Tag: India

  • ITC Misses Profit Estimate

    ITC Misses Profit Estimate

    ITC’s profit rose 3 percent to INR50.78 billion ($604.2 million) in the quarter that ended Sept. 30, missing estimates of INR51.14 billion, reports Reuters. The company cited subdued demand conditions, unusually heavy rains in parts of India and a sharp escalation in certain input costs, among other factors.

    Higher prices of raw materials, such as tobacco leaf and crude oil, also weighed on the consumer goods sector’s earnings for the July-September period. The increase in leaf tobacco prices was partly mitigated through improved mix, calibrated pricing and strategic cost management, according to ITC.

    In the cigarette business, net segment revenue was up 7.3 percent. ITC said the business continues to counter illicit trade and make strategic portfolio and market interventions “with focus on competitive belts to reinforce market standing.”

    The company also noted in a statement that recent stability in cigarette taxes, backed by deterrent enforcement, enabled volume recovery for the legal cigarette industry from illicit trade, leading to higher demand for Indian tobaccos and bolstering revenue to the exchequer from the tobacco sector.

  • India Wants Streaming Anti-Tobacco Messages

    India Wants Streaming Anti-Tobacco Messages

    Photo: Gorodenkoff

    India’s central government wants to require over-the-top (OTT) platforms to display non-skippable anti-tobacco health spots for at least 30 seconds when users begin streaming content, reports The Economic Times.

    According to the draft guidelines, all films released on or after Sept. 1, 2023, must show anti-tobacco health spots of at least 30 seconds at the beginning and middle of the movie. Additionally, these films must display prominent static anti-tobacco health warnings at the bottom of the screen during scenes that depict tobacco use.

    The proposed legislation updates the anti-tobacco regulations issued by the ministry in May 2022.

    “Essentially, streaming platforms will now be required to show these health spots and disclaimers not only at the beginning and middle of programs but also as soon as the platform is opened,” an official source told the Economic Times. “Currently, the health spots and disclaimers are not displayed immediately upon opening the platform.”

    India became the first country in May 2022 to make it mandatory for OTT platforms to show anti-tobacco warnings and disclaimers similar to those seen in theatrical releases and TV programs, prioritizing public health.

    The OTT rules of 2023 took effect on Sept. 1, 2023.

  • Cigarette Business Boosts ITC Performance

    Cigarette Business Boosts ITC Performance

    Photo: sdx15

    Higher cigarettes sales boosted ITC’s overall revenue from operations 7.2 percent to INR182.20 billion ($2.17 billion).

    Net cigarette segment revenue grew 7 percent and segment profit before interest and tax was up 6.5 percent year on year.

    In a statement, ITC said it fortified its product portfolio through “innovation and democratizing premiumization across segments backed by superior on-ground execution.”

    The company reported strong performance in its differentiated variants and premium segment and  sequential improvement in its value segment.

    It said it mitigated the sharp escalation in costs of leaf tobacco and certain other inputs through improved mix, strategic cost management and calibrated pricing.

    The company attributed the strong performance of its cigarette business in part to the India’s stable tax environment.

    “ s seen in the past, stability in taxes on cigarettes, backed by deterrent actions by enforcement agencies, enables volume recovery for the legal cigarette industry from illicit trade leading to higher demand for Indian tobaccos and bolstering revenue to the exchequer from the tobacco sector,”  the company wrote.

  • Shareholders Approve Hotels Demerger

    Shareholders Approve Hotels Demerger

    Timon Schneider/Wirestock

    Shareholders on May 6 approved ITC’s plan to demerge its hotels business, reports Reuters.

    The company, which has a substantial cigarette business, announced the demerger plan in July last year and later said that the new entity would be tentatively listed.

    In May, proxy advisory firms Stakeholders Empowerment Services and InGovern Research Services asked shareholders to support the proposal, while Institutional Investor Advisory Services opposed the move.

    The hotels business contributed 4 percent to ITC’s fiscal year 2024 revenue, while its mainstay consumer staples business made up 71 percent of the topline.

  • ITC Reports Growth in Cigarette Business

    ITC Reports Growth in Cigarette Business

    Timon Schneider/Wirestock

    ITC reported gross Revenue of INR694.46 billion ($8.34 billion) for the 12 months that ended March 31, up 6.8 percent over the comparable period a year earlier. Net revenue of conglomerate’s cigarette businesses was up 7.1 percent.

