Final Brand Project Report-1

7/27/2019 Final Brand Project Report-1

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OBJECTIVE OF THE PROJECT

The primary motive is to understand the branding strategies

and marketing of the company to promote its No.1 brand of

cigarettes Gold Flake.

The secondary motive is to understand how the company

overcomes the challenges put forward by the government like

ban on advertisements and promotion of cigarettes.


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LIMITATIONS

It was impossible to gather the current sales of Gold Flake andthe current branding strategy applied by the company because

as a part of secret information of the company they have not

disclosed it.

It was also not possible to know the top position in the sales ofcigarettes of this year, as the company has still not come up

with its facts and figures.


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Tobacco industry

Tobacco is a principal cash crop of National importance. It has been playing a prominent role inthe development of Nation's Economy. Although the cultivation of Tobacco is restricted to 0.3%

of the total cultivated area, it provides employment to large number of people on the one hand.

On the other hand, it makes significant contribution to National Exchequer by way of excise

revenue and foreign exchange earnings. Tobacco being a labor intensive crop provides

employment to more than 60 lakh people who are engaged in the farming curing, re-drying,

packaging, grading, manufacturing distribution, export and retailing activities. The bidi industry

which provides employment to around 44.00 lakh essentially unskilled rural folks mostly women

is also arresting the influx of rural labor to urban centers.

INDIAN SCENARIO

India ranks 4th in the total Tobacco consumption in the world still Indian cigarettes

consumption ranks 11th in the world. Out of the total production, only 19% of the totalconsumption of Tobacco is in the form of cigarette whereas 81% is in other forms like,

chewing, bidi, snuff, Gutkas paste, Jarda, hookah paste etc. The per capita consumption of

cigarette in India is one of the lowest in the world in comparison to major Tobacco consumingcountries like Zimbabwe, UK, Brazil, U.S.A and Pakistan. The annual level for demand of

cigarette in India remains the same at 96 billion sticks as it was 15 years ago, despite the

cumulative growth in population by nearly 35 percent during the same period.

About 5 to 6 per cent of the total area under Tobacco is accounted forNicotianarustica varieties. The cultivation ofNicotiana tabacum has country-wise spread and this type

also accounts for more than 80% of the exchange earnings.

Specific types and varieties of Tobacco have been developed for use in cigarette, bidi,

cigar, and cheroot, hookah, chewing, snuff and hookah paste. Nicotiana rustica types are usedin chewing and snuff whereasNicotiana tabacum types are used for all purposes.

Even though the cultivation of Tobacco is spread all over the country, the commercial

cultivation of Tobacco is concentrated in States like Andhra Pradesh, Karnataka, Gujarat,Maharashtra, Bihar, Tamil Nadu and West Bengal etc. Cigarette Tobacco is mostly cultivated

in Andhra and Karnataka, whereas bidi Tobacco is grown in Gujarat, Karnataka andMaharashtra. Cigar and Cheroot Tobacco are also grown in Tamil Nadu, Andhra Pradesh and

West Bengal and Chewing Tobacco is grown in Tamil Nadu, Gujarat, Bihar, West Bengal andU.P. Hookah Tobacco is grown in UP, and West Bengal.

The total area and production of Tobacco in India for the year 1997-98 were 463.5

thousand hectare and 646 million kg respectively.


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Tobacco is traditional item of India's foreign trade. India is one of the leading Tobacco

exporting countries in the world. India accounts for 5.8% of the international trade and ranks

5th after Brazil, U.S.A. Turkey and Zimbabwe. The principal markets for India Tobacco areU.S.S.R, U.K, Japan and Middle East countries.

