ITC uses a strategic pricing approach for its FMCG products. Currently, a small number of large retail chains control most retail sales volume in India, giving them pricing power over suppliers. ITC aims to set prices that customers are willing to pay and can be adapted to market conditions. The company distributes products through multiple channels to reach customers nationwide and maintains market leadership in cigarettes through investments in innovation, quality, and marketing. Emerging markets represent significant opportunities for businesses due to their large populations and growing economies. Companies must tailor their supply chains and skills to each specific market.
ITC uses a strategic pricing approach for its FMCG products. Currently, a small number of large retail chains control most retail sales volume in India, giving them pricing power over suppliers. ITC aims to set prices that customers are willing to pay and can be adapted to market conditions. The company distributes products through multiple channels to reach customers nationwide and maintains market leadership in cigarettes through investments in innovation, quality, and marketing. Emerging markets represent significant opportunities for businesses due to their large populations and growing economies. Companies must tailor their supply chains and skills to each specific market.
ITC uses a strategic pricing approach for its FMCG products. Currently, a small number of large retail chains control most retail sales volume in India, giving them pricing power over suppliers. ITC aims to set prices that customers are willing to pay and can be adapted to market conditions. The company distributes products through multiple channels to reach customers nationwide and maintains market leadership in cigarettes through investments in innovation, quality, and marketing. Emerging markets represent significant opportunities for businesses due to their large populations and growing economies. Companies must tailor their supply chains and skills to each specific market.
ITC uses a strategic pricing approach for its FMCG products. Currently, a small number of large retail chains control most retail sales volume in India, giving them pricing power over suppliers. ITC aims to set prices that customers are willing to pay and can be adapted to market conditions. The company distributes products through multiple channels to reach customers nationwide and maintains market leadership in cigarettes through investments in innovation, quality, and marketing. Emerging markets represent significant opportunities for businesses due to their large populations and growing economies. Companies must tailor their supply chains and skills to each specific market.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 5
PRICING STRATEGY OF ITC –
ITC Foods Business Division Pricing Policy-
The management mix now includes a crucial component called the FMCG Pricing Strategy. In today's information-driven world, traditional management roles such as sales owning the trade spend budget and customer negotiations with marketing owning the recommended retail price do not function.
Currently, two or three chains control 80% of the retail sales volume, with a few scattered independent operators accounting for the remaining 20%. Because of this concentration, the supplier will pass over margin to the retailer through the mechanism of the trading terms and by demanding more frequent promotions and significant price reductions on important branded goods.
Creating a price structure that can be modified to reflect different market
conditions is a difficulty for Trade Marketing, Category Management, and Sales and Marketing.
The Basic Concept used by ITC is:
“PRICE IS SOMETHING WHICH CUSTOMER IS READY TO PAY FOR
YOUR PRODUCT”
Background: tax policy and structure - The parameters within
which UK tobacco tax policy is set are determined by European Union legislation requiring member states to have a mixed tobacco excise structure with both proportional and fixed elements. Until January 2011 excise taxes were based on the retail selling price of the price category most in demand, commonly known as the most popular price category, which entered into effect on 1 January 2011, changing the reference point for calculating taxes from the MPPC to the weighted average retail selling price.
METHODS- The study was approved by the University of Bath
Research Ethics Approval Committee for Health. A comprehensive review of the literature on brand segmentation and cigarette prices covering the period 1999 to 2009 was used to inform the allocation of brands to price segments. The review, which included the academic literature, market reports (Euromonitor, KeyNote and Mintel), industry analyst reports, tobacco manufacturer annual reports, and tobacco industry and retail journals.
