GOLD FLAKE

A PROJECT REPORT ON

INDIAS TOP BRAND IN CIGARETTES GOLD FLAKE

SUBMITTED BY

NIKHIL BANSAL T.Y.B.M.S. SEMESTER V 2009 2010 ROLL 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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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 INDIAS 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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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 INDIAS 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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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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INDIAS TOP BRAND IN CIGARETTES GOLD FLAKE

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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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INDEX
Sr.No 1. TOPIC Chapter I Introduction. About the Cigarette Industry of India. About the Company (ITC). Chapter II Gold Flake. Hierarchy of the company. Manufacturing process. Chapter III Attributes of the product. Benefits of the product. Packaging of the product. Chapter IV Marketing Mix. Chapter V Branding of Gold Flake. Chapter VI Data analysis. Chapter VII SWOT Analysis. Chapter VIII Conclusion. Page No. 1-11

2.

12-24

25-30

4 5 6 7 8

31-36 37-45 46-65 66-71 72-73

Bibliography Annexure

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CHAPTER I

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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 paperrolled 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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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 womens 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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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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About the cigarettes Industry of India

The Cigarette Industry is one of the oldest industries in India. It is an important agrobased 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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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.

About the Company

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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 multibusiness 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. 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 14

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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.

Achievements

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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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CHAPTER II

GOLD FLAKE
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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 gold flake are Bacons' Gold Flake, Hignett's Golden Flaked Honey Dew, Salmon and Gulckstein's Gold Flake.

Launch and Promotion

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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.

Hierarchy of the Company

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CHAIRMAN Y.C Deveshwar

Indian Leaf Tobacco Development Division Divisional Chief Executive S Janardhan Reddy

India Tobacco and Cigarette Division Chief Executive Kurush N Grant

Head, HR A Dutt

VP, Marketing & R&D K C Biddappa

Ex-VP, Marketing S M Ahmad

Ex-VP, Finance & MIS R Tandon

Head, Processing & Tech S Ramakrishna

Ex-VP, Technical & HR T V Ramaswamy

Manufacturing Process
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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. 4. Primary processing. 5. Cigarette manufacturing. 6. Packaging. 1)

Tobacco Harvest :
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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.

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 :
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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.

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 :

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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.

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:
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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.

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 :

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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.

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:
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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 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.

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CHAPTER III

ATTRIBUTES OF THE PRODUCT

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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 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.

Paper (form)

FILTE

Tobacco Inside

Holder or Accessory

The various components and attributes of GOLD FLAKE are:-

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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 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
wrapped on Bobbins: a) Width: 26 - 27mm b) Length: 5,000 - 6,000m

industry

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, 30

GOLD FLAKE

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.

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

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GOLD FLAKE

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. 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.

Superior quality. Consistent quality. Smoothness. Mildness. Refreshing. Less Tar level.

Packaging of the Product

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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.

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GOLD FLAKE

CHAPTER IV

Marketing Mix of Gold Flake

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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.

1) Product :

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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.

36

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 consumers demand and supply. The prices also changes as per the tax rate and government rules and regulations.

37

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.

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GOLD FLAKE

4) Promotion:

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.

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CHAPTER V

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GOLD FLAKE

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 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.

41

GOLD FLAKE

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 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 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.

42

GOLD FLAKE

B) Price hikes

In the month of October 2001, the company (ITC) increased prices of its cigarettes by 1018%. 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 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.

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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 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.

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GOLD FLAKE

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 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 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 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.

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CHAPTER VI

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GOLD FLAKE

ANALYSIS OF THE SURVEY

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 20062007. 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.

47

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Q1) Which brand of cigarettes do you buy? Name of the brand Consumers GOLD FLAKE 18 WILLS NAVY CUT 17 SCISSORS 5 NONE OF THESE 10

34%

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GOLD FLAKE

Interpretations: 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 wont 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 consumers taste and preferences is very difficult for the company to predict and forecast the demand.

49

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Q2) If Gold Flake, then why do you like the Brand? Factors of the brand Consumers Quality 21 Availability 6 Value for money 8 Harmless 15

42%

50

GOLD FLAKE

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 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.

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GOLD FLAKE

Q3) How many packs do you buy each time? No. of packets Consumers 1 18 2 14 3 8 4 6 More than 4 4

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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.

Buying of the packet depends upon the addiction of the consumers to the cigarette
brand. On one hand it is bad for the consumers health but on the other hand it is good for the companys sale.

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Q4) How much do you spend on buying Cigarettes each month?

Amount spent Consumers 20 Rs100-Rs500 Rs500Rs1000 10 Rs1000Rs1500 6 Rs1500Rs2000 8 6 More than Rs 2000

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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. 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?
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GOLD FLAKE

Yes /NO Consumers

Yes 29

No 21

42%

58%

YES NO

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.

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GOLD FLAKE

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:

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.

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Q7) What is your opinion about the price of Gold Flake? Price of Gold Flake Consumers Affordable 28 Costly 8 Cheap 14

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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/-

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.

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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 Consumers YES 15 NO 35

Consumers opinion whether the company should accompany the brand Gold Flake with any celebrity for its promotion and advertisement

30%
70%
YES NO

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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:

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.

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Q9) Do you think the ban on advertisement of Cigarettes has affected the brand name of
Gold Flake? Give your reasons. YES/NO Consumers YES 14 NO 36

Consumers opinion about the ban on advertisement of Cigarettes has affected the brand name of Gold Flake.

72%

Interpretations:
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GOLD FLAKE

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. 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.

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10) Should government impose high tax rate on Manufacturing and Promotion of Gold Flake? Give your reasons. YES/NO Consumers YES 18 NO 32

64%

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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.

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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CHAPTER VII

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GOLD FLAKE

SWOT ANALYSIS

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GOLD FLAKE

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.

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

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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.

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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.

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.

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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 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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CHAPTER VIII

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GOLD FLAKE

Conclusion
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.

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Bibliography

www.google.com www.en.wikipedia.org www.itcportal.com

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