Section (B)

SL No- (9)
Group Name - (The Marketocrats)
Marketing Plan - (Mini-Cigarettes)

Presented By:
Anirudh N
Dharnendran G
Kumar Nishant
Pradipta Mondal
Rohan Kumar
Sourav Anand

Executive Summary
The product Control Z is a mini cigarette with the brand mantra renounce to reduce
which would cater to the need of chain smokers to reduce smoking. The idea here is to reduce
the size and price of the cigarette inorder to decrease the intake of the nicotine.

Situation analysis
MARKET NEEDS IDENTIFICATION:
Today in India 53% of the total Indian male population is smoking cigarettes or bidis which
accounts to nearly 12% of the total smoking population of the world. By 2014 there has been
an exponential rise in the number of smokers in India by 110million from 74.5 million over a
period of 30years. Thus it is evident that a huge demand is craving over nicotine.
A large number of Indian smokers are trying to quit cigarettes to lead a healthy life. Both GOI
and Non-Govt organisations have taken the charge to make India nicotine-free through many
initiatives. But medical research suggests that an abrupt decline in the consumption of
nicotine by quitting smoking leads to various problems like mood swing, headaches etc.
Thus, reducing the consumption and slowly getting over the addiction would be the best
choice. People trying to quit, again start smoking due to external influence work pressures,
while drinking alcohol in groups etc. The nicotine intake can be controlled by controlling the
number of puffs. It has been seen that chain smokers tend to smoke a few puffs of cigarette
to satisfy their need, the rest they waste it. Thus they are not only waste a significant portion
of the cigarettes but also their money. The mini- cigarettes are best suited to help meet this
need.
MARKET SUMMARY:
India is the 2nd largest producer of tobacco in the world. Tobacco is a major commodity in the
Indian GDP which has high contribution to the Agricultural, Industrial and Export sectors.
Presently India is the largest tobacco exporting country in the World. Imperial Tobacco
(presently known as ITC) is the first private player in the Indian tobacco industry. Presently
major players in the Indian tobacco industry are: ITC, Godfrey Phillips, VST and GTC. The
market share of the major players is as shown below:

TOBACCO INDUSTRY IN INDIA

VST

GTC

8
12

Godfrey Phillips

72

ITC
0

10

20

30

40

50

60

70

80

The tobacco industry amounts to Rs 22,000 crores out of which 12% is exported. The tobacco
industry has high inter-dependence on Agro industry which also contributes to 70% of the
Indian GDP. Also, tobacco industry is the 2nd largest Excise duty tax- payer.
PRODUCT CHARACTERISTICS: The product Mini Cigarettes is a cigarette with size
below 64mm - the shortest of all the present cigarette category in India.
The existing length of the Cigarette present in the Indian market are 75, 69 and 64mm with a
nicotine content of approx 0.8-1.8 mg and 13-14 mg of tar.
Brand
Size
Nicotine content
Classic Regular
King Size
1.8mg
Gold flake kings
King Size
1.7mg
Navy Cut
Medium Size
1.7mg
Gold Flake Premium
Medium Size
1.0mg
Gold Flake Superstar
Small Size
0.8mg
The level of nicotine content varies proportionately with the size of the cigarette and the
quality of tobacco used. Nicotine is the drug which the smokers get addicted to. Reduction of
nicotine content (to less than 0.8 mg) in the cigarette can actually help those who are willing
to quit smoking.
SWOT ANALYSIS OF THE PRODUCT
Strength:

Reduces the consumption

Minimizes Expenditure

Weakness:

No brand recognition
High Brand loyalty among consumers

Opportunities:

Threats:

Entry of non-smokers
First mover advantage

Various Anti-Tobacco campaigns

Increase in Excise duty
Entry barriers
Availability of substitutes

Analyzing the Environment:

MACRO ENVIRONMENT:
Demography:
Age: The major consumers are between the age group of 18-65. Students, working
professionals, labourers and business persons comprise of this group.
Gender: Male population is the major consumer of cigarettes. Though a portion of female
population are also consuming cigarettes, there is no separate product orientated towards this
section is sold. Hence, female smokers can also be considered as our consumers.
Economic:
Income levels and consumption pattern: Consumption of cigarettes is high among middle
and higher income groups. Poor are lowest consumers of cigarettes as they depend on bidis
and other non-smoking ways to consume tobacco.
Natural Environment: Raw tobacco is a cash crop, which has been found in abundance all
over India especially Gujarat, Uttar Pradesh, and Andhra Pradesh.
Political-Legal Environment: Cigarettes prices have grown up by 40% due to heavy excise
duty rates over the last 10 years. States have varied rates of VAT on cigarette prices; Current
VAT rate in Gujarat is 30% which is leading to inter-state trafficking of cigarettes. Smoking
in public places, direct advertisements of promoting cigarettes have been banned by the GOI.
Also, statutory warnings, disclaimers have been made mandatory to educate people about the
harmful effects of tobacco.
MICRO ENVIROMENT:
We use Porters five forces to analyze the micro environment:
Market Competitors: High