    “After a period of sustained growth momentum, the business witnessed consolidation in volumes on a high base amidst subdued demand conditions in the overall consumption space, even as illicit trade remained at elevated levels,” the company wrote in a statement.

    “Differentiated and premium offerings saw robust traction during the year. Sharp escalation in leaf tobacco prices and other inputs, along with increase in taxes were largely mitigated through improved mix, strategic cost management and calibrated pricing.”

    During the reporting period, ITC launched several new cigarette brands, including Classic Alphatec, Classic Icon and Gold Flake Indie Mint.

    The company continues to be concerned about the strength of the illicit market. While recent stability in cigarette taxes has enabled the legal cigarette industry to claw back some of the volumes lost to illegal traders, India remains the world’s third largest illicit cigarette market, according to ITC, with tax-avoiding products accounting for roughly one-third of the market.

    The company said it continues to engage with policy makers for a framework of evidence-based regulations and taxation policies that balance India’s economic imperatives and tobacco control objectives.

  • GPI Leader Honored for CSR Contributions

    GPI Leader Honored for CSR Contributions

    From left to right: India’s vice president, Jagdeep Dhankhar, and Bina Modi, along with the lawyers Jyoti Sagar and Lalit Bhasin (Photo: Business Wire)

    Bina Modi, the chairperson and managing director of Godfrey Phillips India (GPI) has been recognized for her contributions to corporate social responsibility (CSR). The honor was bestowed by the India’s vice president, Jagdeep Dhankhar, during a recent event in New Delhi.

    “I am honored to receive this recognition, which reflects the dedication and hard work of every member of the KK Modi Group family,” said Modi in a statement. “Our ‘people-first’ philosophy, which encompasses all stakeholders of our group companies, remains central to our mission of nation-building and giving back to society. Our CSR initiatives predate their legal mandate in India and are strategically aligned with the global sustainable development goals.”

    Driven by Modi’s vision, GPI’s key CSR initiatives have focused on access to safe drinking water, soil and water conservation, plantation and biodiversity, eliminating child labor, improving community health and empowering marginalized tobacco farmers in southern India. In alignment with the commitment of GPI’s partner, Philip Morris International, to good agricultural practices, GPI aims to enhance livelihoods while preserving the environment. GPI’s CSR initiatives were also given a special mention by Control Union, a globally renowned testing, inspection and certification organization.

    Modi emphasized the symbiotic relationship between environmental sustainability and community welfare. “We’ve taken proactive steps to establish biodiversity parks, safeguarding and revitalizing native flora and fauna,” she said.

    “I am also deeply committed to a bold initiative of large-scale plantation in a semi-arid region of Andhra Pradesh, a state in southern India. We implement check-dams, farm ponds and regular pond de-siltation to promote water conservation in the rain-starved region, enabling farmers to access a secondary water source for cultivating additional crops. By nurturing our environment, we not only preserve natural resources but also create resilient communities capable of thriving in the face of challenges.”

    In addition to her dedication to farmer communities, Modi is passionate about the education and empowerment of young girls and women. Through the Khushi project, she aims to sponsor the education and vocational aspirations of rural girls nationwide.

    Modi’s recent honor follows earlier recognitions such as Women Empowerment in Leadership and Outstanding Businesswoman of the Year.

  • A Perfect Storm

    A Perfect Storm

    Image: StockImageFactory

    How India came to deny consumers legal access to safer ways of consuming nicotine.

    By Samrat Chowdhery

    India’s ban on commercialization of electronic nicotine-delivery systems (ENDS) in 2019 was the blunt political end to a meandering administrative and legal process that began after the World Health Organization Framework Convention on Tobacco Control (FCTC) stated of ENDS in a report presented at its sixth general body meeting held in Moscow in 2014: “while medicinal use of nicotine is a public health option under the treaty, recreational use is not.”

    This early denial of harm reduction principles and mistaking product evolution and substitution for market expansion by the tobacco industry led many developing nations to begin formulating policies to ban e-cigarettes even as they were undergoing rapid development by small-scale Chinese producers—becoming safer, affordable and more effective in helping smokers switch.

