Indian Tobacco Company Limited

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In 2017, the Indian Tobacco Company Limited (ITC) was the cigarette market leader in India (the 8th largest cigarette market in the world bar China).[1]

British American Tobacco (BAT), through its subsidiaries Tobacco Manufacturers (India) Limited, Rothmans International Enterprises Ltd, and Myddleton Investment Company Ltd, was ITC’s major shareholder holding 30% shares.[2]

According to several media reports[3][4][5] BAT tried to increase its stake in ITC on several occasions but ITC “thwarted all attempts”, with the Indian ban on all Foreign Direct Investment in the cigarette industry (which took effect on 8 April 2010) alledgely a direct result of ITC’s lobbying of the Indian health and finance ministries.[6]

Background

Headquartered in Kolkata, ITC was established in 1910 as the Imperial Tobacco Company of India Limited.[7] The company name was changed to India Tobacco Company Limited (1970), I.T.C. Limited (1974), and finally to ITC Limited in 2001. The name changes reflect ITC’s attempts at “shedding the cigarette tag” by diversifying into non-tobacco goods and services.[8][9]

In addition to tobacco, the company manufacturers food products and stationary, and is active in the hospitality industry, packaging industry, and the agricultural and information technology sectors.[10] In March 2017, the media reported that ITC was given shareholder approval to explore health care services, with the aim of establishing multi-speciality hospitals in India.[11] In July 2017 ITC announced that it had amended the company’s Articles of Association to incorporate “healthcare” under its purview and was searching for a CEO to take the initiative forward.[12][13]

Cigarettes remain ITC’s biggest earner, representing 62% of the company's gross revenue in 2016 (42% of its net revenue).[8][14] ITC’s popular brands of cigarettes and cigars include Insignia, India Kings, Lucky Strike, Classic, Gold Flake, Navy Cut, Players, Scissors, Capstan, Berkeley, Bristol, Flake, Silk Cut, Duke & Royal.[7]

Editor's note: the sections below focus on the company's tobacco business.

Membership and Affiliations

ITC representatives were speakers at the annual tobacco industry event, the Global Tobacco and Nicotine Forum, in both 2012 and 2013.

ITC is a leading member of The Tobacco Institute of India (TII), “a representative body of farmers, manufacturers, exporters and ancillaries of the cigarettes’ segment of the tobacco industry in India”.[15][16] As of 2017, TII reported to be a member of the following organisations:[15] International Tobacco Growers Association (ITGA) | International Tobacco Documentation Centre, UK | Tobacco Merchants’ Association (TMA), USA | Confederation of Indian Industry (CII)] | Federation of Indian Chambers of Commerce and Industry (FICCI) | Associated Chambers of Commerce and Industry of India (ASSOCHAM) | PHD Chamber of Commerce and Industry (PHDCCI) | Indian Chamber of Commerce & Industry (ICCI) | Federation of Andhra Pradesh Chamber of Commerce & Industry (FAPCCI) | Chambers of Commerce: Andhra, Karnataka and Maharashtra

Controversial Marketing Strategies

ITC has been criticised for using direct and indirect advertisements to promote their tobacco products despite the Indian tobacco advertisement ban.[17][18][19] Some of the criticisms were:

  • illegal display of advertising billboards and posters[17][18]
  • glamourising cigarette smoking to target youth and low socio-economic groups (for example by associating cigarette brands with success, wealth, achievement and western lifestyles)[17]
  • using brand variant extensions (for example a ‘light’ version)[17]
  • point of sale marketing targeting minors (for example by placing cigarettes and cigarette advertising in close proximity to candies and snacks)[17][18]
  • camouflaging tobacco marketing by coupling it with other ITC products[17]
  • misleading retailers to display tobacco advertisements near their shops[18][19]
  • paying retailers to promote and market tobacco products[18][19]
  • indirectly targeting women (for example including women in the advertisements and using images that create an aura of elegance, sexual allure, culture and style)[17][18]

Tactics to Subvert Tobacco Control Campaigns and Policies

Intimidating Government with Litigation or Threat of Litigation

ITC has legally challenged tobacco control laws on two occasions:[20]

  • 2016 – As a member of TII, challenged expansion of Pictorial Health Warnings (PHWs) to 85% in a court case filed collectively with a retailer, farmer and a smoker
  • 2003 – Challenged implementation of the Cigarettes and Other Tobacco Products Act and appealed against prohibition of smoking in public places.

