pankaj sharma mmm b division

8/8/2019 Pankaj Sharma Mmm b Division

1/62


2/62

Table of Contents

CHAPTER DESCRIPTION PAGE NO

1. ACKNOWLEGMENT 3

2. EXECUTIVE SUMMARY 4

3. INTRODUCTION 6

4. COMPANY PROFILE 28

5.

INDUSTRY PROFILE

34

6. SCOPE,OBJECTIVE OF PROJECT

WORK

39

7. RESARCH METHODOLOGY 41

8.DATA ANALYSIS &INTERPRETATION

46

9. FINDINGS 59

10. LIMITATION 60

11. RECOMMENDATION 61

12. CONCLUSIONS 62

13. BIBLIYOGRAPHY 63

14. QUESTIONNAIRE 64

2


3/62

ACKNOWLEGEMENT

Determination, co-operation and guidance are essential ingredients to make any project

successful. I was very lucky enough to all of the above in Chaini khaini. In my endeavour to

learn basic of management, I would like to thank Chaini khaini for providing me an

opportunity to work with their sales product promotion and market potential, Mumbai.

The synergetic effort of the various department and the people working in an organisation,

results in an exponential success of the organization. The project that I did is also an outcome

of the efforts of various departments and the people working in Chaini khaini. The guidance of

marketing, servicing, and department helped me to understand the actual position of product in

market.

It has been a sheer pleasure and honour to work for such a great organisation. I would like to

thank the management for providing me this opportunity. First of all I thank Mr. Pankaj guptaregional manager, mahak Chaini khaini ltd, Mumbai, for his support. It was a matter of

privilege to work under the guidence of mr.kailash gupta (area sales manager). I would like to

thank him for without his co-operation and help, this project would not have been such a huge

success. He was always there to provide me with necessary inputs and keeping me motivated

during the project despite his busy schedules.

I am very thankful to my project guide Prof.Mr.R.Puni, who helped me to relate the

theoretical aspects of the subjects with the practical field.

3


4/62

DECLARATION

This project report on understanding the market potential and sales product promotionat

mumbai is submitted by me for the partial fulfillment of the course of Master of marketing

management (M.M.M) from university of Pune.

This is an original work done by me expected the guidance received which has been properly

acknowledgement in the report.

This is not the copy of any other report or any part of it hasnt been submitted for the award of

any degree or diploma.

Date:

Place Pankaj Sharma

4


5/62

INTRODUCTON TO THE TOPIC

My summer project title understanding market potential & sales product promotion is a

descriptive research design. In this report, I have tried to collect data through questionnaire &

survey filled by retailer and wholesaler belonging to different localities in the Mumbai.

The project deals with detailed study of chaini-khaini.I have done a detailed survey in themarket of Mumbai find out market potential and short out quirie. At the end of my research, it

was concluded that chaini-khaini rapidly captures the market and but have problem related to

service and out of stock problem in Mumbai.

The product chaini-khaini was launched before eight years and market share of the product is

very high in comparison of competitor. Demand of the product is also very good.

Sales promotion play a key role in every organisation and with the help of sales promotion sort

out there problem and with the help of sales promotion increase the market share.

Reason for selecting the topic:

My project topic understands market potential & sales product promotion. The

reason behind selecting the topic is that sales promotion is key factors in organisation for

increase the sales and with the help of that also know the market potential of chaini khaini

thats why I have chosen this topic to find out all the fact/reasons behind the popularity of

chaini-khaini.

5


6/62

EXECUTIVE SUMMARY

In summer internship of two months, I selected mahak chaini khaini, mumbai region &

the topic which I have selected to do research on undersatnding market potential and sales

product promotion. At the time of surve, I had to go through Wholesaler, Retailer. The

objective of this research is to find the market potential as well as promotes the product of

chaini khaini to increase the market share and good relation.

This research was limited to a particular area of mumbai only. This project work purely

relies on primary data to study the objective which was collected through a structured

questionnaire as well as through observations. The secondary data which gives the current

information regarding chaini khaini was collected through company authority.

This study is based on Descriptive research to study the psychology and mentality of

Retailer towards different offer/scheme provided by the Distributers. Data had collected from

1500 Wholesaler/retailers of 6 different routes which describe the perception & buying

behavior of retailers of khaini products. Also I have fill up questionnaire by interview of

retailers (pan-wala), Wholesaler which describe current performance of Chaini Khaini, serviceinformation, buying influence, product quality etc.

After collecting the whole data I have observed that the availability of Chaini khaini is

good .in comparison with Demand of customer is main criteria of retailers while ordering a

particular filter tobacco, the maximum no. of retailers, wholesaler, attract towards chaini

6


7/62

khaini due to good demand , good profits, the maximum no. of retailers feels that chaini

khaini provides good profit.

During this project, I found several limitations like salesman not comming, out of stock, emptypouch, etc.The conclusion of this project is that chaini khaini is rapidly capturing the market at

Mumbai due to good demand, good quality.

INTRODUCTON TO THE TOPIC

Tobacco

Introduction

India is the third largest producer and eighth largest exporter of tobacco and tobacco productin the world. While India's share in the world's area under tobacco crop has risen from 9% to11% in the last 3 decades, its share in production has inched up from 8% to 9% in tobacco

industry. Asia and America, together account for 75% of world's production of tobacco.China, USA and India are the three leading tobacco-producing nations in the world

Production area

Andhra Pradesh, Gujarat and Karnataka account for the major portion (80%) of raw tobaccoproduction in India. These states produce FCV tobacco, bidi tobacco, natu tobacco, cigartobacco, cheroot tobacco and snuff tobacco. Other states which manufacture tobacco isMaharashtra, Orissa, Tamil Nadu, West Bengal, UP and Bihar.

Growth promotional activities

FCV (Flue cured Virginia) tobacco production and is regulated by The Tobacco Board. About

0.75mn growers are engaged in tobacco production. Easy availability of tobacco has helpeddevelopment of cottage industry for manufacture of chewing tobacco, cigar, cheroot, flux etc.Bidi industry provides employment to 4.4mn rural people, mostly women and the cigaretteindustry provides employment to 0.55mn people.

Types

Tobacco is consumed in two ways, either by smoking or chewing. While smoking thefollowing tobacco products are consumed: Cigarette, Cigar, Bidi (Hand rolled, leaf wrappedcountry cigarettes) and to chew the products are: Raw tobacco, Supari (Arecanut), Gutkha, PanParag etc.. Due to diverse climatic conditions every type of tobacco is grown in India. Almost

7


8/62


9/62

Pouch

Now in 6 Exiting

Flavours

PRODUCT PROFILE

To augment and achieve benchmark safety the filter pouches

of chaini khaini are manufactured with German Technology.

For additional freshness and authentic flavour, the pouches

are laminated by a special processing technique.

Only the choicest Indian tobacco is encased in the filter

pouches of chaini khaini.

In addition to the finest Indian tobacco, chaini khaini contains menthol, spices and selectednatural herbs which give a unique flavour to its formulation.

Each ingredient that goes in the pouch carries the assurance of stringent quality checks, to

ensure that you get only the finest filter pouch offering, wherever you are in the world.

Available in two convenient sizes (big & small) and six exciting flavours:

9


10/62

Mint Green Apple Cinnamon

Lemon Cardamom Strawberry

WHY CHAINI KHAINI

What makes Chaini Khaini safer is the encasement pouch which does not allow tobacco

leaves to come in contact with the oral organs. Thus the inner skin of the mouth remains

unaffected and unharmed.

Because of the pouch, not a single tobacco particle is ingested in the gastro-intestinal tract.

Thus the intestines or other inner parts of the stomach are not harmed due to tobacco.

Smoking affects both the teeth and the lips, causing unsightly stains & tooth decay. The

filter tobacco pouches of Chaini Khaini are free from these side effects.

As the tobacco in the pouch of Chaini Khaini is released in the mouth gradually, the sense

of satisfaction is also prolonged & consistent.

10


11/62

Now in 6

Exiting

Flavours

More and more people across the world are

switching from smoking & tobacco chewing to

Chaini Khaini Filter Pouches, not only for the

safety but for the unique Chaini Khaini

experience.

The concept of filter tobacco pouches is not a

new one. It has been popular in the west and other

religions as snus. It is a medically proven fact that

snus (Chaini Khaini) is much less harmful than

smoking. Sweden, where people prefer snus over

smoking has the lowest incidence of tobacco

related lung cancer.