Market and marketing system play a dominant role in ensuring remunerative price forcommercial crop like Tobacco. There has been significant improvement in the marketing of

VFC Tobacco with establishment of Tobacco Board. The production and marketing of VFCTobacco have been statutorily regulated by the Tobacco Board. But the growers of other

varieties of Tobacco are at the mercy of unscrupulous traders and middlemen. Excluding VFC

Tobacco, the method of marketing of Tobacco in India differs from type to type and fromState to State. In case of VFC Tobacco the Government of India and the Tobacco Board are

announcing Minimum Support Price (MSP) from year to year with the objective of protecting

the interest of the growers of VFC Tobacco. There is need for establishment of organizedmarketing system for all types of Tobacco so that the Indian Tobacco can achieve significant

share in the International market.

Research on Tobacco has been playing an important role in the development of

Tobacco varieties in India. India grows different variety of Tobacco under different agro-climatic conditions. As such the problem of improvement of different varieties of Tobacco in

India are numerous and complicated. The main research work on Tobacco is being done at

Central Tobacco Research Institute at Raja humundry and its Research Stations spreadthroughout India. Apart from conducting research for development of different varieties of

Tobacco for maximizing production, the CTRI, Raja humundry has been presently doing

research for development of alternative crops to Tobacco. CTRI, Raja humundry has also been

entrusted with the research for development of alternative uses of Tobacco in view of anti-smoking campaign.

Earlier the Directorate of Tobacco Development was running two Non-Plan Schemes

on bidi Tobacco viz. (i) Seed and Seedlings Scheme and (ii) Farmers Training Scheme atGujarat Agricultural University, Anand, but both these scheme have been terminated by the

end of March 2000.

As a part of all India Comprehensive Scheme to study the cost of cultivation of the

principal crops, this Directorate is running the scheme for Assessing the Cost of Production ofVFC Tobacco in Andhra Pradesh from 1974-75 onwards. Under this scheme the data on cost

of production are collected by cost accounting method by Field staff posted in selected clusters

in Tobacco belt of Andhra Pradesh. After collection and compilation of such field data, this

Directorate has been regularly sending such Information to Directorate of Economics andStatistics. Afterwards, the estimates of cost generated under this scheme are passed on to the

Commission for Agricultural Cost and Prices (CACP) for its use in recommending the

Minimum Support Price (MSP) on VFC Tobacco from year to year basis.

Tobacco Industry in India contributes in a unique manner to several important facets of

the Indian Economy, covering revenue, export, employment, and GDP growth. The Tobacco


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industry in India mainly covers manufacturing of cigarette, bidi, cigar and cheroot, hookah,

snuff and other chewing Tobacco like zarda, gutkha and other pan masala.

Cigarette industry in India is essentially capital intensive in nature. The growth ofcigarette industry both in domestic and international market represents a big revenue

opportunity for the economy. But the burden of Tobacco tax has increasingly shifted tocigarette with the removal of duty on raw Tobacco since 1979, resulting in discriminatory

rates of duty compared to other Tobacco products.

India's share in world cigarette production has remained at around 1.7% whereas

India's exports of around 2.8 billion sticks of cigarette per year accounts for less than 1% of

the world export of cigarette. There is significant opportunity for cigarette industry to extentand consolidate its position in intentional market due to some recent trend like

withdrawal/reduction of agricultural subsidy and escalating cost in the traditional cigarette

exporting countries.

Bidi industry is one of the foremost cottage industries in India. Total amount of bidiTobacco production was 150million kg and that of bidi was around 700 billion pieces

during1994-95. Around 37% of Tobacco production in India goes to bidi making as per Indian

Market Research Bureau (IMRB) report 1996.The social significance of bidi industry derives

from the fact that it generates more employment in the economy compared to cigaretteindustry. During 1993-94 the bidi industry generate around 1310 million man days of

employment. There is scope for development of bidi industry in view of excessive and biased

tax treatment of cigarette.

Cigar and Cheroot industry is one of the oldest industries in India, and is mainly

concentrated in Tamil Nadu and Andhra Pradesh. But presently this industry is in deep

dwindling condition due to unorganized marketing system. There is a cent spurt in thedevelopment of chewing Tobacco segment which uses modern packing technology to attractthe consumer.