    In India, the then Union health minister, Harsh Vardhan, who was well-steeped in the WHO mindset through his earlier work in establishing smoke-free public spaces policies in the 1990s as a state health minister, formed committees soon after the FCTC meeting to evaluate the impact of e-cigarettes. Staffed with experts from the same WHO-linked tobacco control ecosystem, the committees recommended a complete ban. Notably, another panel formed by the commerce ministry to study ENDS favored the regulatory approach but was overlooked.

    In an unexpected twist, the health minister was thereafter reshuffled to another ministry in late 2014, and the issue remained on the backburner until 2019 under the incumbent, although a slow-paced administrative and legal battle continued. The health ministry, through various regulatory bodies, tried to outlaw e-cigarettes, first by claiming they contain nicotine, which requires these products to gain medical approval, and thereafter by stating nicotine is governed by the Poisons Act, which forbids its sale as a consumer product. Both claims were shot down by courts that consistently indicated favor toward the regulatory pathway.

    This deadlock continued until Vardhan was reappointed health minister when his party swept back to power in mid-2019 with an absolute majority. Strengthening his hand was a perfect storm. A major push to ban vaping was being led by tobacco control nonprofits linked to funding from Bloomberg Philanthropies. Among them were The Union, the Campaign for Tobacco-Free Kids (CTFK) and Vital Strategies, which had been lobbying state governments to ban e-cigarettes. With the central government now on board, the wave became a tsunami, and soon, over 15 Indian states had declared a ban on vapor products.

    An underlying economic factor could also be that U.S. e-cigarette maker Juul, which had captured 70 percent of U.S. market share in under two years, announced its entry into India earlier that year, spooking the Indian tobacco industry, which until then had made little effort to develop vapor products, perhaps because the regulatory cloud cast on them since 2014 made long-term investment a risky proposition. Data revealed recently through a Supreme Court directive shows that India’s dominant tobacco company, ITC, donated upward of $11 million to the ruling dispensation a few months before the vape ban. However, it is unclear if this was to influence the ban, to favor or oppose it, or if it was part of election-time funding corporations often provide.

    Nevertheless, the insistence by Juul, which publicly led the pro-vaping side, on relying on foreign experts who did not well understand the complex and opaque Indian tobacco ecosystem; lack of homegrown research and tobacco cessation researchers who could have countered the anti-vaping narrative from the local network developed by Bloomberg-funded nonprofits; as well as the absence of the local tobacco industry from the debate were all contributing factors.

    What followed in rapid succession was to counter the opposition from courts by first banning research into e-cigarettes, followed by a “white paper” by the country’s top government-controlled research body, which cherry-picked research to make a case for a complete ban. This became the basis for an executive order prohibiting the sale of e-cigarettes and heated-tobacco devices, which, breaking from tradition, was announced by the finance minister. Stocks of Indian tobacco companies spiked after the news.

    The bill was debated in Parliament a few months later, where after a lengthy but low-quality debate as many politicians admitted they had not seen these devices and despite allegations of favoring the local tobacco industry and over 60 specific objections to the law, it was passed by brute majority. Vardhan was honored by the WHO with its top award for implementing the e-cigarette ban while The Union and the CTFK congratulated the Indian government along with claiming credit for the legislation. It was win-win for all, those selling tobacco and the ones opposing them, except the over 100 million smokers who had been denied legal access to safer ways of consuming nicotine, as well as the independent e-cigarette vendors, most of whom moved shop to Dubai when a Juul-led court challenge to the ban failed to bring relief.

    The Fallout

    After a year or two of realignment, which saw the vapor market change hands from rule-conscious vendors to black market operators who added e-cigarettes to their portfolio along with smuggled cigarettes (which constitute over a quarter of the market), mobile phones, gold and other prohibited or tax-evaded goods, the full scale of untended consequences some parliamentarians, policymakers and international experts had warned about started becoming apparent.

    The first was a product shift from mod-based devices to much cheaper disposables, which had lower barriers to entry and could be stocked by streetside vendors who have become accustomed to and adept at violating tobacco control laws such as the bar on selling loose cigarette sticks and the ban on gutka and pan masala. It did not take long for these substandard and untested, though affordable, single-use devices from becoming available in small towns across the country, growing the illicit vape market into an industry worth billions as smokers voted for their health by trying to switch while teens had a lot freer and cheaper access to them, the key rationale for the ban. The constituents that suffered were older and women smokers, for whom risk reduction could be most beneficial but who are least likely to engage with the black market. Many of them who had switched went back to smoking.

