ITC LTD: Toward a triple bottom line performance

Case Facts• India is one of 3 largest producers of tobacco• 8th largest exporter of tobacco (3383 crore RS)• Cigarettes form 85% of exports• 10 million people employed by tobacco industry• ITC ltd has 75 % market in cigarette industry• Higher taxes on cigarettes, very low on bidis• India is home to 12% world smokers• Per capita consumption less than world average• Significant growth opportunity for cigarette industry in

domestic and international markets• Significant health hazards- 0.5 million people die in an year

(India)• Cigarettes and other tobacco products act 2003- Ban on

advertising and smoking in public places

ITC VISION• TBL philosophy- Corporate performance to be judged on Economic , Social, and Environmental sustainability

It is indeed gratifying that sustainability and inclusiveness of growth not only remains government objective but also guides key organizations in private sector such as ITC

-Dr. Hamid Ansari VP India

Sustainability report 2011 figures

Leadershipin Energy and Environmental Design

ITC’s way out

• Disproportionate taxes on cigarettes (affects revenue as well as Govt objective to curb use of tobacco)

• Growing incidence of smuggled cigarettes and illegal manufacturing

Key challenges-1

• ITC is engaging with policy makers through industry associations to enable balanced taxes

Q-1: Should they wind down the cigarette operations?

Effects on Stakeholders & shareholders:• Farmers- no alternative livelihood for farmers and cottage

industry workers

• Employees- future of 26000 employees at stake??

• Government- currently gets 20 % tax revenue on cigarettes

• Shareholders- 65% gross revenues comes from cigarettes, will

affect the companies revenues and profits

• Community- total loss from tobacco related diseases was Rs.

277 billion in 1999

Q-2: Should he grow cigarette business?• Yes, they should keep cigarette business going on

• They should make public more and more aware about the harms

and hazards of the cigarette smoking

• Mean while they should also look for research in reducing the harm

done by cigarette smoking

• They should make cigarette less harmful may be by reducing tobacco

content or other substitute of it

• For that research investment will be required which can be shown to

public as an investment by ITC Ltd. toward public welfare

• Increased good-will in public

Q-3: Should he lobby against negative publicity of smoking?• Increased negative publicity has lead to the governmental

pressure on taxes and other duties• Thus he should try to lobby in decreasing such publicity which

as a whole can affect the cigarette industry• Such taxes rises normally leads public to consume other

tobacco products which are even more hazardous to the health

• Public should be made aware about the health hazards of cigarette as well as other tobacco products and thus can reduce negative publicity

• Public should also be made about the initiatives being carried out by ITC to make public aware about ITC as a good brand

Q-4: Entire export of tobacco products in long run?• This can lead to a wrong message in global presence of ITC

that company is exporting all tobacco products just gain fame in their own home country

• They should instead continue operations in India as well as export the products

• They should sell the products with given warnings about the negative aspects of consumption of tobacco products

• Indian market for tobacco products is also bigger in economic aspects which may harm company financially

News on ITC

27 July 2012 The statesman report• Aiming to become the number one FMCG player in the country (barring cigarettes),

Mr Deveshwar (Chairman ITC) said the company was eyeing a topline of around Rs 15,000 crore over the next five to seven years from this new line of business.

• ITC paid the Indian National Congress (Rs. 3 crore), the Bharatiya Janata Party (Rs. 2.50 crore), the Samajwadi Party (Rs. 0.42 crore), the Rashtriya Janata Dal (Rs. 0.33 crore), the Dravida Munnetra Kazhagam ( Rs. 0.22 crore), the Shiv Sena (Rs. 0.17 crore) and the Nationalist Congress Party (Rs. 0.14 crore) in the last two years (2010-2011). Health activists say that this is a move to stop government from curbing smoking completely

Hindu 9th june 2012

Thank You