From the beginning of 17th century, Tobacco has been playing an important role in

international trade. Recently there has been world-wide anti Tobacco campaign which resulted

in modest fall in area and production of Tobacco. But consumption of Tobacco in the worldhas remained more or less stable. Similarly the world cigarette production grew steadily up to

1997and started declining slowly during 1998 and its again shows upward trend during 1999.

As per the projection by F.A.O, the global Tobacco industry is poised to increase at the

rate of 1.9% annually which will result in a deficit of 2% projected global demand. Assetssuch as experienced farming community confer a significant competitive advantage for India.

With an increase in the world import requirements translating in to a rise in export potential,

Indian Tobacco industry is presented with significant opportunities to consolidate and extentits position in the global market.

Although there is nationwide anti-Tobacco campaign, the commercial importance of Tobacco

can never be underestimated due to the revenue earning potentiality and employment generation


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capacity of the crop. Presently there is a call for substitution of Tobacco with other crops, but the

research findings show that there is no economically viable alternative crop which is as

remunerative as Tobacco to the farmer. Table showing net return from Tobacco and next best

crop in some of the Tobacco growing state is detailed below:-

Differences in Net Returns from Tobacco and Next Best Crop(Rupees per hectare)

StateCrop Giving Next Best

Returns (I)

Differences in Net Returns

Between Tobacco and (I)

Andhra Pradesh (NorthernBlack Soils)

Bengalgram 4405

Andhra Pradesh (SouthernBlack Soils)

Chillies 875

Karnataka Cotton 4500

Gujarat Pearl millet 2306Bihar Maize+ Potato 2729

West Bengal Potato 5134

Tamil Nadu Groundnut 2825

Source: Central Tobacco Research Institute

Indias tobacco exports the third-largest in the world surged by about 39% to reach Rs 2,561

crore in the first 10 months of this fiscal on a sharp rise in price realization and a weakening

rupee. In volume terms, tobacco exports comprising raw tobacco and its products rose 12% to 1,83,605 tones between April 2008 and January 2009 from 1, 64,117 tones in the year-ago period.

India exported tobacco worth Rs 2,560.71 crore between April and January against Rs 1,573.93

crore in the same period last year.

The export of tobacco in January was down marginally in volume terms to 10,121 tones from

10,126 tones a year before but record prices have more than compensated for the decline in

volume.

In value terms the shipment more than doubled to Rs 132.06 crore compared with Rs 65.42 crore

in January 2008.Record prices for the Indian tobacco have contributed significantly to the cause

of exporters this year. That apart the weakening of the domestic currency against the dollar

added to their benefit. Indian tobacco prices hit records due to a shortfall in output in some of the

major producing countries, including China last year. Prices of tobacco skyrocketed to a record

average of Rs 84.85 per kg during auctions in Andhra Pradesh in 2008 against Rs 47.47 the

previous year. Similarly prices of the highest quality tobacco in Andhra Pradesh spiraled to a

record Rs 141 a kg against Rs 65 in 2007.


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Prices in the on-going Karnataka auction is reported to have exceeded the peak achieved at the

Andhra auctions by over 30%.

Indian tobacco industryDespite being the second largest producer, India is only the ninth largest exporter of tobacco and

tobacco products in the world. Out of the total tobacco produced in India, only one-third is flue-

cured tobacco suitable for cigarette manufacturing. Most of the tobacco produce is suitable for

the manufacture of chewing tobacco, bidis and other cheap tobacco products, which have no

demand outside the country. In India, three major cigarette players dominate the market,

primarily ITC with 72% market share, Godfrey Phillips with 12% and VST with 8% share of the

market.


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ITC

ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has aleadership position in every segment of the market. It's highly popular portfolio of brandsincludes 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 leadershipposition 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 tofortify 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 focuson 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-pricedcigarettes 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, Saharanpurand Kolkata. These factories are known for their high levels of quality, contemporary technologyand work environment.

Company is the largest manufacturer of cigarettes in India.

