ITC Ltd., the Indian conglomerate, has witnessed a significant recovery in its cigarette sales volume, with levels almost reaching the peak of the fiscal year 2012-13. This resurgence can be attributed to stable taxation, the introduction of new variants, and a decline in illicit trade.
Cigarette volumes had experienced a decline of 20% between fiscal years 2013 and 2019-20 due to a substantial increase in taxes. However, ITC managed to regain sales from illicit trade starting from fiscal year 2022, as taxes remained relatively stable and portfolio interventions were implemented.
The consistent stability in taxation witnessed over the last half-decade has been a pivotal factor in the resurgence of ITC’s cigarette sales volume. This steady tax environment has effectively mitigated the price advantage of illegally imported cigarettes, consequently bolstering profitability. Moreover, the introduction of new cigarette variants has notably contributed to ITC’s sales revival, constituting a notable 17% of the overall sales volume. This successful diversification strategy underscores the company’s adaptability. Additionally, the notable decline in illicit trade has significantly impacted ITC’s sales recovery.
ITC’s focus remains on maximising the potential of cigarettes within the tobacco basket, reinforcing its market standing, and implementing portfolio interventions in differentiated formats to counter illicit trade. The company has established itself as a leader in every market through its micro-market strategy, price laddering, and regional customization. The company’s flagship brands, Gold Flake and Classic, have also played a significant role in the recovery. Gold Flake, ITC’s largest trademark, has seen new launches account for 19% of its portfolio, while Classic has launched four new variants contributing to 25% of its portfolio.
RTM Watch’s Take
The recovery of ITC’s cigarette sales volume to almost the peak levels of FY 2012-13 is a positive development for the company. Stable taxation, the introduction of new variants, and efforts to counter illicit trade have all contributed to this resurgence. As ITC continues to focus on maximising the potential of cigarettes within the tobacco basket and implementing portfolio interventions, it is well-positioned to maintain its market standing and drive further growth in the future.
