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Cigarettes – ITC
A study on the Channel Distribution

       Group 10 Section D
Company Overview
• ITC is one of India’s foremost private sector
  companies with a market capitalisation of nearly
  US $ 19 billion and a turnover of over US $ 5
  billion
• ITC has a diversified presence in Cigarettes,
  Hotels, Paperboards & Specialty Papers,
  Packaging, Agri-Business, Packaged Foods &
  Confectionery, Information Technology, Branded
  Apparel, Personal Care, Stationery, Safety
  Matches and other FMCG products
The Product-Mix
• FMCG
    –   Cigarette
    –   Foods
    –   Lifestyle retailing
    –   Personal Care
    –   Stationery
    –   Safety Matches
    –   Agarbatti
•   Hotels
•   Agri-business
•   Paperboard and Packaging
•   Information Technology
Cigarettes Business
• Market leader in cigarettes in India
• Highly popular portfolio of brands includes
  Insignia, India Kings, Classic, Gold Flake,
  Silk Cut, Navy Cut, Scissors, Capstan,
  Berkeley, Bristol and Flake
• Cigarettes are produced in the state-of-
  the-art factories at Bengaluru, Munger,
  Saharanpur and Kolkata
Distribution Channel - Overview
Manufactu                                      Small
ring Unit -                       Wholesale
                                              Retailers
   Atta



  MU -
                                   Retailer
 Biscuits


                    Distributor
              Hub
                    - Exclusive
MU – Food
                                   Panwalas
 Products




   MU -                              Malls
Cigarettes
Distribution Channel - Composition
• Manufacturing Unit
  – Separate for each product line
  – Contract Manufacturing
  – Backward Integration
  – E-Chaupal
• Storage Hubs
  – Stores all the products
Contd…..
• Distributors
  – Exclusive based on population
  – Needs to stock all FMCG products (Except
    Stationery)
• Wholesalers
• Retailers
• Paanwalas
  – Deepest penetration possible
Factors for Channel selection
• Perishable
  – Short Span
  – Customers prefer fresh products
• Lot Size
  – Smaller Lot sizes
• Convenience
• Waiting Time
• Product Assortment
Channel Objectives
• Consumer Behavior
  –   Quality Conscious
  –   Convenience goods, Needs Intensive distribution
  –   Demands variety
  –   Very less waiting time
• Company Objectives
  –   Reach masses
  –   Rural penetration
  –   Diversification
  –   Competitive advantage
Features
• Selection of Distributor
   – Infrastructures, Delivery Van, Computer, Warehouse,
     Sales Force
   – Population based ( 1 Distributor per 20-25 thousand)
• Control
   – Uses Coercive power
   – To deal in Cigarettes, it is must to deal in Other goods
• Terms and Conditions
   – Price, Selling Condition, Godown Condition etc…
Other Features
• Order
  –   Distributors- Weekly
  –   Retailers- Twice a week
  –   Paanwalas- daily
  –   Online order is placed by distributor
  –   The periodical order from wholeseller , retailer,
      paanwalas is collected by staff of distributor.
• Payment
  – Mostly on Cash-Basis; sometimes post dated
    cheques
  – Very rarely Credit is allowed on cigarettes
Contd….
• Transportation
  – Uses delivery van, Rickshaw, Cycles, Autos
• Conflicts
  – No Conflicts
  – Some tiffs raise between distributor and
    retailer due to under supply from distributor
• Problems
Conclusion
• ITC has the most popular brands of cigarettes in India
   – The sale takes place from the largest of retailers like Big Bazaar,
     Spencers to the smallest of paanwalas at every nook and corner
     in India
   – Thus ITC has deeply penetrated the Indian cigarette market

• With an already established distribution channel for
  cigarettes, ITC is also selling safety matches, which is
  complementary to both the cigarettes and agarbattis
THANK YOU

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Marketing assignment

  • 1. Cigarettes – ITC A study on the Channel Distribution Group 10 Section D
  • 2. Company Overview • ITC is one of India’s foremost private sector companies with a market capitalisation of nearly US $ 19 billion and a turnover of over US $ 5 billion • ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products
  • 3. The Product-Mix • FMCG – Cigarette – Foods – Lifestyle retailing – Personal Care – Stationery – Safety Matches – Agarbatti • Hotels • Agri-business • Paperboard and Packaging • Information Technology
  • 4. Cigarettes Business • Market leader in cigarettes in India • Highly popular portfolio of brands includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake • Cigarettes are produced in the state-of- the-art factories at Bengaluru, Munger, Saharanpur and Kolkata
  • 6. Manufactu Small ring Unit - Wholesale Retailers Atta MU - Retailer Biscuits Distributor Hub - Exclusive MU – Food Panwalas Products MU - Malls Cigarettes
  • 7. Distribution Channel - Composition • Manufacturing Unit – Separate for each product line – Contract Manufacturing – Backward Integration – E-Chaupal • Storage Hubs – Stores all the products
  • 8. Contd….. • Distributors – Exclusive based on population – Needs to stock all FMCG products (Except Stationery) • Wholesalers • Retailers • Paanwalas – Deepest penetration possible
  • 9. Factors for Channel selection • Perishable – Short Span – Customers prefer fresh products • Lot Size – Smaller Lot sizes • Convenience • Waiting Time • Product Assortment
  • 10. Channel Objectives • Consumer Behavior – Quality Conscious – Convenience goods, Needs Intensive distribution – Demands variety – Very less waiting time • Company Objectives – Reach masses – Rural penetration – Diversification – Competitive advantage
  • 11. Features • Selection of Distributor – Infrastructures, Delivery Van, Computer, Warehouse, Sales Force – Population based ( 1 Distributor per 20-25 thousand) • Control – Uses Coercive power – To deal in Cigarettes, it is must to deal in Other goods • Terms and Conditions – Price, Selling Condition, Godown Condition etc…
  • 12. Other Features • Order – Distributors- Weekly – Retailers- Twice a week – Paanwalas- daily – Online order is placed by distributor – The periodical order from wholeseller , retailer, paanwalas is collected by staff of distributor. • Payment – Mostly on Cash-Basis; sometimes post dated cheques – Very rarely Credit is allowed on cigarettes
  • 13. Contd…. • Transportation – Uses delivery van, Rickshaw, Cycles, Autos • Conflicts – No Conflicts – Some tiffs raise between distributor and retailer due to under supply from distributor • Problems
  • 14. Conclusion • ITC has the most popular brands of cigarettes in India – The sale takes place from the largest of retailers like Big Bazaar, Spencers to the smallest of paanwalas at every nook and corner in India – Thus ITC has deeply penetrated the Indian cigarette market • With an already established distribution channel for cigarettes, ITC is also selling safety matches, which is complementary to both the cigarettes and agarbattis