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: How do you face taxing times in the Rs 15,000-crore branded cigarette industry in India? “Take a price hike to puff away your worries” seems to be the mantra for major players in this sector. And it seems to have worked well. For, tobacco-to-hotels and FMCG major ITC Ltd has reported that its cigarette sales rose 12% to Rs 15.7 billion in the second quarter of FY 08 and profit before tax and one- time gains or charges increased 9.8% to Rs 8.64 billion despite high incidence of taxes. Incidentally, ITC had raised cigarette prices by about 20% in the first quarter to offset a decline in sales volumes. Clearly, it is survival of the smartest in this overcrowded category.

With a market share of 75%, ITC currently leads the pack in the branded cigarette industry. Other major players include Godfrey Philips India Ltd, GTC Industries, VST Industries Ltd, Dalmia Consumer Care and Kothari Products Ltd. According to industry analysts, the Indian branded cigarette sector has registered a growth of 8% in the last two years.

“Despite high taxes, the industry is maintaining its growth rate. That's quite something to cheer the sector. Major players are now drawing up fresh game plans,” says an analyst based in Mumbai.

To sustain its leading edge in the highly competitive sector, ITC is now brewing a growth strategy, which includes expansion of manufacturing facilities and taking up innovative business processes. Says S Wanchoo, general manager, marketing, Tobacco Division, ITC Ltd, “Our focus on quality and innovation in responding to emerging consumer needs, across any category of product, not just cigarettes, will ensure that we maintain and improve our competitiveness on a continuous basis.”

According to industry sources, ITC is planning to kick off a Rs 300-crore expansion at its cigarette factory in Kolkata. Wanchoo is, however, reluctant to divulge further details about the company's expansion plans. “Currently, the Indian cigarette industry is operating at less than 50% of the installed capacity due to the high taxes on cigarettes vis-à-vis other forms of tobacco. Our manufacturing strategy is designed to remain quality-and cost-competitive, in step with the emerging demand and is being constantly reviewed,” he adds. At present, ITC has manufacturing facilities at four locations at Bengaluru, Munger, Saharanpur and Kolkata.