ITC Cigarettes

Page 1 of 26

Name Enrollment No.

Sourav Pramanik 09BS0002392

Swarnabha Dey 09BS0002492

Vivek Bhagat 09BS0002750

Zoom Guha 09BS0003104

RURAL MARKETING PROJECT ON ITC CIGARETTES

SECTION: D

IBS, KOLKATA

Page 2 of 26

Name Enrollment no.

Sourav Pramanik 09BS0002392

Swarnabha dey 09BS0002492

Vivek Bhagat 09BS0002750

Zoom Guha 09BS0003104

RURAL MARKETING PROJECT ON ITC CIGARETTES

Marketing Management 2

IBS, Kolkata

Date of submission: 17.11.2009

Page 3 of 26

AUTHORIZATION:

The report is submitted as partial fulfillment of the requirement of MBA

Program of IBS.

Page 4 of 26

Acknowledgements

First of all, we are immensely indebted to Mr. Ashim Ghosh, Director, IBS Kolkata & Mr. Shibashis Chakraborty, Faculty Member of Marketing management, IBS Kolkata for giving us the opportunity to work for such an interesting project. We like to specially acknowledge with thanks, the support of our faculty Mr. Shibashis Chakraborty without whom, this project would have been incomplete. Her intense knowledge in this subject has made this project a huge success. We would also like to thank Mr. Anirban Sen (Area Manager of Tobacco

Sector, ITC) & Mr. Sakhawat Ali (Distributor of ITC cigarettes) without whom

our project would have been a very difficult task.

We would be failing in our duty if we do not thank our respondents who gave their

valuable time and answered the survey questions with tremendous patience and

understanding.

Page 5 of 26

Table of contents:

Topic Page No.

Executive Summary 01

Introduction 02

Company profile 03

Product-line of ITC ltd. 05

Distribution channel of ITC Ltd. 07

Pricing of ITC cigarettes 08

Price point segmentation 10

Consumption Preferences 11

Sales pattern 14

4 A’s of Marketing 15

Conclusions 20

Attachments 21

References 22

Page 6 of 26

List of illustrations:

Topic Page No.

Distributors’ Price List(table 2) 08

Demand as a % of Total Demand(fig 3) 08

Whole Salers’ Price List(table 3) 09

Retailer Price List(table 4) 09

Price point segmentation(table 5) 10

Customer Preferences in Urban Area(table 6) 11

Customer Preferences Pie Chart(fig 4) 11

Sales of ITC Cigarettes in Urban Area Pie Chart 14

Sales of ITC Cigarettes in Rural Area Pie Chart 14

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Executive Summary

The Indian rural market with its vast size and demand base offers a huge opportunity that MNC’s cannot afford

to ignore. With 128 million households, the rural population is nearly three times the urban. As a result of the

growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tonnes

from 176 million tons in 1991, rural India has a large consuming class with 41 per cent of India's middle-class

and 58 per cent of the total disposable income.

The importance of the rural market for some FMCG and durable marketers is underlined by the fact that the

rural market accounts for close to 70 per cent of toilet-soap users and 38 per cent of all two-wheeler purchased.

The rural market accounts for half the total market for TV sets, fans, pressure cookers, bicycles, washing soap,

blades, tea, salt and toothpowder, What is more, the rural market for FMCG products is growing much faster

than the urban.

This project that was assigned was to prepare the consumption pattern & sales distribution of a product in urban

market and rural market in and around Kolkata. The product that was chosen for this project was ITC cigarettes.

Keeping in mind the four A’s of marketing, Availability, Affordability, Acceptability & Awareness, the steps

for the project was taken.

Data were collected on the basis of the distribution of various products of ITC cigarettes, their sales and

consumption patterns both in rural as well as urban areas, amongst the people of different earning status, in and

around Kolkata. After collecting the data a random sampling was done to analyze the price point variation of

the different ITC cigarette products.

To collect the data we have interviewed the customers/consumers of ITC cigarette, the sellers, distributors, and

the area manager of Tobacco Sector, ITC.

Along with the consumption pattern, this project has also thrown a light on the change on the consumption

pattern of cigarette in recent days due to the awareness of the people for their health.

