GOLD FLAKE
A PROJECT REPORT ON
INDIA’S TOP BRAND IN CIGARETTES‘GOLD FLAKE’
SUBMITTED BY
NIKHIL BANSALT.Y.B.M.S. SEMESTER V
2009 – 2010ROLL NO. 9
UNDER THE GUIDANCE OF
PROF. PANKAJ NATU
DATE OF SUBMISSION
30ST OCTOBER 2009
NARSEE MONJEE COLLEGE OF COMMERCE & ECONOMICS
VILE PARLE (W). MUMBAI – 400 056
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GOLD FLAKE
DECLARATION
I, Nikhil Bansal of Narsee Monjee College of Commerce and Economics, of T.Y.B.M.S. (Semester V) declare that I have completed this project on INDIA’S TOP BRAND IN CIGARETTES ‘GOLD FLAKE’ in the academic year 2009 – 10. The information submitted is true and original to the best of my knowledge.
Signature of the Student
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GOLD FLAKE
CERTIFICATE
I, Prof. Pankaj Natu hereby certify that Mr. Nikhil Bansal of Narsee Monjee College of
Commerce and Economics, of T.Y.B.M.S. (Semester V) has completed the project on
INDIA’S TOP BRAND IN CIGARETTES ‘GOLD FLAKE’ in the academic year 2009 –
10. The information submitted is true and original to the best of my knowledge.
Signature of the Project Co-ordinator Signature of the Principal of the
College/ Institution.
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GOLD FLAKE
ACKNOWLEDGEMENT
It has always been my sincere desire as a management student to get an opportunity to
express my views, skills, attitude and talent in which I am proficient. A project is one
such avenue through which a student who aspires to be a future manager does
something creative. This project has given me the chance to get in touch with the
practical aspects of management.
I am extremely grateful to the University of Mumbai for having prescribed this project
work to me as a part of the academic requirement in the Bachelor of Management
(BMS) course.
I wish to appreciate the management and staff of N.M. College, BMS for providing the
entire state of the art infrastructure and resources to enable the completion and
enrichment of my project.
I wish to extend a special thanks to my project Guide Prof Pankaj Natu without whose
guidance, the project may not have taken shape.
Finally, I thank all my friends and family members who have directly or indirectly
helped me towards the execution of this project.
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GOLD FLAKE
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INDIA’S TOP BRAND IN CIGARETTES
‘GOLD FLAKE’
GOLD FLAKE
EXECUTIVE SUMMARY
Cigarette is a product which is harmful for health, in spite of this feeble; its sales are increasing
globally. The product has been ban from advertisement and promotional activities. It is a challenge for
the companies to sale this product and build its brand image. The Cigarette Industry is one of the
oldest industries in India. India is the second largest producer of tobacco in the world after China. It
produced 572 million kilograms of tobacco in 2002-2003. Approximately 5.5 trillion cigarettes are
produced globally each year by the tobacco industry, smoked by over 1.1 billion people, which is
more than 1/6 of the world's total population.
ITC is the market leader in cigarettes in India. It's highly popular portfolio of brands includes
Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissor, etc. Gold Flake is the top
brand of cigarettes in India. It was launched by ITC in the seventies. It is a well-positioned brand in
India and is the market leader in its segment. The brand Gold Flake became popular because of the
exceptional characteristics offered by the product and also the branding strategies applied by the
company to establish the brand name. Gold Flake was at No.1 position in highest sales in 2003-2004
in FMCG products. About 85% of the revenues of ITC are earned through the sales of cigarettes. The
company today is facing competition from International players.
Today the cigarette industry of India is booming in the market. The sales of cigarettes are
increasing day-by-day. In future the company may face many challenges from competitors and
government, but it is very difficult to change the aspirations of the consumers. Due to this the
company is benefited. It has been predicted by the company the sale of Gold Flake will grow at the
rate of 8% annually.
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GOLD FLAKE
INDEX
Sr.No TOPIC Page No.1. Chapter I
Introduction. About the Cigarette Industry of
India. About the Company (ITC).
1-11
2. Chapter II Gold Flake. Hierarchy of the company. Manufacturing process.
12-24
3 Chapter III Attributes of the product. Benefits of the product. Packaging of the product.
25-30
4 Chapter IV Marketing Mix. 31-36
5 Chapter V Branding of Gold Flake. 37-45
6 Chapter VI Data analysis. 46-65
7 Chapter VII SWOT Analysis. 66-71
8 Chapter VIII Conclusion.
72-73
BibliographyAnnexure
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GOLD FLAKE
8
CHAPTER I
GOLD FLAKE
Introduction
"I like to think of fire held in a man's hand. Fire, a dangerous force, tamed at his
fingertips. I often wonder about the hours when a man sits alone, watching the smoke of a
cigarette, and thinking. I wonder what great things have come from such hours. When a man
thinks, there is a spot of fire alive in his mind--and it is proper that he should have the
burning point of a cigarette as his one expression."
A cigarette is a product consumed via smoking and manufactured out of cured and finely
cut tobacco leaves, which are combined with other additives, then rolled or stuffed into a
paper-wrapped cylinder generally less than 120 mm in length and 10 mm in diameter. The
cigarette is ignited at one end and allowed to smolder for the purpose of inhalation of its
smoke from the other which is usually filtered at the end and is usually inserted in the mouth.
They are sometimes smoked with a cigarette holder. The term cigarette as commonly used,
refers to a tobacco cigarette but can apply to similar devices containing other herbs, such as
cannabis. They are colloquially known as 'cigs', 'smokes', 'ciggies', 'straights', 'cancer sticks',
'death sticks', 'coffin nails' and 'fags'. Cigarettes are proven to be highly addictive, as well as
a cause of multiple types of cancer, heart disease, respiratory disease, circulatory disease and
birth defects. A cigarette is distinguished from a cigar by its smaller size, use of processed
leaf, and white paper wrapping. Cigars are typically composed entirely of whole leaf tobacco.
Commercially manufactured cigarettes are relatively simple objects consisting mainly of a
tobacco blend, paper, PVA glue to bond the outer layer of paper together, and often also a
cellulose acetate based filter.
In the beginning of the 16th century, beggars in Seville, Spain developed the first paper-
rolled cigarettes when they collected discarded cigar butts, shredded them, and rolled them in
scraps of paper. Although the Spanish elite first dismissed them as recycled garbage, these
cigarillos, or little cigars, eventually gained popularity during the 18th century. Cigarette
smoking spread to Italy and Portugal, and eventually to the rest of Europe and into Asia.
