 1,759 2,163

Official statistics (Central Board of Excise Customs) The tax rates listed above are basic and additional excise duties totalled together

Average Cigarette Pack Price Breakdown

With mid-priced cigarettes being the largest contributor to value sales in cigarettes in India during 2010, the average proportion of tax within the final retail price of cigarettes was estimated at above 38%. The highest level of taxation as a proportion of the final retail price of pack of cigarettes in India during 2010, 68%, was registered in economy brands, which are mostly unfiltered cigarettes. Tobacco product manufacturers and wholesalers were able to retain a relatively significant proportion of the final retail price of a pack of cigarettes in 2010, particularly in mid-priced cigarettes, in which the proportion of the final retail price retained by manufacturers and wholesalers was estimated at almost 56%. This was much higher in comparison to the 45% of the final retail selling price retained by manufacturers and wholesalers of premium cigarettes and the rather meagre 27% retained by the manufacturers and wholesalers of economy cigarette brands. Thus, economy cigarette brands, which include all unfiltered cigarettes, are becoming less popular with manufacturers. There is no standard period for cigarette manufacturers in India to increase the prices of their products because they various factors need to be taken into consideration before doing so. These include consumer purchasing power, particularly the purchasing power of middle income and low income households, as well as the severity of government tax increases. Amidst frequent and significant tobacco tax increases, cigarette manufacturers find it necessary to pass on some of the resultant price increases to consumers. In 2010, 60-70mm filtered cigarettes were subject to the highest increases in tobacco tax, which exceeded 18%. The manufacturers of cigarettes in the 60-70mm filtered cigarettes segment came under pressure to increase the retail prices of their products in 2010, a situation which resulted in a decline in volume sales for many cigarette brands in this segment during 2010. The pricing strategies of Indian cigarette manufacturers generally vary between different target consumer segments. However, various different cigarette companies in India offer distinct product portfolios. For example, ITC no longer offers any unfiltered cigarettes, although some other smaller companies still do, albeit in much smaller volumes. Demand among cigarette consumers in India is already very segmented and the majority of Indian smokers base their purchasing decisions mainly on the retail price of their favourite smokes. For example, upper income

Euromonitor International

Page

Tobacco

India

smokers are expected to remain loyal to premium cigarettes as these more affluent consumers are relatively insulated from the negative effects of the global economic slowdown. Middle-income consumers generally smoke mid-priced cigarettes, but sometimes switch to premium cigarettes when socialising. However, low income consumers are more likely to switch to cheaper cigarettes or even beedis.
Table 5 Price in Rs Price Premium Classic Ultra Milds (20 sticks) % 44.7 5.0 49.7 39.2 11.1 50.3 100.0 Price Midpriced Gold Flake (10 sticks) % 56.2 5.0 61.2 27.7 11.1 38.8 100.0 Price Economy Scissors Filter (10 sticks) % Average Cigarette Pack Price Breakdown: Brand Examples 2010

Manufacturer/wholesaler Retailer Retained Specific Tax VAT TOTAL Tax End Price
Source:

44.7 5.0 49.7 39.2 11.1 50.3 100.0

19.7 1.8 21.4 9.7 3.9 13.6 35.0

4.6 0.9 5.4 9.7 1.9 11.6 13.0

26.9 5.0 31.9 57.0 11.1 68.1 100.0

Euromonitor International from trade Interviews

PRODUCTION/IMPORTS/EXPORTS
According to industry sources, India is currently the third largest producer and exporter of raw tobacco leaf in the world and tobacco is one of the principal cash crops throughout India. Andhra Pradesh and Karnataka are the countrys two principal tobacco growing states and tobacco crops planted across these two states amount to around 217,000 hectares, according to data published by the Tobacco Board of India. It is estimated that there are some five million farmers engaged in tobacco cultivation in India, with an additional 30 million people dependent on the processing and production of tobacco products such as beedis for employment. The very varied geographic and agro-climatic conditions across Indias vast landscape make it possible for the country to cultivate a wide range of raw tobacco for export, including Flue Cured Virginia (FCV). During the financial year ending 31 March 2008, India produced approximately 700,000 tonnes of raw tobacco leaf. Indias exports of unmanufactured tobacco increased year-on-year during the review period, climbing to over 200,000 tonnes by March 2010 due to a global shortfall in production resulting from adverse weather conditions in many key tobacco growing countries as well as the stricter regulation of global tobacco production stemming from the widespread ratification of the FCTC. This was mainly driven by demand for unmanufactured tobacco from Western European countries such as Belgium and Asian countries such as South Korea, Indonesia and Vietnam. Cigarette export volume also increased strongly in India during the 2009/2010 financial year. Indias primary cigarette export markets remain the United Arab Emirates, the US, Romania, Saudi Arabia and Iraq. Furthermore, Indias tobacco exports were also driven by the relatively high excise tax levied on domestic tobacco products, particularly in the wake of the significant excise tax hike on unfiltered cigarettes which was levied during 2010. Thus, with Indian tobacco very much in demand around the globe during the review period, the price of tobacco leaf was driven up. Furthermore, with rising fuel prices in 2007 and 2008, a factor which also boosted the price of fertiliser, and labour shortages, the increasing prices of other crops such as chickpeas, palm oil and maize made these more viable as alternatives to tobacco crops, helping to drive up the unit price of tobacco leaf even further, especially during 2008. According to industry sources, during 2008 the price of tobacco leaf in Andhra Pradesh rose as high as US$3.30 per kg, while the price of tobacco leaf in Karnataka increased to as high as US$3.70 per kg, significant increases from the US$1.57 per kg and US$1.63 per kg respectively during 2007. Nonetheless, the average auction price remained around Rs110 per kg and Rs85 per kg in Karnataka and Andhra Pradesh respectively. In 2009, the price of tobacco leaf remained particularly high in Andhra Pradesh, at an average of Rs103 per kg, although this was lower than the average price charged during 2008.

Euromonitor International

Page

10

Tobacco

India

In order to meet the challenges detailed above, the Tobacco Board of India has sought to provide assistance to tobacco farmers. For example, modern equipment has been provided, which has served to improve the quality of Indian tobacco. Moreover, strict criteria have been imposed, which has improved the yield of many Indian tobacco plantations, and farmers have been educated on the ins and outs of the tobacco logistics process, which has encouraged practices which facilitate the distribution of Indian tobacco.
Table 6 Million sticks 2005 Cigarettes - Production Cigarettes - Import Cigarettes - Export
Source:

Production/Imports/Exports 2005-2010

2006 106,478.0 404.9 2,404.5

2007 107,475.0 484.8 1,403.7

2008 103,250.0 186.6 1,903.4

2009 101,000.0 201.6 4,800.0

2010 100,000.0 222.0 7,800.0

98,500.0 398.4 1,649.1

Euromonitor International from national statistics

Table 7 000 tonnes

Trade Statistics Flue Cured Virginia Tobacco Auction 2004-2009

2004 Andhra Pradesh Karnataka

Source: Notes:

2005 153.0 82.9

2006 145.4 97.0

2007 172.0 87.7

2008 165.3 114.0

2009 203.9 n/a

148.0 90.3

Euromonitor International estimates End per 31 March, * estimates

Table 8 000 tonnes

Trade Statistics Tobacco 2005-2010

2005 Production -Unmanufactured tobacco Export -Unmanufactured tobacco -Tobacco products

Source: Notes:

2006

2007

2008

2009

2010

n/a 138.2 24.8

n/a 142.0 24.9

n/a 152.6 28.4

700 174.7 30.7

n/a 197.1 27.7

n/a 204.3* 26.8*

Euromonitor International estimates End per 31 March, * provisional

Illicit Trade in Cigarettes

The illicit cigarette trade in India increased rapidly during the review period, accounting for some 16% of total cigarette volume sales during 2010. The illicit trade in cigarettes encompasses contraband cigarettes as well as counterfeit cigarettes. According to key industry sources, contraband products include non-duty paid and smuggled cigarettes. Domestically produced non-duty paid cigarettes are the largest contributors to volume sales of illicit cigarettes in India. The appeal of these cigarettes obviously lies in their greater affordability; the bulk of non-duty paid cigarettes in India are available by the stick for Rs1 or less. Growth in the illicit cigarette trade over the review period was mainly driven by rising levels of excise tax on cigarettes, particularly the significant increases in the excise tax levied on unfiltered cigarettes which occurred in 2008 and again in 2010. It must be noted that the vast majority of smuggled cigarettes in India are king size cigarettes, which retail for around Rs80 per pack of 20 sticks, targeting niche consumers due to the relatively high retail price in comparison with non-duty paid cigarettes and the low brand awareness of Indian smokers. During the review period, this resulted in a lower proportion of cigarettes consumed in India being smuggled cigarettes, despite the liberal importation of underpriced international brands under free trade agreements in force between India and neighbouring countries, which ensures high availability of these brands at lower retail prices than even duty-free cigarettes in India. It also prompted higher illegal importation of cigarettes which retail under these brands

Euromonitor International

Page

11

Tobacco

India

through Indias borders, with key transit points for these clandestinely imported cigarettes including the northeastern state of Bengal, which borders Bangladesh, as well as border villages in the adjoining states of Uttar Pradesh and Bihar. Over the forecast period, the Indian cigarette production industry is expecting further rises in excise tax to be levied on both filtered and unfiltered cigarettes longer than 60mm. This move could fuel the illicit cigarette trade, particularly the trade in contraband products in which the bulk of sales are derived from domestically produced non-duty paid cigarettes. Furthermore, the VAT levied on tobacco products in some states of India is predicted to rise, particularly following the lead of certain states such of India such as Gujarat and Maharasthra to increase VAT as high as 16%-18%, which is expected to further fuel the illicit trade in cigarettes during the early stages of the forecast period. The Tobacco Institute of India has been engaging in constant dialogue with the government in its efforts to curb the illicit cigarette trade. Nonetheless, there has not yet been any visible effort on the part of the Indian government to stem the flow of illicit cigarettes in India. Meanwhile, the illicit cigarette trade continues to have a highly deleterious effect on the Indian governments tax revenues.

