Presented By:

Anirudh N

Dharnendran G

Kumar Nishant

Pradipta Mondal

Rohan Kumar

Sourav Anand

Section – (B)

SL No- (9)

Group Name - (The Marketocrats)

Marketing Plan - (Mini-Cigarettes)

Executive Summary

The product “Control Z” is a mini cigarette with the brand mantra “renounce to reduce”

which would cater to the need of chain smokers to reduce smoking. The idea here is to reduce

the size and price of the cigarette inorder to decrease the intake of the nicotine.

Situation analysis

MARKET NEEDS IDENTIFICATION:

Today in India 53% of the total Indian male population is smoking cigarettes or bidis which

accounts to nearly 12% of the total smoking population of the world. By 2014 there has been

an exponential rise in the number of smokers in India by 110million from 74.5 million over a

period of 30years. Thus it is evident that a huge demand is craving over nicotine.

A large number of Indian smokers are trying to quit cigarettes to lead a healthy life. Both

GOI and Non-Govt organisations have taken the charge to make India nicotine-free through

many initiatives. But medical research suggests that an abrupt decline in the consumption of

nicotine by quitting smoking leads to various problems like mood swing, headaches etc.

Thus, reducing the consumption and slowly getting over the addiction would be the best

choice. People trying to quit, again start smoking due to external influence– work pressures,

while drinking alcohol in groups etc. The nicotine intake can be controlled by controlling the

number of puffs. It has been seen that chain smokers tend to smoke a few puffs of cigarette

to satisfy their need, the rest they waste it. Thus they are not only waste a significant portion

of the cigarettes but also their money. The mini- cigarettes are best suited to help meet this

need.

MARKET SUMMARY:

India is the 2nd largest producer of tobacco in the world. Tobacco is a major commodity in the

Indian GDP which has high contribution to the Agricultural, Industrial and Export sectors.

Presently India is the largest tobacco exporting country in the World. Imperial Tobacco

(presently known as ITC) is the first private player in the Indian tobacco industry. Presently

major players in the Indian tobacco industry are: ITC, Godfrey Phillips, VST and GTC. The

market share of the major players is as shown below:

ITC

Godfrey Phillips

GTC

VST

0 10 20 30 40 50 60 70 80

72

12

8

8TOBACCO INDUSTRY IN INDIA

The tobacco industry amounts to Rs 22,000 crores out of which 12% is exported. The tobacco

industry has high inter-dependence on Agro industry which also contributes to 70% of the

Indian GDP. Also, tobacco industry is the 2nd largest Excise duty tax- payer.

PRODUCT CHARACTERISTICS: The product “Mini Cigarettes” is a cigarette with size

below 64mm - the shortest of all the present cigarette category in India.

The existing length of the Cigarette present in the Indian market are 75, 69 and 64mm with a

nicotine content of approx 0.8-1.8 mg and 13-14 mg of tar.

Brand Size Nicotine content

Classic Regular King Size 1.8mg

Gold flake kings King Size 1.7mg

Navy Cut Medium Size 1.7mg

Gold Flake Premium Medium Size 1.0mg

Gold Flake Superstar Small Size 0.8mg

The level of nicotine content varies proportionately with the size of the cigarette and the

quality of tobacco used. Nicotine is the drug which the smokers get addicted to. Reduction of

nicotine content (to less than 0.8 mg) in the cigarette can actually help those who are willing

to quit smoking.

SWOT ANALYSIS OF THE PRODUCT

Strength:

Reduces the consumption

Minimizes Expenditure

Weakness:

No brand recognition

High Brand loyalty among consumers

Opportunities:

Entry of non-smokers

First mover advantage

Threats:

Various Anti-Tobacco campaigns

Increase in Excise duty

Entry barriers

Availability of substitutes

Analyzing the Environment:

MACRO ENVIRONMENT:

Demography:

Age: The major consumers are between the age group of 18-65. Students, working

professionals, labourers and business persons comprise of this group.

Gender: Male population is the major consumer of cigarettes. Though a portion of female

population are also consuming cigarettes, there is no separate product orientated towards this

section is sold. Hence, female smokers can also be considered as our consumers.

Economic:

Income levels and consumption pattern: Consumption of cigarettes is high among middle

and higher income groups. Poor are lowest consumers of cigarettes as they depend on bidis

and other non-smoking ways to consume tobacco.

Natural Environment: Raw tobacco is a cash crop, which has been found in abundance all

over India especially Gujarat, Uttar Pradesh, and Andhra Pradesh.

Political-Legal Environment: Cigarettes prices have grown up by 40% due to heavy excise

duty rates over the last 10 years. States have varied rates of VAT on cigarette prices; Current

VAT rate in Gujarat is 30% which is leading to inter-state trafficking of cigarettes. Smoking

in public places, direct advertisements of promoting cigarettes have been banned by the GOI.