    A public health opportunity to convert over 100 million smokers and save lives with minimal stress on state resources while earning tax revenue and creating jobs, especially when unemployment rates are soaring, was lost and replaced by increased criminality, lost revenue, heightened risk for adult switchers as these products have not undergone quality checks, and easier access for teens and unintended users.

    The ban led to a short-term windfall for the local cigarette industry with most companies witnessing steady rise in valuations—ITC’s market cap recently overtook BAT’s—especially with the additional sop of the government not raising taxes on cigarettes and other tobacco products for three consecutive years. Yet, despite these remarkable industry concessions for a country hailed as the leader in tobacco control among developing nations, the picture is beginning to look less rosy by the day for local tobacco companies as these switchers are their lost customers who, given the high quit rates for smokers who try vaping, will likely never be back nor will those who are being introduced to recreational nicotine through e-cigarettes as there is little empirical evidence for the gateway theory.

    Failure to preempt shifting consumer behavior and the ensuing black market explosion, that too in a competing future category in which they are now prohibited from participating, could have significant implications for the Indian cigarette industry as no amount of protections and launching sticks in new flavors, which is partly responsible for sustaining cigarette sales, can compete with the users’ desire to safeguard their health and consume nicotine in less harmful ways.

    The Challenges Ahead

    Despite the central government’s ban on e-cigarette research and the media gag on publishing anything pro-vaping, despite the ban on carrying vapes through flights even though their use is not prohibited and despite Bloomberg Philanthropies pumping in a large tranche of funds for anti-vaping efforts, it is hard to miss the rapid transformation taking place in Indian towns and cities as smokers switch en masse to vapor devices.

    An additional pain point for the legacy industry could be the South African experience of the difficulty in shaking off the black market once it takes hold. Even if vaping was legalized in the near term, the legitimate taxed products will find it hard to compete with the cheaper illicit ones, more so when the consumers have been introduced to vaping through the black market.

    The challenge also lies in re-educating the medical fraternity on nicotine—eight of 10 doctors in India believe nicotine causes cancer—such that they understand the role risk reduction can play in reducing tobacco-related mortality and morbidity and sign on to help people struggling to quit toxic forms of nicotine use, or those who do not want to, lower risks by switching to much less harmful alternatives. This will be a tough barrier to cross because high nicotine illiteracy has led to proposals to overturn even the 2014 Moscow statement by restricting access to medical nicotine by making nicotine-replacement therapy (gums and patches) available only through prescription.   

    But it is never too late to course correct, and there appears to be some signaling from the ruling dispensation, which, if opinion polls hold, is set to return to power in the ongoing national elections (the opposition already favors regulation over a ban). The home ministry recently restricted the funding of the CTFK, a significant anti-vaping voice in the country, along with its key local partner while pro-government media is beginning to publish in favor of tobacco harm reduction again. It must not be hard to see the health and economic rationale for ending the ban on safer nicotine alternatives when it is not working anyway.

  • India Urged to Embrace Harm Reduction

    India Urged to Embrace Harm Reduction

    Photo: Taco Tuinstra

    India should consider harm reduction strategies to reduce the health toll of tobacco, according to the Global Sustainability Alliance (GSA), a group that focuses on developing global solutions to achieve the United Nation’s Sustainable Development Goals.

    A recent report by World Health Organization suggests that new cancer cases are likely to rise to at least 35 million in 2050, a 77 percent rise over the cases diagnosed in 2022. In India, an estimated 1.4 million cancer cases were recorded in the same year, while one in 9 citizens could develop cancer in their lifetime. Tobacco-related cancers accounted for 27 percent of the country’s cancer burden in 2020, according to the Indian Council of Medical Research.

    Despite recent progress, India remains the second largest consumer and producer of tobacco. The number of smokers as well as smoking related diseases seem to be stagnant, which, the GSA says, sheds light into the fact that the tobacco control polices under WHO have not been successful for India. The group says country needs to find a solution on its own and develop a strategy to reduce the number of cancer patients owing to tobacco consumption.