It is a member of BAT Group of UK. ITC is rated among the World's Best Big

Companies, Asia's 'Fab 50'

World's Most Reputable Companies by Forbes magazine, among India's Most Respected

Companies by BusinessWorld

India's Most Valuable Companies by Business Today.

ITC ranks among India's "10 Most Valuable (Company) Brands", in a study conducted by

Brand Finance published by the Economic Times.

ITC also ranks among Asia's 50 best performing companies compiled by Business Week.

Diversification


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FMCG-

Cigarettes-

Foods

Lifestyle Retailing

Greeting, Gifting & stationary

Safety matches

Agarbattis

Hotels

Paperboards & packaging

Specialty Paper

Packaging

Agri-business

Agro-products Exports

E-choupal

Leaf Tobacco

Cigarettes

Company is the market leader in cigarettes manufacturing in India. Company provides largerange of international quality brands; and has a leadership position in every segment of the

market. Its highly popular portfolio of brands includes India Kings, Gold Flake, Navy Cut,

Scissors, Capstan, Berkeley and Bristol. Company's leadership is continuously enhancingproduct values through significant investments in product design, manufacturing technology,

quality, and marketing and distribution strategies. Company made huge capital expenditure inlast few years in its cigarettes business. Company's share of filter cigarettes in the country is

more than 70%. Company has launched four brands of international quality standards- Checkers,Hi-Val, Royale Classic and Gold Crest - in the extremely competitive US market. ITC also

launched Royale Classic, Gold Cut and Scissors Filter Kings cigarettes in the Middle East. Its

manufacturing facilities are located at Bangalore, Munger, Saharanpur and Kolkata.


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From 90 years, company's Indian Leaf Tobacco Development Division has worked closely with

farmers to grow quality cigarette tobaccos. It is the largest buyer, processor and exporter of

cigarette tobaccos in India. Company buys almost 40 per cent of all cigarette type tobaccosgrown in India. Company has large inventory of quality tobaccos for Indian cigarette tobaccos.

This strategic policy insulates customers from crop fluctuations.

ValuationCompany planned huge capital expenditure in coming years to drive its future earnings.

Company diversified its operations and aim to create multiple Earning drivers for future. Strong

distribution reach, superior brand-building capabilities, effective supply chain management andacknowledged service skills makes it the one of the safest investment for future. At the current

market price, ITC is trading at attractive valuation of 18.47 X multiple of estimated FY2010

earnings. We recommend "Strong BUY" on ITC with medium to long-term investment horizon.

Gold Flake

Gold Flake is a cigarette brand widely sold all over India and Pakistan. The ITC

Company is the owner, manufacturer and dealer of the Gold Flake brand. ITC is

India's leading cigarette industry. Gold Flake is probably the largest selling cigarette

brands in India. Originally the term gold flake was used in general for the

cigarettes that were made by using bright rich golden tobacco'. Later on the ITC

Company introduced one of their cigarette brands by this name.

In the early 70s, the Gold Flake cigarettes were launched all over India. During that

period India was considered as a country of wealth and culture. The upper class

people used to smoke cigarettes for style. Gold Flake was traditionally marked as a

premium cigarette deigned specially for the elite and rich citizens of India. Gold

Flake, for its high quality and purity has often been compared with gold.

Gold Flake assortment available:

Gold Flake kings (84mm)

Gold Flake Lights (80mm)

Gold Flake Filter (69mm)

Gold Flake (without filter) (69mm)

Gold Flake Kings is the highest selling cigarette brand in India. It has a very mild

and smooth flavor. Gold Flake Filter and the standard Gold Flake cigarettes have the


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strongest flavor among these varieties and include a huge amount of tar and

nicotine. On the other hand, Gold Flake Lights has a softer and smother taste with

very small amount of nicotine.

