presents

Cigar Potential Study in India

7th April, 2004.

Prepared for

Swedish Match AB

Contents
Cigar Market Background Products Market Consumer Clients Objectives Indianet Role Types of research suggested Time estimates Estimated Cost Indianet

Cigar Market A brief background

Cigar The Product

Type of CigarsShapes Parajos Parallel sides Figurados Irregular shapes. Sizes Structure of Cigar Primary Components Competitive Tobacco Consumption - methods Cigarettes Bidis

Gigante/ Presidente Corona Churchill Rothschild Lonsdale Panatela Cigarillos

Filler Binder

Body for 'strength', and even 'intensity Flavour the 'taste' that characterizes a particular cigar)

Wrapper.

Chewing Tobacco (Khaini)

Paan Masala Snuff Hukkah

Types of Cigars - As per Size

The major types of cigars according to the size thus are
Gigante or Presidente - The largest of the cigars. Their length can be as high as ten inches and their ring sizes can max out to 64 or 1 inch. Corona - The classic corona measures about 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.

Cigar market growth- International scenario (Mature markets)

Consumption of large cigars and cigarillos has been increasing since 1993.

2003
An estimated 3.8 billion large cigars and cigarillos were expected to be consumed in 2001. Small-cigar production increased from 1.5 billion pounds in 1997 to an estimated 2.4 billion pounds in 2001. Sales of premium cigars, most of which are hand-made and imported, have increased an estimated 150% since 1973.

1973

Cigar market growth- India

No concrete market figures available
Nascent market /Very niche market Poised for a growth in select Metro cities among the Connoisseurs Yuppies Arrived adults

Tobacco consumption in Indian Market

Cigarettes 18%

Other tobacco products 82%

Cigar Availability in India

Then. Mostly imported Available at only at select foreign goods stores Select 5 Star hotels or cigarette stores selling foreign brands.
Now . All the above plus.. Godfrey Philips India bringing in the Jewels and Phillies brands of cigars (of Altadis USA), even small paan shops seem to have started to stock them.

Current Supply chain in the Indian Market

Cigars in India are available at the following pointsPaan Beedi Shop 5 Star Hotels, restaurants and Pubs Exclusive cigar outlets. (Mostly importers who have a dedicated customer following) Most Paan Beedi shops stocking Cigars get their supplies from the grey market. 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. At least a dozen local brands are available from Trichy in South India.

Cigar Brands currently available in India

Mumbai
Jewels Black Gold Jewels Vanila Jewels Mild Phillies Blunt Phillies Junior King Edward Seventh Imperial Caf Crme - GPI - GPI - GPI - GPI - GPI - Swisher International - Henri Winterman Rs. 125 Rs. 125 Rs. 125 Rs.100 Rs.75 Rs.125 Rs.110

Delhi
Jewels Black Gold Jewels Vanila Jewels Natural Phillies Blunt Phillies Junior Phillies Sweet King Edward Seventh Imperial Caf Crme - GPI - GPI - GPI - GPI - GPI - GPI - Swisher International - Henri Winterman Rs.125 Rs.125 Rs.125 Rs.100 Rs.75 Rs.60 Rs.140 Rs.140

Cigar Brands currently available in India .. Contd.

Kolkata
King Edward Seventh Imperial Caf Crme - Swisher International - Henri Winterman Rs.150 Rs.150

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

Indian ConsumerCigars A Fashion Statement

People start smoking cigars as a trend, then it becomes a lifestyle statement and they get hooked onto it.
The actual cigar connoisseur, of course, is passionate about his cigar. He wants to learn more about it. Cigar smoking for him is not a trend. Hes really enjoying the experience, They are happy that cigars are now available at their door-step through us. And that our prices are competitive and cheaper than anywhere in Europe.

