For retailers, profit from every puff

Abhishek Law Kolkata | Updated on January 09, 2018

bl16_ITC cigar

Price of cigarettes has moved up post the levy of cess in the GST regime. But, some people in the retail trade are off-loading lesser priced stocks at a premium.

In simple parlance, a section of the trade has pocketed gains by black marketing, that is : selling old offerings with a lower MRP at a 4-8 per cent increase. What is more surprising is the premium charged by retailers matches the new price range released by companies.

Take the case of ITC Ltd’s cigarette brands that virtually commands a 70 to 80 per cent market share in the country.

The company’s announcement to hike prices came a week after the GST Council imposed cess on sin products. Ever since price revisions were announced on July 24, cigarettes prices, across brands, moved up by 4 per cent or between ₹2 and ₹6 on every pack of 10 sticks; even if the printed prices were lower.

As on August 15, three weeks after the price revision was announced, trade sources say, new stocks of brands like “Flake”; “Gold Flake”; “Navy Cut” and “Classic” are coming in.

But, it hasn’t deterred the trade from selling at a premium.

Commanding a Premium

According to a prominent retailer of the Central Business District, Rajesh (name changed), the old stock of Flake – a pack of 10 sticks priced at ₹48 – was sold at a 4 per cent premium or at ₹50 for a pack of 10. In fact, if a customer argues, he hands over a new pack showing the revised price.

Another instance is with Classic. A pack of 20 is being sold – in parts of the city – at ₹300. (The previous price was ₹278.)

For Navy Cut Filter, the printed price was previously Rs 89. Its moved northward to ₹94 / ₹95 for a pack of 10 (or a 5-6 per cent premium). New stocks of 10 sticks of 74 mm (manufacturing date of 31/7/17) now have a printed price of ₹100, trade sources say.

ITC in an emailed response told BusinessLine that stocks with new MRPs across “select brands” are available in the market.

“Given the multiple channels, stocks with new MRP of select brands where prices have been revised are already available progressively in the market. ITC prints the MRP on all cigarette packages in compliance of the packaged commodities rules, and sells them to over 1500 wholesale dealers in the country,” it said.

Wholesalers’ business

These wholesale dealers in turn sell to secondary wholesalers, from whom retailers, purchase the cigarette packs for eventual sale to consumers. In fact, retailers BusinessLine spoke to point out that the price rise was done by these wholesalers at their end.

“I sell at the price at which I buy from a stockist. I cannot help if the stockist or wholesaler sells at a price higher than the printed one. I pass it on to the consumer,” a shop-keeper said.

Published on August 16, 2017

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