ITC Limited India

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Background

ITC Limited (ITC), headquartered in Kolkata, is the main cigarette manufacturer in India.[1][2] ITC’s commonly sold cigarette and cigar brands include; Insignia, India Kings, Lucky Strike, Classic, Gold Flake, Navy Cut, Players, Capstan, Bristol, Flake, Silk Cut, Duke & Royal.[2] In 2016, cigarettes provided 62% of the gross revenue of the company.[3][4]

ITC, established in 1910 as a subsidiary of British American Tobacco (BAT), was first titled Imperial Tobacco Company of India Limited, acronymic as “ITC”. It underwent several title changes, India Tobacco Company Limited (1970), I.T.C. Limited (1974) and ITC Limited (2001), the final name change reportedly to “shed(ding) the cigarette tag”.[4] The company’s multi-business portfolio includes:[5][6]
Image 1: ITC Colombo ground breaking ceremony with the participation of Basil Rajapaksa (Minister for Economic Development), Y K Sinha (High Commissioner of India to Sri Lanka), Y C Deveshwar (Chairman, ITC Limited), Lakshman Yapa Abeywardena (Minister for Investment Promotion), A.J.M. Muzammil (Mayor of Colombo), Ajith Nivard Cabraal (Governer, Central Bank of Sri Lanka) and Daya Ratnayake (Army Commander).[7]

Investors

The two main investors of ITC are the Government of India and the British American Tobacco (BAT). As of 2017, BAT held 24.68% via its subsidiary Tobacco Manufacturers (India) Limited.[16] According to media BAT unsuccessfully attempted to increase its shares in ITC in several occasions.[17][18][19] The second largest (14.35%) shareholder was Life Insurance Corporation, the Indian government-owned insurance company. There are four other government-owned insurance companies (General Insurance Corporation of India, The New India Assurance Company Limited, The Oriental Insurance Company Limited and National Insurance Company Limited) among the top 10 investors of ITC.[16] Thus, as of 2017, Indian government owned around 31% of ITC shares, receiving criticisms for the “irony” of its attempts to control tobacco while being the “biggest investor” of the industry.[20][21]

Governing Board

ITC is governed by a Board of Directors headed by a Non-Executive Chairman. In 2017, Board included all Indians except for the BAT representative David Robert Simpson.[22] A complete list of ITC’s Board of Directors can be found on the [1]. In 2017, the list included Nirupama Rao, the former (2004-2006) Indian High Commissioner for Sri Lanka as a Non-executive Director.[22][23]

Overseas Tobacco Subsidiaries

ITC owns a tobacco company in Nepal, Surya Nepal Private Limited (Surya Nepal), in partnership with BAT.[5][24]

Controversial Activities

Temporary Shut-down of Cigarette Factories

As of 2017, ITC shut down their cigarette factories twice. This was as a response to the government’s initiatives to implement Pictorial Health Warnings (PHWs) on cigarette packs as detailed below:

  • December 2010 – Indian government planned to implement 20% pictorial health warnings in tobacco packs from 1st December 2010. ITC and Godfrey Philips India Limited, the two leading cigarette manufactures in India, halted cigarette production for a month from the supposed date of implementation, stating they did not receive clear instructions on the graphic warnings to be included.[25][26][27]
  • April 2016 - ITC and two other cigarette companies (Godfrey Philips India Limited and VST Industries Limited) closed their cigarette manufacturing factories as a response to the government’s decision to expand pictorial health warnings from 20% to 85% of surface of the cigarette packs.[28][29]

Involvement in Healthcare Services

In 2017, media reported ITC has decided to explore health care services, with the aim of establishing multi-speciality hospitals in India.[30][31][32]

Establishing Apparel Brands Based on Cigarette Brand Names

Image 2: Logos of the two ITC apparel chains based on the cigarette brand names[33]
ITC established two main apparel chains based on BAT cigarette brands as detailed below (Image 2).[33]

Wills Sport, Classic and Clublife

“Wills Navy Cut”, commonly known as “Wills”, was the first filtered cigarette brand of ITC. Introduced to the Indian market in 1963, it was promoted through a campaign tag-lined “Made for each other” depicting a young couple in different day-to-day scenes.[34][6] In 2000, it established an apparel chain branded “Wills Sport”, entering into sports-wear and casual wear market (Image 2). The apparel chain was later expanded to “Wills Classic” (formal wear – 2002) and “Wills Clublife” (evening wear – 2003).

