CIGAR MARKET IN INDIA AN OVERVIEW

CONTENTS

Market Overview size & trends

Select case studies

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Key challenges

Questions for discussion

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MARKET OVERVIEW SIZE & TRENDS

MARKET OVERVIEW SIZE AND GROWTH FACTORS

ORGANISED CIGAR MARKET IN INDIA SIZE AND GROWTH

Market Size 2007 7 Crore 2012 (E)* ~15 Crore Major Players Market Growth YoY (2004 - 2009) 25 30%; CAGR 9% Godfrey Philips India (~65% market share 2007); Cingari, KK Modi group (Habanos, Davidoff etc), ITC (Armenteros)

Major Growth Factors The growing young and earning population that considers cigars a lifestyle product Increasing target base with women willing to experiment with low-tobacco content cigarette products More expats and foreign nationals traveling to and from India Increased willingness of Food & Beverage outlets to include cigar lounges in their space
*Source: http://articles.economictimes.indiatimes.com/2007-07-29/news/28442474_1_cigar-market-international-brands-gpi 4

MARKET OVERVIEW TOBACCO CONSUMPTION IN INDIA

Cigarettes 18%

Other tobacco products 82%

(Most of which is chewing tobacco)

MARKET OVERVIEW TYPES OF CIGARS The major types of cigars according to the size are Gigante or Presidente - The largest of the cigars. Their length can be as high as ten inches and their ring sizes are up to 64 or 1 inch Corona - The classic corona measures ~5 inches and has a ring size of around 40

Churchill - Named after Winston Churchill measures approximately eight inches and has a ring size of about 48
Rothschild - are also known as Robustos. The Robusto is a short and fat cigar. Its size is five to six inches with a ring size of 50 Lonsdale - They have a ring size of about 40 and can be as long as seven inches Panatela - This is thin long cigar with a ring size around 37 and length is seven inches Cigarillos - These cigars are about the size of a cigarette. Their ring size can be as low as 20 inches and their length as small as three inches

MARKET OVERVIEW CIGAR AVAILABILITY IN INDIA Cigars in India are available at the following points-- Paan Beedi Shop -- 5 Star Hotels, restaurants and Pubs -- Exclusive cigar outlets. (Mostly importers who have a dedicated customer following) Legitimate distribution of the Cigar brands are made by sales staff of Godfrey Philips Ltd. for their Jewel and Phillies brands covering the simple paan shops to exclusive cigarette outlets Availability of cigars on a large scale through grey markets Many local brands are available from Trichy in South India

MARKET OVERVIEW TRENDS

The latest trends in promoting cigar usage and educating consumers are Cigar Clubs where smokers bond over their favourite smokes. Examples include 1. Cigar Company by Sharik Currimbhoy 2. Breach Candy Club by Danny Carroll Lounges Lounges in high-end fine dining restaurants and hotels that display cigars and educate new consumers on their correct usage Accessories Cigars are incomplete without accessories. Most sellers are now including accessories (metal cutters, glass/steel ashtrays, humidors etc) in their display with the cigars Fun Flavours Manufacturers have introduced various flavours in cigars to cater to different segment preferences. Additionally, this helps save costs as the cigars are machine-rolled

Packaging Manufacturers are also experimenting with packaging to attract the new consumer. For example, the chocolate-flavoured cigar from Phillies comes in a tin that looks just like a chocolate box
Increased Presence in High-Profile Weddings and Parties Keeping a dedicated corner for cigars is also a new trend. Examples include, Elizabeth Hurleys wedding in Umaid Bhavan that had a dedicated cigar corner

Focusing on Points-of-Consumption Most manufacturers are now increasingly focusing on points-of-consumption (lounges, hotels, pubs, bars etc) instead of points-of-sale (retail outlets) to create awareness and desire
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MARKET OVERVIEW MAJOR BRANDS IN INDIA

Mumbai Jewels Black Gold Jewels Vanila Jewels Mild Phillies Blunt Phillies Junior King Edward Seventh Imperial Caf Crme Delhi Jewels Black Gold Jewels Vanila Jewels Natural Phillies Blunt Phillies Junior Phillies Sweet King Edward Seventh Imperial Caf Crme Kolkata King Edward Seventh Imperial Caf Crme

- GPI - GPI - GPI - GPI - GPI - Swisher International - Henri Winterman - GPI - GPI - GPI - GPI - GPI - GPI - Swisher International - Henri Winterman - Swisher International - Henri Winterman -

Rs. 125 Rs. 125 Rs. 125 Rs.100 Rs.75 Rs.125 Rs.110
Rs.125 Rs.125 Rs.125 Rs.100 Rs.75 Rs.60 Rs.140 Rs.140 Rs.150 Rs.150

MARKET OVERVIEW MAJOR BRANDS IN INDIA

Chennai Villiger Mild Gross format Villiger Rillos Villiger Premium Vanilla Villiger Sumatra Villiger Premium petit Villiger Premium No.8 Villiger Tabatip Brainiff Cantos Light Midi Rillos American Blend King Edward Imperial Caf Creme - Villiger & Sons - Villiger & Sons - Villiger & Sons - Villiger & Sons - Villiger & Sons - Villiger & Sons - Villiger & Sons - Villiger & Sons - Villiger & Sons - Swisher International - Henri Winterman Rs.305 Rs.135 Rs.305 Rs.440 Rs.200 Rs.425 Rs.100 Rs.305 Rs.150 Rs.150 Rs.140

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SELECT CASE STUDIES

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CASE STUDY GODFREY PHILIPS INDIA

One of the first movers in the Indian cigar market in 2003, Godfrey Philip has Tied-up with hotels and stores to market high-end cigars Trained many Food & Beverage staff about cigar etiquette five sales branches in 5 cities and presence in 55 cities with 8,000 outlets Introduced new flavors and attractive packaging to cater to the new and experimental customer

Resultantly, it has
A turnover of over 1800 crore INR (overall) ~65% cigar market share (2007)

CASE STUDY CINGARI

Having increased its cigar sales three-fold to 4 million cigars in 2010, up from less than 1.5 million in 2005, Cingari has been
Hosting high-profile parties and weddings centered around cigars, accessories and dcor Focusing on educating consumers in lounges on cigar usage Has an extensive collection of over 144 cigars in its outlets Opened a walk-in humidor at its flagship store in Oberoi, New Delhi
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KEY CHALLENGES

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KEY CHALLENGES
The key challenges in the Indian cigar market are Relatively new product with a lack of penetration in the Indian market Lack of awareness of proper cigar usage Presence of a big unorgainsed sector Legislatively

-- there is a ban on smoking in public places including work places, restaurants etc unless there is a designated smoking area thus, increased costs -- total ban on display of tobacco products or their use, in movies or television -- ban on sale of tobacco products through vending machines -- ban on Visible stacking of tobacco products at the point of sale -- ban on all direct and indirect advertisement of tobacco products has also -- increasing Tax and Price of Tobacco Products -- ban on surrogate advertising -- ban on picture, illumination and back-lighting with only one permitted board of advertisement at point-of-sale of tobacco products

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