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Introduction:

The report has been prepared to understand the consumption pattern & sales distribution of ITC

cigarettes in urban market and rural market. This study also detailed information about the

Availability, Affordability, Affordability & Awareness (4 A’s of Marketing) of the ITC

cigarettes in rural as well as in urban markets.

Purpose & Scopes:

The Purpose of this report is to list out the different brands of ITC cigarettes which are consumed in

the urban market & that in the rural market. Although the sampling has been carried out only in few

selective cities, the general Stock Keeping Units (SKU’s) are more or less the same all over cities.

The same applies for the villages also where we have conducted the surveys.

Sources and Methods:

Data collected is predominantly Primary data. In preparing this report, we have interviewed

Shopkeepers, Paanwalas, Wholesellers, Distributors, Company persons & Customers at several

places in Kolkata & Howrah which include Saltlake City, Garia, Patuli, Haatibagan, Shyambazar,

Khanna, Ultatanga, Beleghata & Panchanantala (Howrah) , Bandhaghat (Howrah). Among the

villages we had chosen Krishnanagar, Barrackpore, Ranaghat & Shantipur for conducting our

surveys.

Report Organization:

The report reviews the different kinds of brands consumed in urban and rural market, analyses the

different trends in their consumption pattern, and summarizes them at the end.

Limitations:

There was time constraint as the research had to be done in a short time & we had to cover cities as

well as villages. Cost constraints were faced. Scarcity of resources was a problem. Only a limited

number of shop-keepers & Customers could be interacted with.

Page 9 of 26

Company Profile:

ITC Limited which previously stood for Imperial Tobacco Company of India Limited is an

Indian conglomerate with a turnover of US $ 4.75 billion. It ranks third in pre-tax profit among India's private sector corporations. The company has its registered office in Kolkata.

The company is currently headed by Yogesh Chander Deveshwar. It employs over 20,000 people at more than 60 locations across India and is listed on Forbes 2000. The Training Centre of the company is in Munger, Bihar. ITC is also known as "Chatkal" (especially in Munger).

List of products & brands:

ITC has a diversified presence in different sectors. They are mentioned below-

TABLE-1

Sectors Brands/ Companies/ Products Cigarettes Wills, Gold Flake, Navy Cut, Insignia, India Kings, Classic Verve, Classic, Silk

Cut, Scissors, Capstan, Berkeley, Bristol and Flake. Hotels ITC Welcomgroup Hotels, Palaces and Resorts is India's second largest hotel

chain with over 80 hotels. Based out of Hotels Division Headquarters at the ITC Green Centre in Gurgaon, ITC Welcomgroup is also the exclusive franchisee of The Luxury Collection brand of Starwood Hotels and Resorts in India .

Paperboards & Specialty Papers

ITC Bhadrachalam Paperboards Limited & ITC Tribeni Tissues Division are now under one roof --> Paper Boards and Specialty Papers Division. There are 4 Units under one umbrella - Bhadrachalam, Tribeni, Bollarum and Kovai.ITC PSPD

Packaging & Printing Business

India's Largest Packaging Solution provider with In-house film manufacturing capability. Multi-locational manufacturing facilities to cater to domestic and export requirements. Product Range includes Cartons (Folding & Fluted), Flexibles (Reels & Pouches), Shoulder Box, HL's & CBO, Printed Cork Tipping, Gay wraps. ITC PPB .

Agricultural Industry

Agri-Business, Leaf Tobacco, Gold Ribbon, Blue Ribbon, Aqua Kings, Aqua Bay, Aqua Feast and Peninsular.

Packaged Foods & Confectionery

Kitchens of India, Aashirvaad, Sunfeast, Mint-O, Candyman, Bingo Snacks .

Branded Apparel Wills Lifestyle, John Players, Miss Players Toiletries Essenza Di Wills, Fiama Di Wills, Superia, Vivel Di Wills, Vivel Education & Stationery Products

Expressions,Classmate, Paperkraft

Information Technology

ITC InfoTech

Safety Matches iKno, Mangaldeep, VaxLit, Delite(Discontinued) and Aim Brands acquired from Wimco (Western India Match Company): Ship , Homelite (Swedish Matches)

Incense Sticks Mangaldeep, Spriha,Yantra

Page 10 of 26

While ITC continues in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is gaining market share in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting Cards.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India Limited, is pursuing emerging opportunities in providing end-to-end IT solutions, including e-enabled services and business process outsourcing.

