ITC Hikes Prices of Premium Cigarettes

Source from:  Financial Express 11/19/2009

Kolkata: Tobacco and FMCG major ITC on Wednesday hiked prices of its premium cigarettes - India Kings and Benson & Hedges - in the range of 5-10%. While India Kings, priced at Rs 100, will now cost Rs 110, a pack of Benson & Hedges will come for Rs 105 against Rs 100 earlier. An ITC spokesperson confirmed the hike but declined to give details. Anand Shah, an analyst with Angel Broking, said the hike was partly to compensate for various regulatory issues and also because the company has seen earlier price hikes being absorbed without a dip in sales. "It has strong pricing power and benign competition in the premium category so it has gone in for a hike," he said. ITC commands a 73% of the cigarettes market in volumes. Though no production figures were available for the category from ITC, analysts said the premium segment (kings and longs) comprises 10-15% of its total cigarette production. At the end of financial year 2009, the company had produced 78,386 million sticks. According to Shah, the hike was also enacted to "slightly compensate" for losses in other divisions, like hotels which has been down for at least three quarters now. For the quarter ended September 30, net revenues from the cigarette business grew 21% to Rs 2,200 crore from Rs 1,812 crore in the corresponding period last fiscal on the back of better realisations due to price hikes and improved product mix, as it has upgraded to filter cigarettes. The company has been contending that the ban on smoking in public places and the imposition of graphic health warnings had led to a rise in smuggled contraband trade. In its core cigarettes business, it has protested against "severe taxation and the regulatory milieu". Enditem