Whatever it may do to consumers, smoking is certainly not injurious to
ITC’s health. The company’s net profit in 2000-01 topped Rs.1,000 crore, and
while it is cagey about providing details, industry watchers aver that a very substantial
chunk would have come from cigarettes and tobacco sales. ITC has diversified into various
fields, including hospitality, paper and packaging, apparel and accessories, and
greeting-cards. Yet while these may be future stars, the cash cow for now is very
definitely the tobacco division, and it’s yielding rich dividends for ITC. Given that
it is operating in an industry which faces public opprobrium and flattening sales, and
that even its most dedicated consumers probably make frequent – albeit largely futile
– efforts to discard its products, ITC represents an interesting example of marketing
in a hostile environment. The cynics would say that nicotine is a highly addictive
substance, and there is very little marketing skill involved in selling what are
essentially nicotine delivery systems, but that’s not entirely true. For one thing, a
whole mythology has been constructed around the act of smoking and the lifestyle it
supposedly represents. The industry has always projected smoking as an expression of
freedom of choice. And even if you believe that all smokers are addicts, what makes them
choose – and stick to – specific brands, even when they end up shelling out
ever-increasing amounts ? Obviously, the importance of branding cannot be discounted. ITC
has acknowledged as much, attributing its success to – among other things –
"continuous value-addition, quality upgradation and strengthening of goodwill of the
company’s trademarks".
In this context, it is interesting to study
the Wills Classic story. ITC had repeatedly tried to introduce a king-size brand as part
of the Wills family, with little success. It already had a best-selling brand in Classic.
So, it simply repositioned Classic as Wills Classic, thus giving the Wills family a
leader. The Classic rub-off has given the entire Wills range a premium sheen, which should
enable ITC to extract more money from consumers for a long time to come. There was, of
course, always the risk that the Classic equity could be diluted, but then the Wills range
sells several times more cigarette sticks than the Classic brand. So ITC probably had a
lot more to gain than lose, which made it a gamble worth taking. ITC itself will only say
for the record that all its brand decisions are carefully thought out, with an eye to the
eventual impact on the bottomline. If it’s ever willing to reveal the figure, it
would be interesting to know just how many crores the Classic repositioning yielded. There
are, of course, several other reasons for ITC’s success. They include a constant
focus on productivity and cost management; a distribution network that covers every
village in India with a population of over 5,000 people – and many below that figure;
a culture that keeps executives constantly in the field; and an efficient management
information system that enables it to keep its finger on the consumer’s pulse. You
may deplore the product that the formidable ITC marketing machine pushes, but smart
marketers could learn a lot by focusing on how, rather than what, it does.