Cigarettes were largely unknown in the English-speaking world before the Crimean War,
when British soldiers began emulating their Ottoman Turkish comrades, who resorted to
rolling their tobacco with newsprint. The cigarette was named sometime in the 18th century.
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GOLD FLAKE
During World War I and World War II, cigarettes were rationed to soldiers. During the
second half of the 20th century, the adverse health effects of cigarettes started to become
widely known and text-only health warnings became commonplace on cigarette packets. The
United States has not yet implemented graphics-based cigarette warning labels, which is
considered a more effective method to communicate to the public the dangers of cigarette
smoking. Canada and Australia, however, have both textual warnings and graphic visual
images displaying, among other things, the damaging effects tobacco use has on the human
body. The cigarette has evolved much since its conception; for example, the thin bands that
travel transverse to the "axis of smoking" (thus forming circles along the length of the
cigarette) are alternate sections of thin and thick paper to facilitate effective burning when
being drawn, and retard burning when at rest. Synthetic particulate filters remove some of the
tar before it reaches the smoker.
Companies like Marlboro a brand of Cigarette made by Altria which started
manufacturing cigarettes in 1924 gave advertisements that Marlboro is a ‘women’s cigarette’
based on the slogan “Mild as May”. It became the most popular brand of United States in
2001. Marlboro became so popular that its sales never came down in the States and earned
huge revenues. It started giving sponsorship to motor sports and racing cars. It was the main
sponsor for Ferrari Formula One car and Yamaha in Super Bike Racing. It became famous
globally till 2003 through Ferrari when it won the world championship of Formula One
Racing. In mid-2006, special "racing editions" of Marlboro Red were sold in the UK, with a
Ferrari-inspired design, although the Ferrari name and badge were not used.
Mostly people smoke cigarettes for pleasure or because of frustration or problem. Once
they start they get addicted to it. It is very difficult to overcome the habit of smoking till one
becomes used to it. In foreign countries most of the people started smoking cigarettes because
of celebrities smoking in films and serials. This gave a boost to the cigarette manufacturing
companies by increase in their sales and also promotion of the product as the demand
increased. Most countries in the world have a legal smoking age of 18. Seven exceptions are
Austria, Belgium, Denmark, Germany, Portugal, the United Kingdom, and The Netherlands,
where the age is 16.
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GOLD FLAKE
Since January 1, 2007 all cigarette machines in public places in Germany must attempt to
verify the customers age by requiring the insertion of a debit card. Turkey, which has one of
the highest percentages of smokers in its population, has a legal age of 18. Another curiosity
is Japan, one of the highest tobacco consuming nations, which requires purchasers to be 20
years of age. However, due to the prevalence of cigarette vending machines in the most
public of places the effectiveness of an underage ban is in doubt.
In other countries, such as Egypt or India (especially Kerala) it is legal to use and
purchase tobacco products regardless of age. Approximately 5.5 trillion cigarettes are
produced globally each year by the tobacco industry, smoked by over 1.1 billion people,
which is more than 1/6 of the world's total population.
Many governments impose restrictions on smoking tobacco, especially in public areas.
The primary justification has been the negative health effects of secondhand smoke. Laws
vary by country and locality. In India the ban on tobacco and cigarettes has been implied
since 2002, but still the companies continue to manufacture cigarettes as the smoking habits
of the consumers do not change. Through sponsorship these companies try to publish their
brand name and promotion of their product. Cigarette advertisement is also done through
movies where the celebrities smoke cigarettes in the film. This also helps in brand and sales
promotion. The Indian government is trying hard to impose strict actions against these
advertisements and promotion. Even though by imposing strict tax rate these companies are
able to continue their business as 1.1 billion people of the world consume cigarettes. In many
parts of the world tobacco advertising and even sponsorship of sporting events has been
outlawed. The ban on tobacco advertising and sponsorship in the EU in 2005 has prompted
Formula One Management to look for races in areas that allow the tobacco sponsored teams
to display their livery. As of 2007, only Ferrari retains tobacco sponsorship, continuing their
relationship with Marlboro until 2011. In spite of the ill effects and health hazards people
continue to smoke cigarettes for pleasure or because of habit. This habitual of the people
helps the companies to overcome the ban and advertisement on cigarettes and tobacco.
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GOLD FLAKE
About the cigarettes Industry of India
The Cigarette Industry is one of the oldest industries in India. It is an important agro-
based industry. It is highly labour intensive and provides livelihood to about five million
people directly and indirectly. Cigarette is an item falling under the First Schedule to the
Industries (Development & Regulation) Act, 1951 and requires an industrial license.
The cigarette industry has always been on the receiving end when it comes to imposition
of taxes and duties in the financial budget of the country. The industry has been reeling under
ever-increasing excise duties and innovative form of taxes like luxury tax. Also, due to the
high taxes in the country, the competitiveness of the Indian cigarette manufacture is adversely
affected in the global market. Its growth is being further stifled by the imposition of ban on
smoking at public places and ban on advertisements. In addition to this, increasing awareness
about harmful effect of smoking and lawsuits in western countries has made the entire
scenario pretty gloomy for the industry. This leads to increased government regulation and
public litigation and a reduced ability to promote the product. In such a scenario, cigarette
companies in India are going in for unrelated diversification. Also, with the increasing threat
to the tobacco industry as a whole and decreased consumption levels of cigarettes, need gaps
in the market are being met by new products like non-tobacco beedi, paan- (betel leaf)
flavored tobacco-free gum lets , and substitutes and tobacco patches like ‘Click’ which are
targeted at the traditional cigarette consumer base.
At present, there are 19 units in the organized sector engaged in the manufacture of
cigarettes with a total installed capacity of about 147.377 billion pieces per annum. The
production of cigarettes during 2001-02 was 60577 million sticks. During the current year i.e.
2002-03 (April 2002 to December, 2002) the production has been 43198.20 million sticks. In
terms of volume, bids dominate the Indian market for tobacco products.
India is the second largest producer of tobacco in the world after China. It produced 572
million kilograms of tobacco in 2002-2003. India only holds a meager 0.7% share of the
US$30 billion global Import-Export trade in Tobacco, with cigarettes/cigarette tobaccos
accounting for 85% of the Country's total tobacco exports.
