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Diversified conglomerate ITC Ltd has initiated an over 14-15 per cent price hike in its ‘Navy Cut’ and ‘Gold Flake’ brand of cigarettes, trade sources aware of the matter said.
Price revisionBoth ‘Navy Cut’ and ‘Gold Flake’ (regular) are considered to be mid-market brands and were priced at ₹78 for a packet of 10 sticks.
For the new ‘Navy Cut’ packets, the printed price is ₹89 for 10 sticks of 74 mm.
In the case of Gold Flake regular (which has a stick size of 69 mm), the maximum retail price has been revised to ₹90 approximately.
The reason for an increase in prices is not yet known.
A company spokesperson confirmed to BusinessLine the revision in prices of select brands.
“Prices of select brands have been revised,” he said, but did not name the brands.
Cigarette brands that the Kolkata-based ITC owns include Insignia, India Kings, Lucky Strike, Classic, Gold Flake, Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke and Royal.
According to Abneesh Roy, Senior VP, Edelweiss, the move to hike price of select brands could have been prompted by apprehensions of a possible hike in taxes during the upcoming Budget.
‘Usual phenomenon’Substantiating his point, Roy further added that ITC has often cross subsidised price-hikes across brands – where the price of select brands is increased to absorb costs while others are left untouched – because of their huge portfolio of offerings.
“In pre- and post-Budget days price hikes are common. The fact that prices of select brands have seen a price revision is because the company may anticipate an increase in taxes during the Budget. Or, it may be a part of its cross subsidising strategy across brands,” he pointed out.
Interestingly, ITC had earlier this year gone for a 12-13 per cent price hike for ‘Classic’ and Gold Flake King Size. This was done post the Budget.
Following the hike, price of these flagship brands stood at ₹123 for a packet of 10 sticks.
Revenue earnersCigarettes continue to be a major part of the company’s revenue (from operations) and profit before tax.
For the first six months (till September 30, 2016) of this fiscal, cigarette sales accounted for 63 per cent of its revenue.
In case of profit before tax , contribution of cigarettes was 83 per cent or ₹6,221 crore out of ₹7,502 crore.
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