More information about other tobacco industry challenges against tobacco control measures internationally, go to Legal Claims.

Tactical Temporary Closure of ITC Cigarette Factories

ITC shut down its cigarette factories twice as a response to government initiatives to implement PHWs on tobacco packs as detailed below:

  • December 2010 – The Indian government announced that it would introduce new graphic PHWs from 1 December 2010, including one about mouth cancer. ITC and Godfrey Philips India Limited, the two leading cigarette manufactures at the time, halted cigarette production for a month from the supposed date of implementation, stating they did not receive clear instructions on the graphic warnings to be included. This led to a delay in implementing the new PHWs and slowed down the rotation of PHW to every two years, rather than annually.[21][22][23]
  • April 2016 – ITC, and the other two cigarette companies that are members of TII, closed their factories as a response to the government’s decision to expand pictorial health warnings from 20% to 85% of surface of the cigarette packs.[24][25]

Mobilising Support through Allies

ITC tried to influence tobacco control actions and policies by mobilising support from the following groups:

Tobacco Institute of India (TII)

The media reported several occasions in which TII lobbied against tobacco control measures. For example, the organisation:

  • sent repeated representations to the Union Ministry of Health and Family Welfare asking it to withdraw the large mandatory pictorial health warnings[16][25]
  • organised large media campaigns generating doubt about effectiveness of PHWs and organised farmers’ protests against the expansion of PHWs on cigarette packs from 20% to 85%.[26]
  • demanded the Indian government include them in the national delegation to the 7th Conference of Parties (CoP 7) of WHO Framework Convention on Tobacco Control (FCTC) held in New Delhi in November 2016, stating tobacco control policies should not be biased towards views of “tobacco control activists and NGOs”[27]
  • publicly criticised FCTC for refusing CoP 'Observer' status to the Federation of All India Farmers Association[28]
  • objected against the increase of cigarette tax under the Goods and Services Tax scheme, claiming it would be detrimental to tobacco farmers[29]

Federation of Indian Chambers of Commerce and Industry (FICCI)

FICCI sent representations against the expansion of pictorial health warnings to the Ministry of Health and Ministry of Commerce.[16]

The Associated Chambers of Commerce and Industry of India (ASSOCHAM)

ASSOCHAM requested a revision of the inclusion of an advertising ban with the tobacco control act in order to “save livelihood of scores of tobacco farmers and farm workers, bide workers, tribals and retailers”.[16]

Corporate Social Responsibility Initiatives

The Economic Times reported that ITC spent 1.2% of its 2014 net profit on Corporate Social Responsibilities (CSR) activities.[30]

ITC’s 2017 annual report highlighted rural development and sustainable agriculture practices as examples of the company’s social investments.[2]

CSR practices like those of ITC have been criticised as “one more tool for unscrupulous companies to circumvent the public health laws”.[31] In lieu of tobacco advertising, which has been banned, its argued that the CSR activities give ITC the opportunity for “proxy advertising” to improve its corporate image.[31]