Beedis
According to industry sources, beedi volume sales declined by 5% in 2010. However, beedis continued to constitute a significant element of tobacco in India, accounting for 35% of total Indian tobacco consumption in 2010. Annual beedi production is estimated at some 750 billion beedis per annum. Bihar and Uttar Pradesh are the leading markets for beedi consumption and were estimated to account for 35% of total beedi volume sales in 2010. Although beedis contain a lower quantity of tobacco than regular cigarettes, the tobacco with which they are produced is much more harmful; unlike cigarettes manufactured from flue cured tobacco, beedis are manufactured from sun-dried flake tobacco. It is estimated that the beedi production industry employs approximately five million workers across India. There are many documented cases of the exploitation of workers, poor working conditions and child labour in the beedi production industry. It has been estimated that there were approximately 1.7 million children working across Indias beedi production industry during 2010. As beedis are mainly produced by small-scale operators and the production of beedis is predominantly homebased, taking place mostly in small, dark, poorly ventilated rooms, the Indian government has always been lenient on beedi manufacturers. Thus, the fear persists that high levels of taxation on beedis would have a negative effect on the livelihoods of a substantial number of low-income Indian workers, particularly in the countrys rural regions. Therefore, despite the high number of volume sales, the tax revenue from beedis was estimated at less than 6% of the total tax revenue from cigarettes in India during 2007; moreover, it has been estimated that less than 50% of total beedi sales were derived from duty-paid products. The excise tax loophole enjoyed by beedi producers was also a major factor influencing the low levels of tax revenue collected from beedis during 2010 as exemptions were granted to beedi manufacturers which produce fewer than two million beedis per annum. According to industry experts, beedi manufacturers need only around six beedi rollers to produce around 1,000 beedis per day, which would result in them meeting the two million beedi benchmark. Furthermore, the excise tax levied on handmade and machine-made beedis remains very low, at around Rs14 and Rs26 per 1,000 beedis in the review a fraction of the excise tax of cigarettes per 1,000 sticks levied. In January 2010, the Indian government passed mandatory regulations for beedi manufacturers to encompass graphic warning images on their packaging. The image chosen was the skull and crossbones. The requirement for the inclusion of the pictorial warning is due to majority of beedi consumers being illiterate. The most popular pack type for beedis is soft packs of 25 sticks, which range in price from Rs2.50 per 25 sticks to Rs5.00 per 25 sticks. Larger packs are also available in sizes up to 500 beedis per carton, although these products are generally intended for wholesale distributors. The majority of beedi smokers are low income consumers who find it difficult to spare more than Rs5 per purchase every 2-3 days. Consumers existing below the poverty line constitute 80% of total beedi volume sales, while lower middle class consumers account for approximately 15% of total beedi volume sales, according to industry sources. For export grade beedis, packaging is of higher quality. Hard packs or plastic packs in hard outer cartons with better printing and sealing are the norm. Demand for beedis in India remains highly fragmented. Demand is regionally diversified with no clear national leader. Based on industry sources, Ganesh Beedi Works has a strong market presence across southern India,

Euromonitor International

Page

12

Tobacco

India

with a value share of 30% in 2010. The company has a daily production capacity of 60 million units. Bharath Beedi Works is the dominant manufacturer and distributor of beedis in northern India, controlling a 20% market share in 2010. Finally, Cow Beedi Works controlled 20% of the beedi industry in western India during 2010. In 2009-2010, Beedi manufacturers such as Ganesh Beedi Works and Kajah Beedi Co, among many others, offered free handbags to premium wholesalers as gifts in order to encourage the wider distribution of their products across urban and rural areas across the country. Meanwhile, manufacturers offered free New Year calendars to their loyal customers in rural areas and regional manufacturers enhanced their surrogate advertising campaigns. For example, Pataka Bidi Manufacturer Co Ltd advertised its Pataka 502 Chai (tea) brand across local and regional television networks in northern India. The beedi production industry is currently facing a significant labour shortage. This can be attributed to improved awareness of health issues and the increasing mobility of the workforce of rural India towards urban areas. While beedis are subject to national consumption, the key production areas remain in the far western states of Gujarat and Maharashtra, the southern state of Karnataka and certain parts of Andhra Pradesh. Unsurprisingly, these regions produce a beedis which are sold under a high number of different and relatively obscure brands. In October 2008, the Indian government banned smoking in public places. This served to reduce volume sales of beedis in India by 5% during 2009). Following the implementation of the smoking ban, the majority of beedi consumers shifted to the closest substitute, chewing tobacco. Paan shops, which are categorised under other grocery retailers, accounted for 98% of total tobacco volume sales across India during 2009. Independent small grocers, known as kirana stores, and small condiment stores accounted for the remaining 2% of total beedi volume sales across India in 2009. There was a rapid change noted in general consumer preference in India towards 2010 as the rising demand for chewing tobacco and filtered cigarette brands such as Four Square and Berkeley, among others, compromised demand for beedis. The majority of beedi consumers aged between 35 and 45 prefer high tar filtered cigarettes due to these being the cheapest cigarettes available in India. Traditional beedi consumers aged between 45 and 55 are the heaviest consumers of beedis, accounting for around 80% of total volume sales in 2010. This proportion increased massively from the 45% registered in 1999, according to industry estimates. The average unit price for beedis increased during 2010, according to industry estimates. This growth was primarily due to the poor betel leaf harvest in India during 2009/2010 along with the increase in the dearness allowance, a component of an individuals salary in India which is similar to a housing allowance and is intended to guard against excessive price increases, and rising raw material costs. Volume sales of beedis in India are set to decline at a CAGR of between 4% and 5% during forecast period. The majority of beedi consumers from low income and lower middle income households are expected to shift towards chewing tobacco and cigarettes due to ongoing improvements in lifestyle and the developing parity in purchasing power which is raising the overall living standards of Indias poorest people. During the forecast period, the Indian government plans to implement uniform wage rates across Indias beedi industry so as to reduce disruptive competitive pressures. Currently, wage rate increases are not aligned with the beedi pricing index, particularly in West Bengal and northeastern India. Therefore, the average beedi unit price is expected to increase further during the forecast period. Thus, volume sales of beedis should be expected to recede during the forecast period.

