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The First Tobacco survey in India report has been released by Union Health Minister Ghulam
Nabi Azad, based on interviews of 69,296 adults. The survey indicates health ministry gravity
in strengthening tobacco control policies and might lead to a). reduction in farm acreage of
tobacco in the longer run and b). increased taxes on tobacco products.
This study, however, also gives some data points which indicate that the volume pressure on
tobacco industry (ITC, etc) in light of price increases, pictorial warnings and ban in public
spaces might be limited.
• Despite clear pictorial warnings on tobacco packages, the survey reveals that three in
five (61%) tobacco users ACTUALLY notice the health warning on tobacco packages.
About two in three adults (64.5%) noticed advertisement or promotion of tobacco
products.
• The survey finds that only One in three current tobacco users (31.5%) thought of
quitting tobacco because of the warning label. Five in ten current smokers (46.6%) and
users of smokeless tobacco (45.2%) planned to quit or at lease thought of quitting –
survey does not specify on what % actually manage to quit smoking in light of
these pictorial warnings.
• The ban on smoking in public spaces has hardly any effect. Among adults who visited a
restaurant, 16.1% observed someone smoking in a designated non-smoking area.
• The level of education was found to have little effect on curbing tobacco consumption.
Though the industry dynamics is becoming negative for tobacco companies in the
longer run, it is little early to pre-empt an absolute bearish case. ITC recorded ~8%
volume growth in cigarettes, despite restrictions (pictorial warning and ban on
smoking in public spaces) being in place. Q1FY11 recorded -3.5% volume growth
for ITC, and the company expects flat volumes with upward bias in FY11.
Cigarettes account for ~15% of tobacco consumption while Bidi and chewing
tobacco account for the balance. So, there is a huge opportunity for ITC to uptrade
consumers in the longer run. At CMP of INR 168, the stock is currently trading at a
P/E multiple of 22.7x on FY12 earnings, representing 8% discount to the FMCG
mean. Any weakness in ITC on back of this news flow is a buying opportunity. We
have a ‘BUY’ rating on the stock.
Other Highlights of First Global Adult Tobacco Survey (GATS) India
• India is world's second largest consumer of tobacco and world's third largest producer of
tobacco.
• Current cigarette smokers: 5.7% of adults: 10.3% of males and 0.8% of females.
• 274.9 mn Indians consume tobacco.
• Current tobacco smokers: 14.0% of adults: 24.3% of males and 2.9% of females
• Current tobacco use in any form: 34.6% of adults; 47.9% of males and 20.3% of
females
• Current bidi smokers: 9.2% of adults: 16.0% of males and 1.9% of females.
• Among daily tobacco users, 60.2% consumed tobacco within half an hour of waking up
• Average age at initiation of tobacco use was 17.8 with 25.8% of females starting tobacco
use before the age of 15
• Among smokers and users of smokeless tobacco who visited a health care provider,
46.3% of smokers and 26.7% of users of smokeless tobacco were advised to quit by a
health care provider
• About five in ten adults (52.3%) were exposed to second-hand smoke at home and
29.0% at public places(mainly in public transport and restaurants)
• ~ 0.9 mn tobacco-related deaths occur in India annually (higher mortality than the
combined deaths resulting from other major diseases, such as tuberculosis, HIV AIDS
and malaria) as compared to 5.5 mn world wide.
• In terms of region, the north eastern states have the highest number of tobacco users,
with 19.3 percent people using tobacco in one form or the other
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