New health warnings on cigarette packs will threaten to commoditise the market: ITC

KOLKATA: ITCBSE 1.61 % Ltd said the new pictorial health warnings covering 85% of cigarette packs will threaten to commoditise the market, making price the sole or prime driver of consumer choice. This, ITC said in its latest annual report released on Tuesday, will erode the value of the company's cigarette brands and pack designs that have been developed through substantial investment.


The company, which accounts for four out of five cigarettes sold in the country, said the new warning will lead to an increase in smuggling.

"The new warning will encourage the flow of illegal trade of brands owned by international companies into the country since such brands are manufactured in many jurisdictions which do not mandate the printing of graphic health warnings on cigarette packages as applicable in India," ITC said.


"The legal cigarette industry in India will be hard pressed to counter the menace of illegal cigarettes as they will be perceived by the consumer to be safer in the absence of the statutorily mandated health warnings. Coupled with the fact that illegal cigarettes are available at a fraction of the price of legal cigarettes, the new graphical health warning will provide further fillip to the growth of illegal cigarettes in the country," ITC said in the release.

When contacted, an ITC ..spokesperson said the high levels of taxation and excessive pictorial warnings serve to divert trade to illegal, tax-evaded and contraband cigarettes. "The proposed 85% pictorial warnings in India, which virtually make the packets unbranded, will migrate consumption from Indian brands to illegally sold foreign cigarettes...In Australia, plain packaging has resulted in a massive jump in the growth of illegal cigarettes," he said.


Till lately, cigarette packs in India were required to carry a pictorial warning covering 40% of the pack front. The Euromonitor International, in its reports, has highlighted that India is now the fourth largest market for illegal cigarettes in the world.

Resource : http://economictimes.indiatimes.com/industry/cons-products/tobacco/new-health-warnings-on-cigarette-packs-will-threaten-to-commoditise-the-market-itc/articleshow/52872739.cms