Also, statutory warnings, disclaimers have been made mandatory to educate people about the

harmful effects of tobacco.

MICRO ENVIROMENT:

We use Porter’s five forces to analyze the micro environment:

Market Competitors: High

ITC: ITC's major cigarette brands popular in Anand include W.D. & H.O. Wills, Gold Flake

Kings, Gold Flake Premium, Gold Flake Super Star, Navy Cut, Insignia, Classic (Menthol,

Menthol Rush, Regular, Mild & Ultra Mild), 555, Capstan, Bristol and Flake.

Godfrey Philips: It is present predominantly in the northern and western parts of India.

Major brands offered by are Four Square, Stellar and Jaisalmer. Four Square is the most

popular brand of Godfrey Philips in Anand.

Brand Name Price per pack of 10

cigarettes

Size

Four Square Rs.48 69mm

Marlboro Rs. 190 84mm

Small Cigarettes: Small cigarettes already available in the market are:

Brand Name Price per pack of 10

cigarettes

Size

Gold Flake Superstar Rs.38 64mm

Flake Liberty Rs.25 64mm

These two brands are not very popular and consumers actually consider them to be of inferior

quality. This is especially true in case of Flake Liberty which positions itself as cheap

cigarettes for the consumers. Another reason for their failure is that parent companies have

not particularly focussed on this segment.

Brand Name Price per

pack of 10

cigarettes

Size Product Category

Gold Flake Kings Rs.95 84mm(king) Regular

Gold Flake Filter Rs.48 69mm(mediu

m)

Regular

Classic Regular Rs.95 84mm(king) Premium Product

Classic Mild / Ultra

Mild

Rs.95 84mm(king) Premium Product

Insignia Rs.200 97mm Super Premium

Product

Bidis In India, out of the total tobacco production, around 38% of it is consumed in the form

of bidis. Bidis are extremely popular in Anand and a major chunk of smokers here are

actually bidi smokers. There exists an opportunity to make these people move to mini-

cigarettes. At the moment though, bidis are a significant hurdle in the way of mini-cigarettes.

People especially villagers and lower socio-economic groups still prefer bidis to cigarettes.

Supplier Power: Moderate

The suppliers of filter, paper and other chemicals involved in cigarette making are in small

scale and are working as an unorganized sector, so the bargaining power of these suppliers is

very low. When it comes to procurement of tobacco, there is a Tobacco board which takes

care of the smooth functioning of a vibrant farming system, fair and remunerative prices to

tobacco growers and export promotion. The growers of tobacco in village Gambhira from

where we are planning to procure practice collective farming. Since the procurement quantity

is sourced from the single production group, negotiations can be made maintaining good

supplier manufacturer relationship to sustain in long run.

Customer Power: Moderate

Our survey results reveals that people know about the harmful effects of smoking, but still

it’s hard for them to quit smoking. After the increase in the price of cigarettes due to higher

taxes, customers who are addicted to smoking have responded by trying to reduce their

consumption. Lower income group people have switched to other cheap tobacco products

like bidi from cigarettes.

Threat of new entrants: Low

As the market is already dominated by a few established players, it’s hard for a new entrant to

get access to the marketing channel. Requirement of capital is also huge. Government taxes

and policies become more cumbersome. Unlike other products, cigarette industry cannot

promote their products through regular media channels. All these factors become a barrier to

the entry of a new entrant

Threat of Substitutes: Low

Bidis, oral tobacco products, nicotine patch etc. are some of the substitutes for cigarettes.

Though these products have market for themselves, they cannot consume the market of

cigarettes. The popularity and usage of the cigarettes have made smokers habituated and

doesn’t allow the consumers to switch.

Market Segmentation:

The segmentation based on “Usage”. The smoking population of Anand city is categorized

into 3 segments based on the following rationale.

As per the survey conducted among the group of 50 people, 38 % of the respondents fall into

the category of chain smokers.

Consumer behaviour Smoking is a strong addiction. It is the nicotine craving that urges

people to smoke more. Young population smoke to experiment, to ape elders and fellow

smokers and look mature. Most of the adults smoke to feel relaxed when they have a lot of

stress and pressures. Some smoke for pleasure which makes them feel good. A full pack of

cigarettes in hand is perceived to give satisfaction and an empty pack gives a feeling of real

frustration and deprivation. So most of the smokers prefer to buy cigarettes in packs. Brand

loyalty among smokers is strong and persistent. Individuals smoke one brand consistently, so

that they become identified with it. 

Most people like the smell of tobacco but dislike the taste of a cigarette. Tastes for cigarettes

are considered to be acquired slowly.