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GOLD FLAKE
The tobacco industry holds tremendous potential for India. For the government, it means
excise duties and export revenues, and for the Country in general, it translates into huge
employment opportunities. Despite 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. There is only an
export demand for flue-cured tobacco, which is used for cigarette manufacturing.
If India adopted a rational tax policy for the tobacco industry that encouraged the growing
of export tobacco, tobacco farmer income would increase and export revenue would grow. If
India adopted China's tax policy on tobacco, tax revenue could rise from the current Rs 6,031
crores to Rs 54,000 crores. China's economy-oriented tax policies have given cigarettes 100%
share of domestic tobacco consumption. This strong domestic base has proved to be
conducive to exports as well as revenue generation. The Indian tobacco industry makes a
very substantial contribution to employment. 35 million people are directly or indirectly
engaged in the production and selling of tobacco & tobacco products as shown in the table
below.
In terms of volume, bidis dominate the Indian market for tobacco products. This
traditional Indian smoke has shown steady growth during the review period, although
manufacturers report that sales are not as high as in the 1980s. Cigarettes dominate the
manufactured tobacco products market. This invaluable study analyses the market for
cigarettes in India over the time period 1998-2002 and provides forecasts to the year 2007.
This title investigates key trends and developments and can be used to evaluate competitive
threats; identify strategic partners and acquisition targets; analyse market and brand share
trends and forecast growth opportunities.
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GOLD FLAKE
About the Company
ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco Company
of India Limited'. The Company's ownership progressively Indianised and the name of the
Company was changed to I.T.C. Limited in 1974. In recognition of the Company's multi-
business portfolio encompassing a wide range of businesses of Cigarettes & Tobacco, Hotels,
Information Technology, Packaging, Paperboards & Specialty Papers, Agri-Exports, Foods,
Lifestyle Retailing and Greeting Gifting & Stationery - the full stops in the Company's name
were removed effective September 18, 2001. The Company now stands rechristened 'ITC
Limited'.
ITC is one of India's foremost private sector companies with a market capitalization of
nearly US $ 15 billion and a turnover of over US $ 4.75 billion. ITC is rated among the
World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by
Forbes magazine, among India's Most Respected Companies by Business World and among
India's Most Valuable Companies by Business Today. ITC also ranks among India's top 10
`Most Valuable Company Brands', in a study conducted by Brand Finance and was also
published by the Economic Times. ITC employs over 21,000 people at more than 60
locations across India. The Company continuously endeavors to enhance its wealth
generating capabilities in a globalising environment to consistently reward more than
4,65,000 shareholders, fulfill the aspirations of its stakeholders and meet societal
expectations.
ITC pioneered the cultivation and development of Leaf Tobaccos in India. ITC has helped
the Indian farmer grow quality leaf tobaccos and linked him to global markets. ITC is the
largest buyer, processor and exporter of leaf tobaccos in India - creating a global benchmark
as the single largest integrated source of quality tobaccos. ITC serves in 48 countries across
more than 69 destinations. ITC buys nearly 50 per cent of all tobacco types grown in India.
ITC's Green Leaf Processing plants at Chirala and Anaparti in Andhra Pradesh, the tobacco
hub of India, are benchmarked with the best in the world. ITC process and deliver 120
million kilo grams of high quality tobaccos annually. ITC's collaboration with related
Government agencies has helped develop new varieties of tobaccos and explore new areas for
tobacco cultivation.
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GOLD FLAKE
ITC is the market leader in cigarettes in India. 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. In the extremely competitive US market, ITC offers high-quality, value-priced
cigarettes. ITC's cigarettes are produced in its state-of-the-art factories at Bangalore, Munger,
Saharanpur and Kolkata. These factories are known for their high levels of quality,
contemporary technology and work environment.
ITC is the leading player in domestic cigarette market. The company commands over
60% market share both in value and volume terms. The company has some of the leading
brands of cigarettes like Wills, Gold Flake etc in its portfolio. The cigarette business forms
the bread & butter business of the company. It gets more than 85% of revenues. The company
has slowly and steadily nurtured its brands over the years to secure this position. With
margins as high as 40% in cigarette business the company has generated huge amount of cash
from its operations and is thus facing the problem of plenty. The problem is not just restricted
to ITC it is through for other tobacco companies also. Though ITC's management has good
track record in managing its cigarette business, its report card on diversification and success
of these unrelated business has not been good.
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GOLD FLAKE
Achievements
Achieved five star Health and Safety Rating from the British Safety Council for
its cigarette factories at Bangalore, Munger, Kolkata and Saharanpur and the
"Sword of Honor" for Bangalore & Saharanpur for 2006-07.
Bangalore, Kolkata and Saharanpur cigarette factories won the prestigious
Greentech Safety Gold Award for the year 2007 in the manufacturing sector.
These awards are in recognition of the high level of performance that the units
have achieved in Environment Health and Safety (EHS). Saharanpur along with
Kolkata and Munger factories were honored with the same award in 2006.
Bangalore Factory has also received the Platinum Award for outstanding
achievement in safety management in 2006.
Bangalore Factory has won the "Safety Innovation Award 2006" for Innovative
Safety Management System from the Safety & Quality Forum (Institution of
Engineers) and also Unnatha Suraksha Puraskara Award from NSC Karnataka
Chapter.
The cigarette factory at Kolkata was awarded the "1st National Security Today
Award 2005" in the category of Best Maintained Fire Safety System.
Bangalore, Munger & Kolkata have won the prestigious Greentech Environment
Excellence Gold Award for the year 2006.
Munger factory won the Excellence in Water Management Award from CII-GBC
for 2006.
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GOLD FLAKE
17
CHAPTER II
GOLD FLAKE
GOLD FLAKE
Gold Flake is a widely-sold cigarette brand in India and Pakistan. It is sold in various
varieties, including Gold Flake Kings (84mm), Gold Flake Lights, Gold Flake Filter (Filter
tipped) and Gold Flake (plain). It is a well-positioned brand in India and is the market leader
in its segment. This brand is owned, manufactured and marketed by ITC which is leader in
cigarette industry in India. Other popular cigarette brands owned by ITC are Wills, Scissors.
It is sold in three varieties. Gold Flake Kings is the largest selling brand of cigarettes in India.
It has a mild flavour. Goldflake Filter King Size Lights (84mm) Goldflake lights is milder
than Gold Flake and contains comparatively less nicotine. Goldflake Filter (Small) Goldflake
Filter (small) has the strongest flavour amongst the three brands.. A pack of 10 costs about 34
Indian rupees. Goldflake Plain (Filter less). The very original Goldflake is simply known as
Gold Plain or Plain in southern markets. It is the strongest of all.
