ITC to increase prices of two of its brands of cigarettes by up to 15%

The diversified conglomerate ITC Ltd has initiated a price hike of more than 14 to 15 percent of its “Navy Cut” and “Gold Flake” brands of cigarettes, business sources familiar with the matter have said.

Price revision

“Navy Cut” and “Gold Flake” (regular) are considered mid-range brands and were priced at 78 for a 10-stick pack.

For the new ‘Navy Cut’ pouches, the printed price is ₹ 89 for 10 x 74mm sticks.

In the case of the Gold Flake regular (which has a stick size of 69mm), the maximum sale price has been revised to around 90.

The reason for the price increase is not yet known.

A company spokesperson confirmed Activity area the revision of the prices of certain brands.

“The prices of some brands have been revised,” he said, without however naming the brands.

Cigarette brands owned by the Kolkata-based ITC include Insignia, India Kings, Lucky Strike, Classic, Gold Flake, Navy Cut, Players, Scissors, Cabestan, Berkeley, Bristol, Flake, Silk Cut, Duke and Royal.

According to Abneesh Roy, senior vice president, Edelweiss, the decision to increase the prices of some brands may have been motivated by fears of a possible tax hike in the next budget.

“Usual phenomenon”

In support of his argument, Roy added that the ITC has often subsidized price increases between brands – where the price of some brands is increased to absorb costs while others are left intact – due to their extensive portfolio of offerings.

“In the days before and after the budget, price increases are common. The fact that the prices of some brands have undergone a price revision is due to the fact that the company can anticipate an increase in taxes during the budget. Or, it can be part of its cross-subsidization strategy between brands, ”he said.

It is interesting to note that the ITC had opted earlier this year for a price increase of 12 to 13% for the “Classic” and the Gold Flake King Size. It was done after the budget.

Following the increase, the price of these flagship brands stood at 123 for a pack of 10 sticks.

Income Generators

Cigarettes continue to represent a significant portion of the company’s (operating) revenue and pre-tax profit.

In the first six months (until September 30, 2016) of this fiscal year, cigarette sales represented 63% of its revenue.

In the case of pre-tax profit, the contribution from cigarettes was 83 percent or 6,221 crore out of ₹ 7,502 crore.