Smoking habits vary among people. Bidi used among low income groups particularly

labourers because of its cheap price. Software professionals preferred to smoke a King size

cigarette. Students and business men preferred medium sized cigarettes. Small cigarettes

were used occasionally by all the groups.

People are aware about the negatives of smoking. Tobacco packaging warning messages and prohibiting smoking in public places has resulted in a change that is evident in the attitudes of people towards preventing the deadly disease.

Chain Smokers: These are the addicted smokers who smoke more than 8 cigarettes per day.

Moderate smokers: These are the smokers who smoke 2 to 7 cigarettes per day.

Occasional Smokers: There is no regular smoking pattern among this group. Their consumption varies from 1 to 20 cigarettes per month.

DEMAND FORECASTING

The adult male urban population in Anand city is 1,30,000. As per study conducted by JHPN

(Journal of Health, population and nutrition) using the WHO stepwise approach, the smoking

population in Gujarat constitute 23% of the state population. Considering the same

percentage figure for the Anand city, the total smoking population is 30,000.

We surveyed 50 smokers. 34% of the respondents are Chain smokers out of which, 28%

wants to quit or reduce their smoking habit.

66% can be termed as Moderate level smokers.

72% of the respondents wants to quit smoking or wants to reduce their smoking habit.

36% of the samples do not smoke the whole cigarette irrespective of the size.

28% of the samples have reduced the consumption of cigarettes due to the increase in

the price of cigarettes by the State/Central government.

Considering 2 lucrative segments:

1) 28 % of the chain smokers were ready to quit smoking: Considering the total smoking

population as 30,000 in Anand city, the market segment consists of a population of

8400.

2) Students who smoke small and medium cigarettes: This constitutes 26 % of the

population i.e., 26% of 30000 = 7800. As students lack money at this phase of their

life, they would look out for a cigarette with an affordable price.

MARKETING STRATEGY

MISSION: Our mission is to offer an affordable and high quality tobacco product for the

smoking population keeping their health in concern.

MARKETING OBJECTIVES: The company is looking forward to cater to the category of

chain smokers so as to reduce the overall consumption by reducing the size of the cigarette

that is sufficient to satisfy the nicotine crunch, thereby, reducing the intake:

The main objectives of the company are:

The company wants to cater to the chain smokers in the Anand city.

The company wants to cater at least 50% of chain smoker’s market that is estimated

as 4200 by 10 years.

The company is looking forward to achieve the revenue projected of Rupees

1681125.6 within a time frame of 5 years.

To have average steady growth of at least 10% in the next 5 years to satisfy the

stakeholders interest.

After 5 years, The Company is looking forward to diversify its target market and

penetrate other areas of the tobacco market to sustain itself and compete with the

market leaders.

FINANCIAL OBJECTIVES:

Reach the breakeven within 4 years.

Sales forecast predicts Rupees 504000 by 5years time.

TARGETING: Evaluating targeting segments using following parameters:

Size: According to our survey 28 % of the chain smokers were ready to quit smoking. Since 55% of the target population represented “businessmen and professionals” and remaining 45 % represented “labourers and students”, the segment includes population with both high and medium or low purchasing power. Hence it is profitable to serve.

Expected growth: Customers in the target market are becoming more health conscious and are willing to quit smoking gradually. Our reduced price has a capability to attract these customers with the reduced health risk. With more of younger generations joining the group, the market for our product will continue to grow.

Competitive position: No brand has been successful so far in this segment as the profits are low with the increase in taxes etc. Hence, fewer players in the small cigarette market will be an advantage.

Cost to reach: Since, there is also a high degree of brand loyalty, it is difficult for the target segment to trust and switch to new brand. Effective marketing strategy needs to be devised which requires capital investment. Initial promotion costs will be high. Hence, margins for the distributors and retailers are set high compared to the competitors.

Compatibility: The target population have a “need” to quit smoking. Survey observed that most of the people who were willing to quit were professionals and businessmen. They have an aspiration to become healthy with reduced price.

BRAND POSITIONING: Mini-cigarettes will position itself as a safer cigarette at an

affordable price compared to its competitors that is intended to reduce one’s cigarette

consumption. This provides an incentive to the smokers specially the chain smokers, who are

willing to quit to switch to our product.

MARKETING MIX (The 4P’s ):

Promotion Decisions

Promotional strategy As a new business, the strategy will be to push the product in order

to generate exposure and retail channels. Once the brand has been established this can be

integrated with the pull strategy. As a promotional offer, mint or chewing gum can be

distributed among the consumers. Setting up kiosk in the strategic locations will also be

helpful.

Advertising As advertising of tobacco products through electronic or print media is banned

in India hence advertising cigarettes can only be done at the point of purchase. Another mode

of advertisement can be done through news articles in print media. This will help us to inform

the purpose of our product, the mini cigarettes. After establishing our company in the minds

of people, we further promote it via talk shows. We can also promote via sponsoring city-

level events like Anand Run etc.