The cigarette market in India has 4 players ITC, a British American Tobacco (BAT)
affiliate, is the largest cigarette manufacturer with 66% of the market share. Godfrey Phillips
India (GPI), a Phillip Morris affiliate, and Vazir Sultan Tobacco (VST), a BAT affiliate, each
have 13% of the total market share. Golden Tobacco Company (GTC) has 8% of the market
share. There are lots of popular brands which are present in the Indian market. They are
divided into 3 segments which are super premium, premium, and bingo segments. Few of the
brands in these categories are: - Super premium - Wills Insignia Premium- Wills
Classic/Milds Wills Navy Cut, Wills Silk Cut, Gold Flake/Lights, four square Bingo– Bristol,
Red and White.
Origin of the Name
Goldflake was neither a brand nor a process of manufacturing cigarettes. The word "Gold
Flake" refers to cigarettes made using 'bright rich golden tobacco'. Brands other than wills
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GOLD FLAKE
gold flake are Bacons' Gold Flake, Hignett's Golden Flaked Honey Dew, Salmon and
Gulckstein's Gold Flake.
Launch and Promotion
ITC launched the brand Gold flake in India in the seventies. The source of the
positioning of Gold Flake can be traced back to its early days. In the Seventies, India was a
country of the genteel rich. People aspired to be honorable and genteel. The lifestyle of the
upper class was what the customers aspired for. The initial ads said, “Wherever you go they
are good”,” Having fun wish you were there” “Worth its length in gold”, then came the
Gracious People Campaigns “For the Gracious People” as the headline followed by, “A touch
of Gold”, with the headline "A tribute to the Gracious People".
Gold Flake had been traditionally positioned as a premium cigarette. It targeted adult,
male SEC A category smokers. It was meant to be a cigarette for the best and the rich – the
gracious people of India. It did not differentiate itself specifically from other brands. The
brand was compared with Gold for the quality and purity of experience. Advertising
emphasised this comparison to gold. The statement – “For the gracious people” summed the
core of the brand. The gracious people as defined by the brand were the premium class they
were successful, elegant, and responsible, and had a sense of purpose.
The consumer was bounded in the Indian ethos and roots. He was perceived to be
unapproachable and sociable only in his high class. ITC's share of filter cigarettes in the
country is more than 70%. In pursuit of international competitiveness, ITC has launched four
brands - Checkers, Hi-Val, Royale Classic and Gold Crest - in the extremely competitive US
market. Recently ITC has launched Royale Classic, Gold Cut and Scissors Filter Kings
cigarettes in the Middle East. The response to these brands has been encouraging.
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GOLD FLAKE
Hierarchy of the Company
20
CHAIRMAN Y.C Deveshwar CHAIRMAN Y.C Deveshwar
India Tobacco and Cigarette Division
Chief ExecutiveKurush N Grant
Indian Leaf Tobacco Development Division
Divisional Chief Executive S Janardhan Reddy
Head, HRA Dutt
VP, Marketing & R&D
K C Biddappa
Head, Processing & TechS Ramakrishna
Ex-VP, MarketingS M Ahmad
Ex-VP, Technical & HRT V Ramaswamy
Ex-VP, Finance & MISR Tandon
GOLD FLAKE
Manufacturing Process
Commercially manufactured cigarettes are relatively simple objects consisting mainly of
a tobacco blend, paper, polyvinyl acetate glue (PVA) to bond the outer layer of paper
together, and often also a cellulose acetate based filter. While the assembly of cigarettes is
straightforward, much focus is given to the creation of each of the components, in particular,
the tobacco blend, which often contains over one hundred ingredients.
Cigarette rods are manufactured at high rates of speed using a cigarette making machine
having a tongue which is equipped such that water is continuously fed there through in order
to exit the surface of the tongue which contacts a tobacco filler stream passing through the
garniture region of the cigarette making machine. The process of introducing water through
the tongue during a cigarette making operation allows the manufacture to produce a
continuous cigarette rod of controlled integrity. For example, cigarettes of controlled density
and firmness, and having very low amounts of hard spots, soft spots and loose ends, can be
manufactured. The process provides for the manufacture of cigarettes at high speeds, and for
the manufacture of cigarettes having high filling capacity tobacco blends. For example,
cigarettes having blends comprising relatively high levels of volume expanded tobacco can
be manufactured efficiently and effectively.
For manufacturing process of cigarettes includes six steps. It is a very long process. As
the demand for cigarettes is increasing the demand for tobacco has also being increased.
Cigarettes are being differentiated according to their smoothness, hardness, quality, size,
tobacco content, etc. but the basic process for manufacturing is the same. The six steps for
manufacturing cigarettes are:
1. Tobacco Harvest.
2. Tobacco Curing.
3. Tobacco grading and buying.
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GOLD FLAKE
4. Primary processing.
5. Cigarette manufacturing.
6. Packaging.
1) Tobacco Harvest :
ITC pioneered the cultivation and development of Leaf Tobaccos in India. ITC is the
largest buyer, processor and exporter of leaf tobaccos in India - creating a global benchmark
as the single largest integrated source of quality tobaccos. Serving customers in 48 countries
across more than 69 destinations, ITC co-creates and delivers value at every stage of the leaf
tobacco value chain and also process and deliver 120 million Kgs of high quality tobaccos
annually. Tobacco is produced in Andaman and Nicobar Islands, Dadra and Nagar Haveli,
Delhi, Pondicherry etc.
Tobacco is harvested in the following steps:-
Tobacco is a crop that can be grown in a wide range of soils and climatic conditions.
Tobacco is also the only crop that thrives on low fertility land and is usually grown in
rotation with other food crops and it needs cold climate.
Tobacco seeds are miniscule and cannot be sown directly in the field. Seedlings are
first produced in plant beds or green houses and then transported after seven weeks by
hand or planting machines into the fields.
These plants are then fertilized according to the type and soil conditions. The tobacco
plant is susceptible to many diseases and therefore, great care is taken to protect these
plants.
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GOLD FLAKE
The tobacco plant generally takes around 5 months from the germination stage to
harvest. In some countries such as Malaysia for example, there are 3 crop harvests in
a year.
The three types of tobacco typically grown, Virginia, Oriental and Burley have
varying stages of ripeness. Some of the tobacco leaves are harvested by hand while
other plants are cut off at the stalk, taking the entire plant.