Data Price- Specific cigarette price data from 1999 to 2009 were obtained for packs of 20 cigarettes . No single source covering the same geographical area was available for the whole period. The main source of price data until October 2005, when it ceased publication, was PriceChecker, a supplement to the Retail Newsagent magazine from which data were extracted by hand. This gave recommended retail prices (RRP) for all major cigarette brands for the UK market. From November 2006 Nielsen started to publish cigarette sales data, including volume and price, for the Great Britain market and obtained, via scan, data inputs covering 87% of total sales . Comparisons between these two datasets, supermarket retail prices and manufacturers’ RRPs showed that manufacturers’ RRP and Nielsen data were almost identical, indicating that our two data sources could be relied on to provide comparable price data over time. The expense of Nielsen data precluded our ability to collate monthly data. . Volume market share data Data on market share by volume were obtained from two sources: Nielsen from November 2006 until November 2009 as detailed above and the General Household Survey (GHS), now known as the General Lifestyle Survey , for the period 2001 to 2008 (2008 being the most recent survey available at the time this work was undertaken). The GHS is an annual survey designed to be representative of the population of the UK. Each year, one question, posed only to smokers of manufactured cigarettes aged 16 years plus, asks which brand of cigarettes they smoke. This question, combined with the number of sticks smoked per week by each smoker, was used to calculate market share by brand and price segment. Analysis Trends in cigarette prices, volumes and revenue by price segment Weighted average prices for a pack of 20 cigarettes were calculated for the period 2001 to 2009 by price segment. RESULTS TRENDS - Cigarette prices, volumes and revenue by price segment While the real weighted average price of premium, midprice and economy brands has increased gradually between 2001 and 2009 , the real price of ULP cigarettes has barely changed. Consequently, the real price gap between these segments has widened. Volume data comparisons show that the two data sources are consistent and provide a reasonable assessment of volume trends over time . The market share held by ULP cigarettes has increased markedly in recent years, doubling between 2006 and 2009 alone. The largest market share, around 50% of the market, is still held by the economy segment, although this has fallen recently owing to gains in the ULP segment. The market share of both premium and mid-price brands has fallen from 2001 onwards, although mid-price brands are far fewer in number and have never been a major part of the market. Consistent with the price data, there is a wide and increasing gap in revenue between premium and ULP brands. Revenue from premium and mid-price brands has increased in real terms, while revenue from ULP brands has not and the gap in average revenue between these segments now stands at about £1.00. An interesting pattern occurs with economy brands; their revenue is virtually static between 2001 and 2005 but, once ULP brands emerge, revenue in the economy segment starts to increase . Industry pricing strategy Across the market as a whole, the industry is increasing prices over and beyond tax increases However, the extent to which tax increases are shifted to smokers varies both over time and by brand segment. Taxes were overshifted in each of the 3 years examined and in all brand segments other than the ULP segment in 2007–08 when taxes were absorbed. Across the 3-year period as a whole, average prices of ULP brands increased by just 1.3 pence compared with between 4.1 and 4.9 pence on more expensive brands. If this 3-year analysis is limited to brands with a market share over 0.2% price falls of -1.2 pence are seen on ULP brands and price increases of between 4.0 and 5.0 pence in the other segments. The time period in which industry-initiated price changes occur also varies by brand segment. For premium and mid-price segments, price increases during the November–May period are greater than for the May–November period. ITC Distribution Channel Distribution channel is having an important role in positioning of the product because we know that distribution channel is tool by which we can make reach our product to the final consumers. That's why selecting a distribution channel is an important aspect of building a competitive advantage for businesses of every size. Distribution channels include your own direct sales force, retailers, distributors and the Internet. The right distribution channel ensures that customers in different locations around the country, or around the world, can buy your products and get the right level of service from your company. To select the right distribution channel for your business, you need to consider what a channel can offer, including location and reach, skills and resources, management costs and degree of control.
A Focus Product Line
ITC one of the leading FMCG in the country which operates in Foods, Personal Care, Cigarettes and Cigars, Branded Apparel, Education and Stationery Products, Incense Sticks and Safety Matches, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and Information Technology, Category, has come a long way from the when it started. The biggest harbinger in the ITC growth story has been Cigarettes, The category in which ITCstill is the major player in the country.ITC's highly popular portfolio of brands includes Silk Cut, Insignia, Lucky Strike, Classic, Bristol, Gold Flake, Players, India Kings, Scissors, Capstan, Berkeley, Flake, Duke & Royal, Navy Cut. The Company has been able to maintain its Market leadership through complete focus on ceaseless value creation for consumers through substantial investments in creating& bringing innovative product designs to market, ensuring consistent & superior quality,state-of-the-art manufacturing technology, & superior marketing and distribution
Gaining Supply Chain Advantage in Emerging Markets :
The vice president of the premier management consulting firm, Solving Group, which conducts business in more than 50 countries worldwide, produced this white paper. The following aspects are illuminated in this white paper: Supply chain with three A ratings: reasonable, accessible, and appealing In contrast to "One size fits all," "One size fits one" Develop your own skills and fill the skill gap. Buy in or stay put Merchandise everyone, everywhere. The author also emphasizes the significance of emerging markets for businesses in the current economic climate. He contends that in order for any economy to develop, emerging markets, like those of the BRIC nations, require rapid attention and cannot be disregarded. He adds the following details: 77% or so of Asia's people live there.