Product -mix of ITC Ltd:

P

IT

FMCG Hotels Paper boards & Packaging

IT Agri- Business

Cigarettes

Foods

Lifestyle Retailing

Education & Stationary

Safety Matches

Incent Sticks

Paper Boards

Packing

Leaf Tobacco

Agri- Commodities

E-Choupal

ITC Ltd.

FIG.-1

Page 11 of 26

ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has a leadership

position in every segment of the market. It's highly popular portfolio of brands includes Insignia, India

Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors,

Capstan, Berkeley, Bristol and Flake.

The Company has been able to build on its leadership position

because of its single minded focus on value creation for the

consumer through significant investments in product design,

innovation, manufacturing technology, quality, marketing and

distribution.

All initiatives are therefore worked upon with the intent to fortify

market standing in the long term. This in turns aids in designing

products which are contemporary and relevant to the changing

attitudes and evolving socio economic profile of the country. This

strategic focus on the consumer has paid ITC handsome dividends.

ITC's pursuit of international competitiveness is reflected in its initiatives in the overseas markets. In the

extremely competitive US market, ITC offers high-quality, value-priced cigarettes and Roll-your-own solutions.

In West Asia, ITC has become a key player in the GCC markets through growing volumes of its brands.

ITC's cigarettes are produced in its state-of-the-art factories at Bengaluru, Munger, Saharanpur and Kolkata.

These factories are known for their high levels of quality, contemporary technology and work environment.

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DISTRIBUTION CHANNEL OF ITC Ltd.

FIG-2

In the distribution channel the price of cigarettes changes from distributors to wholesalers to retailers to

hawkers. The several details regarding pricing are discussed in the next part.

GODOWN (AREA MANAGER)

DISTRIBUTORS

WHOLESALERS HAWKERS

RETAILERS HAWKERS

CUSTOMERS

At the point of delivery distributors

need to pay cash and collect stock.

. Distributors distribute its

stock to hawkers via cycles. A

hawker gets one day credit.

Distributors give maximum

of 1 month credit to its

wholesalers

Retailers don’t get any

credit from

wholesalers; they need

to purchase in cash

Page 13 of 26

Pricing Of ITC Cigarettes:

DISTRIBUTOR’S PRICE LIST:

COMMENTS:-

Distributor’s earns a profit margin of 1.8% after charging VAT of 12.5%.

The distributors can achieve approximately 75% of their target i.e.; if company asks the distributor to

sell 100 packs he is only able to sell 75 packs. We can conclude the overall consumption went down to

25%.

India kings0.76%

Insignia0.50%

Classic5.06%

Gold Flake43.03%

Navy Cut22.15%

Flake18.98%

Silk Cut9.52%

Demand(as a percentage of total demand)

Brands Purchasing price/1000 packets (Rs.)

Demand (as a percentage of total demand)

India Kings 3836.20 0.76%

Insignia 3950.00 0.50%

Classic Mild 3791.00

Ultra Mild 3791.00 5.06%

Menthol 3791.00

Gold Flake King 3527.20

Light 3527.20 43.03%

Honey Dew 2363.29

Navy Cut King 3650.00

Regular 3100.00 22.15%

Small 2136.00

Flake 1543.20 18.98%

Silk Cut 1640.20 9.52%

TABLE-2

FIG-3

Page 14 of 26

Combining both the markets (Urban & Rural), there exists maximum demand for Gold Flake in the

market. Gold Flake contributes to 43.03% of the total demand for ITC cigarettes.

WHOLESALER’S PRICE LIST: TABLE-3

COMMENTS:-

Wholesalers’ earns a commission per 1000 packets and even gain on the margin amount, i.e. the

difference between their purchasing price and their selling price.

*Price of Silk Cut varies by 0.10 per unit based on demand for the product.

RETAILER'S PRICE LIST: TABLE-4

Brands Purchasing Price/10 sticks (Rs.) Selling Price/10 sticks (Rs.)

