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Market Dynamics: Cigarette retailer as the new king

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Market Dynamics: Cigarette retailer as the new king

The war for cigarette marketing has been reduced to a three-by-two foot space. That’s the size of the board on which cigarette makers can advertise at retail outlets. With the advertising ban now in effect, cigarette retailers have lunged up the value chain, and are elevated to being the premium publicity battleground between cigarette makers.

Cigarette makers like Godfrey Phillips India (GPI) are rushing to forge exclusivity contracts with cigarette shops for better display of their products and fliers. Market leader ITC says it already has exclusivity arrangements and will work within this before it can come up with something new and innovative later. More goodwill strategies include both GPI and ITC shipping display boards to retailers which say that cigarettes will not be sold to people under 18.

For starters, ‘Cigarettes will not be sold to persons below 18 years of age, and the panwadis who violate this will be prosecuted’ (in Hindi). Now that would seem like just a clause from the Tobacco Bill. It is actually part of point-of-sale (PoS) material that cigarette companies like GPI are shipping out to retail outlets as a goodwill gesture. Though the Bill says that retailers are required to carry these statutory signs, it does not say that cigarette companies are required to supply these to retailers. GPI is supplying over four lakh retail outlets with the warning sign—the beginnings of the retailer’s new exalted status.

GPI senior vice-president (corporate affairs) Sundeep Kumar says the signs are “to help retailers comply with new government directives which require them to display such a sign.”

ITC senior executive vice-president K Vaidyanathan says, “We will supply such boards to our retailers. We will also advise them on these signs and help in translating exactly as per the government directive, so that they are not harassed.”

According to the government directive, cigarette companies are allowed to have two boards advertising their products at retail outlets and merchandising racks.

Another battleground is product packaging itself—another brand promotion gimmick to make cigarette packs visually attractive as well. GPI launched its flagship Red & White in new packaging a few months ago, while ITC introduced the ‘wave pack’ for certain Wills brands including Silk Cut recently. ITC’s premium Insignia brand also has a new pack and other products are being considered for new packaging.

Whisper Design, a Delhi-based design studio is in the final stages of negotiations with ITC for the latter’s dispensing and merchandising retail publicity. The firm’s managing director Niladri Mukherjee feels cigarette companies are still in the process of understanding what they can and cannot do under the ban and once they figure that out, there will be more clarity on the significance of design in retail publicity.

Considering that cigarette shops are the only place now left where cigarette companies can advertise their products, the fight for space is narrowed down considerably. ITC and Godfrey Phillips were the major point-of-sale advertisers even before the advertising ban came into effect.

GPI will also forge exclusivity contracts with retailers across the country for better display of its products and publicity boards than others.

“The retailer is now absolute king. We will also look at exclusivity contracts,” says Mr Kumar, “with as many retailers as possible.”

KSA Technopak chairman Arvind Singhal says, “Cigarette retailers tend to gain from other means of brand promotion — glow signs, cigarette shelves and even empty cartons supplied by cigarette companies.”

ITC’s Mr Vaidyanathan says the company already has exclusivity arrangements with retailers and will work within these parameters.

Either way, it’s time for retailers to live life kingsize.


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