2) Tobacco Curing :
Immediately after harvesting, tobacco is cured to remove all of the natural sap from
the leaves so that it can be further processed and manufactured. There are three
primary methods of curing cigarette tobaccos, air curing, flue curing and sun curing,
but all curing focuses on regulating the rate at which moisture is removed from the
tobacco.
The three stages of curing: Coloring: The continuation of natural ripening process.
Lamina drying: The leaf tissue is dried to a particular moisture level. Stem drying:
Moisture is removed from the stem.
Flue curing takes place in closed structures with ventilation and artificial heating.
Heat and humidity are controlled to remove moisture from the leaf and this drying
process fixes the characteristic orange-yellow color. Flue curing requires four to seven
days.
Air curing requires an open framework where sticks of leaves or whole tobacco plants
are hung. Leaf color changes from green to yellow to its final brown color as leaves
and stems dry slowly. This process takes about one to two months.
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GOLD FLAKE
Sun cured tobacco is also called oriental tobacco. These leaves are usually dried by
stringing the tobacco leaves and leaving them to dry in the sun. Sun-cured tobaccos
have characteristic aromas. This takes up to three to four weeks.
3) Tobacco grading and buying :
The quality of tobacco is dependent on the curing and fermentation processes. As a
result, even within the same types of tobacco, two different batches of tobacco are not
necessarily the same.
Depending on the area, tobacco growers use two main methods of selling tobacco - by
auction or by a contract system. The former is when merchants buy tobacco
selectively and the latter is when they buy the growers' whole crop. ITC mainly
purchases tobacco in whole sale as it is large scale manufacturer of cigarettes.
The company has also hired Just in Time (JIT) buyers for buying qualitative tobacco
for manufacturing, so that the manufacturing quality is also maintained. The JTI
buyers know exactly what they are looking for when it comes to tobacco. They see,
smell and feel the difference between the different tobacco qualities, when they buy it
from the merchants.
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GOLD FLAKE
Before exporting, Virginia and Burley tobaccos are threshed. This involves separating
the midrib of the leaf, resulting in fairly small pieces of tobacco lamina suitable for
cigarette production. Threshed tobaccos are then packed to specific controlled
moisture levels. For JTI, grading parameters are stalk position, color, texture, aroma,
and leaf size.
ITC also purchases tobacco from outside India especially Burley tobacco which is
used for making stronger cigarettes.
4) Primary Processing :
After the tobacco is stored and aged, it goes through a final processing phase
according to blend formulas used for making various types of cigarettes. This process
includes blending, conditioning, casing, cutting, drying and top flavoring. Once this is
done, the raw material is finally ready to be made into cigarettes.
In order to produce a characteristic, homogeneous blend of tobacco, different types of
tobacco are mixed according to precise recipes. Moisture is then added to render it
supple enough to be handled, processed or manufactured.
Casing refers to the sauce composed of a variety of ingredients such as sugars,
humectants and aromatic substances applied to tobacco before being cut into thin
strands called cut rag.
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GOLD FLAKE
When the tobacco has been cut it is dried and cooled to the final moisture required
before cigarette manufacture. The tobacco is then ready for the addition of
concentrated scents and aromatic essences called top flavors.
The top flavors are sprayed onto the tobacco or applied in drums. In the
manufacturing of menthol cigarettes, menthol is sprayed onto the tobacco instead of
top flavors. After this, the cut tobacco is placed in silos.
5) Cigarette Manufacturing :
ITC uses industrial machines which are capable of mass-production up to 16,000
cigarettes per minute. After the tobacco has been treated and processed, the tobacco is
made into cigarettes in a machine typically called the "Maker". They then are put
through quality control checks to ensure they meet predetermined standards before
being sent to the packing machine.
26
GOLD FLAKE
Tobacco is transferred from the silos via a pneumatic tube system into the "Maker"
machine and the tobacco is shaped into a circular form. White cigarette paper is then
fed into a machine from a roller.
The trademark logo is printed and the paper is wrapped around the bare tobacco. The
paper is then sealed with glue, creating a continuous cigarette stick. A cutting tool
slices this into double-length sticks to which a filter is added.
The double-length sticks are cut in half and a double length filter is placed between
the two sticks. Brown cork paper is wrapped around the filter to rejoin the two halves
and sealed with glue creating two cigarettes joined back-to-back.
Finally, an ingenious mechanism divides the double cigarette and turns one half the
other ways around. This process ensures that the cigarettes created are facing the right
direction and ready for the packing machine.
6) Packaging :
Cigarettes that are ready for packaging are transported by conveyer belt to the
"packer" machine where they are separated into feeder channels to be inserted into
packs. Meanwhile, aluminum from a roller as well as cardboard is fed into another
machine and template patterns of the packs are stamped out. Groups of 10, 20 or 30
27
GOLD FLAKE
cigarettes are inserted into the finished inner lining and then the final external packing
is added.
Next comes the wrapping of each pack with a polypropylene film with pull strings
and weld. This is done to preserve the humidity of the freshly made cigarettes - a vital
factor in preserving their overall quality.
The packing process, however, does not end there. The final part is to collect the
individual packs of cigarettes into cartons of ten, which are again wrapped by
polypropylene.
For customer shipping, fifty cartons are automatically packed in cardboard boxes. The
pallet machine lifts the 15g cardboard boxes each containing 10,000 cigarettes,
directly on transport pallets.
During the cigarette manufacturing process, engineers and technicians conduct
numerous quality control checks aided by an array of monitoring devices as well as
testing and measurement systems.
28
CHAPTER III
GOLD FLAKE
ATTRIBUTES OF THE PRODUCT
Gold Flake is a category brand name for the product class of cigarettes. The Gold Flake
cigarettes are composed primarily of golden tobacco, which is distinctive feature from other
cigarettes. Gold Flake cigarette is composed primarily of golden tobacco (brightly colored
tobacco), which like any other tobacco is considered injurious to health. Some other
cigarettes which are generally not very prevalent also consist of nicotine as opposed to
tobacco. However, such cigarettes are not manufactured under Gold Flake brand name or by
ITC or by any branded company.
The smoke of the cigarettes is considered so harmful that it causes diseases even to the
passive smokers, the diseases primarily of respiratory disorder nature. Paper is used to roll the
29
GOLD FLAKE
tobacco inside. Gold Flake comes in various lengths and types. The length of a cigarette
varies from 60mm to 100 mm. The various types are filter, plain and micros.