ITC: ITC's major cigarette brands popular in Anand include W.D. & H.O. Wills, Gold Flake
Kings, Gold Flake Premium, Gold Flake Super Star, Navy Cut, Insignia, Classic (Menthol,
Menthol Rush, Regular, Mild & Ultra Mild), 555, Capstan, Bristol and Flake.
Brand Name

Price per

Size

Product Category

pack of 10
cigarettes
Rs.95
Rs.48

84mm(king) Regular
69mm(mediu Regular

Classic Regular
Classic Mild / Ultra

Rs.95
Rs.95

m)
84mm(king)
84mm(king)

Premium Product
Premium Product

Mild
Insignia

Rs.200

97mm

Super Premium

Gold Flake Kings

Gold Flake Filter

Product
Godfrey Philips: It is present predominantly in the northern and western parts of India.
Major brands offered by are Four Square, Stellar and Jaisalmer. Four Square is the most
popular brand of Godfrey Philips in Anand.
Brand Name

Price per pack of 10

Size

Four Square

cigarettes
Rs.48

69mm

Marlboro

Rs. 190

84mm

Small Cigarettes: Small cigarettes already available in the market are:

Brand Name

Price per pack of 10

Size

Gold Flake Superstar

Flake Liberty

cigarettes
Rs.38
Rs.25

64mm
64mm

These two brands are not very popular and consumers actually consider them to be of inferior
quality. This is especially true in case of Flake Liberty which positions itself as cheap
cigarettes for the consumers. Another reason for their failure is that parent companies have
not particularly focussed on this segment.
Bidis In India, out of the total tobacco production, around 38% of it is consumed in the form
of bidis. Bidis are extremely popular in Anand and a major chunk of smokers here are

actually bidi smokers. There exists an opportunity to make these people move to minicigarettes. At the moment though, bidis are a significant hurdle in the way of mini-cigarettes.
People especially villagers and lower socio-economic groups still prefer bidis to cigarettes.
Supplier Power: Moderate
The suppliers of filter, paper and other chemicals involved in cigarette making are in small
scale and are working as an unorganized sector, so the bargaining power of these suppliers is
very low. When it comes to procurement of tobacco, there is a Tobacco board which takes
care of the smooth functioning of a vibrant farming system, fair and remunerative prices to
tobacco growers and export promotion. The growers of tobacco in village Gambhira from
where we are planning to procure practice collective farming. Since the procurement quantity
is sourced from the single production group, negotiations can be made maintaining good
supplier manufacturer relationship to sustain in long run.
Customer Power: Moderate
Our survey results reveals that people know about the harmful effects of smoking, but still its
hard for them to quit smoking. After the increase in the price of cigarettes due to higher taxes,
customers who are addicted to smoking have responded by trying to reduce their
consumption. Lower income group people have switched to other cheap tobacco products
like bidi from cigarettes.
Threat of new entrants: Low
As the market is already dominated by a few established players, its hard for a new entrant to
get access to the marketing channel. Requirement of capital is also huge. Government taxes
and policies become more cumbersome. Unlike other products, cigarette industry cannot
promote their products through regular media channels. All these factors become a barrier to
the entry of a new entrant
Threat of Substitutes: Low
Bidis, oral tobacco products, nicotine patch etc. are some of the substitutes for cigarettes.
Though these products have market for themselves, they cannot consume the market of
cigarettes. The popularity and usage of the cigarettes have made smokers habituated and
doesnt allow the consumers to switch.

Market Segmentation:
The segmentation based on Usage. The smoking population of Anand city is categorized
into 3 segments based on the following rationale.

Chain Smokers: These are the addicted smokers who smoke more than 8 cigarettes per
day.
Moderate smokers: These are the smokers who smoke 2 to 7 cigarettes per day.
Occasional Smokers: There is no regular smoking pattern among this group. Their
consumption varies from 1 to 20 cigarettes per month.
As per the survey conducted among the group of 50 people, 38 % of the respondents fall into
the category of chain smokers.
Consumer behaviour Smoking is a strong addiction. It is the nicotine craving that urges
people to smoke more. Young population smoke to experiment, to ape elders and fellow
smokers and look mature. Most of the adults smoke to feel relaxed when they have a lot of
stress and pressures. Some smoke for pleasure which makes them feel good. A full pack of
cigarettes in hand is perceived to give satisfaction and an empty pack gives a feeling of real
frustration and deprivation. So most of the smokers prefer to buy cigarettes in packs. Brand
loyalty among smokers is strong and persistent. Individuals smoke one brand consistently, so
that they become identified with it.
Most people like the smell of tobacco but dislike the taste of a cigarette. Tastes for cigarettes
are considered to be acquired slowly.
Smoking habits vary among people. Bidi used among low income groups particularly
labourers because of its cheap price. Software professionals preferred to smoke a King size
cigarette. Students and business men preferred medium sized cigarettes. Small cigarettes
were used occasionally by all the groups.
People are aware about the negatives of smoking. Tobacco packaging warning
messages and prohibiting smoking in public places has resulted in a change that is evident in
the attitudes of people towards preventing the deadly disease.
DEMAND FORECASTING