Natural Indian Herbs

Raw Tobacco

11


12/62

INGREDIENTS

Tobacco, Lime, Water Menthol, Oil, Spices

Contains Added Flavour.

Net Weight : 3.6 g When packed

Best Before : 6 Months

Packing : 10 FILTER TOBACCO POUCH

READY TO USE

THE HAZARDS OF

SMOKING

Avoiding the dangers of smoking cigarettes is critical to your survival in this day and age. Here are

some well established but shocking smoking statistics about the know hazards of smoking:

There are more than 4,000 chemicals in cigarette smoke, including 43 known cancer

causing (carcinogenic) compounds and 400 other toxins.

The soot, tar, gases, in cigarette smoke harm your body over a period of time.

Smoking accounts for more than 30% of all deaths from cancer and almost 90 % if deaths

from lung cancer.

About 75% of deaths from chronic bronchitis and emphysema are attributed to smoking.

The US Environmental Protection Agency has classified environmental tobacco smoke as

a Class A carcinogen along with asbestos, arsenic, benzene and radon gas.

There is no doubt that smoking is a global health problem. But the surveys have proved that

smokers are not ignorant to the injurious effects of their habit, yet they cannot overcome their

addiction.

12


13/62

Thankfully, there is a way out. Read on to find out how to turn around the impossible.

THE WORLD TOBACCO INDUSTRY

INTRODUCTON

Tobacco products are being chewed, snuffed, and (mostly) smoked all around the world.People have been consuming tobacco products for centuries. Tobacco is also grown in many

places. Originally from the Americas, since 1492 it has spread far and wide. Today, tobacco isgrown in over 100 countries.

No other product has stimulated demand for tobacco as much as the cigarette. Until the 1870s,cigarettes were mainly rolled by hand. Today, they are made by machines. Thanks to thesemachines, which can produce hundreds if not thousands of sticks per minute, cigarettes have

become an article of mass consumption. In the process, cigarettes have become the maintobacco product (box 1). Today, over 80 per cent of tobacco grown is used for cigarettes. The

13


14/62

world market for cigarettes is dominated by a low and steadily diminishing number ofsuppliers.

Box 1. Tobacco usage

It is useful to distinguish smoking from smokeless tobacco. Smokeless tobacco is

tobacco that is consumed in an unburned form. The main types of smokeless tobacco aresnuff and chewing tobacco. Snuff is powdered tobacco that can be inhaled through thenose or taken orally. It is popular in the United States and in Scandinavia. Plug, loose-leafand twist are the main types of chewing tobacco used in Western Europe and NorthAmerica but their use is in decline. Pan chewing (orbetel quid) chewing is popular inSouth and South-East Asia.

Cigarettes are the most popular type of smoking tobacco, as indeed of all tobacco.They can be without filter, but most are sold with filter-tips. They are machine made, butan important (sub-market) segment consists of Roll-Your-Own (RYO) cigarettes. Bidisare popular in India, where eight times as many bidis are sold as cigarettes (but sales ofcigarettes are increasing more rapidly). Bidis consist of a small amount of tobacco

wrapped in temburni leaf and tied with a small string. Cheroots are small cigars made ofheavy-bodied tobacco; they have no wrapper and contain a single binder. Kreteks areindigenous cheroots containing tobacco, cloves and cocoa. Kreteks are very popular inIndonesia, where three times as many kreteks as cigarettes are being produced. Cigarscome in many shapes and sizes from cigarette-sized cigarillos to 10 g. double coronas.Lastly, pipe smoking is one of the oldest methods of smoking tobacco. Pipes are smokedaround the world but they differ in size, shape and material used. Certain water pipesallow a number of people to smoke simultaneously from the same pipe.Sources: Corrao et al., 2000; WHO, 1997.

Components of demand for US cigarette production (1960-99)

14


15/62

This paper is essentially a paper on cigarette manufacturing. Its focus is on the 1990s. It paysspecial attention to the most recent period. Where appropriate, reference is made to othertobacco products, and to the production and trade of tobacco. The paper is organized asfollows. The second part of this introduction discusses the relationship between tobacco andcigarettes. Chapter 2 considers world demand for, production of and trade in tobacco andcigarettes. Chapter 3 discusses the role of the tobacco companies, particularly that of the largemultinationally operating groups, in production and trade. Governments for their part face adilemma. The production and marketing of tobacco and tobacco products generateemployment and tax revenues. But the consumption of cigarettes can be harmful to health.

Treating people for smoking-related illnesses is expensive. How governments cope with thisdilemma is the subject of Chapter 4. Chapter 5 is on employment in the tobacco-processingindustry. Hundreds of thousands of people are active in the tobacco industry. Will theirnumber decrease, and if so, where will this occur? Employment in tobacco growing is countedin the millions. Though not the subject of this paper, 2 the last section of Chapter 5 will make afew remarks on employment in tobacco growing. Chapter 6 offers some conclusions.

Tobacco and cigarettes

Tobacco is an essential ingredient for cigarettes, cigars, RYO (roll-your-own) tobacco, pipetobacco, cigars, snuff and chewing tobacco. That is not to say that the value of tobacco incigarettes and other tobacco products is necessarily high. In fact, in many OECD countries itsshare in total value is low compared to that of taxes, advertising andThe paper will also not consider other tobacco-related jobs, such as those in leaf dealing; in

the production of cigarette machines, paper and packaging materials and filters; in advertising,wholesale trade and transportation; or in retail trade activities such as supermarkets, petrolservice stations and special tobacco outlets.2 SECTOR WP 179-2002.doc/v2

15


16/62

retailing: in the US, in 1997, tobacco made up only 4 per cent of the total (Gale et al., 2000).With taxes rising, this percentage is likely to drop even further.Most tobacco is used for cigarettes. In the early 1990s, it was estimated that at least 80 per centof tobacco leaf was used for cigarettes (FAO, 1990). Today, this might well be higher as

demand for cigarettes is seen to outgrow that for other tobacco products.Demand for tobacco is thus in large part determined by demand for cigarettes. The volume oftobacco sold in the world can be expected to closely follow increases (or decreases) in thedemand for cigarettes. That is not to say that demand for tobacco increases at the same pace asthat for cigarettes. Historically, the amount of tobacco used per cigarette has decreased as aresult of the increased use of filter tips; of the smaller diameter of cigarettes; and of reducedwaste due to more efficient packing technologies. In addition, the proportion of leaf that can beused has increased through advanced processing technology (FAO, 1990).

DIFFERENT TYPES OF CIGERETTES USE DIFFERNET TYPES OF TOBACCO:

Neither tobacco nor cigarettes are a homogeneous product. Due to the different conditions(type of soil, rainfall, irrigation, and climate) in the various tobacco growing regions, tobaccoleaves vary in size, thickness, colour, and flavour. Factors like the environment, the leafs

position on the stalk, harvesting, curing (i.e. drying), handling and processing, all influence thequality of the leaf and ultimately the smoking product. The sugar and nicotine ratios of the leafaccount for the overall aroma and flavour of the tobacco leaf. The quality of the leaf isdetermined by its colour, texture, body, thickness, strength, flavour, aroma, rate of burn and

processing qualities. Quality is expressed in grades. The US Department of Agriculture(USDA) recognizes 117 official grades of tobacco (see also Annex 1).There are basically four types of cigarettes: Virginia (flue-cured); 4 American blend; dark;

and oriental cigarettes. The latter two, dark (traditionally popular in French-, Spanish-, andPortuguese-speaking countries) and oriental (traditionally popular in the EasternMediterranean, Eastern Europe and the (former) USSR) have lost ground to the first two.Virginia (or English) cigarettes are made almost entirely from flue-cured Virginia tobaccos.They are popular in the UK and in its former colonies. The American blend is currently themost popular type of cigarettes. Its world market share continues to grow. The main tobaccocomponents of the American blend are flue-cured Virginia (approx. 50 per cent), Burley andOriental (around 12 per cent). In addition, each cigarette brand uses a specific mix of tobaccos(and other ingredients such as sugar and aromatic substances) to give it its characteristic tasteand to set it apart from its competitors.Virginia flue-cured is thus the main source of cigarette tobacco today. Its share in total

unmanufactured tobacco has increased as a result of the popularity of Virginia and AmericanBlend cigarettes (figure 2). Originally from the (US) state of Virginia, today it is grown inmany countries. US leaf is considered to be the best ingredient for providing quality, flavourand aroma to cigarettes but it is expensive. Its high price (compared to non-US tobaccos) wasonce justified by its superior quality, but the quality of leaf from3 This section is based on FAO, 1990; Gale, 2000; and Dimon, 1999.4 The term flue-cured comes from the artificial curing (or drying) system by which metal

pipes (flues) are used to distribute heat in curing barns as a means to remove all of thenatural sap and moisture from tobacco leaves.SECTOR WP 179-2002.doc/v2 3

16


17/62

other countries has improved. Therefore it is no longer as important as it was formanufacturers of quality cigarettes to use a high proportion of US tobaccos in their blend.

