Mixed Blessing For Uk Giant

BAT Industries Plc's premium cigarette brands will enter a stagnant Indian market with low consumption levels that offers challenges but also good opportunities, a top industry official said on Tuesday.

Tobacco Institute of India director A C Sarkar said the British firm, which has signed a licensing agreement with India's ITC Ltd, could be rushing into a largely listless market in the world's third largest tobacco producer.

"We're talking about a market where the use of cigarettes is hardly 20 per cent of tobacco consumption by weight. Only 13 per cent of the 200 million adult tobacco users smoke cigarettes," Sarkar told Reuters.

 

Tobacco and hotels company ITC Ltd on Monday announced the two firms had signed an agreement under which BAT would license brands to the Indian firm.

The company gave no other details but newspapers said the deal included marketing rights for BAT cigarette brands State Express, 555 and Benson & Hedges. Sarkar said India's cigarette market had been steadily shrinking until two years ago, when it began growing at about two per cent annually.

"This year, the industry is not expecting much growth," he said. "The government has very heavily taxed the lower priced segment, which accounts for 80 per cent of cigarette consumption." About one third of Indian tobacco users chew tobacco. Most smoke "bidis", rolls of dried tobacco leaves with crushed tobacco which are cheap and popular in rural areas.

The average per capita cigarette consumption in the country is only 100 cigarettes annually, compared to a world average of 1,030 cigarettes, Sarkar said. Tobacco products consumption was about 0.8 kg per capita against a world average of 1.8 kg.

"In all countries around the world, traditional tobacco products are more popular with consumers. The switch to cigarettes has been gradual and in India, the pace has been particularly slow," Sarkar said.

"But it also offers good opportunity for expansion of cigarettes within the tobacco market," he said. Sarkar said low tobacco consumption patterns were rooted in low incomes and Indian social practices. Women traditionally do not smoke and many young Indians still consider it disrespectful to smoke in the presence of their parents.

In recent months, India has also started introducing anti-smoking laws. The Delhi govbanned smoking in specified enclosed public places in January. Cigarette advertisements are banned on state-run radio and television. (Reuter)