India Kings 43.50 43.75

Insignia 45.00 50.50

Classic Mild 42.55 43.00

Ultra Mild 42.55 43.00

Menthol 42.55 43.00

Gold Flake King 39.55 40.00

Light 39.55 40.00

Honey Dew 26.60 26.80

Navy Cut King 36.50 37.00

Regular 31.00 31.20

Small 21.36 21.50

Flake 17.36 17.50

Silk Cut 17.36 17.50*

Brands Purchasing price/10 units (Rs.)

Selling Price/ 10 sticks (RS.)

Selling Price/ stick (RS.)

India Kings 43.75 47.50 5.00

Insignia 50.50 55.50 6.00

Classic Mild 43.00 47.00 5.00

Ultra Mild 43.00 47.00 5.00

Menthol 43.00 47.00 5.00

Gold Flake King 40.00 44.00 4.00

Light 40.00 44.00 4.00

Honey Dew 26.80 29.00 3.00

Navy Cut King 37.00 40.00 4.00

Regular 31.20 34.00 3.50

Small 21.50 24.00 2.50

Flake 17.50 19.00 2.00

Silk Cut 17.50 20.00 2.00

Page 15 of 26

COMMENTS:-

Price of India Kings varies because of location and their purchasing price. Though purchasing price of

Navy Cut and Navy Cut King varies but selling price does not change because of negligible variation.

Price point segmentation:

On the basis of MRP of cigarettes & customer’s affordability in different areas, the total Cigarette line of ITC

Ltd. can be divided into three major segments. Those are mentioned below-

TABLE-5

There exist mainly three Price-bands- 1. Above Rs.40/pack

2. Rs. 20-40/pack

3. Below Rs. 20/pack.

The first price band is for the higher end of the market.

The second price band is for the upper middle & middle class customers existing in the market. This price band

has a larger share in the market.

The third price band is for the lower end of the market.

Price bands Brands MRP/10 sticks (Rs.) Price/sticks (Rs.)

Above Rs. 40/pack

India Kings 47.50 5.00

Insignia 50.00 6.00

Classic Mild 47.00 5.00

Ultra Mild 47.00 5.00

Menthol 47.00 5.00

Gold Flake King 44.00 4.50

Light 44.00 4.50

Rs. 20-40/pack

Navy Cut King 40.00 4.00

Regular 34.00 3.50

Small 24.00 2.50

Gold Flake Honey dew 29.00 3.00

Below Rs. 20/pack

Flake 19.00 2.00

Silk Cut 20 2.00

Page 16 of 26

Consumption preferences:

Customer- Preference in URBAN AREA: TABLE-6

Gold Flake = King + Light + Honey Dew

Navy Cut = King + Regular + Small FIG-4

Classic = Mild + Ultra mild + Menthol

TABLE-7

OBSERVATIONS:

In urban area consumers tend to have liking for the

Gold Flake more in comparison with other ITC brands. Flake is

cheaper cost wise and satisfies customer needs.

Navy Cut is more preferable in Higher Income group

Flake is preferred by people of low income group.

Some people having an income level below Rs. 5,000

consume ‘Beedi’ and/or Flake.

Customer’s preference

in rural area

Income group

Composition Brand Preference

Name of the Brands Percentage of people

Below Rs.10,000/ month 41.50% Gold Flake 16.20%

Flake 18.19%

Silk Cut 1.11%

Beedi 6.00%

Rs. 10,000- 30,000/ month

34.33% Navy Cut 8.06%

Classic 0.03%

Gold Flake 17.60%

Flake 8.64%

Rs. 30-000- 50,000/ Month 15.07% Navy Cut 8.46%

Classic 1.01%

Gold Flake 3.50%

India Kings 2.10%

Above Rs. 50,000/ month 9.10% Navy cut 6.46%

Classic 1.15%

India Kings 1.49%

Brand name Customer Preference (%)

Gold Flake 16.20 + 17.60 + 3.50 = 37.30

Flake 19.30 + 8.64 = 33.94

Navy Cut 8.06 + 8.46 + 6.46 = 22.98

India kings 2.10 + 1.49 = 3.59

Classic 0.03 + 1.01 + 1.15 = 2.19

Silk Cut 1.11

Beedi 6.00

Customer preference

Gold Flake

Flake

Navy Cut

India kings

Clasic

Silk Cut

Beedi

Page 17 of 26

The customers of rural market are not exactly same as that of urban market. There is a significant difference in

demographic, psychographic & social environment between the two class of people. So it is important for

marketers to segment the rural market using appropriate variablesnmto decide on their marketing strategies.