Nonetheless, demand for US tobaccos is still considerable. Manufacturers are reluctant tochange the mixture of tobaccos in their blend for fear of altering the taste and losing loyal

customers. For existing brands, changes in the sources of supply will thus occur gradually(providing a degree of stability to the world tobacco trade). A more rapid way of reducing theuse of expensive leaf is by including less of it in new brands or new variations of the general

brand (e.g. in light cigarettes).

Figure 2. World unmanufactured tobacco production by type (metric tons;

1994-96)

Consumption, production, and international trade

In the world of tobacco and cigarettes many configurations co-exist. Malawi is an importantproducer of tobacco, but it exports 98 per cent of its crop. The Netherlands grows no tobaccoof its own. Yet it is one of the worlds top exporters of cigarettes and cigars. The United Statesis a leading importer and exporter of tobacco as well as a leading exporter of cigarettes. And

17


18/62

there is China, the worlds largest producer of raw tobacco, and the worlds largest consumerand producer of cigarettes whose participation in world trade of tobacco and cigarettes is verymodest (see also box 2 on the China factor). We shall start with a discussion of demand and ofdemand trends. Data on world tobacco consumption and world cigarette production by country

are available. But data on demand for cigarettes by country are more difficult to obtain. Withthe help of production and trade data apparent demand can be calculated. The second part ofthis chapter considers production and international trade.

CONSUMPTION

Worldwide, the production of tobacco and the consumption of tobacco products increasedsteadily until the early 1990s. Between the early 1970s and the early 1990s tobacco productionincreased by around 50 per cent in volume terms. Cigarette consumption and productionincreased at a slightly faster pace. Between 1990 and 1995, production of and demand forcigarettes grew at a more modest rate. Tobacco production reacted to this weakening ofdemand with a lag. After 1996, consumption appears to have declined. The Asian and theRussian crises dampened demand as did the drastic price increases in the US following theMaster Settlement Agreement (section 3.3). On balance, according to the USDA, worldtobacco consumption (at 6.5 million metric tons) and world cigarette production (at 5.5 million

pieces) were no higher in 1999 than they were in 1991.It should be kept in mind, however, that slow overall growth does not necessarily mean thatdemand growth for all countries or all categories of tobacco and cigarettes was slow.American Blend cigarettes have gained in market share. As a result, demand for thetobaccos that make up the American Blend has been above average (see also section 1.1.1).Per capita demand for cigarettes in the industrialized countries started to decline in the early

1980s (figure 3). After 1995, demand growth in the countries outside the OECD area sloweddown and no longer compensated for declining demand in the industrialized countries.

18


19/62

Figure 3. Average annual cigarette consumption per adult in

industrializedcountries (1920-90)

Table 1. Worlds leading unmanufactured tobacco producing,trading, and consuming countries (metric tons; dry weight;calendar years)

1995 1996 1997 1998 1999*ProductionWorldtotal 5 541 142 6 563 927 7 720 562 6 438 201 5 926 859China,PeoplesRepublicof 2 082 600 2 910 600 3 613 350 2 521 100 2 023 000

India 528 390 506 475 561 330 572 200 587 600UnitedStates 513 247 619 432 729 139 626 504 571 526Brazil 323 500 365 900 485 100 373 150 476 150 Turkey 170 070 190 391 250 836 217 570 215 640Indonesia 145 650 150 450 148 775 175 825 185 005ExportsWorldtotal 1 759 091 1 981 981 2 004 521 1 907 289 1 949 663Brazil 256 300 282 500 319 000 300 500 318 000

19


20/62

UnitedStates 209 482 222 316 221 512 211 917 230 000Zimbabwe 174 289 195 958 159 941 168 804 205 500 Turkey 136 392 170 098 160 360 128 808 125 500

Malawi 99 057 95 555 111 449 135 300 107 600Greece 133 000 130 250 103 000 97 179 100 000ImportsWorldtotal 1 778 246 1 949 282 1 960 464 1 858 915 1 712 450Germany1 209 761 235 855 222 080 230 000 217 463UnitedStates2 199 088 326 454 306 838 246 762 200 000RussianFederation 148 110 148 000 184 900 200 830 165 000UnitedKingdom 141 467 166 027 157 689 149 756 147 000 Japan 115 072 85 634 90 469 91 500 92 950Netherlands 89 075 97 368 105 358 84 813 84 813ConsumptionWorldtotal 6 305 704 6 453 712 6 374 201 6 287 785 6 282 163China,PeoplesRepublic

of 2 208 554 2 313 705 2 289 834 2 306 757 2 342 000UnitedStates 699 200 706 688 673 927 634 412 662 488India 463 920 472 326 476 850 483 360 478 310RussianFederation 142 320 150 055 175 100 180 460 190 560Indonesia 183 050 196 670 195 650 187 115 180 505 Japan 196 900 197 250 184 100 177 500 179 750Ending StocksWorldtotal 5 789 570 5 879 493 7 084 745 7 184 410 6 587 119

China,PeoplesRepublicof 1 390 866 1 941 310 3 079 364 3 211 291 2 807 691UnitedStates 1 446 555 1 463 437 1 603 975 1 630 912 1 509 950 Turkey 320 595 268 172 292 898 313 010 334 150 Japan 370 251 318 049 280 235 252 735 221 681Brazil 276 900 210 700 231 500 162 950 176 350Italy 192 710 140 634 141 900 148 547 153 372

20


21/62

* Estimate; 1 Unified Germany; 2 General imports (actual arrivals). Source:USDA/FAS (Dec. 1999).

On the whole, world demand and world production develop more or less in parallel. But this is

clearer for cigarettes than it is for tobacco. Cigarettes are unsuitable for long-termstockholding. Their quality deteriorates rapidly and this is a powerful incentive for producersto adjust to changes in demand without too much delay. Other things being equal, trends inworld cigarette production can act as a fair indicator of world cigarette demand.That is not the case with tobacco. Tobacco stocks at year-end can be as high as the volume of

production in that year (table 1). There are several reasons for this. First, tobacco can bestocked for a longer period than cigarettes before its quality starts to decline. Second, tobaccois an agricultural product. This makes it hard to predict with much precision the productionvolumes of different types and of different growing regions. Indeed, tobacco productionvolumes can vary considerably from one year to the next. Most manufacturers use a blend ofdifferent tobaccos in their product. Therefore they cannot risk having a shortage in acomponent part of their blend. They thus need sufficient stocks to tide them over from oneharvest to the next. Lastly, stocks serve as a price-stabilization mechanism. Stocks do not just

prevent supply shortages; they also prevent undue price increases following a poor harvest of aparticular type of tobacco.For individual countries and regions, demand for cigarettes is determined by a number offactors, including price, real incomes, macroeconomic developments, government efforts todiscourage consumption (discussed in Chapter 4), as well as a range of structural and culturalfactors. Retail price increases and a slowing economy have a negative effect on the demand foror the expenditure on tobacco products (but this sensitivity differs by each nations level ofdevelopment and by socio-economic group). It may, but it need not lead to a reduction in the

number of cigarettes consumed. People may simply buy cheaper cigarettes (downtrading).They buy local instead of imported cigarettes; popular instead of premium brands.Structural and cultural factors also play a role. Why do people smoke, and why do they smokethe number of cigarettes that they do? On the whole, the average cigarette smoker is morelikely to be male rather than female, with a low rather than a high income, and with fewerrather than more years of education. Far more smokers are found in less developed than inmore developed countries (table 2).