Cigars vs Beedis- Candy Flavored Cigarettes Latest Teen Smoking Fad

Flavored to taste like vanilla, chocolate and strawberry, Bidis (pronounced "beedies"), are an imported cigarette from India and the latest rage among teenagers experimenting with smoking. Sold most often in specialty shops, and amazingly, health food stores, bidis are hand-rolled and strongly resemble a marijuana joint, perhaps providing an additional allure for teenagers.

Ironically, bidis have been produced in India for decades and have been known there as the 'poor man's' cigarette. Exporters recently discovered a new market: American youths. This latest fad mirrors another that also has been around for years and again only recently discovered by youths - cigar smoking.

Indian Consumer-The Challenge

Cigar smoking has to mature from a trend/fad to a wholesome enjoyable experience

Educate people who dont know about Cigars.

Understanding the characteristics & subtle differences of cigars can contribute to an important part of the cigar smokers enjoyment.

Consumption Trends - Paradigm Shifts

Only Men
Slightly older mature men Only connoisseurs Had at private places.mostly at home

Both Men and Women

Tried more by young Wannabes - wanting to make a statement Women - Impulse to be slightly outrageous,

Public places..dining out, private parties

Glamourised- movie stars and

athletes photographed smoking cigars.

Case study- Retail scenario

Distributor for Habanos Distribution through 67 outlets in India (premier hotel restaurants and bars) They have 5,000 customers already, and, there has been a dramatic increase in the number of cigar-smokers in India during the last three years. They are in Bombay, Goa, Bangalore and Delhi,

Case study- Retail scenario

Retail shop called Cingari at The Oberoi in New Delhi. cigar-smoker can walk into the humidor collection of 144 varieties of cigars Buy cigar accessories, Leaf through the Cigar Aficionado magazine Higher sales from Cingari than out of any outlet
Future plans Cingari in Bombay in the next couple of months & in all the major cities of India. Plus Duty Free shops in the international airports, starting with the Indri Gandhi international Airport

Client objectives

Establish market potential for Swedish Match products in India.

Our role

To obtain a holistic picture of the cigar market in India by understanding the demand and supply situation, for this we will study all the three aspects of trade , consumer and the market overall.

Types of Research suggested

1. 2. 3. 4. 5. Demand Potential Study Usage and Attitude Study Retail Study Awareness and Perception Study Product Reactions & Pricing Study

Demand Potential Study

Objectives
-Estimate market potential for cigars Assess demand / supply scenario for 6 years [ 3 previous years and the coming three years ] -Consumption pattern of cigar among users

-Mapping of manufacturers of cigar across markets,

sales, share and distribution
-Estimated sales from grey market

-Import / export data of cigars

Research Approach
Study to be conducted using Secondary Research Primary Research Secondary research Data research using secondary data publications [ Govt./ Tobacco bodies / Manufacturing Association bodies / Data libraries and the Internet ] Primary research Interviews with Manufacturers / Marketing agencies importing and distributing Interviews with Grey market Retailers / Tobacconists / Pan Beedi shops / General Stores in high end shopping malls and 5 star hotels/ Bars/ Pubs

Areas of Information
About the Manufacturer Company information, Information on brands portfolio and prices Sales turnover of the company and also for products under study Installed capacity and capacity utilization for the study products for last 3 years and also for next 3 years. Market share of the company and also competitor Future expansion plan ( if any ) related to products under study. Major end user market and also % break up by market wise presence. Consumption pattern by the end users of cigars. Sales distribution system e.g. dealer / distributor ,direct enduser Trade terms in terms of price.

About the Retail Trade & Grey Market Volume sales per month, seasonality differences if any Source of supply, trade terms & conditions [ for grey market ] Dealing methods with companies manufacturing cigars direct / via distribution network, dealing details, trade terms and conditions.

Analysis & Projection

-Study data on the production growth over the past 10 years from Govt. publications / sources -Analyse data of licensed capacity versus utilised -Analyse data from letter of intent issued for production of cigars [ to capture data on new entrants ]

-Analyse data from future projection of production and sales from manufacturers.
-Use the CAGR method to calculate the potential volumes required on a market to market basis

Usage & Attitude Study For Cigars

Target Audience
CIGAR CONNOISSUER Those who have been smoking cigar since the 3 years.