    “Cancer is a serious concern for our population, especially with tobacco use as a leading cause, which is avoidable,” said Bharat Gopal, director of  Pulmonology, Delhi Heart & Lung Institute in  a statement. “There is no safe way to use tobacco, however a major risk of cancer comes from combustion of tobacco or tobacco smoke. Most toxic substances, including carcinogenic agents, are released due to combustion. If we can somehow remove combustion from the process, it would reduce harm and help save lives.”

    The GSA points to Sweden, Japan and the United Kingdom as examples of countries that have bettered their public health by adopting tobacco harm reduction policies to reduce disease rates, cancer being one. The smoking rate in Sweden had dropped from 15 percent to a 5.6 percent in the past 15 years, registering a 41 percent lower incidence than in the EU. Similarly, the Japanese smoking rate declined drastically between 2016 and 2019. Almost three in every 10 Japanese smokers stopped smoking cigarettes.

    “We know stopping smoking is ideal to stop cancer, but the reality is that millions struggle to quit,” said R. Zimlichman, director of the Brunner Institute for Cardiovascular Research at the Sackler Faculty of Medicine of Tel Aviv University in Israel. “Harm reduction offers a pragmatic and potentially life-saving alternative. Embracing harm reduction strategies, such as switching to nicotine alternatives, has led to a remarkable decline in mortality rates and improved public health outcomes. The world needs standardized harm reduction solutions chosen by governments for their safety and efficacy. Delay in implementing harm reduction measures costs millions of lives worldwide.”

  • ITC Reports ‘Resilient’ Cigarette Business

    ITC Reports ‘Resilient’ Cigarette Business

    Timon Schneider/Wirestock

    ITC’s cigarette business demonstrated resilience in the quarter that ended Sept. 30, the company announced in a trading update.

    Net segment revenue and segment profit before tax and interest were up 8.5 percent and 8 percent year-on-year, respectively.

    Stable fiscal policies, along with a crackdown by law enforcement on illicit tobacco sales, allowed the company to claw back sustained volumes from the black market, boosting demand for Indian tobaccos and bolstering revenue to the exchequer.

    Meanwhile, ITC continued fortifying its product portfolio through innovation, premiumization and enhancing product availability, “backed by superior on-ground execution.”

    Several recently launched brand variants launched continue to perform well, according to the company.

    While the cost of leaf tobacco and inputs escalated during the quarter, the company was able to mitigate these developments through improved mix, strategic cost management and calibrated pricing.

    During the quarter, ITC’s IndiVision subsidiary (IIVL) received regulatory approvals for its facility to manufacture nicotine and nicotine derivative products conforming to U.S. and EU pharmacopoeia standards.

    ITC believes that its unique crop development capabilities, along with its ability to provide complete traceability and assure sustainability across the value chain, will establishing IIVL as a trusted partner for high quality nicotine/nicotine derivative products.

    For the company’s paperboards, paper and packaging segments, the quarter was characterized by competition from low-priced Chinese suppliers and muted demand in export markets, along with a sharp reduction in global pulp prices. Domestic demand was also relatively subdued in certain discretionary categories

    ITC believes the drop in net sales realization and global pulp prices are likely to have bottomed out, however, and says it detected “green shoots of revival” in demand toward the end of the quarter

  • ITC Plans To Spin off Hotel Business

    ITC Plans To Spin off Hotel Business

    Timon Schneider/Wirestock

    ITC plans to spin off its hotel business, separating it from its cigarettes and food units. The company intends to retain a 40 percent stake in the new entity, with ITC shareholders holding the rest.

    At its July 24 meeting, the board noted that the ITC’s hotels business has matured and is well positioned to chart its own growth path as a separate entity in the fast-growing hospitality industry with sharper focus on the business and an optimal capital structure, while continuing to leverage ITC’s institutional strengths, brand equity and goodwill.

    According to the board, the demerger will help the new entity in attracting appropriate investors and partners whose investment strategies and risk profiles are aligned more sharply with the hospitality industry.

    Driven by strong macroeconomic fundamentals and the Indian economy’s strong growth prospects, the Indian hospitality industry is expected to witness rapid growth going forward.

    “The proposed demerger of the hotels business is testament to the company’s commitment to creating sustained value for stakeholders,” said ITC Chairman Sanjiv Puri in a statement. “Creation of a hospitality focused entity will engender the next horizon of growth and value creation by harnessing the exciting opportunities in the Indian hospitality industry.”

    ITC’s largest revenue contributor is its consumer goods business, led by cigarettes.