MARKET INDICATORS
Table 9 million sticks 2005 Legal sales Illicit trade % penetration of 99,963.5 12,476.2 11.1 2006 101,082.4 13,474.3 11.8 2007 99,763.7 14,552.2 12.7 2008 91,161.1 16,735.1 15.5 2009 93,321.4 17,571.8 15.8 2010 95,569.8 18,626.1 16.3 Illicit Trade Estimate of Cigarettes by Volume 2005-2010

Euromonitor International

Page

13

Tobacco

India

illicit trade Actual consumption

Source:

112,439.7

114,556.6

114,315.9

107,896.2

110,893.2

114,195.9

Euromonitor International from official statistics, trade associations, trade interviews

MARKET DATA
Table 10 Sales of Tobacco by Category: Volume 2005-2010 2005 Cigarettes (million sticks) Cigars (million units) Smoking Tobacco (Tonnes) Smokeless Tobacco (Tonnes) Tobacco (Not calculable)
Source:

2006 101,082.4 7.5 539,083.6 -

2007 99,763.7 9.5 566,037.7 -

2008 91,161.1 11.9 600,000.0 -

2009 93,321.4 12.9 624,000.0 -

2010 95,569.8 14.3 636,480.0 -

99,963.5 5.9 506,181.7 -

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 11 Rs bn

Sales of Tobacco by Category: Value 2005-2010

2005 Cigarettes Cigars Smoking Tobacco Smokeless Tobacco Cigarettes Including RYO Stick Equivalent Tobacco
Source:

2006 166.6 2.8 214.4 166.6 383.7

2007 177.7 3.7 229.4 177.7 410.7

2008 195.3 4.8 246.6 195.3 446.7

2009 226.0 5.2 262.6 226.0 493.8

2010 270.0 5.9 278.3 270.0 554.2

155.8 2.1 197.6 155.8 355.4

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 12 % volume growth

Sales of Tobacco by Category: % Volume Growth 2005-2010

2009/10 Cigarettes Cigars Smoking Tobacco Smokeless Tobacco Tobacco

Source:

2005-10 CAGR -0.9 19.2 4.7 -

2005/10 TOTAL -4.4 140.7 25.7 -

2.4 10.5 2.0 -

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 13

Sales of Tobacco by Category: % Value Growth 2005-2010

% current value growth 2009/10 Cigarettes Cigars Smoking Tobacco Smokeless Tobacco 19.4 12.0 6.0 2005-10 CAGR 11.6 22.9 7.1 2005/10 TOTAL 73.3 180.2 40.9

Euromonitor International

Page

14

Tobacco

India

Cigarettes Including RYO Stick Equivalent Tobacco

Source:

19.4 12.2

11.6 9.3

73.3 55.9

Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 14

Forecast Sales of Tobacco by Category: Volume 2010-2015 2010 2011 97,697.5 16.0 646,027.2 2012 99,686.8 18.1 652,487.5 2013 101,232.0 20.7 657,707.4 2014 102,511.3 23.8 661,653.6 2015 103,612.1 27.7 664,300.2 -