CIGRETTE MANUFACTURING

Tobacco leaves are fed in a hopper from there ,leaves travel down and they are grinded into fine

cut particles and from there ground tobacco is fed into jets, these jets feed release the tobacco to

long white paper being un rolled on the machine and this paper is automatically getting gum

applied to its sides and there is a converter which folds the paper filled with tobacco into

cylindrical shape and this long cigarette travels a distance of 3 meters and from there it starts

entering cutting section, the cutting is done in a length of 69 mm as programmed by the

engineers and from there it goes onto the filter section and finally cigarettes roll out on the

packing conveyor belts and they are handpicked there and put into a feeder of packing section.

The feeder wraps every 10, 20 cigarettes in aluminum foil and from there it is fed into unmade

cigarette packet and it passes into gum applying section and folding section of the machine and

wrapping section where it is wrapped by cellophane.

There are many more sections in a cigarette machine, like garniture section, where emblem isprinted on the cigarette and many such functions. It is a very huge and big machine, every

machine has an operator, 4 labors and 3 engineers are always there on each shift, they are run 24

hours a day because of the big demand. There are 3 shifts of productions between each shift there

is a break of half hours, which is spent by maintenance staff to check the machines and do their

job.


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So I have come back to the flavor of GOLDFLAKE, its flavor is made by MAFATLAL group of

Industries, its white starch with some chemicals which is mixed with tobacco to give us that

flavor, otherwise there is no flavor in natural plants except high quality land and low quality

land.

Like we have Basmati Rice and Rice produced in the fields around my home, it all depends on

the land and the kind of seed you put.

GOLDFLAKE has huge market in India, one successful brand ruling all of India since now 25

years.

Branding of Gold Flake

1) Building the brand image:

To create a brand image of Gold Flake the company started branding of the product since it

was launched in 1970. In those days India was a country of the genteel rich. The product offered

the user the sense of belonging to the upper class.

For creating a brand image; the advertisements of Gold Flake launched by the company in

the seventies was as per the consumers taste and preference. The first advertisement was the

balcony ad For the Gracious people, A touch of Gold and A tribute to the gracious people.

But after few years this advertisement became stale as average age of the consumer of Gold

Flake had fallen and it also affected the sales of the company because the young smokers did not

emphasis with the brand. The brand did not stand for success and respectability because theliberalization and globalization had changed the consumer needs and mindset.

To overcome this problem the company followed a brand repositioning strategy. The brand

was still positioned as a premium cigarette but the target consumer had changed. Gold Flake then

targeted adult as well as young smokers. It extended beyond SEC A and included SEC B as

well. The product still differentiated itself on purity and quality of its experience. The


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advertisement for the Gracious People was continued with another slogan added to it

Celebrate the Feeling to encourage the young smokers.

2) Branding Strategies:

Two brand strategies were applied by the company. The first brand strategy is more qualitative in

nature and is concentrated on increasing market share and loyalty while the second strategy

refers to the more quantitative aspects of increasing bottom line profits. The brand extension

strategy has also been mentioned.

A) Honeydew smooth campaign

At a time when sales were stagnating, the tangible and identifiable USP of being honeydew

smooth was associated with Gold Flake by revolving all ad campaigns around it. It was meant to

be unique and durable. It attempted to reignite loyalty among its consumers. The honey drop

icon in everything connected with the brand which signified the identifiable characteristic of the

brand. Unlike the previous campaigns, the USP was not derivedit was a tangible offering to

the consumer. The honey drop icon was designed to be recognizable, simple and powerful. With

this, the campaigns also focused on slogan The world of Gold Flake. Always mellow, Always

smooth.

With this, the brand was positioned as a premium cigarette targeting young and adult malesmokers from the SEC A & B categories in the twenties. The consumers were projected to be

young, upwardly mobile and contemporary and had achieved a smooth balance between the

various facets of their lives.

The results were visible within a single quarter. Sales had increased. The Indian male

identified with the brand and Gold Flake was on the path to success. In 2002, the No. 1 spot in

Brand Equitys first listing of Indias 100 biggest FMCG brands went to Gold Flake. Gold Flake

remains Indias biggest FMCG brand for the year 2003. It continues to be twice as big as its

nearest competitor (in terms of sales) and has even grown by almost 8% in the year 2002-03.