PREMIUM CIGARRETTE SMOKERS POTENTIAL CIGAR SMOKERS YUPPY Young professionals (25- 40 years) who enjoy speedy career growths and have aspire to arrive at a distinguish social status. Premiumness symbols marks their lifestyle. ARRIVED ADULT Established businessmen / women and professionals between the age of 40 60 years. Their lifestyle marks achievement and arrival at a particular status in which premium products are a part of their repertoire.

U & A Study : Our Focus

Target Group : CIGAR SMOKERS To understand consumers perceptions, attitudes and usage of Cigars. To identify the core values, image and emotional associations with Cigars. To study the entire gamut of decision making process w.r.t. Cigar vs. other premium smoking options. To identify the key motivating factors that perpetuates Cigar consumption. Target Group : POTENTIAL CIGAR SMOKER To understand consumers perceptions towards Cigars. To identify the image and emotional associations with Cigars and Premium brands of cigarettes. To identify the key motivating factors that perpetuates smoking premium cigarettes. To map the growth line that brought them to use of premium cigarette brands & rationale for the same .

U & A Study : Our Focus contd.

Target Group : CIGAR SMOKERS To detail consumer preferences with regards to the types of cigars. To gauge the brand saliency and loyalty within the category. To detail product intrinsic and extrinsic as desired by the consumers. Target Group : POTENTIAL CIGAR SMOKER To study the desired product intrinsic and extrinsic while smoking.

To map the psychographic profile of cigar vs a premium cigarette smoker.

To identify cigar within the repertoire of other considered premium products.

To map a psychographic profile of cigar consumers.

To understand price perceptions w.r.t. its connotations of premiumness.

Methodology

Qualitative Research Technique

Depth Interview
Cigar Smokers Arrived Adults

Focus Group Discussions Yuppy

F.G.Ds and DI would be conducted amongst both Male as well as the Females qualifying on the smoking criteria.

Sample Design
Centers
Cigar Connoisseurs Yuppy Arrived Adult Mumbai 5 DI 10 DI

2 FGDs

Delhi

5 DI

2 FGDs

10 DI

Kolkatta

5 DI

2 FGDs

10 DI

Chennai

5 DI

2 FGDs

10 DI

Bangalore

5 DI

2 FGDs

10 DI

Hyderabad

5 DI

2 FGDs

10 DI

Sample Design - contd

30 Depth Interviews amongst Cigar Connoisseurs

60 Depth Interviews amongst Arrived Adults who smoke premium cigarettes.

12 Focus Group Discussions amongst YUPPIES who smoke premium cigarettes.

Retail study

Objectives
Marketing need Assess market size & potential Explore ideal distribution channel (s)
Research need Market Scenario ( Past, Present & future) Understand the distribution system Consumer trends

Target Audience
Pan Beedi Shops Tobacconists (Five stars, other premium outlets) Exclusive Cigar shops Other sales points ( Bars/Pubs /Restaurants)

Information Areas
Market Scenario Stocking pattern Brands of cigars stocked New brands stocked Units stocked of each Reasons for stocking cigars Mode of stocking ( If any special arrangements undertaken) Sales pattern Total sales per day/per week/ per month Sales by brand Highest selling brand Proportion of increase/decrease from the past to current Expectations of sales in the future Pricing of the different brands Price range stocked highest priced brand& lowest priced brand

Information Areas - contd

Distributing system Source of supply for cigars Type of relationship with the supplier Source of interaction No of intermediaries involved in the supply chain Supply service to the consumers Margins sought on the sale Bad/ Dead stock replacement Awareness of number of manufactureres in the market No of suppliers deal with Problems encountered( if any) with the current system