In 2004, with the implementation of new legislations in India restricting advertisement and promotion of tobacco, ITC announced that they will “dissociate” the brand name “Wills” from the cigarettes and make it “inconspicuous” to avoid claims on ‘surrogate advertising’. However, even though the word “Wills” was separated from the “Navy Cut”, it remained prominent in the packaging (Image 3), earning criticisms from the health advocates.[6][35]
Image 3: The change of Wills Navy Cut package[36]

An Apparel Chain Targeting Youth

  • Image 4: Popular Bollywood Actor Hrithik Roshan in a John Players advertisement.[37]
    John Players Men’s Wear - In 2003, ITC established a global mid-price ranged Men’s wear chain branded “John Players”. According to ITC officials, it "caters to the fashion-conscious youth at affordable price". The brand name was a direct take on of the commonly sold BAT cigarette brand “John Player”. ITC refused they are ‘brand stretching’ stating absence of a cigarette similarly named in India and the use of suffix “s” as reasons. However, ITC has a commonly sold cigarette brand named “Players” in the Indian market. The apparel brand was in the Indian market since 2001.[38][39][40]

Using the same colour scheme (red and white) as the logo of the BAT “John Player” cigarette pack, “John Players” apparel chain runs a prominent advertisement campaign targeting youth, sometimes even involving popular Bollywood actors (Image 4).[41][37][42]

  • ”Miss Players” - In 2006, the “John Players” apparel chain was expanded to include female wear for young females, introducing a brand named “Miss Players”. As mentioned earlier, ITC sells a cigarette brand named “Players” in the Indian market.[38][6][43]

Fabricating Support through Front Groups

ITC is reportedly a leading member of The Tobacco Institute of India (TII), “a representative body of farmers, manufacturers, exporters and ancillaries of the cigarettes’ segment of the tobacco industry in India”.[44][45] However, TII does not list its members in its website. As of 2017, TII reported to be a member of the following organisations:[44] International Tobacco Growers’ Association (ITGA) | International Tobacco Documentation Centre, UK | Tobacco Merchants’ Association (TMA), USA | Confederation of Indian Industry (CII) | Federation of Indian Chambers of Commerce and Industry (FICCI) | The Associated Chambers of Commerce and Industry of India (ASSOCHAM) | PHD Chamber of Commerce and Industry (PHDCCI) | Indian Chamber of Commerce & Industry (ICCI) | Federation of Andhra Pradesh Chamber of Commerce & Industry (FAPCCI) | Chambers of Commerce: Andhra, Karnataka & Maharashtra

Media reported several occasions in which TII attempted to influence tobacco control actions and policies. A few selected examples are listed below:

  • Implementation of PHWs - “sent repeated representations to the Union Ministry of Health and Family Welfare asking it to withdraw the notification mandating large-size pictorial health warnings”; conducted massive media campaigns generating doubt about effectiveness of PHWs and organised farmers’ protests against the expansion of PHWs on cigarette packs from 20% to 85%.[45][29][46]
  • Influencing Conference of Parties - demanded the Indian government to include them in the national delegation to the 7th Conference of Parties (CoP 7) of WHO Framework Convention on Tobacco Control (FCTC) held in New Delhi in November 2016.[47]. Further, TII publicly criticized FCTC for refusing the observer status to Federation of All India Farmers Association, a known front group with vested interests, to CoP 7.[48]
  • Tax increase - objected against an increase of cess on cigarettes stating it would be detrimental to tobacco farmers[49]

Corporate Social Responsibility (CSR) Initiatives

ITC has been criticised for using their CSR initiatives to engage tobacco farmers.[50]