The adult male urban population in Anand city is 1,30,000. As per study conducted by JHPN
(Journal of Health, population and nutrition) using the WHO stepwise approach, the smoking
population in Gujarat constitute 23% of the state population. Considering the same
percentage figure for the Anand city, the total smoking population is 30,000.
We surveyed 50 smokers. 34% of the respondents are Chain smokers out of which, 28%
wants to quit or reduce their smoking habit.

66% can be termed as Moderate level smokers.

72% of the respondents wants to quit smoking or wants to reduce their smoking habit.
36% of the samples do not smoke the whole cigarette irrespective of the size.
28% of the samples have reduced the consumption of cigarettes due to the increase in
the price of cigarettes by the State/Central government.

Considering 2 lucrative segments:

1) 28 % of the chain smokers were ready to quit smoking: Considering the total smoking
population as 30,000 in Anand city, the market segment consists of a population of
8400.
2) Students who smoke small and medium cigarettes: This constitutes 26 % of the
population i.e., 26% of 30000 = 7800. As students lack money at this phase of their
life, they would look out for a cigarette with an affordable price.
MARKETING STRATEGY
MISSION: Our mission is to offer an affordable and high quality tobacco product for the
smoking population keeping their health in concern.
MARKETING OBJECTIVES: The company is looking forward to cater to the category of
chain smokers so as to reduce the overall consumption by reducing the size of the cigarette
that is sufficient to satisfy the nicotine crunch, thereby, reducing the intake:
The main objectives of the company are:

The company wants to cater to the chain smokers in the Anand city.
The company wants to cater at least 50% of chain smokers market that is estimated

as 4200 by 10 years.
The company is looking forward to achieve the revenue projected of Rupees
1681125.6 within a time frame of 5 years.

To have average steady growth of at least 10% in the next 5 years to satisfy the

stakeholders interest.
After 5 years, The Company is looking forward to diversify its target market and
penetrate other areas of the tobacco market to sustain itself and compete with the
market leaders.

FINANCIAL OBJECTIVES:

Reach the breakeven within 4 years.

Sales forecast predicts Rupees 504000 by 5years time.

TARGETING: Evaluating targeting segments using following parameters:

Size: According to our survey 28 % of the chain smokers were ready to quit smoking. Since
55% of the target population represented businessmen and professionals and remaining 45
% represented labourers and students, the segment includes population with both high and
medium or low purchasing power. Hence it is profitable to serve.
Expected growth: Customers in the target market are becoming more health conscious and
are willing to quit smoking gradually. Our reduced price has a capability to attract these
customers with the reduced health risk. With more of younger generations joining the group,
the market for our product will continue to grow.
Competitive position: No brand has been successful so far in this segment as the profits are
low with the increase in taxes etc. Hence, fewer players in the small cigarette market will be
an advantage.
Cost to reach: Since, there is also a high degree of brand loyalty, it is difficult for the target
segment to trust and switch to new brand. Effective marketing strategy needs to be devised
which requires capital investment. Initial promotion costs will be high. Hence, margins for
the distributors and retailers are set high compared to the competitors.
Compatibility: The target population have a need to quit smoking. Survey observed that
most of the people who were willing to quit were professionals and businessmen. They have
an aspiration to become healthy with reduced price.
BRAND POSITIONING: Mini-cigarettes will position itself as a safer cigarette at an
affordable price compared to its competitors that is intended to reduce ones cigarette
consumption. This provides an incentive to the smokers specially the chain smokers, who are
willing to quit to switch to our product.
The Points of Parity will be:

High quality tobacco is used as found in premium segment cigarettes

Increased smoothness through additives/design changes, reduced tar

The Points of Difference will be:

First and only cigarette brand that aims to reduce cigarette consumption or to quit
smoking
Harm Reduction- less harmful than other cigarettes. Small size of cigarette, but with a
king size filter, less tobacco content but its enough to satisfy the nicotine crunch.
Low price- one of the cheapest cigarettes available at Rs 4.