Marketers of rural area use alternative segmentation scheme to segment the rural market.

One of the useful segmentation schemes for rural areas used in India is the Socio-economic Classfication

(SEC), using two variables, namely occupation of the chief wage earner & the type of house that they live in.

The scheme classifes rural consumers into four classes, R1, R2, R3 & R4.

SEC R1:

The charecteristics of each class are mentioned below- Landlord farmers, educated, exposed to urban

environment with their children studying in nearby towns, exhibit a lifestyle close to urban areas, adopt modern

technology, own consumer-durable products such as tractors, refrigerators, two-wheelers & sometimes even

four-wheelers.

SEC R2:

Rich farmers, with about 5 acres of land, may not be educated, but want their children to be educated, aspire to

have social status, own some of the consumer-durable products like television, tractor & two-wheelers.

SEC R3:

Landhoding size between 2 & 5 acres, with childrenstudying in village schools,conservative in technology

adoption, own some consumer-durable products.

SEC R4:

Agricultural or non-agricultural labor with a low income, utilize subsidized food-grains & other products

distributed through the public distribution system.

Tobacco consumption of these clases vary depending on their affordability, taste & preferences.the brand

preferences of several socio-economic classes are discussed below in detais.

Page 18 of 26

TABLE-8

FIG-5 Table-9

*other brands are not available in Rural Market.

Observations:

In rural area customer prefers beedi over cigarettes because of their low income.

But when we consider cigarette sector as a whole consumer wants to have Flake in comparison with

others.

People belonging to SEC R4 do not consume any ITC cigarettes, they consume beedi only.

People belonging to SEC R3 generally consume beedi. But within a week after getting the wages or

after selling of their vegetables they prefer to consume Flake.

Villagers mainly prefer Flake due to its low price.

Flake 20.88%

Gold Flake 19.54%

Navy Cut0.27%

Beedi61.11%

Customer Preference

Social economic class (SEC)

Average Monthly Income

Composition Brand Preference

Name of the Brands Percentage of people

SEC R1 RS. 30,000 - 50,000 8.23% Gold Flake 7.96%

Navy Cut 0.27%

SEC R2 RS. 10,000 – 30,000 25.75% Gold Flake 9.78%

Flake 10.82%

Beedi 5.15%

SEC R3 Rs. 5,000 – 10,000 33.52% Flake 10.06%

Beedi 23.46%

SEC R4 Below Rs. 5,000 32.50% Beedi 32.50%

Brand Name

Customer Preference (%)

Flake 10.82 + 10.06 = 20.88

Gold Flake 7.96 + 9.78 = 19.54

Navy Cut 0.27

Beedi 5.15 + 23.46 + 32.50 = 61.11

Page 19 of 26

Sales Pattern:

Sales of ITC cigarettes in Urban area:-

Observations:

Gold flake is occupying the highest market share in the cigarette sector. The reason behind this may be cited as

its high affordability as per urban people’s income & its high availability in every shop.

Sales of ITC cigarettes in rural area:

Brand Name Monthly sales (as a percentage Of total monthly sales)

Flake 48.3%

Gold Flake 28.67%

Navy Cut 13.97%

Other ITC brands 9.06%

Brand name Monthly sales (as a percentage Of total monthly sales)

Gold Flake 36.66%

Navy Cut 24.71%

Flake 27.11%

India kings 3.23%

Classic 2.33%

Silk Cut 4.77%

Insignia 1.19%

Flake48.30%

Gold Flake28.67%

Navy Cut13.97%

Other ITC Brands

9.06

Sales

Gold Flake37%

Navy Cuit25%

Flake27%

India Kings3%

Classic2%

Silk Cut5%

Insignia1%

Sales

Page 20 of 26

Observations:

High demand of Flake in rural sector makes it the market leader. Consumers in rural area can easily

afford Flake because of its low price and availability at every common store. Other product which is

highly consumed in rural area is beedi.