TobaccoTactics Resources

Relevant Link

References

  1. Tobacco Free Kids, The Global Cigarette Industry, September 2017, accessed November 2017
  2. 2.0 2.1 ITC Company Ltd, Annual Report 2017, 2017, accessed November 2017
  3. S. Reckhi, R. Banerjee, Raising the Stake, indiatoday, 31 December 1994, accessed May 2017
  4. BAT not averse to raising stake in ITC, The Times of India, 5 July 2002, accessed May 2017
  5. I. Gupta, T. Surendar, Remaking Indian Tobacco Co., Forbes, 30 June 2010, accessed May 2017
  6. J. Kothari, Why is the government brazenly batting for ITC, Moneylife India, 2 November 2012, accessed January 2018
  7. 7.0 7.1 ITC Limited, FMCG: Cigarettes, 2017, accessed May 2017
  8. 8.0 8.1 MoneyControl, ITC hasn't kicked the butt, but journey from 'health hazard' to healthcare is complete, 29 September 2017, accessed October 2017
  9. ITC Limited, Company Profile: History and Evolution, 2017, accessed June 2017
  10. ITC Limited, Businesses, 2017, accessed November 2017
  11. Shareholders approve plans to enter health care: ITC, The Times of India, 17 March 2017, accessed May 2017
  12. U.P. Mukherji, ITC to enter healthcare sector with hospital, The Times of India, 29 July 2017, accessed October 2017
  13. ITC looking for a CEO to enter healthcare, The Economic Times, 28 July 2017, accessed November 2017
  14. ITC Limited, ITC Limited: One of India’s Most Admired and Valuable Companies, ITC Corporate Presentation, 2017, accessed May 2017
  15. 15.0 15.1 The Tobacco Institute of India, About Us, 2017, accessed October 2017
  16. 16.0 16.1 16.2 16.3 A. Jithendra, U. Bhojani, How The Tobacco Industry Wins Friends And Influences Policy, 2 June 2015, accessed October 2017
  17. 17.0 17.1 17.2 17.3 17.4 17.5 17.6 R. Bansal, S. John, P.M. Ling, Cigarette advertising in Mumbai, India: targeting different socioeconomic groups, women, and youth, Tobacco Control, 2005(14):201–206
  18. 18.0 18.1 18.2 18.3 18.4 18.5 A. Kalra, P. Bansal, T. Lasseter et al, India fumes as Big Tobacco targets young people in bid to recruit new smokers, The Independent, 19 July 2017, accessed October 2017
  19. 19.0 19.1 19.2 S. Patel, H. Rendell, S. Maudgal et al. Tobacco industry tactics with advertisements at the point of sale in Mumbai, Indian Journal of Cancer, 2013:50(3);245-249
  20. Tobacco Free Kids, Tobacco Control Laws: India, 2017, accessed October 2017
  21. India cigarette firms stop production over health warnings, The Independent, 4 December 2010, accessed October 2017
  22. ET Bureau, ITC, Godfrey Phillips India shutter factories over warning pics, The Economic Times, 3 December 2010, accessed October 2017
  23. India tobacco firms halt production over health warning, BBC News South Asia, 3 December 2010, accessed October 2017
  24. B. B. Chatterjee, Cigarette Factories – Shutdown, ITC Limited, 2 April 2016, accessed October 2017
  25. 25.0 25.1 Tobacco Companies Shut Factories; Opposing Cigarette Larger Pictorial Warnings, Punjab Today, 01 April 2016, accessed October 2017
  26. A. Pasricha, India's Tobacco Industry, Farmers Resist Warnings on Cigarettes, VOA News Asia, 6 May 2016, accessed October 2017
  27. W. Mukherjee, Tobacco Institute doesn't want Tobacco policy development to be left to activists alone, The Economic Times, 30 August 2016, accessed October 2017
  28. WHO tobacco conference rejects applications for observer, Press Trust of India, undated, accessed October 2017
  29. Cigarette industry body wants GST Council to roll back tax increase, The Economic Times, 17 October 2017, accessed October 2017
  30. W. Mukherjee, India’s Best Companies for CSR 2014: Here’s how ITC’s social outreach programme works, 28 April 2015, accessed November 2017
  31. 31.0 31.1 N.V. Rao, Neethi V Rao: Corporate social responsibility in India, thebmjopinion, 9 May 2014, accessed October 2017