B) Price hikes

In the month of October 2001, the company (ITC) increased prices of its cigarettes by 10-

18%. The move was welcomed in the market and there was a 14% jump in the stock price (from


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Rs.718 on Oct 10th to Rs. 819 on Nov 2). The jump was solely on the reason that ITC is so strong

in the market that such a hike will not affect its volumes or market share.

Gold Flake (20 stick filter) price was increased from Rs. 46 to Rs. 48 (4.3% increase). In

addition to this, the government imposed a 15% natural calamity on all cigarettes. The entire

domestic cigarette industry was also suffering from a robust grey market of smuggled cigarettes(growth rate 20% p.a. based on price differentials). There was also a removal of quantity

restrictions on importing cigarettes which would make all international brands more easily

available in the market.

In such a scenario, the company took another bold step by increasing the price of all its filter

brands again (this time in the range of 10-30%). Price of Gold Flake (20 stick filter) now

increased from Rs. 48 to Rs. 53 (10.4% increase)

Thus the total increase is from Rs. 46 to Rs.53 which is 15.2%. The brand commands a

premium in the market and hence the company has been able to pass on the excise hikes onto theconsumers. This is because a high degree of brand loyalty exists.

The no. of sticks sold by the company has been decreasing continuously for the past 3-4 years

but, an increasing focus on the premium segment and passing on any hike in excise on to the

customers has helped in increasing the sales in value terms.

ITC is also following a brand extension strategy. It is extending the name of Gold Flake

to greeting cards. During Financial Year 2000, the company extended its Gold Flake brand to

other tastes and flavors. The brand equity has also been stretched into products like leather and

fashion accessories. (Brand Stretching)

In 2002 and 2003, Gold Flake has retained the No. 1 spot in Brand Equitys first listing of

Indias 100 Biggest FMCG Brands in terms of sales. It has sales worth Rs. 3900 crores, while

Wills Navy Cut has sales worth Rs. 1500 crores. Today the prices offered are Rs 34 and Rs 28.

Thus the prices are being lowered by the company.

3) Fall of the Brand Image:

Gold flake positions itself as a brand which inspires the customer to aspire for fine living.

This brand image has been developed over the years, and the consumers are accustomed to the

particular blend of tobacco and the particular level of filter. The resulting smoothness is what

distinguishes Gold Flake from the ITC brands, such as India Kings, Gold Flake, Wills, Scissors,

Capstan, Berkeley and Bristol.

But due to the ban on advertisements by the government in 2002 it affected the brand image

of the product. Gold flake was not affected up to the core because the company had already

stretched to other product categories like leisurewear and accessories, categories. ITC suffered a

loss of 40 crores which was invested in advertisement of Gold Flake. The advertising amount


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constitutes very small proportion of the total sales value of the brand i.e. 2 3 % of the total

sales. It was not a big deal for the company as far as investment was concerned.

After the ban the brand was not in the eyes of the consumer, so the promotion of the product

was done by Word of Mouth. The other means for the promotion of Gold Flake was through

advertisements in magazines and sponsorship for different events and sports. The brand was alsopromoted through celebrities like John Abraham smoke Gold Flake cigarette in DHOOM and

also many other stars for its promotion.

The positive point of Gold Flake was that it was harmless, affordable, quality, smooth and

it also had different categories like Gold Flake Hard, Gold Flake Filter, small size gold Flake and

large size Gold Flake. Because of the exceptional attributes of the brand the sales of Gold Flake

were not affected. As in 2004 it was at number one position in FMGC, products people

continued smoking the same brand as they needed the same type of quality, stress buster,

smoothness and affordable price.

4) Management and Marketing objective for maintaining brand image:

The management objective of the company in fiscal year 2004 was to emphasize on

maintaining and reinforcing the brand image of Gold Flake. This serves the purpose of retainingthe huge customer base, and avoids cannibalization of the other products from the same

company.