Information Areas - contd

Consumer trends Profile of consumers buying Perceived profile by different brands Proportion of old customers vs those that are just trying it out Proportion of trials converting to regular users Buying pattern for new buyers
Questions asked Factors considered- price, strength, size, brand name, awareness & knowledge Reasons for a customer trying a cigar for he first time

Brands recommended by the retailer and reasons for it

Sample Size
Total Mum bai
42

Delhi

Kol kata
40

Che nnai
37

Bang a lore
30

Hyde rabad
25

Panaj i
27

Cochi n
11

Total

244

42

Cigar Stores

8-16

1-2

1-2

1-2

1-2

1-2

1-2

1-2

1-2

Paan Beedi Shops Stores stockin g in 5 Star / Bars Hotels Pubs /

Restaur ants

130

20

20

20

20

15

15

15

40

10

10

58

10

10

10

10

Awareness & Perception Study

Objectives

Awareness and extent of knowledge about Cigar

Awareness of brands
Potential for Cigars among current premium cigarette smokers

Research Approach

Propose conducting a personal face to face interviews with a structured questionnaires with identified target sample Target sample profile - Men / Women - 25 40 years - Premium brand smokers of cigarettes - SEC A

Information Areas
Awareness and extent of knowledge about Cigars Awareness of different tobacco consumption methods Aided awareness of a Cigar Source of awareness of a cigar Friends, Movies, Magazines, Traveling abroad, Advertisement, others, etc Reasons for smoking a cigarette Extent of knowledge about a Cigar Aided Awareness of types of Cigars on either size, shape, structure Awareness of method of smoking a Cigar ( like or unlike a cigarette)

Information Areas - contd

Negatives associated with Cigars Motivation to smoke a cigar Barriers to smoking Cigars ( Price, Availability, Lack of knowledge, one time use) Usage pattern for Cigar as well as Cigarette Ever trial , frequency of trial, last smoked when Overall description of experience of smoking the cigar Intention to smoke a cigar and reasons for it

Information Areas - contd

Awareness & knowldedge of Cigar brands Spontaneous & Aided Awareness of different Cigar brands Source of awareness of the brands Friends, Movies, Magazines, Traveling abroad, Advertisement, Retail outlets, Direct Marketing broachure others, etc The brand perceived to be ranked the best and reasons for it Awareness of these brands in terms of price, type, strength Trial of either of these brands ( Ever tried, No of times tried) Overall description of experience of smoking the brand (s) Rating of brands tried after trial

Information Areas - contd

Potential for Cigars among current premium cigarette smokers - Willingness to try cigars in the future and reasons for it - Type of cigar would like to try ( Mild / Strong, Flavoured, other preference,etc ) - Brand would prefer to try - Price at which willing to buy - Expectations of a new cigar in the market

Sample Size
Total TOTAL
SEC A1+/A1 800 400 Mum bai 200 100 Delhi 200 100 Kol kata 100 50 Che nna i 100 50 Hyde rabad 100 50 Bang alore 100 50

Males

25-40

200 200
400

50 50
100 50 50

50 50
100 50 50

25 25
50 25 25

25 25
50 25 25

25 25
50 25 25

25 25
50 25 25

Females 25-40
SEC A2 Males 25-40

200 200

Females 25-40

Product Reactions & Pricing Study

Objectives
-Assess the acceptance of the product post smoking
-Future purchase intention of trying out the cigar if it was available in the market

-Identifying the right price band which will be acceptable to traditional smokers as well as experimenters and switchers.

Research approach
Propose conducting a product placement study with regular smokers of cigars / experimenters [ atleast have tried once in the last 2 months and willing to try again]. Two alternative methods could be adopted : Blind product test for the test brand Study conducted with regular smokers of cigars using a structured questionnaire both at the pre-placement and the post placement stage. Placement of the atleast 7 cigars for personal smoking over a 7 day period.

The cigars are to be placed in a blind form with no recognition of brand visible.

