Philip Morris eyes to change landscape of cigarette brands

India: Indian cigarette market might see some changes as global cigarette giant Philip Morris has begun talks with its 36 years old partner Godfrey Philips India (GPI) to acquire cigarette brands. Cigarette is highly restricted sector barring FDI in manufacturing of tobacco and related products.

The discussions involve considering splitting of Godfrey Philips India into two different companies with one entirely focusing on manufacturing while the latter focusing on marketing and distribution while retaining the existing GPI brands. As per this structure the former will remain under Indian control acting as contract manufacturer while the latter under Philip Morris.

Currently 35000 crore cigarette industry is dominated by ITC with the share of over 80 % with estimated sales of 10800 crores last year. Godfrey Philips India controls only 8% of market and by this deal it aims to eat into the market share of ITC and emerge as big player in the Indian cigarette industry.

According to TechSci Research, cigarette consumption is declining in India. Total consumption stood at 93.2 billion sticks for year 2014-15 which is 10 billion less than year 2012-13. There is a decline in production in the same period. Seeing this decline in market if the deal gets finalised this will give a big advantage to India Philip Morris (IPM) in terms of increased brand portfolio and complete control over distribution channel. Currently GPI has a distribution network of 800 distributors with over 800,000 retail outlets.