21


22/62

Table 2. Estimated number of smokers in the world (early 1990s) (in

millions)Countries Males Females TotalDeveloped countries 200 100 300

Developing countries 700 100 800World 900 200 1100Source: WHO, 1997.

What about demand in individual countries? In the absence of precise demand data we need tocalculate apparent demand by deducting net exports (i.e. gross exports less imports) fromdomestic production. However, this figure may differ from real demand for two reasons. First,it takes no account of the variation in year-end stocks held by cigarette traders, wholesalersand retailers. Second, and more important, apparent demand takes no account of the share ofdemand that is satisfied by smuggling. Smuggled cigarettes take up a large share of the marketin several countries (Chapter 4).Table 5 gives data on apparent demand for the worlds main markets. It shows that China is byfar the largest market for cigarettes, followed by the United States, Japan, Russia, Indonesia,

Germany, Turkey, Brazil, India and the Republic of Korea. Demand in Indonesia and Turkeyis increasing fast.These data can be a poor indicator of value, though. Quality and prices differ from one tobacco

and from one cigarette to another. US tobaccos, in particular, fetch high prices in the market.

The quality of many Asian tobaccos, on the other hand, can be much lower. Their price may

be one-half, or even one-third of US tobaccos. So in value terms, the share of the US is higher

than the volume figures would seem to imply.

22


23/62

World cigarette production volume, net exports (NE) and apparentconsumption (AC). Selected countries and years (1,000 millionpieces)Country 1985 1990 1995 1998 NE-98 AC-98France 67 53 46 44 -40 84Germany 165 164 221 178 40 138Italy 78 65 50 52 -43 95

Netherlands 46 65 100 116 86 30Spain 77 79 76 70 -12 82United

Kingdom 123 112 156 160 80 80Switzerland 23 27 42 37 23 24Bulgaria 92 82 74 46 15 31Poland 90 81 101 95 3 91USSR 381 350 141* 179* -52 231Egypt 47 41 42 47 1 46Rep. ofSouthAfrica 28 32 37 36 36Canada 63 46 51 50 1 49

Mexico 46 50 46 47 47UnitedStates 665 670 746 716 197 519Argentina 39 33 41 42 42Brazil 146 160 173 178 73** 105China 1178 1650 1735 1675 20 1655India 80 85 95 106 1 105Indonesia 106 155 186 214 17 197

Production and international trade

Table 6 gives data on the share of major regions and countries in the volume of world

production of unmanufactured tobacco. Asia, at around 60 per cent of the total, is the main

tobacco producing region with China alone accounting for 36 per cent. Chinas share of world

production, which had risen rapidly in the 1980s, was no higher in 1998 than it was in 1990.

The shares of India, South America (mainly Brazil), and particularly Africa (Zimbabwe,

Malawi) have not stopped increasing. The share of Europe (including Eastern Europe)

declined (Italys production dropped by one-third between 1990 and 1997) and that of the US

23


24/62

remained more or less the same. By1997, the developing countries accounted for 80 per cent

of world production, compared to 53 per cent 30 years earlier (TJI, 5/97; and figure 5).

THE COMPANY RESPONSE

The OECD-based tobacco companies have reacted to stagnating demand on their traditionalmarkets in basically three ways: consolidation (the industry is increasingly dominated by asmall number of relatively large players), diversification, and increasing productivity.Consolidation and diversification are the subject of this chapter. Productivity is discussed inChapter

CONSOLIDATIONConsolidation in the tobacco industry had been taking place for quite some time, but itaccelerated in the late 1990s. Also, the size of the deals has become steadily bigger.Concentration can make a critical contribution to profitability through marketing (global

brands), manufacturing and distribution. By producing high volumes at fewer locations, andby merging distribution activities, companies benefit from economies of scale. The cigarettebusiness needs volume to be profitable 1 (see also Chapter 5). Companies with large sales inthe quality brand segment (with high margins) are particularly attractive take-over targets asare those with a presence in fast-growing emerging markets.Consolidation takes various forms. Smaller companies have been absorbed by their largercompetitors. Austria Tabak took over the cigarette activities of Swedish Match, and was thentaken over by Gallaher. Former state monopolies (such as Portugals Tabaquiera or thoseoperating in Central and Eastern Europe, and in Central Asia) have come under the control ofthe large multinationals. And, in an effort to broaden their market base, companies that

previously were little active abroad have gone on a shopping spree outside of their nationalmarket (see also section 3.2). In the process, the degree of concentration of the industry hasreached high levels, both at the national level (see table 8 for some examples) and worldwide.In 1999, three companies (CNTC at 30 per cent; Philip Morris at 17 per cent, and BAT at 16

per cent) controlled close to two-thirds of world cigarette production.

Table 8. Concentration in the tobacco industry (market share of the

dominant supplier; selected countries)Country Percentage

Korea, Democratic Rep. of* 100Iraq* 100Algeria* 100Madagascar* 100Uganda 100Zambia 100

24


25/62

Sri Lanka 99Malawi 99Mauritius 99Sierra Leone

99

Litigation

The rationalization that follows consolidation, the various forms of diversification, and their

strengthened hand vis--vis their suppliers should all help the remaining companies to

maintain their profitability and, where possible, increase it. There is, however, one dark cloud

on the horizon: litigation. Litigation means that the industry cannot do without the assistanceof a sizeable number of legal experts. This is a cost factor. But in view of the sometimes

enormous damages claimed by plaintiffs this would appear to be money well spent.

Governments and tobacco

Governments face a dilemma. On the one hand, tobacco-growing and processing can make aconsiderable contribution to employment (the subject of the next chapter), tax revenue andforeign exchange receipts. In many developing and formerly centrally-planned economies, the

tobacco companies have made sizeable and most welcome investments when other investorswere reluctant to do so. On the other hand, governments have the obligation to protect the

populations health. Smoking can be harmful to health. Treating people for smoking-relatedillnesses is expensive. This can lead to heated debates within the same government as eachsector defends the interests it believes it should represent. How do governments cope with thisdilemma?

25


26/62

Tax income, foreign exchange earnings and direct foreign investment

The economic importance of tobacco-growing and processing differs from country to country.At the national level, cigarette (sales and import) tax can be a main source of governmentrevenue. In Russia, cigarette tax revenue contributes around 8 per cent to the financing of thestate budget (TJI 6/99).

When the government owns the industry, it receives profits in addition to tax. That is why, inso many countries, State monopolies continue to control cigarette trade and production (seealso table 8). In China, profits from state-owned CNTC amounted to the equivalent ofUS$11,000 million in 1999. CNTC has been the Chinese States top revenue generator foryears. Japan Tobacco earned more than US$400 million for the Japanese State in the fiscalyear ending March 2000 (BW, 28 May 2001). The monopolies can also play a social function.In Italy, several of the state monopolys factories are placed in areas hit by highunemployment (TJI 3/98).Then there are balance of payments issues to consider: many low-income countries rely on theexport of cash crops such as tobacco to pay for the service of their foreign debt. Tobaccoexports made up close to 10 per cent of Cubas exports in 1997-98. In the case of Tanzania it

was 15 per cent, In Zimbabwe over 25 per cent and in Malawi tobacco exports made up two-thirds of commodity exports (UNCTAD, 2000).People smoke. But whether they smoke domestically produced cigarettes using home-growntobacco or use imported cigarettes and tobaccos can make a world of difference when foreignexchange is scarce. That explains why so many countries try to limit the importation ofcigarettes and encourage domestic producers to use local tobaccos, for instance, by providing afavourable tax treatment to companies that use a minimum percentage of home-growntobaccos.The cigarette companies have also been a prime source of investment in the formerlycentrally-planned countries of Central and Eastern Europe, and Central Asia. When otherswere reluctant to invest, those companies saw the possibilities offered by a combination of

pent-up consumer demand, outdated production facilities and the association with freedomand western style living that so appealed to the people in these countries after many years ofcentral planning and little consumer choice. After having lobbied successfully for the openingup of Asian markets such as Japan and the Republic of Korea, the large tobacco companiesare eagerly waiting for the opening up of the other economies (notably China) that continue torestrict imports from and/or investments by foreign tobacco companies.Tobacco growing, processing and exports can thus make a significant contribution to national

employment and national income. Yet, however important tobacco growing and processing