A cigarette has may attributes and components like filter, shape, weight, color, form
material, hard, soft, internal and external parts, style, etc.
The various components and attributes of GOLD FLAKE are:-
Shape: The shape of the Gold Flake cigarette is cylindrical and is called a stick. It
has golden tobacco rolled in paper with filter on one side in case of filtered cigarettes.
Length: The length of a cigarette varies for different brands. There is different tax
rate charged by the government on basis of cigarette length. High length of cigarette
attract high tax rate. The Gold Flake cigarette (Large) has the standardized length of
84mm and Small Gold Flake is having length of 69mm.
Form: Though the tobacco is also consumed in powder form, however in case of
cigarettes it is usually smoked. The smoke carries the burnt tobacco particles with it
30
FILTE
Holder or Accessory
Paper (form)
Tobacco Inside
GOLD FLAKE
which act as a stimulant, satisfying the motive of consumption for the consumer or
smoker.
Cigarette Paper: The cigarette paper for Gold flake comes to the industry
wrapped on Bobbins:
a) Width: 26 - 27mm
b) Length: 5,000 - 6,000m
Weight: The tobacco is the main component of weight in the cigarette.
GOLD FLAKE is of different sizes 84mm and 69mm where the tobacco content is
different which matters the weight of the cigarette as well as the size and price.
Color: The paper used is generally white in color. However, the whiteness of the
paper varies. The filter comes in two colors that is golden and white.
Price: The price of large packet of Gold Flake is Rs 34/- containing 10 cigarettes,
small packet is Rs 28/- and loose cigarette is Rs3.50/-
Filter: It is a type of material which is used in every cigarette to reduced irritation,
cough, bad breath, excessive phlegm, and smoke by-product on teeth, fewer
symptoms of shortness of breath, tightened chest, and heart discomfort. Filter is safe,
hygienic, and easy to carry. The specifications of the filter used in GOLD FLAKE
cigarettes are:
• Diameter: 5-7 mm.
• Length: 13-16mm.
• Weight: 1g.
• Filter material: high-quality nontoxic plastic and inner core wood fiber
• Package material: high-quality nontoxic plastic sheets and aluminum foil.
• UV sterilized.
31
GOLD FLAKE
External parts: As such there is no external part, however, few people like to
smoke with an additional pipe attached to it which also acts as a filter.
Style: The inherent word cigarette itself reflects style in some of the consumer
minds. Gold flake is primarily associated with a state of richness. Most cigarettes give
a perception of confidence to the user.
Benefits of the Product
People smoke cigarettes for many reasons as it helps in losing weight, release from stress,
if anyone has a stuffy nose, and smoking will help the respiratory tract unobstructed. It also
aids in relaxation and reducing boredom. Smoking a filter cigarette causes lesser harm to
health than non filter cigarettes.
The benefits of the product have been divided into two categories.
Primary Benefits. Secondary Benefits.
32
GOLD FLAKE
Superior quality.
Consistent quality.
Smoothness.
Mildness.
Refreshing.
Less Tar level.
Improves concentration.
Reduces stress.
Helps lose weight.
Helps to relax and reduce boredom.
Helps to socialize.
Acts as appetite suppressant.
A companion when lonely.
Private indulgence for women.
Packaging of the Product
33
GOLD FLAKE
Gold Flake cigarettes come in packs containing 10 to 20 cigarettes. The packets are
constructed from hard paper, with a water resistant glossy finish on the outside. The shape is
polygonal (similar to packs of many other cigarette brands) with rectangular faces. The pack
can be opened from the top via a paper lid. The lid is linked and joined for proper rotation.
The body of the packet is chrome yellow with a gold band separating the red colored lid.
The logo is bordered with gold and displayed on both the front and back faces of the body as
well as on the upper portion of the lid. The front face is depicted in the image above. The
front and back faces have a slightly ribbed texture around the logo. “FILTER TIPPED” along
with an 8 pointed star is written in gold on both sides of the lid. On one side of the lid, the no.
of cigarettes inside is written in gold. On the other side of the lid “NOT FOR SALE TO
MINORS” is written. The statutory warning is given at the base of the front face. The no. of
cigarettes, price and packaging is displayed at the bottom of the packet. All the written
information is in a Sans Serif style font.
Each single cigarette is white in color with an ochre colored bottom portion (with yellow
flakes). W.D. & H.O. Wills is inscribed both on the packet and on each cigarette in a stylized
font. The length of the cigarette in is around 69mm for a pack size of 10.
34
GOLD FLAKE
Marketing Mix of Gold Flake
35
CHAPTER IV
GOLD FLAKE
The marketing mix of Gold Flake consists of four P’s that is Product, Price, Place and
Promotion. The evaluation of the 4 P’s 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.
1) Product :
36
GOLD FLAKE
Brand name: The brand name of Gold flake has a very good position in the
market. The brand name of Gold Flake is popular since last 25 years.
Quality: Gold Flake offers superior quality of cigarettes with a different type of
tobacco i.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 to the 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 packet
contains 10 cigarettes and small packet contains 5 cigarettes. The packaging also
includes 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 a
cigarette holder for smoking.
37
GOLD FLAKE
2) Price:
Pricing strategy: The pricing strategy of the company depends upon the demand
of Gold Flake 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
Flake is Rs 34/-; small packet is Rs 28/- and loose cigarettes cost around Rs 3.50/-.
Voloume 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 change
depending upon the market and consumer’s demand and supply. The prices also
changes as per the tax rate and government rules and regulations.
38
GOLD FLAKE
3) Place:
Distribution channels: The distribution channel starts from the whole seller then
the distributers. The third party is the retailers and then finally the retailers to the
consumers.
Market coverage: ITC covers a wide range of the retail spectrum, from premium
outlets in 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
the product 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
containers depending upon the quantity of the product to be transported. Small
distance transportation like distributing to the local retailers is done through small
tempos.
4) Promotion:
39
GOLD FLAKE
Promotional strategy: The product was promoted through advertisements
since it was 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
media like 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 50 crores on advertisement of Gold Flake. After the ban on advertisement
fewer amounts is spent on marketing communication.
40
GOLD FLAKE
Branding of Gold Flake
41
CHAPTER V
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 the liberalization 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 advertisement “for the Gracious People” was continued with another slogan
added to it “Celebrate the Feeling” to encourage the young smokers.