In spite of the ban on cigarette advertisement in 2002 and 2003, Gold Flake has retained the

No. 1 spot in Brand Equitys first listing of Indias 100 Biggest FMCG Brands in terms of sales.

It has sales worth Rs. 3900 crores, while Wills Navy Cut has sales worth Rs. 1500 crores .

In Financial Year 2004, Gold Flake had a target growth rate of 8% and projected earning

exceeding Rs. 4200 crores of sales. While the cigarette industry is expected to grow at 3%, Gold

Flake is projected to grow at 8%. Gold Flake enjoys the status of a start product in the BCGmatrix. Last year, it earned Rs. 3,900 crores of sales; double that of its nearest rival.

Since the company is dealing in the habitual buying category, ITC (Indian Tobacco

Company) is confident of growing market share of 8% in spite of a price hike. The hike will also

cover the cost of VAT. For the maintaining the brand image the company also had to concentrate

on the prices as per the fluctuating demand of Gold Flake. The demand fluctuates because of the

prices of other brands and changing habits of the consumer.


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Marketing Mix of Gold Flake

The marketing mix of Gold Flake consists of four Ps that is Product, Price, Place and

Promotion. The evaluation of the 4 Ps is done on the basis of the attributes of the product,

consumers taste and preference, research and development carried by the company regarding the

product, its retail outlets etc.


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1) Product :

Brand name: The brand name of Gold flake has a very good position in the market. Thebrand name of Gold Flake is popular since last 25 years.

Quality: Gold Flake offers superior quality of cigarettes with a different type of tobaccoi.e. golden tobacco in it, which is being bleached before manufacturing of the cigarette.

This gives a different type of quality to the product.

Safety: It is less harmful as the tobacco content is less. There is also a filter connected tothe end of the product, through which the tobacco content is inhaled in less proportion

while smoking.

Packaging: The packaging of Gold Flake is done in hard cardboard paper. A packetcontains 10 cigarettes and small packet contains 5 cigarettes. The packaging also includes


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the raw materials used for the product, the harmful character of the product and the price

of the product.

Accessories: The accessories offered by the product are a cigarette filter and also acigarette holder for smoking.

2) Price:

Pricing strategy: The pricing strategy of the company depends upon the demand of GoldFlake and also the prices of other products. If the price of other brand is high the prices of

Gold Flake are lowered down. If the demand for the product is high the prices are risen

up.

Retail price: Gold Flake has different categories. The price of large packet of Gold Flakeis Rs 34/-; small packet is Rs 28/- and loose cigarettes cost around Rs 3.50/-.

Volume pricing: The large packet of Gold Flake contains 10 cigarettes which is Rs 34/-,small packet Rs 28/- contains 5 cigarettes. These prices are offered to the consumers. To

retailers the price offer is comparatively less than that of consumers as the buy in bulk.The price depends upon the quantity of the wholesale purchase by the retailers.

Price flexibility: Price flexibility is very less in this product. The prices changedepending upon the market and consumers demand and supply. The prices also changes

as per the tax rate and government rules and regulations.

3) Place:

Distribution channels: The distribution channel starts from the whole seller then thedistributers. The third party is the retailers and then finally the retailers to the consumers.


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Market coverage: ITC covers a wide range of the retail spectrum, from premium outletsin the metros to small shops in the interiors of rural India.

Order processing: the order processing is done as per the demand and supply of theproduct in the market. In this category of product the demand is increasing day-by day,

therefore each year the company has to increase its production as per the increasing

demand. Especially as the standard of rural consumer is increasing, the demand for

branded cigarettes is also increasing. Therefore order processing has to be done well in

advance.

Transportation: Long distance transportation is done through trucks and containersdepending upon the quantity of the product to be transported. Small distancetransportation like distributing to the local retailers is done through small tempos.

