ITC hikes cigarette prices by 10-20% following increase in taxes

Abhishek Law Kolkata | Updated on February 12, 2020

FMCG major ITC Ltd has initiated a steep 10-20 per cent hike in prices across select cigarette brands. This follows the increase in National Calamity Contingency Duty (NCCD) announced in the Union Budget this year.

Market sources had anticipated that a rise in NCCD would lead to escalation in taxes on cigarettes. It was only a matter of time before cigarette-makers, including ITC – which is the market leader in the segment – hiked prices.

When contacted, an ITC spokesperson told BusinessLine: “Prices of a number of brands have been revised.”

For the first nine months of this fiscal, the company reported an over 6 per cent, year-on-year rise in cigarette sales at ₹16,071 crore while profit (before taxation) from cigarette sales rose by over 7 per cent to ₹11,450 crore.

Price hikes, sources say, will come into immediate effect; and across all markets.

According to Edelweiss Securities Ltd, “the NCCD component has been increased 2-4x across stick sizes. This has resulted in tax hikes in the range of 9-15 per cent.”

Sources had expected price hikes to be “calibrated”, in view of the slowdown.

Tax hikes, at a portfolio level, were expected to be in the range of 11 per cent, which in turn would lead to an MRP increase of 6-7 per cent.

Steep price hike

Price hikes, incidentally, have been higher than expected especially on stick sizes ranging around 64 mm.

The steepest hike is of 20 per cent across brands ‘Goldflake Superstar’ and ‘Flake Special Filter’. While a pack of 10 sticks of Goldflake Superstar has now been increased to ₹59, up from ₹49; that of Flake Special Filter will be revised to ₹60 for a pack of 10 sticks, as against the previous price of ₹50.

Market sources say price hikes have also been initiated for brands like ‘American Club Cool Fresh Taste’ (a 10 per cent hike for a pack of 20 sticks); while that of ‘Navy Cut Filter’ rose by 16 per cent – from ₹69 for a pack of 10 sticks to that of ₹80. Price of ‘Flake Filter’ has seen a near 14 per cent price hike – to ₹80 for a pack of 10 sticks as against ₹70.

Other brands where price hikes have been initiated include ‘Flake Blue Special Filter’, ‘Wave Cool Mint’, ‘Duke Special Filter’, among others.

ITC Ltd had in 2019 increased prices of brands like ‘Bristol’, ‘Capstan’,‘Flake Excel’ and some other regional brands between 7 and 14 per cent. Price hikes across select brands were made in 2017 and 2016 too.

The ITC stock closed at 212.70, up by 0.95 per cent, at the BSE, on Tuesday.

Published on February 11, 2020

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