2) Branding Strategies:
42
GOLD FLAKE
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 derived—it 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
Goldflake. Always mellow, Always smooth.”
With this, the brand was positioned as a premium cigarette targeting young and adult
male smokers 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 Equity’s first listing of India’s 100 biggest FMCG brands went to Gold Flake. Gold
Flake remains India’s 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”
43
GOLD FLAKE
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 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
the consumers. 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 Equity’s first listing of
India’s 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:
44
GOLD FLAKE
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 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 also promoted 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:
45
GOLD FLAKE
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
retaining the 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 Equity’s first listing of India’s 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
BCG matrix. 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.
46
GOLD FLAKE
ANALYSIS OF THE SURVEY
47
CHAPTER VI
GOLD FLAKE
Gold Flake was launched by ITC in the seventies. This brand of cigarette has been in the
Indian market since the last 35 years. Its branding was done when it was launched. The
product also has many attributes which has attracted the consumer. In 1990 its advertisements
started which gave a boost to its sales. Till 2000 the product had a good competitive position
in the market. After the ban on advertisement of cigarettes in 2002 by the government it had
very modest affect on its brand image. But in 2003 and 2004 Gold Flake ranked No.1 in
position in the sales of FMCG products Rs 3,900 crores of sales followed by Pepsi Rs 1,771
crores, Thumps up 1,688 crores and then Wills Navy Cut and Scissors with sales of Rs 1500
and Rs 1400 crores. It was being predicted that the sale of the Gold Flake would rise in 2006-
2007.
A survey has been carried out on Gold Flake with comparison of other brand of the same
company (ITC) regarding the brand, price and sales of the products. The sample size of the
survey is 50 consumers.
The questionnaire compromises of quality, attributes and sales voloume of Gold Flake as
well as the brand name, the price of the product, advertisement of the product and effect of
tax rate on the product.
Q1) Which brand of cigarettes do you buy?
48
GOLD FLAKE
Name of the brand
GOLD FLAKE WILLS NAVY CUT
SCISSORS NONE OF THESE
Consumers 18 17 5 10
Interpretations:
49
34%
GOLD FLAKE
From the above table it has been seen that Gold Flake and Wills Navy Cut has a
strong competition as far as brand is concerned. Both the brands are launched by ITC.
By this it can be predicted that in future either Gold Flake or Wills Navy Cut may be
the best brand of cigarettes manufacture by ITC.
In the diagram Gold Flake is preferred by 36% of the sample and Wills Navy Cut is
preferred by 34%. Whereas Scissors is only 10% and other brands 20%. The only
competitor of gold flake is Wills Navy Cut but in future it may also face hard
competition from international brands. Recently Marlboro, Marlboro lights, 555, Four
Square etc are approaching positively in the upcoming market.
Hence as far as Gold Flake and Wills Navy Cut are concerned ITC won’t be facing
any problem as both the brands are manufactured by ITC. The only problem the
company will face is competition from international brands. It also depends upon the
consumer tastes and preferences which brand they buy, either they may continue with
the same brand or they may change their brand. The consumer’s taste and preferences
is very difficult for the company to predict and forecast the demand.
Q2) If Gold Flake, then why do you like the Brand?
Factors of the
brand
Quality Availability Value for
money
Harmless
50
GOLD FLAKE
Consumers 21 6 8 15
Interpretations:
In the above diagram it can be seen that 42% of the consumers choose the brand
because of its good quality, 30% because it is harmless, 12% of the consumers prefer
51
42%
GOLD FLAKE
it because it is available in the market and 16% of the consumers choose it because it
is valuable.
Gold Flake is good in quality because of the different type of tobacco used in it which
distinguishes it from other brands. There are also different types in Gold Flake
cigarettes like hard, small in size, filter cigarettes etc. This gives the consumer a
choice in Gold Flake rather than selecting another brand. Therefore most of the
consumers prefer Gold Flake for its good quality.
About 30% of the consumers prefer the brand because it is harmless. As smoking is
bad for health the ill effects and hazards of cigarettes is always there in the minds of
the consumers. Therefore these consumers do not smoke hard Gold Flake; they either
prefer Filter Gold Flake or Small Gold Flake 69mm.
About 12% of the people prefer the brand because it is available in the market and
sixteen percent of the consumers prefer it because it valuable.
Q3) How many packs do you buy each time?
52
No. of packets 1 2 3 4 More than 4
Consumers 18 14 8 6 4
GOLD FLAKE
Interpretations:
About 36% percent of the consumers i.e. out of 50; 18 consumers buy 1 packet of
Gold Flake each time. Twenty eight percent of consumers i.e. out of 50; 14 prefer
buying 2 packets. Sixteen percent prefer 3 packets for buying the cigarettes. Twelve
and eight percent of the consumers prefer buying 4 packets or more than four.
53
GOLD FLAKE
Buying of the packet depends upon the addiction of the consumers to the cigarette
brand. On one hand it is bad for the consumer’s health but on the other hand it is good
for the company’s sale.
Q4) How much do you spend on buying Cigarettes each month?
Amount
spent
Rs100-Rs500 Rs500-
Rs1000
Rs1000-
Rs1500
Rs1500-
Rs2000
More than Rs 2000
Consumers 20 10 6 8 6
54
GOLD FLAKE
Interpretations:
About 20 consumers out of 50 spend Rs 100-500 on buying cigarettes each month that
is about 40% of the total sample size.
10 consumers spend Rs 500-1000 which compromises of about 20%.
About Rs1000-1500 is being spent by 6 consumers which are 12% of the sample size.
55
GOLD FLAKE
About 16% of the sample size i.e. 8 out of 50 consumers spent Rs 1500-2000 on
cigarette each month and 6 consumers i.e. 12% of the sample size spent more than
Rs2000 on purchasing cigarettes.
By taking this into account it can be analysed that of about Rs 1000-1500 on an
average, has been spend by the consumers on buying the brand.
Q5) Do you think that Gold Flake is the best brand for cigarettes in India?
Yes /NO Yes NoConsumers 29 21
56
GOLD FLAKE
Interpretations:
About 29 of the consumers out 50 mentioned that Gold Flake is the best brand of cigarettes
and 21 of the consumers mentioned that it is not the best brand.
Q6) If YES then mention your reasons; If NO then mention your reason.
About 58% of the consumers of the total sample size mentioned that Gold Flake is the best
brand for cigarettes because:
57
GOLD FLAKE
It has good quality and harmless. It is available in the market. It is affordable and also
as its brand image is popular since last 25 years, it is recognized as the best brand of
cigarettes in India.
