GPI reworks marketing strategy

Reeling under the impact of a complete ban on tobacco advertising announced by the government last May, Godfrey Phillips India (GPI) had been reworking its marketing strategies.

Now the unexpected 10 per cent surcharge on tobacco announced during Budget 2005, has left the cigarette company scrambling to correct its pricing strategy too.

For starters, GPI has increased the price of its cigarette brands such as Red & White, Cavendars Magna and North Pole. The price for a pack of 10 cigarettes has gone up by 50 paisa. The loose stick prices remain unchanged.

Says Sundeep Kumar, senior VP (corporate), GPI: "The price increase will be implemented in a phased manner." The fact is that the tobacco companies were prepared for a 2 per cent health cess in the budget. "The 10 per cent surcharge was totally unexpected," adds Kumar.

But cigarette companies like GPI have reasons to worry for the cigarette market declined after the 2002-2003 hike in prices. To push its products in the market, GPI is now concentrating on below-the-line activities.

Since no form of advertising is permitted, GPI is looking at innovative packaging for its brands. In the last three months, the company has come up with two new package designs for its brand. The packs are definitely more eye-catching.

Explains Kumar: "Cigarette packets are being used as a communication device between the manufacturers and the consumers. We're trying to build some excitement around packaging itself," he says.

In the absence of mass media campaigns, the cigarette company is now focusing on point of sale (POS) as well. And the people who seem to be laughing all the way to the bank are the retailers. This is primarily because the only place left for any advertising activity is the corner pan shop.

"These panwallas are our only means of talking to the consumer. And since each stall can display only two advertising boards (of 3x2 feet) each, the retailer asks us for almost 10 times the amount that he was originally charging. The highest bidder (read cigarette company) obviously gets the space," explains Kumar.

The stringent norms on the size and the number of display boards as well as their content ("cigarette will not be sold to people below 18 years") leaves even ad companies with little scope for innovation.

With all the doors to reach their consumers virtually shut (including surrogate advertising which pushed the company to rename its Red & White Bravery Award to Godfrey Phillips Bravery Awards) ), GPI is investing time and money in developing a new products cell.

Predictably, Kumar is tightlipped about the kind of products that the cell is working on. However, he does remark that it will look only at tobacco-related products rather then diversify into a completely new sector.