26


27/62

may be at the national level, its full economic and social significance is best grasped at the

local or regional level. In some regions, tobacco is grown side by side with

Public health

Tobacco growing and tobacco processing may bring considerable economicand social benefits, but the treatment of smoking-related illnesses is costly.Cigarette smoking causes cancer. It is addictive. The WHO estimates thattobacco products cause around 3 million deaths per year. Cigarettesmoking is the major cause of preventible mortality in developed countries.In the mid-1990s, about 25 per cent of all male deaths in developedcountries were due to smoking. Among men aged 35-69 years, more thanone-third of all deaths were caused by smoking. The costs of treating all

these people are clearly enormous (WHO, 1997).So far, smoking has not had the same impact on mortality among womenand among people from developing countries. There is an approximate 30-40 year time lag between the onset of persistent smoking and deaths fromsmoking. The effects of the greater incidence of smoking among these twogroups will thus be felt with a lag, but it seems reasonable to believe thatits impact on them will not differ fundamentally from that on developedcountry males.It may be argued that smokers willingly take a certain health risk when

enjoying their smoke. They like the taste and all the other things that they

associate with smoking. But this does not apply to environmental tobacco

smoke (ETS) or second-hand smoke. Smoke gets in your eyes. In your

clothes. And in your lungs. Non-smokers cannot escape from smoke in

badly ventilated areas. To be exposed to other peoples tobacco smoke can

be a nuisance in addition to being a health risk for non-smokers

Taxation

Raising the tax on tobacco products is a component of virtually every governments tobacco

policy. On the surface, it is an attractive component because it raises the price of tobaccoproducts (and thus discourages demand) and it raises government revenue (and keeps thetreasurer happy). In actual practice, the situation can be more complicated. First, a flat tax per

packet would act as a regressive tax as it weighs more heavily on people with1 In Thailand, the no-smoking campaign involves singers, actors and actresses as models foryoung people (TJI, 6/96). Sector a low income. This effect is exacerbated by the fact that, indeveloped countries, this group of people uses tobacco more intensively than people with highincomes. Second, overall demand for cigarettes may decline so steeply that increased revenuethrough the higher tax per packet is outweighed by the lower sales volume.

27


28/62

However, the main constraining factor is that, as a result of the tax increases, prices become sohigh compared to those of surrounding countries that legally sold cigarettes are beingsubstituted for smuggled ones. 2 In the mid-1990s, contraband goods made up 80 per cent ofthe Estonian market (TJI 5/99). In 1993, they made up 60 per cent of the Quebec market a

year later the Canadian Government was forced to cut back taxation. Worldwide, smuggledcigarettes were estimated to account for 5 per cent of global cigarette production and 30 percent of international cigarette trade in 1994 (WHO, 1997)

Employment in the tobacco industry

Worldwide, the tobacco-processing industry employs hundreds of thousands of people.However, due to a combination of slow demand growth, consolidation, and higher

productivity, this number is unlikely to increase by much in the near future. Fewer people areneeded per unit of production. The industry is becoming less intensive in the use of labour.Tobacco growing, in contrast, gives work to millions of people. It continues to be a highly

labour-intensive activity. The scope for productivity increases in tobacco growing wouldappear to be more limited than those in tobacco processing.

Employment: the figuresOver a million people are employed in the world tobacco industry (ISIC 314 or 16). But of thisnumber a high percentage is employed in just three countries: China, India and Indonesia(table 9). The large number employed in China comes as no surprise in view of the largenumber of cigarettes (one-third of the world total) produced there. Still, the productivity gapwith the United States is striking. China produces roughly three times as many cigarettes as theUS, but it needs over nine times as many people to produce them. In the other two countries

the scope for productivity improvements would appear to be even higher.

Employment trends

Table 10 gives employment data for selected OECD countries. Following considerable joblosses in the 1980s, 1 these data show that, in the 1990s, employment in the tobacco industrydeclined in all cases (except for Poland which registered a small increase). In Australia,Germany, Hungary, the Republic of Korea and Turkey, employment declined by one-third ormore in the seven-year period 1990-97. In most countries, the number of establishments in theindustry also declined, in some cases quite substantially (Turkey, Denmark, Germany,Hungary, the Republic of Korea and the United Kingdom). The data given are for the tobacco

industry as a whole, encompassing also other tobacco products than cigarettes (although thelatter is usually its main component). Comparisons with cigarette production volumes aretherefore not all that meaningful because they do not take account of changes in the volume of

production in these other tobacco products. Nonetheless, it is noteworthy that in many casescigarette production decreased far less than employment in the tobacco industry. In somecases, employment went down when production increased.1 In the US and the UK alone, close to 40,000 jobs were lost in that decade, according to theOECD.

28


29/62

Some remarks on employment in tobacco-growing

Tobacco is grown in over a hundred countries. It is a labour-intensive crop that provides workand income to millions of people. Over 80 per cent of world tobacco is produced in developing

countries and regions (Chapter 2). The share of these countries in world production andexports is growing, but it is a slow process. There are limits to the possibilities of changingone tobacco for another in existing blends (see section 1.1.1).Also, many governments consider tobacco growing a strategic activity. Governments supporttobacco growing in various ways. Some subsidize production. Others oblige cigarettemanufacturers to use a certain percentage of home-grown tobacco (or provide manufacturerswith financial incentives to do so). Yet others oblige the state monopoly to buy up all (or allunsold) domestically grown tobacco (sometimes at high prices). In short, in many cases eitherthe tax payer or the smokers are asked to subsidize domestic tobacco production.As is the case with other types of agricultural activity, these governments support tobaccogrowing for economic (contribution to government revenue), social (it provides employmentto many people), strategic (they dont want to depend on imports in times of war or crisis) and

political (tobacco farmers may have a decisive vote in a decentralized political system)reasons. Not infrequently, a combination of these factors is at work.The opportunities for productivity enhancement in tobacco growing would appear to be morelimited than those in the tobacco industry. Tobacco growing will thus continue to occupymany people. But how their number will develop in the future is hard to say with precision.Stagnant demand for tobacco makes it likely that, worldwide, the number will go down. Justwhere this will occur depends on the circumstances of each country and region. Peopleinvolved in the production of high quality tobaccos at competitive cost of the type for whichdemand prospects are good would appear to be in a more favourable position than others. But

whatever changes do take place, they are bound to occur slowly.Nonetheless, the authorities in many places are concerned about the effects that a drastic slow-down in demand for tobacco might entail. Often the question is raised whether tobacco can bereplaced by an alternative crop that matches its earnings per hectare or per person. Suchquestions must consider technical aspects (for instance, the sloping, rocky soils that are usedfor growing oriental tobaccos may be unsuitable for other crops); skill problems (farmers mayhave no experience in the growing of alternative crops) and sunk costs (farmers may haveinvested heavily in installations that are specific for tobacco). How easy or difficult is it to findalternative jobs for the people involved in tobacco growing? How are tobacco prices expectedto develop compared to those of alternative crops? All these questions can only really beanswered case by case, region by region, and country by country. Only detailed case-studies

can be the basis of a meaningful discussion.

Conclusion

Demand for cigarettes and other tobacco products is influenced by two conflicting trends. Onthe one hand, the smoking prevalence of women is much lower than that of men; and that ofdeveloping country adults lower than people in industrialized countries. Even small increases

29


30/62

in the percentage of women who smoke, and small increases in the proportion of smokers indeveloping countries would significantly raise world demand. On the other hand, more andmore governments 1 try to discourage demand for tobacco products. How these different

pressures will affect the volume of demand in the near future is hard to predict. The current

uncertain macroeconomic outlook is a further complicating factor. A return to the pre-1990growth rates looks unlikely though.In this uncertain situation, two scenarios are possible for the tobacco companies. In the bestscenario, privatization and trade and investment liberalization continue as they did in the1990s. The companies are allowed to enter hitherto closed markets where their superiormanufacturing, distribution and marketing skills and deep pockets will lead them to conquergreater market shares. Litigation and demand discouragement remain within manageable

proportions. High levels of concentration at the national level remain acceptable and increaseinternationally, enabling them to become ever more efficient and to lower costs. MoreIndonesian and Indian smokers switch to (white) cigarettes.The worst-case scenario would be radically different. Privatization, and trade and capital

liberalization, come to a halt. Chinese exporters become important competitors in the Asianmarket. Litigation becomes an ever greater threat, with claims so high that they threaten thevery existence of the companies concerned. Efforts to discourage cigarette smoking are highlysuccessful. Indonesian smokers stick to their kretek cigarettes and Indian smokers to their

bidis. This latter scenario is the less likely of the two. But it cannot be discarded.The prospects for further employment growth in the tobacco processing industry look dim,however. Even if demand were to increase on a significant scale, this demand impulse wouldmost likely be outweighed by the effects of consolidation and further productivity increases.High cost countries with stagnant demand; countries preparing for market opening; andcountries on the verge of privatizing their state-owned companies look particularly vulnerable.