It is also best because it provides different types of cigarettes as per the consumer
preference.
About 42% of the consumers the total sample size mentioned that Gold Flake is not the best
brand for cigarettes because:
It is more costly than other cigarettes, therefore the consumer prefer other brands or
bidis which are less in price than that of Gold Flake.
It is not considered as the best brand because its brand image is not popular as that of
the other cigarette brands like Marlboro, Camel etc. being at the international levels
these brands has the same quality and price as that of Gold Flake.
It is also not the best brand because Will Navy Cut also has a god quality factor and is
less harmful than Gold flake.
Q7) What is your opinion about the price of Gold Flake?
Price of Gold Flake Affordable Costly Cheap
Consumers 28 8 14
58
GOLD FLAKE
Interpretations:
The price of Large Gold Flake is Rs 34/- Small Gold Flake is Rs 28/- and loose
cigarette is Rs 3.50/-
59
GOLD FLAKE
In the above diagram 28 consumers out of 50 i.e. about 56% of the total sample size
find that the price of the cigarette affordable. It also depends upon the consumer
whether he is buying a packet or loose cigarettes.
About 16% of the total sample size of the consumers i.e. 14 consumers out of 50
stated that the price of Gold Flake is costly.
14 consumers mentioned that price of Gold Flake is cheap i.e. about 28% of the total
sample size of the consumers.
Q8) Do you think that the company should accompany the brand Gold Flake with any celebrity for its promotion and advertisement? Give your reasons.
YES/NO YES NO
Consumers 15 35
60
GOLD FLAKE
Interpretations:The advertisement of Gold Flake is done through sponsorship and photos in magazines.
Reasons given by the consumers:
From the above table 15 consumers out of 50; i.e. about 30% of the total sample size
mentioned YES because:
61
70%
Consumer’s opinion whether the company should accompany the brand Gold Flake with any celebrity for its promotion and advertisement
GOLD FLAKE
In movies many celebrities smoke cigarettes; through them the company can advertise
its brand, this will only help the company.
Through celebrity endorsement the brand name will popular. It can only be done
through magazines.
About 70% of the total sample size mentioned NO because:
Through celebrity endorsement it will affect the culture of the people.
It will also affect the age limit for smoking of cigarettes.
As already there is ban on smoking advertisement, and if any celebrity is supporting
the brand, he might get in to trouble. As in the movie ‘DON’ where Shahrukh Khan
smokes cigarette, the censor board published the movie as an adult movie.
Q9) Do you think the ban on advertisement of Cigarettes has affected the brand name of Gold Flake? Give your reasons.
YES/NO YES NO
Consumers 14 36
62
GOLD FLAKE
Interpretations:
Reasons given by the consumers:
About 28% of the total sample size said YES, that the ban on advertisement has affected the
brand name of Gold Flake because:
It is not in the eyes of the consumer.
Because of the ban few consumers doubted the quality of the product.
63
72%
Consumer’s opinion about the ban on advertisement of Cigarettes has affected the brand name of Gold Flake.
GOLD FLAKE
After the ban, the brand Gold Flake does not stand as an exceptional brand from the
other brands of cigarettes.
About 72% of the consumers mentioned NO, that the brand name has not been affected
because:
The brand name of Gold Flake was not affected because of its quality.
ITC promoted the brand through magazines and sponsorship, so Gold Flake was in
the eyes of the consumer.
Even after the ban on advertisement in 2002, the sales of Gold Flake was 3900 crores
in the financial year2003-2004 and the brand ranked in No.1 position as the highest
sales in FMCG products.
10) Should government impose high tax rate on Manufacturing and Promotion of Gold Flake? Give your reasons.
YES/NO YES NO
Consumers 18 32
64
GOLD FLAKE
Interpretations:
Reasons specified by the consumers:
About 18 consumers out of 50 i.e. 36% of the total sample size mentioned YES because:
The sales of Gold Flake are very high each year; therefore by imposing high tax rate
the government can increase its revenues.
65
64%
GOLD FLAKE
About 32 consumers i.e. 64% of the total sample size mentioned NO because:
Due to high tax rate the prices of the product will increase, which will become costlier
for the consumers.
Also due to high tax rate there will be vast change in the demand as well as supply of
the product.
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SWOT ANALYSIS
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CHAPTER VII
GOLD FLAKE
STRENGTHS
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GOLD FLAKE
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.
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 and supply 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, Goldflake from ITC holds the lion's share of the market selling 60 million
sticks. Four Square special comes second with 55 million sticks and Wills is third
WEAKNESS
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GOLD FLAKE
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
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GOLD FLAKE
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.
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 World's Best Big Companies and the World's Most
Reputable Companies by Forbes magazine, the company can launch Gold Flake at
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
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GOLD FLAKE
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 quit smoking
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.
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GOLD FLAKE
Conclusion
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CHAPTER VIII
GOLD FLAKE
ITC is the leading player in domestic cigarette market. The company commands over
60% market share both in value and volume terms. The company has some of the leading
brands of cigarettes like Wills, Gold Flake etc in its portfolio. The cigarette business forms
the bread & butter business of the company. It gets more than 85% of revenues. The company
has slowly and steadily nurtured its brands over the years to secure this position. With
margins as high as 40% in cigarette business the company has generated huge amount of cash
from its operations and is thus facing the problem of plenty. The problem is not just restricted
to ITC it is through for other tobacco companies also. Though ITC's organization has good
track record in managing its cigarette business, its report card on diversification and success
of these unrelated business has not been good.
Today Gold Flake is facing competition from International brands. As an Indian brand
ITC is forecasting the changing habits of the consumer, so that the manufacturing of the
cigarettes could be done as per the consumers taste and specifications. In 2005-2006 Gold
Flake has not retained the No.1 spot in the sales of FMCG products. But its sale margin has
increased very miniature compare to 2003-2004. As per 2006-2007 Gold Flake has not lost
its brand image; the brand is still recognized as popular brand of cigarettes. It has been seen
that the standard of living of the people is increasing day-by-day. The standard of rural
consumer is increasing. The rural areas people prefer to smoke ‘bidis’, but as per their
increasing standard they prefer smoking cigarettes. Due to this the sales growth of cigarettes
in India is boosting up rapidly.
Bibliography
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GOLD FLAKE
www.google.com
www.en.wikipedia.org
www.itcportal.com
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