4 A’s of marketing:-

The rural market may be appealing but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute

dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media.

However, the rural consumer is not unlike his urban counterpart in many ways.

The more daring MNC’s are meeting the consequent challenges of availability, affordability, acceptability and awareness (the so-called 4 A’s).

Availability: Table-10

Brands Variance (if any)

Units/pack Availability

In Urban Market In Rural market Gold Flake Honey Dew 10 High Moderate

20 High Moderate

King 10 High Moderate

20 High Low

Light 10 High Moderate

20 High Low

Flake N/A 10 High High

20 High High

Navy Cut King 10 High Moderate

20 High Low

Regular 10 High moderate

20 High Low

Small 10 High High

20 High Moderate

India Kings N/A 10 Low Low

20 Moderate* Low

Silk Cut N/A 10 Moderate Low

20 Low** Low

Insignia N/A 10 Low Low

20 Low Low

Berkeley N/A 10 Low Low

20 Low Low

Page 21 of 26

*India kings is generally consumed by people of high income group who generally prefer to buy the big pack

instead of buying the small pack.

**Silk Cut is consumed by the people of lower income group who generally purchase the smaller pack instead

of larger one.

Affordability:

Affordability in rural area- FIG-6

INCOME

80,000

70,000

60,000

50,000

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

B R A N D S

In rural market, the poverty-level is quite high. Therefore, the number of people in the low income group cannot

afford cigarettes, they only consume beedis. As the income level increase the amount of consumption of beedi

also decreases. Same applies for Flake also which is consumed by the people of lower middle & upper-middle

income group.

Beedi

Beedi

RURAL MARKET

Flake

Flake

Decrease

Decrease

Beedi Gold Flake

Gold Flake Navy Cut

Increase

Decrease

Page 22 of 26

But same does not hold good for Gold flake which is generally consumed by people of higher-middle & High

income-group. It has been observed that with the increase in income the no. of sticks of cigarettes consumed per

day increases, thereby total consumption also increases. Navy Cut is only consumed by higher income group.

Affordability in urban area-

FIG-7

Income

1,00,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

B R A N D S

Beedi is only consumed by people of lower income group. In the case of urban market, consumption of Gold

flake at first increases due to positive correlation between income & cigarette consumption. But after a certain

point, that decrease due to shifting of the customers from Gold Flake to other luxury brands like Navy Cut,

Classic etc.

Navy Cut, insignia, Classic are consumed by people of very higher income group only.

URBAN MARKET

Beedi Silk Cut Flake

Flake

Decrease

Gold Flake

Gold Flake

Gold Flake Navy Cut

Navy Cut Insignia Classic India Kings

Increase

Decrease

Increase

Page 23 of 26

Acceptability-

Awareness:

Creating awareness among target customers about the product is one of the most challenging jobs. Basically

company does awareness programmers when the target customers are unaware of the product.

While tobacco advertising was banned in India in 2004, the year the study began, cigarette companies are

coming up with new ways to reach a relatively untapped audience. They do Event sponsorship and lifestyle

stores centered on tobacco products are slipping through the cracks of the law. Research has shown that most of

the youngsters are addicted to smoking. Keeping in mind ITC has launched Wills Life Style garments brand

which has basically targeted the youngsters. They actually promote their cigarettes through this brand. Such

Tobacco use rose with measures of receptivity, including having use of tobacco promotional item (such as

wearing a T-shirt that advertises tobacco).

Awareness of cigarettes spread through “social networking channels”, which is a part of personal

communication channels. Research has proved that most of the youngsters who are addicted to using tobacco

are influenced by either by their family members, neighbors or friend circles.

Example (Launching of Wills Navy Cut by ITC):-

Tobacco major ITC Ltd had launched Wills Navy Cut Regular size filer cigarettes, priced at Rs 24 a pack of 10

sticks in select markets in north and west India.

"The brand has been launched keeping in mind ITC's objective of delivering superior quality and value to, all its

consumers," the company said in an e-mailed response to NewsWire18.