MARKETING MIX (The 4Ps ):

Promotion Decisions
Promotional strategy As a new business, the strategy will be to push the product in order
to generate exposure and retail channels. Once the brand has been established this can be
integrated with the pull strategy. As a promotional offer, mint or chewing gum can be
distributed among the consumers. Setting up kiosk in the strategic locations will also be
helpful.
Advertising As advertising of tobacco products through electronic or print media is banned
in India hence advertising cigarettes can only be done at the point of purchase. Another mode
of advertisement can be done through news articles in print media. This will help us to inform
the purpose of our product, the mini cigarettes. After establishing our company in the minds
of people, we further promote it via talk shows. We can also promote via sponsoring citylevel events like Anand Run etc.

Product Decisions
Varieties

proper substitute in a smaller

form.

We are going to come up with

two varieties in the initial stage
- Regular and the other will be
Light. Since most of your
customers are chain smokers,
we need to provide them a

Quality

Our cigarette in quality and

smoothness will be at par with
the cigarettes of other premium
brands. The cigarette will be

produced by using high quality

tobacco leaves and best natural

cigarette papers.

Place Decisions
Point of purchase The POPs for cigarettes include Paan shop around the corner
of the street, street tea stalls, kirana stores, supermarkets, hypermarkets in the urban
areas.

In the rural areas POPs of cigarettes includes dhabas along the highways, tea stalls,

stalls at melas, haats, paan shops etc.

Distribution

Manufacturing
firm:

The manufacturing units will be

located at Anand.
Retailers:

intermediate before the

The last

cigarette reaches the customer are the

retailoutlets.

Wholesale Distributors:
They are not only representing the
company but also involved in the
promotional
Wholesalers:activities of the product.
They will help in bulk breaking
and supply to the retailers in and

END
around Anand.
a) Convenience
stores
(Kirana
a)
shops)
b) Pan
Shop
shops/Beetle
Price Decision
c) Kiosks
d) Large
stores (LFS)
b)formatFollowing
steps are used in finding price of cigarette:
e) Multi Branding Outlets (MBOs)

CONSUMERS

c) Selecting the pricing objective : To gain maximum market share.

d) Estimating Demand: Equivalent to the demand forecasting
e) Price insensitivity: Cigarette market among chain smokers is price insensitive.
f) Estimating cost: Considering the prevailing excise duty, VAT and state government tax,
the manufacturing cost of per cigarette is Rs 3.03/- in first year which gradually decreases
in the subsequent years.
g) Selecting a pricing model: Going rate pricing method is used.

h) Selecting the final price: Therefore considering our production cost and profit margin for
the intermediaries in the value chain. The product is priced at Rs.4 per cigarette.

i)
j) Financials, Budget and Forecasts:

SALES FORECAST:
k) With the increase in the number of customers per year the sales of the product will also
increase simultaneously. We have considered 5% increase in the first two years due to the
nascent stage of promotion of the product. From the third year onwards there is a rise in
sales to 10%. The overall growth trend is provided below.
l)

Sales per year (in Rupees)

25000000

20160000

20000000

15120000

15000000
10000000
5000000

Sales per year (in Rupees)

10080000
2520000

5040000

0
1

EXPENSE FORECAST:
m) Expenses incurred for the production of the product includes

n) 1. VAT
o) 2. Excise Duty
p) 3. Gujarat State tax
q) 4. Promotion Costs (which is been
reduced by 0.7 factor every year)
r) 5. Fixed Cost (which includes the
Overhead cost, Rent, Cost associated

in buying fixed assest like machineries

etc.)
s) 6. Variable Cost (which includes
wages to employees, cost of material
procurement, packaging cost etc.)

u)

Total Expenses incured per year

1600000

1520496

1400000
1200000

1193022
Total Expenses incured per year

1000000

875553

800000
600000
400000

491037

580209

200000
0
1

BREAK-EVEN ANALYSIS:
Estimation of Sales and Profit Margin for 5 years
Total population of chain smokers
Cigarette Consumption/day

v)

4200
10
Profit
Operation
Total sales/
Sales
Total cost Total Revenue Margin(In
year
year
%)
Year 1
5%
63000
491037
210140.7
-57%
Year 2
10%
126000
580209
420281.4
-28%
Year 3
20%
252000
875553
840562.8
-4%
Year 4
30%
378000
1193022
1260844.2
6%
Year 5
40%
504000
1520496
1681125.6
11%
Note: Considered 300 days as a conservative data while calculating sales

w)

The above table depicts the Break-even analysis of the company. We found that, within

4years the break-even point should reach as per your estimated data for the Total cost and Total
revenue. Hence from 4th year onwards we will start gaining profits. A graphical representation has
been provided for the estimating of the break-even year.

x)

1800000

1681125.6
1520496

1600000
1400000

1260844.2
1193022

1200000
1000000

Total Cost

875553

800000
600000
491037

580209

Total Revenue

840562.8

420281.4

400000
200000 210140.7
0
1

y)