ITC launches 69mm sticks, eyes volume growth: report

Tobbaco to hospitality major ITC is focusing more on volume sales of its cigarettes and according to a recent market check by Deutsche Bank Markets Research the Kolkata based conglomerate has launched a new 69 mm ‘Wills Navy Cut’ cigarette priced at Rs34/pack of ten (retails at Rs 3.5/stick).

“Our channel checks indicate that ITC has launched a new 69 mm ‘Wills Navy Cut’ cigarette priced at Rs34/pack of ten (retails at Rs3.5/stick). This appears to be targeted at ‘Four Square’ (brand owned by competitor Godfrey Philips (NR) which is priced at Rs37/pack of ten (retails at Rs4.0/stick),” said the report.

With this recent launch, it appears that ITC’s intent is now to target volume market shares after a hiatus, this augurs well for it.

Going forward the competitive activity levels in the industry could increase and likely tougher days for competitors as ITC has a strong presence in retail.  If the new launch is successful. Furthermore, the potential to gain market  shares from illicit cigarettes sold in India (industry estimates it to be 15% of the market) also exists.

“Wills Navy Cut was always present in the 74mm segment and hence its extension into 69mm is significant, in our view ITC needs to ensure that the new 69mm Navy Cut (INR 34) does not cannibalize its current 74mm offering (Rs 49),” the report added.

Importantly, it was ITC's  ‘accommodative’ practices which was the key for Godfrey and VST (as ITC with a dominant market share was probably happy with the balance of power).

ITC’s and Godfrey Phillips’ (in which Philip Morris owns 25% stake) volumes have grown at a CAGR of 3.6% and 7.3% over FY2002-12 .