HISTORY OF TOBACCO IN INDIA

Tobacco was first brought to India by Portuguese merchants 400 years ago. Although therewere already some strains of locally-grown tobacco in India these were outclassed by the newimported varieties from Brazil.The trade boomed and tobacco quickly established itself as themost important commodity passing through Goa in the 17th century.

Virtually every household in the Portuguese colony took up the new fashion ofsmoking or chewing tobacco. Later on the British introduced modern commercially-produced

cigarettes.

Tobacco occupies a prime place in the Indian economy on account of itsconsiderable contribution to the agricultural, industrial and export sectors. India is the secondlargest producer of tobacco in the world. China and the USA rank first and third, respectively,in terms of tobacco cultivation.

Brazil, Turkey, Zimbabwe, Malawi, Italy and Greece are the other major tobaccoproducing countries. Tobacco contributes substantially to the economies of these countries. In2000.2001, the contribution of tobacco to the Indian economy was to the extent of Rs 81,820million, which accounted for about 12% of the total excise collections.Foreign exchangeearnings during the same period were Rs 9030 million, accounting for 4% of India.s totalagricultural exports. Endowed with favourable agro-climatic attributes such as fertile soil,

30


31/62

rainfall and ample sunshine, India has the potential of producing different varieties of tobaccowith varied flavours.Figure 2.3 shows the locations and varieties of tobacco grown in variousIndian states. AndhraPradesh, Gujarat, Karnataka, Maharashtra, Bihar and Tamil Nadu are themajor tobacco producing states in India.

Around 65% of India.s production comes from Andhra Pradesh (34%),Gujarat (22%) and Karnataka (11%). Tobacco is also grown in Orissa, Uttar Pradesh and WestBengal. Andhra Pradesh, Gujarat, Karnataka andUttar Pradesh together account for over 90%of the total tobacco production in the country.Currently, Indian tobacco is exported to morethan 80 countries spread over all the continents A few of the top multinational companies suchas British American Tobacco (BAT), Philip Morris, RJ Reynolds, Seita, Imperials, Reemtsma,etc. and many companies with government monopoly import Indian tobacco either directly orindirectly.The Indian market for tobacco products, however, has some characteristics ratherdifferent from most other markets. India has a large, highly integrated tobacco industry, whichinvolves the cultivation of several varieties of tobacco, the manufacture of different tobacco

products, including unprocessed and chewing tobacco, and an extensive distribution and retail

system.Over the years, a combination of strong prices, domestic consumption,

good exportdemand for tobacco and low prices of other crops helped the growth of tobaccofrom a cash crop to a manufacturing industry linked with commercial considerations. Thetobacco industry in India includes the production, distribution and consumption of (i) leaftobacco,(ii) smoking products such as cigarettes andbeedis and (iii) various chewing tobacco

products. These factors present policy-makers with an unenviable dilemma. On the one hand,it is a robust and largely irrigation-independent crop, provides substantial employment, hassignificant export potential and, most importantly, is a source of ever-growing tax revenues.On the other hand, there are public health concerns about the effects of tobacco use with healthadvocacy groups and consumer-led lobbies asking for more controls on tobacco. In spite of its

proven adverse implications for public health, the industry sustains itself in many quarters onthe grounds of its contribution to employment and national production. The organized sectorof the industry, dominated by multinational corporations, is at the forefront of canvassingsupport for the sector. The unorganized sector too exploits its emotive appeal as a massemployer of the poor, especially rural women can be tapped relatively more easily than manyother commodities. In view of its special qualities, alevy on it does not cause markedsubstitution effects and what the noted fiscal expert, Richard Musgrave terms .the spiteeffects..35 Therefore, in practically every fiscal budget in India, the finance minister proposesraising a levy on tobacco products and justifies it on the ground that tobacco consumption isinjurious to health.

There is considerable domestic and international demand for tobacco and its products.Thehistorical developments relating to the economic aspects of tobacco in India can be studied intwo periods: the colonial era before India became independent in 1947 and the post-Independence period of national governance and policy-making.

Types of tabcco grown in India

Unmanufactured tobacco is either exported, directly consumed as chewing tobacco, or used asan input in the production of manufactured items such as cigarettes, cigars and beedis.Usually;there are seven broad types of unmanufactured

31


32/62

Tobacco, based on the end-use and curing methods. These are: (i) FCV, (ii)Burley, (iii) Oriental, (iv) dark air/sun-cured,(v) light air-cured, (vi) dark air-cured (cigar)and(vii) dark fire-cured.Currently, India produces 600 million kg (dryWeight) of tobacco on an average. Of this, FCVtobacco accounts for 31% (185 million

kg).Cigarette (FCV), beedi, chewing, hookah, cigar,cheroot, snuff, natu and Burley tobaccoare grown in different parts of India. FCV, burley and natu tobacco are the three main varieties

of cigarette tobacco. Flue-cured Virginia tobacco is the primary ingredient in the manufacture

of cigarettes. It is mainly cultivated in Andhra Pradesh and Karnataka, whereas beedi tobacco

is grown in Gujarat. Tobacco used for chewing and hookah are grown in other tobacco

producing states of India. Burley and Oriental types are blended with FCV in appro

CONSUMPTION OF TOBACCO

India is one of the biggest tobacco markets in the world, ranking third in total tobacco

consumption behind only the markets of China and the United States. However, the per capitaconsumption in the country is 0.9 kg compared to the world average of 1.8 kg.43 Domesticunmanufactured tobacco consumption has increased from 483,360 tonnes in 1998.1999 to488,130 tonnes in 2003.2004 (Table 2.9).45 Tobacco usage in India is contrary to world trendssince chewing tobacco and beedi are the dominant forms of tobacco consumption,whereasinternationally, cigarette is the dominant form of tobacco use.The use of tobacco and itsvarious products appears to have declined in the rural and urban populations of India over the

period from 1987.1988 to 1999.2000. According to the National Sample Survey (NSS) datashown in Table 2.10, consumption of tobacco in all recorded forms has reduced.52 This trendin decline in consumption is faster among the urban population. Since gutka is a recent entrant,the trends of oral tobacco use are not clearly documented by using.

EXPORT

Tobacco has been a traditional export item for India. However, the share of tobacco exports in

India.s total exports witnessed a declining trend from 1974.1975 to 2002.2003. The share of

tobacco exports to total exports declined from 2.5% in 1974.1975 to 0.4% in 2002.2003. The

share in disaggregated forms of unmanufactured and manufactured tobacco also depicted a

similar declining trend. The declining share of tobacco exports to total exports is basically due

to the sharp fall in the export share of unmanufactured tobacco. In 1985, India exported

unmanufactured tobacco products to nearly 50 countries. Currently, India has tobacco tradewith 100 countries. It appears that exports have the total tobacco exported in 2003.2004 (Table

2.12).51 Nevertheless, due to the global increase in tobacco prices, India.s export earnings

have gone up by over 58 times from Rs 152 million in the beginning of the 1950s to Rs 8834

million. India.s exports of tobacco and its products in terms of volume spurted from 44.6

million kg in 1950.1951 to 115.4 million kg in 2003.2004. An analysis of variety-wise exports

of unmanufactured tobacco shows that FCV tobacco accounted for between 60% and 82% of

the total

32


33/62

(Table 2.14).55 Chewing tobacco is followed by cigarettes (29.7%), hookah tobacco paste

(12.2%), and beedis (11.7%). However, there is not much scope for increasing the exports of

manufactured tobacco products except cigarettes, which constitute the most widely usedtobacco product in the world. Table 2.14 shows that the share of cigarettes in total

manufactured exports increased both in volume and in terms of value from 1995.1996 to

2001.2002.However, the likelihood of the global tobacco market shrinking due to worldwide

controls on tobacco and the extremely competitive nature of the global tobacco market would

suggest that India.s policies on tobacco agriculture and manufacture should not be guided by

unrealistic expectations of potential exports.