Information Areas
-Overall opinion about the cigar smoked
-Experienced positives / negatives about the cigar smoked -Comparative ratings of the test cigar with current brand of cigar [ among cigar smokers ] -Future purchase intention if the product was available in the market. -Maximum price willing to pay for the cigar and minimum price willing to pay without compromising quality. -Future purchase intention if the product was available in the market at a specified price. -Ratings on selected attributes related to smoking e.g. Quality of tobacco, Strength, Body, Satisfaction while smoking, Easy to draw, Not irritating to the throat,Tobacco packing is tight, Flavour of tobacco, Type of packaging, Grip while smoking, Ease of smoking,Reputation of the manufacturer, Tobacco is not dry, etc.

Sample Size
Total Total Yuppie Males 350 70 Mumbai 175 35 Chennai 175 35

Females
Arrived Adults Cigar Smokers Occasional Smokers

30
100 100 50

15
50 50 25

15
50 50 25

Time estimates
Day 1 Day 2-4 Approval of the project Development of Qualitative research guide and depth interview questionnaire Approval of the guide / depth interview questionnaire Secondary Research data collection in progress Recruitment of Focus Groups in progress Depth interviewing in progress Submission of the Retail Study Awareness Perception Study & Product Test questionnaires for approval Approval of Retail Study, Awareness & Perception Study and Product test questionnaires

Day 7
Day 2-23 Day 9-17

Day 10

Time estimates
Day 14-21 Day 14 Focus groups in progress Briefing to field teams for the Retail Study Receipt of materials for product placement Retail Study in progress Briefing to Field Teams for the Awareness & Perception Study Briefing to field teams for the Product Placement study

Day 15 Day 16 Day 19

Time estimates contd.

Day 20-26 Day 33 Day 34-40 Day 35 Day 23-55 Product Placement in progress Briefing to field teams for the Call backs Call backs for Product Placement in progress Conclusion of Depth Interviewing Transcription, Translation, Data coding,Data entry,Data processing and analysis in progress for Focus Groups, Depth Interviews, Retail Study and Product Placement study Presentation of the findings

Day 60

Cost Estimates
Demand Estimation study [ including costs of secondary research and 5 primary interviews with Manufacturers and channels suppliers ] Qualitative Usage & Attitude study involving 30 depth interviews to be conducted by our executives with high profile individuals across the cities of Mumbai, Delhi,Kolkata,Chennai, Bangalore and Hyderabad Cost of conducting 12 Focus groups including all costs across the cities of Mumbai, Delhi, Kolkata, Chennai,Bangalore and Hyderabad Cost of conducting 60 depth interviews among Arrived adults including all costs across the cities of Mumbai, Delhi, Kolkata, Chennai, Bangalore and Hyderabad 50,000 00

135,000 00

300,000 00

150,000 - 00

Cost Estimates contd.

Awareness & Perception Study involving 800 interviews to be conducted among premium cigarette smokers across the cities of Mumbai, Delhi,Kolkata,Chennai,Bangalore, Hyderabad. 200,000 - 00

Retail Study involving 244 interviews to be conducted among retailers of cigars across the cities of Mumbai, Delhi,Kolkata,Chennai,Bangalore, Hyderabad , Panaji and Cochin

61,000 00

Cost Estimates contd.

Product Reactions and Pricing Study involving 350 interviews to be conducted among smokers of cigars across the cities of Mumbai, Delhi, Kolkata,Chennai,Bangalore, Hyderabad , Panaji and Cochin Product placement and Call Back interview 96,250 00

8% Service tax would be charged extra on the total amount billed Additional travel and stay by the executive on clients insistence to any destination would be charged at actuals. 50% advance of the total amount estimated payable at the time of commissioning of the research, balance 50% to be settled within 7 days after the presentation of the Final findings.