TobaccoUnmasked Resources

Relevant Link

ITC Limited website: http://www.itcportal.com/

Notes

  1. Tobacco Free Kids. The Global Cigarette Industry, December 2016, accessed May 2017
  2. 2.0 2.1 ITC Limited. FMCG: Cigarettes, 2017, accessed May 2017
  3. 3.0 3.1 ITC Limited. ITC Limited: One of India’s Most Admired and Valuable Companies, ITC Corporate Presentation, 2017, accessed May 2017
  4. 4.0 4.1 MoneyControl. ITC hasn't kicked the butt, but journey from 'health hazard' to healthcare is complete, 29 September 2017, accessed October 2017
  5. 5.0 5.1 5.2 5.3 5.4 5.5 ITC Limited. Company Profile: History and Evolution, 2017, accessed June 2017
  6. 6.0 6.1 6.2 6.3 D Simpson. News Analysis: India Surrogates and Spoofs, BMJ Tobacco Control, 2009:18(3)p163, accessed April 2018
  7. 7.0 7.1 Department of Government Information. Ground Breaking Ceremony of ITC Colombo One, News.lk, 21 November (…), accessed May 2018
  8. ITC Limited. FMCG, 2017, accessed May 2017
  9. ITC Limited. Packaging, 2017, accessed May 2017
  10. ITC Company Limited. Hospitality, 2017, accessed May 2017
  11. ITC Limited. World-class, $300m "ITC One, Colombo 1" to open in 2021: Top Indian hotel chain adding a jewel to Lanka’s hospitality sector, 14 May 2016, accessed May 2017
  12. ITC Limited. Paperboards & Speciality Papers, 2017, accessed May 2017
  13. WWF-GFTN. GFTN in the News, 2017, accessed May 2017
  14. ET Bureau. WWF-India and ITC join hands for forest mgmnt practices, The Economic Times, 11 July 2009, accessed May 2017
  15. ITC Limited. Agri Business, 2017, accessed May 2017
  16. 16.0 16.1 ITC Company Ltd. Annual Report 2017, 2017, accessed October 2017
  17. S Reckhi, R Banerjee. Raising the Stake, indiatoday, 31 December 1994, Accessed May 2017
  18. The Times of India BAT not averse to raising stake in ITC, 5 July 2002, accessed May 2017
  19. I Gupta, T Surendar. Remaking Indian Tobacco Co., Forbes, 30 June 2010, accessed May 2017
  20. FirstPost. Indian govt is the biggest tobacco offender - and the biggest investor in ITC, 05 August 2014, accessed October 2017
  21. India Environment Portal. Insurance companies among top 10 shareholders of ITC Limited, 2012, accessed October 2017
  22. 22.0 22.1 ITC Limited. Board of Directors, 2017, accessed October 2017
  23. High Commission of India, Sri Lanka. website, undated, accessed April 2018
  24. Surya Nepal Private Limited. Company Profile, 2017, accessed May 2017
  25. Independent. India cigarette firms stop production over health warnings, 4 December 2010, accessed October 2017
  26. The Economic Times. ITC, Godfrey Phillips India shutter factories over warning pics, 03 December 2010, accessed October 2017
  27. BBC News South Asia. India tobacco firms halt production over health warning, 03 December 2010, accessed October 2017
  28. B B Chatterjee. Cigarette Factories – Shutdown, ITC Limited, 2nd April 2016, accessed October 2017
  29. 29.0 29.1 Punjab Today. Tobacco Companies Shut Factories; Opposing Cigarette Larger Pictorial Warnings, 01 April 2016, accessed October 2017
  30. The Times of India. Shareholders approve plans to enter health care: ITC, Business, 17 March 2017, accessed May 2017
  31. U P Mukherji. ITC to enter healthcare sector with hospital, The Times of India, 29 July 2017, accessed October 2017
  32. The Economic Times. ITC looking for a CEO to enter healthcare, 28 July 2017, accessed October 2017
  33. 33.0 33.1 OnedayCart. Brand Profile, undated, accessed April 2018
  34. IA Dutt. 40 Years Ago...and now: 'Made for each other'- A case of perfect insight, Business Standard, 20 November 2014, accessed April 2018
  35. TR Vivek. Tobacco ban forces ITC to stub Wills, 21 July 2004, accessed April 2018
  36. I Gubchik, I Zakrevsky. Cigarette Packaging, undated, accessed April 2018
  37. 37.0 37.1 Neoverve. Closure to Youth: John Player, Marketing and Management, 03 April 2010, accessed April 2018
  38. 38.0 38.1 Rediff India Abroad. ITC set to register John Players as apparel brand, 04 April 2003, accessed April 2018
  39. S Kar. John Players' new innings, Business Standard, 20 January 2013, accessed April 2018
  40. Business Standard. ITC Expands John Players, 14 June 2013, accessed April 2018
  41. ITC Lifestyle. John Players, 2018, accessed April 2018
  42. The Indian Beauty Blog. Men’s summer fashion trends with John Players, 16 June 2017, accessed April 2018
  43. India Retailing Bureau. ITC Group will Introduce Miss Players, INDIARETAILING.com, 02 June 2007, accessed April 2018
  44. 44.0 44.1 The Tobacco Institute of India. About Us, 2017, accessed October 2017
  45. 45.0 45.1 A Jithendra, U Bhojani. How The Tobacco Industry Wins Friends And Influences Policy, 02 June 2015, accessed October 2017
  46. A Pasricha. India's Tobacco Industry, Farmers Resist Warnings on Cigarettes, VOA News Asia, 06 May 2016, accessed October 2017
  47. W Mukherjee. Tobacco Institute doesn't want Tobacco policy development to be left to activists alone, The Economic Times, 30 August 2016, accessed October 2017
  48. Press Trust of India. WHO tobacco conference rejects applications for observer, undated, accessed October 2017
  49. The Economic Times. Cigarette industry body wants GST Council to roll back tax increase, 17 October 2017, accessed October 2017
  50. N V Rao. Neethi V Rao: Corporate social responsibility in India, ‘’’thebmjopinion’’’, 9th May 2014, accessed October 2017