The new cigarettes, which have been launched in select retail markets such as Mumbai and Pune, could be

rolled out nationally based on the response from these "test markets", ITC's distributors said. Analysts believe

ITC's move to launch the new cigarette directly through retailers instead of the company’s distributor network

could be a part of a strategy to de-emphasize Wills as a tobacco brand.

Rural market Urban Market Beedi is more acceptable by the people of

lower income group as it is available at lower prices & in greater quantities – which gives value for money.

Beedi is preferred by those people whose incomes are lesser than Rs. 5,000. In urban area, Flake & Silk Cut are two substitutes for beedi as the price of those is very low (Rs. 2 only).

Majority of rural customers do not think about their health while buying a packet of cigarette/ beedi. For this reason, they generally purchase beedi or less costly cigarettes without filters.

Urban people are more health- conscious than rural people. For this reason the acceptability of beedi is less in cities compared to villages & demand for filtered cigarettes are more.

Small packs are more acceptable Small & large both packs are acceptable depending on the income group

Page 24 of 26

They believe ITC could be transforming Wills into a Lifestyle brand. Another reason could be the need to plug

product gaps in the lower end of the price band. “A new launch by ITC in the Rs 24 bracket is good. It may be

filling the gaps in that price range, especially after the volume loss from the non- filters segment," said Mr

Anand Shah, analyst with Angel Broking.

CONCLUSIONS:

From the above study it can be concluded that there are several differences between demographic,

psychographic, behavioral & social environment between urban & rural market. If a product is successful in

urban market, not necessarily it’ll be successful in rural market. The success of a product depend on the four

important factors, those are –

1. Availability of the product a particular market

2. Acceptability of the product in a particular market

3. Affordability of the customers to purchase that product &

4. Awareness of the product.

All these parameters also vary from rural to urban market. In this study, we can see that Flake is the highest

selling cigarette of ITC Ltd. in rural market, but it does not has the highest market share in the urban market.

The reverse is true for Gold Flake. The reason main reason behind this is AFFORDABILITY of the customers

concerned. As the per capita income is low in rural areas therefore the villagers does not have the ability to

purchase luxury cigarette brands. Flake the price of which is very low gives “value for money” to them.

Whether in urban areas, people are more concerned with hygiene rather than price. For that reason they are

more prone to buy the cigarettes with high filter quality & low tobacco content. For this reason the brands like

gold flake, navy cut etc. are more popular in urban market than the rural market.

Now- a-days companies are trying to make the product & services on the basis of the needs & preferences of the

rural customers to capture the rural market with 128 million households. The rural population is nearly three

times the urban. Greater the population greater is the opportunity to do a business.

The Indian rural market with its vast size and demand base offers a huge opportunity that MNC’s cannot afford

to be ignored.

Page 25 of 26

ATTACHMENTS:- Questionnaire for customers

Name:

Age:

Monthly income:

A. Below Rs.2000 B. Rs. 2000- 5000 C. Rs. 5000-10000 D. Rs.10000-20000 E. Above Rs. 20000

Occupation: Number of family members:

Have you ever heard the name of the following brands?

Gold flake Gold flake king Gold flake light India kings Navy cut Flake

Classic Navy cut small Insignia

Silk cut Navy cut king Bristol

Scissor Capstan Berkeley

What are the brands that you have tasted?

Gold flake Gold flake king Gold flake light

India kings Navy cut Flake

Classic Navy cut small Insignia

Silk cut Navy cut king Bristol

Scissor Capstan Berkeley

Which of the following statements is true?

I smoke occasionally

I smoke 1-5 times in a day I smoke 5-10 times in a day

I smoke 10-15 times in a day

I smoke more than 15 times in a day

I used to smoke the same brand all the time.

a. Strongly agree b. Agree c. Neither agree nor disagree d. disagree e. Strongly disagree

Do u smoke ‘Beedi’?

Ans.

Which brand of ‘beedi’ you smoke?

Ans.

Page 26 of 26

REFERENCES:

The following references were used to complete the project efficiently:

Marketing Management, 12th Edition by Philip Kotler.

Rural Marketing, Pradip Kashyap.