Indianet Team for WIMCO

Ranjit Ghosh 24 years in Market Research [ first 14 years in AC Nielsens ]

Handled over 2000 research assignments involving FMCG,Financial Products and Services, Industrial products.
Research executive in-charge of handling Procter & Gamble account both while in ACNielsens as well as thereafter. Was involved in developing the brand Ariel in India. For 10 years handled the Godfrey Philips portfolio [ during his stay in AC Nielsens ] involved in Smokers U & A studies, New Product development, Communications study, Product placement Tests, Retailer studies, Observation studies at point of purchase across India. In addition, was involved in Qualitative work done prior to launching Indias first branded cigarette meant for Ladies by Golden Tobacco.

Indianet Team for WIMCO

Tasnim Sabuwala 12 years of experience in the field of marketing Research Qualitative & Quantitative Research. Before joining Indianet she was working with ORG-MARG as a Senior Executive. A Graduated in Sociology. During her years in ORG Marg, she was involved in Qualitative research conducting studies for large Indian business houses, Financial Institutions and FMCG Manufacturing companies. For 2 years she was also associated with one of the most reputed packaging design agency in India IDI, a DMA Alia Group company helping them advise as a market research consultant on development of brand and its packaging for several large FMCG business houses.

Indianet Team for WIMCO

Mahjabeen Wadia 15 years of experience in Qualitative Research. Prior to Indianet she was a Research Director with ORG MARGs qualitative division - Quest.She has post graduated in Consumer Behavior (branch of Psychology) Over the years has been involved in continuous and intense applications of research tools such as : Creative extended and /or reconvened panels Brain storming Psycho drama Psycho drawings Synectics Apart from market research she has been involved in a number of social research projects commissioned by the World Bank, UNICEF, USAIDS, ODA (UK) and GOI.

Indianet the organisation

Full service market research agency Qualitative Quantitative Headquartered in Mumbai.

Research and marketing offices in Mumbai and Delhi.

Having operations offices in Delhi, Chennai, Hyderabad, Bangalore and Kolkata.

Indianet the organisation

Systems and Controls

Data Collection
#1 Briefing

#2
#3

Stimulus for better interviewing

Maintaining online control while data collection is in progress

Indianet the organisation

Briefing #1 Only agency in India to have local language 250 pages interviewing / supervising manual for training. Using OHPs for clarity of understanding hear and see method. 5 mocks calls [ rehearsals ] before the interviewers are sent to the field.

#2

#3

Indianet the organisation

Stimulus for better interviewing #1 Actual pack shot pictures instead of brand names for correct identification. Expressions card showing facial expressions for identifying feelings. Executive help at all times a briefing copy giving guide to question by question pictorial explanation about dos and donts. Ready reckoner booklet for guidance on general marketing research interviewing practices.

#2

#3

#4

Indianet the organisation

Maintaining online control while data collection is in progress

#1 #2 #3

Linear organisation reporting direct via fax daily using PDPPPA system. Overnight feedback for corrective measures Supervisor Field in charge

Field Manager

Executive

Management

Indianet the organisation

Systems and Controls

Data Analysis
#1 #2 #3 #4 Scrutiny & Coding of responses Translation checks of open ended responses. In house data entry and processing. Softwares in use Quantum SPSS

Weve worked with..

Adventure Quest Bank Of India Bharat Forge Cadburys Cellular Operation Associations Of India CITIBank Securities Coca Cola Colgate Palmolive Department Of Telecom Global Trust Bank Godrej Agrivet Godrej Foods Godrej GE Godrej Soaps Hughes Ispat Hughes software system Hughes Telecom ICICI India Cement Ltd. Kotak Mahindra MTV Merck Platinum Guild Parle Agro Parle Products Ltd. Philips India Ltd. Pioma Industries Ltd. Procter & Gamble India Raymond Reliance Telecom SM Foods SOTC Kuoni Standard Chartered Bank Transelektra US Aid Zydus Cadilla

Thank You

Lifestyle product categories

The sharp rise in the popularity of in gourmet coffee and microbrewery beers has led to a large increase in cigar smoking particularly among young and middle-aged white men (ages 18 to 44) with higher than average incomes and education.