Product Decisions

Varieties

We are going to come up with two

varieties in the initial stage - Regular and

the other will be Light. Since most of your

customers are chain smokers, we need to

provide them a proper substitute in a

smaller form.

Quality

The Points of Parity will be:

High quality tobacco is used as found in premium segment cigarettes Increased smoothness through additives/design changes, reduced tar

The Points of Difference will be:

First and only cigarette brand that aims to reduce cigarette consumption or to quit smoking

Harm Reduction- less harmful than other cigarettes. Small size of cigarette, but with a king size filter, less tobacco content but it’s enough to satisfy the nicotine crunch.

Low price- one of the cheapest cigarettes available at Rs 4.

Our cigarette in quality and smoothness

will be at par with the cigarettes of other

premium brands. The cigarette will be

produced by using high quality tobacco

leaves and best natural cigarette papers.

Place Decisions

Point of purchase The POP‟s for cigarettes include Paan shop around the corner of the

street, street tea stalls, kirana stores, supermarkets, hypermarkets in the urban areas.

In the rural areas POPs of cigarettes includes dhabas along the highways, tea stalls, stalls

at melas, haats, paan shops etc.

Distribution

Price Decision

Following steps are used in finding price of cigarette:

Selecting the pricing objective : To gain maximum market share.

Estimating Demand: Equivalent to the demand forecasting

Price insensitivity: Cigarette market among chain smokers is price insensitive.

Estimating cost: Considering the prevailing excise duty, VAT and state government tax, the

manufacturing cost of per cigarette is Rs 3.03/- in first year which gradually decreases in the

subsequent years.

Selecting a pricing model: Going rate pricing method is used.

Manufacturing firm:

The manufacturing units will be

located at Anand.

Wholesalers:

They will help in “bulk breaking”

and supply to the retailers in and

around Anand.

Wholesale Distributors:

They are not only representing the

company but also involved in the

promotional activities of the product. Retailers:

The last intermediate before the

cigarette reaches the customer are the

retail outlets.

a) Convenience stores (Kirana

shops)

b) Pan shops/Beetle Shop

c) Kiosks

d) Large format stores (LFS)

e) Multi Branding Outlets (MBO’s)

END CONSUMERS

Selecting the final price: Therefore considering our production cost and profit margin for the

intermediaries in the value chain. The product is priced at Rs.4 per cigarette.

Description Cost Rs.Margin/Taxes (In %)

Rs. To

Cost of Manufacturing 0.76Cost Including Excise,VAT and state taxes 3.03 300 2.274 GovernmnetCost to Distributor 3.34 10 0.303 CompanyCost to Dealer/wholesaler 3.54 6 0.200 DistributorCost to Retailer 3.71 5 0.177 WholesalerCall to consumers 4.00 8 0.297 Retailer

Year1: Margin@ Different stages

Financials, Budget and Forecasts:

SALES FORECAST:

With the increase in the number of customers per year the sales of the product will also

increase simultaneously. We have considered 5% increase in the first two years due to the

nascent stage of promotion of the product. From the third year onwards there is a rise in sales

to 10%. The overall growth trend is provided below.

1 2 3 4 50

5000000

10000000

15000000

20000000

25000000

25200005040000

10080000

15120000

20160000

Sales per year (in Rupees)

Sales per year (in Rupees)

EXPENSE FORECAST:

Expenses incurred for the production of the product includes

1. VAT

2. Excise Duty

3. Gujarat State tax

4. Promotion Costs (which is been reduced

by 0.7 factor every year)

5. Fixed Cost (which includes the

Overhead cost, Rent, Cost associated in

buying fixed assest like machineries etc.)

6. Variable Cost (which includes wages to

employees, cost of material procurement,

packaging cost etc.)

1 2 3 4 50

200000

400000

600000

800000

1000000

1200000

1400000

1600000

491037580209

875553

1193022

1520496

Total Expenses incured per year

Total Expenses incured per year

BREAK-EVEN ANALYSIS:

The above table depicts the Break-even analysis of the company. We found that, within 4years the

break-even point should reach as per your estimated data for the Total cost and Total revenue. Hence

from 4th year onwards we will start gaining profits. A graphical representation has been provided for

the estimating of the break-even year.

1 2 3 4 5

Total Cost 491037 580209 875553 1193022 1520496

Total Revenue 210140.7 420281.4 840562.8 1260844.2 1681125.6

100000

300000

500000

700000

900000

1100000

1300000

1500000

1700000

491037580209

8755531193022

1520496

210140.7

420281.4

840562.8

1260844.2

1681125.6

Total CostTotal Revenue