4) Promotion:

Promotional strategy: The product was promoted through advertisements since itwas launched. The branding of the product was done by the ITC by applying two

branding strategies: (i) Honeydew smooth campaign (ii) Price hikes.

Advertising: Before the ban advertisements were done through channels of medialike television, radio, posters etc. after the ban on advertisement, it is advertised in

magazines and through sponsorship of different events. After the ban Gold Flake was

also promoted through Word of Mouth.

Marketing communications budget: Before the ban advertisement ITC invested 50crores on advertisement of Gold Flake. After the ban on advertisement fewer amounts

is spent on marketing communication.

SWOT Analysis

STRENGTHS

1) The main strength of the company is the brand Image of Gold Flake. In spite of

ban on the advertisement the product was at No.1 position in FMCG products in

2003-2004 and its sales were up to Rs 3900 crores.


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2) The attributes of the product is as per the consumer aspirations, specifications

and taste. It has high perceived quality; it is affordable by the consumers. This factor

has helped the company to keep steady margin of its sales volume.

3) The company has an excellent distribution channel of network which has enabled

the availability of products in different regions as per the consumer demand andsupply for the product.

4) The Gold Flake brand name has been promoted through vacation tours Gold

Flake Golden Getaways. ITC has also paid Indian tennis stars to endorse Gold Flake

cigarettes.

5) In Mumbai, Gold Flake from ITC holds the lions share of the market selling 60

million sticks. Four Square special comes second with 55 million sticks and Wills is

third

WEAKNESS

1) The main weakness of the company is that after the ban on advertisement it is not

able to promote the product on higher basis as it was promoted before the ban.

2) The other weakness is the manufacturing process which is very time consuming.

Sometimes it is very difficult for the company to supply the cigarettes as per the

demand; it is because the demand of Gold Flake is increasing rapidly.

3) Most the times the consumer prefers the price of the product first and then the

quality and other factors. The price of Gold Flake is Rs 34/- therefore as a high price

product the quality is ignored by the consumer and then they prefer to buy bidis or

pan.

4) The next weakness is that the company is not able to build a further brand image

due to the ban on advertisement. The branding of the company is done on small basis

which is hardly ever seen.

5) ITC not only manufacturers Gold Flake but also Wills Navy Cut, Bristol, Four

Square etc. It becomes difficult for the company to differentiate and decide the

quality, price and other factors of the cigarettes while manufacturing and distributing.

OPPORTUNITIES

1) The opportunity of the company (ITC) is to reduce the price of the product and

offer the same quality. This will increase the sales volume of the company.


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2) The packaging of the product should be changed and each and every attribute

should be mentioned on the packet and also the level of harmless should be

mentioned. This will help in Word of Mouth marketing.

3) As ITC is being recognized as Worlds Best Big Companies and the Worlds

Most Reputable Companies by Forbes magazine, the company can launch Gold Flakeat international level through collaboration with sports events held at international

level and also with other brands.

4) In India the company can launch the product Gold Flake as mild cigarette and

less harmful for consumer attraction.

THREATS

1) The threats of the company are competition from international companies. The

main competitors are Marlboro, Marlboro Lights, and 555 cigarettes. These

companies are famous at international level and also as an imported cigarette brand

with affordable price; the consumers prefer to buy them.

2) The promotion done by the company of Gold Flake is through advertisements in

magazines and sponsorship, where as the advertisement of the international

companies like Marlboro and Camel is done on international level, like sponsorship

to Ferrari team in Formula One and also to Super Bike racing. Camel cigarettes give

sponsorship to Rally Races in Africa and UK. This is the biggest threat to the brand

image of the company at national as well as international level.

3) The next threat may also be the changing habits of the consumer; they may quitsmoking due to its ill effects and hazards. This may affect the sales as well as the

brand image of the product

4) In future the government may completely put ban on advertisement of cigarettes

or also put a ban on sponsorship under the consideration that cigarette is harmful for

health. This will be the biggest threat for the product as well as the company.

Key financial data of


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Documents

Final Brand Project Report-1