EMPLOYMENT

The structure of employment in the Indian tobacco industry largely reflects the structure of the

consumer market for tobacco products in India. Specifically, the effect of the production of

beedis dominates employment opportunities within the manufacturing sector of the domestic

industry as this is a highly labour-intensive activity and involves much less sophisticated

manufacturing techniques compared to those employed by cigarette manufacturers.Within the

33


34/62

tobacco industry, there are some important additional characteristics of the structure of

employment. The vast majority of positions in the tobacco industry are available either on a

part-time or seasonal basis. The main activities in which there is full-time employment are leaf

processing, cigarette manufacturing,distribution and retailing. Of course, people involved with

the distribution and retailing of tobacco products will derive only part of their livelihoods from

the sale of tobacco products.The manufacture of beedis is undertaken by part-time employees

only. Seasonal employment dominates in the leaf-growing industry, with relatively small

contributions to seasonal employment opportunities also coming from leaf Source: Tobacco

Board, 2002 processing and from brokering, auctions and

SCOPE & OBJECTIVE OF THE PROJECT WORK

The scope and objective of project work is to understanding the customer behaviour and the

potential market in tobacco segment of Mumbai region is taken to find out the customers

34


35/62

perception or what a customer thinks while stock Chaini khaini. The idea was to find out the

basic process of how a customer goes about stock a filter tabcco and what are its needs and

requirements that can be taken into account and catered to,The project covered both the things.

Chaini khaini is first filter Tobacco Company in India.and it is only filter tobacco companywho export there products more then twenty country.and it is certified by japan laboretary.

OBJECTIVES

6.1 PRIMARY OBJECTIVE:

UNDERSTANDING MARKET POTENTIAL & SALES PRODUCT

PROMOTION

6.2 SECONDRY OBJECTIVE

The objective of the project to understand the market share of mahak chaini khaini.

Promotion the product which helps to increase revenue of company.

Sortout custmers problem it also helps to promotion of product availbility.

35


36/62

SCOPE

The study would be of importance for the reader to understand the perception of the Retailers,

Wholesaler about mahak chaini khaini. It would give insight into their attitude towards the

brand and the prospect of the brand in the area of study. Understanding market potential and

sales product promotion it helps to improve demand of the company.

It will help to know market potential of chaini khani in mumbai.

It will help to know the retailers& wholesaler preference towards chaini.

It will help to identify potential market.

It will help to increase the sale of product.

To know about the problems of the customers which they are facing in & solve their

problems in convenient manor.

Solve the filter tabocco and stock maintenance problems of the respective wholesaler,

and retailer.

36


37/62

RESEARCH METHADOLOGY

Market research is the systematic and objective identification, collection analysis,

dissemination, and use of information For the purpose of improving decision making related to

the identification and solution of the problem.

To find out the potential market for the product so that it will help the company to concentrate

on this key area.

To obtain the information from wholesaler & retailer regarding the product, daily salesman

service, present condition of the product in the market, future expansion plans.

For the purpose of the project both internal and external data was collected. The methodology

adopted for the project was the questionnaire method. For this a questionnaire was prepared

keeping in mind of both individual i.e. wholesaler, retailer.

Problem Identification

The decision problem faced by management must be translated into a market research problem

in the form of questions that define the information that is required to make the decision andhow this information can be obtained. Thus, the decision

Problem is translated into a research problem. For example, a decision problem may be

whether to launch a new product. The corresponding research problem might be to assess

whether the market would accept the new product. The objective of the research should be

defined clearly. To ensure that the true decision problem is addressed, it is useful for the

researcher to outline possible scenarios of the research results and then for the decision maker

to formulate plans of action under each

37


38/62

Scenario. As we know that Chaini Khaini is market leader in the filgter tobacco, segment. So

company must understand the problem which they are facing in the filter tobacco segment

sectors. We further need to understand the market potential and consumer behaviour of the

customer; this would help Chaini Khain to increase the market value in the filter tobacco

segment.

RESEARCH DESIGN

Marketing research can classify in one of three categories:

Exploratory research

Descriptive research

Causal research

These classifications are made according to the objective of the research. In some cases the

research will fall into one of these categories, but in other cases different phases of the same

research project will fall into different categories.

Exploratory research has the goal of formulating problems more precisely, clarifying concepts,

gathering explanations, gaining insight, eliminating impractical ideas, and forming hypotheses.

Exploratory research can be performed using a literature search, surveying certain peopleabout their experiences, focus groups, and case studies. When surveying people, exploratory

research studies would not try to acquire a representative sample,

Whether the data is useful in the research study.

How current the data is and whether it applies to time period of

Interest. Errors and accuracy - whether the data is dependable and can be

Verified. Presence of bias in the data. Specifications and methodologies used, including data

collection method, response rate, quality and analysis of the data, sample size and sampling

technique, and questionnaire design.

Objective of the original data collection. Nature of the data, including definition of variables,units of measure, categories used, and relationships examined.

External Survey:

The main wholesaler and retailer in mumbai were visited and interviewed to get the data

related to the objective of the project .the individual owner i.e.pan wala and dealer both were

interviewed for

38


39/62

thepurposeofsurvey.the,are,asurveyed,in,mumbai,consists,of,Khar,Bandra,Santacruz,Mahim,A

ndheri,Kurla Wadala, Sion etc ,and other smaller areas also.

To understand the market in a better way it is very important to understand your competitor .to

survive in this era of cut throat competition to a company should be always updated about thecompetition .regarding my project i visited the competitors of Chaini khaini i.e. Hot, Cool lip.

DATABASE CREATION:

An extensive database is created for the analysis, which can be used by Chaini Khaini in future

for a better customer interaction.

PRIMARY DATA:

1. Data collected with help of Quesnnaire from the individual owners i.e.pan wala,

Wholesaler, Retailer .

SECONDERY DATA:

We have taken the help of various websites for collecting the data, which are as

follows;

www.mahakchainikhaini.com

www.wikipedia.com

www.google.com

www.businessline.com

www.Indian tobaccoIndustry.com

www.economictimes.com

39
http://www.mahakchainikhaini.com/http://www.wikipedia.com/http://www.google.com/http://www.businessline.com/http://www.economictimes.com/http://www.mahakchainikhaini.com/http://www.wikipedia.com/http://www.google.com/http://www.businessline.com/http://www.economictimes.com/


40/62

SAMPLEING PLAN:

UNIVERSE:

The universe or the population in research is infinite. Due to limited time period I cannot take

all the retailers& wholesaler as universe.

SAMPLE SIZE:

The survey was carried mainly in Mumbai division only. A list of the major tobacco dealer in

the Mumbai was prepared and the major tobacco trader areas were visited. 1000 retailers and

500 wholesaler of the city were visited and interviewed.

SAMPLE UNIT:1000 retailers and 500 wholesalers in Mumbai region

SAMPLE AREA:

40


41/62

the area of sampling was Mumbai region where i have collected the data, &the area was there

in mumbai is as follows;

Khar

Bandra

Andheri

Wadala

King circle

Mahim

Santacruz

These were the place from where the data was collected.

SAMPLING TECHNIQUE: I have used Non Probability Sampling techniques for

Descriptive Research design. To construct a sample frame I have chosen Non Probability

Sampling design. Under this I have selected convenience sampling..

TOOLS OF DATA COLLECTION:

Questionnaire preparation:

This was the most important part of the project as the information collected on the basis of this

questionnaire only was going to be analyzed. Hence, the questionnaire was made extensive.

Deciding the attributes related to the objective of the project. The important attributes, which

should be included in the questionnaire, were decided and accordingly the questionnaire was

designed. The questions were designed in a simple way.

RESEARCH APPROACH:

Direct contacts with the wholesaler, retailer. Further personal interviews were taken of every

individual and wholesaler & retailer of chaini khaini for collecting the important data.

TOOLS USED FOR ANALYSIS THE DATA:

To better understand and analyse the data we used various types of tools, by the help of which

we could understand the graphical condition in the best way.

41


42/62

TOOLS FOR ANALYSIS:

Tabular form

Graphical form

Bar chart

Pie chart

Line graph

DATA ANALYSIS AND DATA INTERPRETATION

Q. Which Brand do you keep in filter tobacco (Wholesaler)?

Data Collection Type: primary data

BRAND KEEP WHOLESALER PERCENTAGE

CHAINI KHAINI 320 65

Hot 50 10

COOL LIP 125 25

42


43/62

Total 500 100%

Interpretation:

A. It is clearly showed that chaini khaini most of the wholesaler keeps.

Q.which brand do you keep in filter tobacco retailer?

