New Delhi
Chaitali Chakravarty
COMPANY TO PIGGYBACK ON CIGARETTE DISTRIBUTION CHANNEL
THERE is no smoke without fire. After
selling cigarettes for decades, ITC is becoming wiser. The company is getting into the
business of making matches under the brandname, Aim.
Sounds mundane? But analysts say that it
makes perfect business sense. If you are already making the fuse, you might as well make
the light too. Says Nikhil Vohra, portfolio advisor, Alchemy share & Stock Brokers.
"ITC’s foray into matches will add another product to its portfolio without
incurring any extra distribution cost. Aim can piggyback on the same distribution channel
as ITC’s cigarette brands like Wills, Goldflake, Classic." The panwallahs who
hawk ITC’s sticks will also now start vending the company’s matches.
Mr. Vohra said that ITC Bhadrachalam was
already exporting match boxes to some African countries. So, the know-how of making
splinters- the wooden piece of the match- already exists within the company. What ITC is
now doing is leveraging that knowledge base to put another related product in the market
at zero marketing cost. But analysts say that there is a limit to which ITC can grow in
this segment. Even though match box is one of the most commonly- used products in the
country, it is a low value item. The industry is somewhat similar to jute, which has not
shown any dramatic growth. This is evident from the revenue figures of market leader
Wimco, which is at Rs 180 crore.
Even though there are no reliable studies
on the market size of the match box industry, analysts put the size of this largely
unorganised industry at Rs 450-500 crore.
But what evidently works to ITC’s
advantage even in this low growth market is the already robust distribution network that
ITC has put in place for its cigarettes brands.
However, ITC would be heartened to find
that the sales of cigarettes are on the upswing. While sales of sticks fell 12.5% last
fiscal, it is up by 5.4% y-o-y April-August this fiscal. The maximum growth has been in
the regular and king-size smokes.