Cigarettes (million sticks) Cigars (million units) Smoking Tobacco (Tonnes) Smokeless Tobacco (Tonnes) Tobacco (Not calculable)
Source:

95,569.8 14.3 636,480.0 -

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 15 Rs bn

Forecast Sales of Tobacco by Category: Value 2010-2015

2010 Cigarettes Cigars Smoking Tobacco Smokeless Tobacco Cigarettes Including RYO Stick Equivalent Tobacco
Source:

2011 283.5 6.2 283.9 283.5 573.7

2012 290.8 6.9 289.0 290.8 586.7

2013 296.3 7.8 293.4 296.3 597.5

2014 301.1 8.9 297.2 301.1 607.2

2015 305.4 10.4 300.1 305.4 615.9

270.0 5.9 278.3 270.0 554.2

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 16 % volume growth

Forecast Sales of Tobacco by Category: % Volume Growth 2010-2015

2014/15 Cigarettes Cigars Smoking Tobacco Smokeless Tobacco Tobacco

Source:

2010-15 CAGR 1.6 14.2 0.9 -

2010/15 TOTAL 8.4 94.4 4.4 -

1.1 16.4 0.4 -

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 17

Forecast Sales of Tobacco by Category: % Value Growth 2010-2015

% constant value growth 2010-15 CAGR Cigarettes Cigars Smoking Tobacco Smokeless Tobacco Cigarettes Including RYO Stick Equivalent Tobacco 2.5 12.1 1.5 2.5 2.1 2010/15 TOTAL 13.1 77.0 7.8 13.1 11.1

Euromonitor International

Page

15

Tobacco

India

Source:

Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

DEFINITIONS
This report analyses the market for tobacco in India. For the purposes of the study, the market has been defined as follows: Cigarettes Cigars Smoking tobacco Smokeless tobacco

Explanations of words and/or terminology used in this report are as follows: Beedis: cheap hand-rolled cigarettes made from lower-quality smoking tobacco and usually consumed by low-income smokers and rural dwellers Bhang: a derivative of cannabis widely used in India, especially during certain religious rituals and festivals Chillum: a conical pipe used for tobacco smoking, usually made from clay, glass or the horn of a cow Ghee: cooking fat made of clarified butter Gudaku: smoking tobacco consumed via a hookah/sheesha or chillum Gutka: a mixture of tobacco, areca, catechu, betel nut, lime and sometimes mint, usually consumed by chewing Hookah: a single or multi-stemmed water pipe device, usually glass-based, which is used for smoking tobacco Khaini: powdered tobacco mixed with lime paste, sometimes used with areca nut, usually consumed by chewing Mawa: dried tobacco leaves, mixed with fennel seeds Paan: a betel nut leaf, which contains chewing tobacco and areca nut Paan shop: small kiosks run by independent retailers, which mainly sell tobacco products and a few confectionery and bakery items Sheesha: a blend of fresh dark tobacco leaves, fruit pulp, honey or molasses and glycerine the word can also refer to the water pipe device used to smoke this kind of tobacco Tendu leaves: the leaves of the Coromandel Ebony plant, commonly used to wrap smoking tobacco in the production of beedis Zarda: tobacco leaf boiled with spices and then dried, usually consumed by chewing

Sources used during the research included the following:

Summary 2 Official Sources Research Sources Directorate General of Commercial Intelligence & Statistics Jitendra Sales Corp Ministry of Finance Ministry of Health Tobacco Board - Ministry of Commerce

Euromonitor International

Page

16

Tobacco

India

United States Department of Agriculture (USDA) Foreign Agricultural Service (FAS) World Health Organization Trade Associations Trade Press Tobacco Institute of India Business Standard Business2media Domain-b Economic Times Financial Express India Infoline Rediff The Hindu Business Line Tobacco Control Tobacco Journal International Tobacco Reporter TobaccoAsia
Source: Euromonitor International

Euromonitor International

Page

17