Data Collection Type: primary data

Brand keep Retailer Percentage

Chaini khaini 730 73

Hot 100 10

43


44/62

Cool lip 170 17

Total 1000 100%

Interpretation:

It is clearly found that chaini khaini keep most of the retailer that why has Hugh market share.

Q. Salesman is comming on time?

44

chaini khaini73%

hot

10%

cool lip

17%

Brand ownership


45/62

Data Collection Type: Primary Data

Chaini khaini Respondent Percentage

Yes 370 40%

No 630 60%

TOTAL 1050 100%

Interpretation:

After the data collection and calculating it is clear that chaini khaini salesman not

comming properly.

Q. Frequencies of placing order?

45

YES

40%

NO

60%

40%

sales man comming on time


46/62


Chaini khaini No.of respondent Percentage

A day 105 10%

Two to three days 315 30%

Above three days 630 60%

Total 1050 100%

Intrepretation:

Above question we get that 60% of customer getting there order above three days.

Q. Are you satisfy with promotional activity (pop material)?

46

10%

30%

60%

frequiecies of placing order

a day

two to three days

above three days


47/62


Chaini khaini No of respondent Percentage

Glow sign 630 60%

Poster 105 10%

Any other 315 30%1050 100%

Interpretation: After the data analysis we clearly know that chaini khaini promotinal material

glow sign is on the top

47


48/62

Q. Are you satisfy regarding sales personneal services?


Customer satisfy with

personneal

No. of respondent Percentage

Yes 315 30

No 630 60

No comment 105 10

Total 1050 100%

INTREPRETATION: It is clearly show that 60% are not satisfy with services of sales

personneal

48

YESNO

NO COMMENT

30%

60%

10%

satisfy regarding sales personneal services

satisfy regarding sales personneal services


49/62

Q.Any problem related to product pouch?


Chaini khaini Number of respondent

Satisfy Percentage only

mention

Empty pouch 420 40

Less pouch 525 50

Filter broken 105 10

Total 1050 100%

Interpretation: After calculatation we know that most of customer highly facing less pouch

problem as well as empty pouch.

49

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

EMPTY POUCH LESS POUCH FILTER BROKEN

Any problem related to product pouch

40%

50%

10%


50/62

Q.Availability of chaini khaini in potential market?


Chaini khaini No of respondent Percentage

Yes 630 60%

No 420 40%

Total 1050 100%

50


51/62

Intrepretation: After surve know that chaini easily availability is not up to the mark only 60%

easily available.

Q.Why you stock chaini khaini?


Stock chaini khaini No of respondent Percentage

Demand 525 50%

Profit margin 420 40%

Any other 105 10%

Total 1050 100%

51


52/62

Interpretation:

Demand is the one the most important reason to stock chaini khaini.

Q.Are you happy with replacement service of chaini khaini?


Happy with service Respondent Percentage

Yes 420 40

No 630 60

Total 1050 100

40%

60%

0%

10%

20%

30%

40%

50%

60%

70%

YES NO

Happy with replacement service

YES

NO

52


53/62

Intrepretation: it is clearly found that most of them not satisfy with replacement service of

chaini khaini.

OBSERVATIONS AND FINDINGS

Market share of product chaini khaini is very high.

.

Non-availability of product is one of the major reasons for that out of stock problem

face.

Sales personnel are not providing proper service to the retailer and wholesaler.at the

time of surve found that only 40% customer says saleman comming remaining 60%

say not coming.

Another important factor by which that due to no proper salesman comming, retailer

say avoids to stock the product.

After sale services customer not much ssatisfy with chaini khaini due to no proper

feedback from company sales personneal.

Online information regarding company is not updated and not enough need to be

improved.

this problem on facing for secondary information

53


54/62

CUSTOMER COMPLAINTS

Unavailbility of salesman.i.e salesman is not coming

Main problem is that in packets pouch are less

Main problem is that product is not easily available.

Due to price hike stock another filter tobacco

Problem is that in packets pouch are less

Mainy time out of stock problem face.

54


55/62

LIMITATION

These are the following limitation which was noticed during the project work.

The survey was limited to a particular area of Mumbai city only.

Time is the big constrain during sample survey. Due to lack of time it is not possible to

take the response of all retailers who was present in the market.

55


56/62

Research has been carried on time span of two months.

Research based on personal opinion of the respondents (retailers) and wholesaler which

may vary depending upon their personal view.

Some of the retailers were not cooperative they were not serious about the questions

which were asked to them.

The primary data is collected from only those retailers who were present in the market.

Most of the retailers & wholesaler were taking more time to fill a questionnaire.

The responses of some retailers were not satisfactory. They were giving irrelevant

information.

RECOMMENDATION

Appoint more salesman to provide proper service to the, wholesaler & retailer which

will help after sale service of chaini khaini.

Improve the production of tabcco product.that is most of time out of stock problem

face in market.

56


57/62

In pouch filter quality should improve.at the time of serve find out that filter is brokenand empty pouch also happens?

For increase the market share company should appoint at least one dealer or wholesaler

in main location who has provided Services to them.

Provide the offer to Wholesaler, Retailer,pan wala through company.ie.for sale more

packets give gift.it helps to increase the sale .

Set up office of chaini khaini in mumbai to close touch the emlpoyee and also with the

dealer, retailer,& customer.

Also update the data of company online information it helps for promotion of thecompany as well as product, Also mention the miles stone of the company.

57


58/62

CONCLUSION

Chaini khaini is capturing rapidly the market at mumbai due to quality product and

reasonable pricing policy.

The demand is more appreciated among the retialer & wholesaler.

The awareness & preference of product amongs retailers & wholesaler changes rapidly.

Filter tobacco industry has huge opportunity to grow in both urban and rural areas .

58


59/62

BIBLIOGRAPHY

www.mahakchainikhaini.com

www.wikipedia.com

www.google.com

www.Indian tabccoIndustry.com

www.economictimes.com

www.business.com

www.thehindu.com

OVERDRIVE.

PHILIP KOTLERS MARKETING MANAGEMENT 13e.

NARESH MALHOTRAS MARKETING RESEARCH.

59
http://www.mahakchainikhaini.com/http://www.wikipedia.com/http://www.google.com/http://www.economictimes.com/http://www.business.com/http://www.thehindu.com/http://www.mahakchainikhaini.com/http://www.wikipedia.com/http://www.google.com/http://www.economictimes.com/http://www.business.com/http://www.thehindu.com/


60/62

QUESTIONNAIRE

Questionnaire for wholesaler &retailer

Name of Shop.............................................................................................................................

Name of

Respondent.........................................................................................................................

Address..........................................................................................................................................

..

Contact no...............................................

1. Which brand of Filter Tobacco do you keep?

a. Hot b.Cool Lip c. Chaini Khaini

2. Do you stock Chaini Khaini?

a. Yes b. No

If No, Would you like to stock Chaini Khaini?

a. Yes b. No

3. Why do you prefer to stock chaini khaini? (Tick)

a. Demand b .Profit c. Any other Reason (Pleasespecify)...............................

4. Do you get chaini khaini easily in market?

a. Yes b. No

5. Which of the following problems do you face related to Chaini Khaini?

a. Empty pouch b. Less pouch c. Broken filter d .Expiry date

60


61/62

6. Do you get replacement for the damaged packet

a. Yes b. No

7. Are you happy with replacement service of chaini khaini?

a. Yes b. No

If No, Please specify the reasons.

7. Are Sales personnel coming on time ?

a. Yes b. No

8. Frequency of placing order?

a. Every day b. Two to three days c. More three days

9. Are you aware of promotional activity of Chaini Khaini (pop material)?

a. Yes b. No

10. If YES, are you satisfied with the following promotional activity (pop material)?

a. Glow sign b. posters

11. If NO then suggest any other effective promotional activity?

Please specify.............................................................................

12. What do you think about Chaini Khaini?

..................................................................................................

13. How will you rate Chaini Khaini on scale of 1 to 10 ?

14.Any sugestion

........................................................................................................................................................

........

61


62/62

..........................................

pankaj sharma mmm b division

Documents