Study on the Implications for Producers and the Supply Chain
Group 10 | Marketing Research Project | November 18, 2012
A Food Safety and Standards Authority of India (FSSAI) regulation issued on August 1, 2011 has recommended a ban on the manufacture, sale and storage of tobacco/nicotine-based pan masala, 1 gutka . This is in accordance with the Food Safety and Standards (Prohibition and Restrictions on Sales) Regulations of 2011 which empower the Food safety Commissioner to ban products that use tobacco and nicotine as ingredients in any food products. The state could now ban gutka using this regulation coupled with a Supreme Court ruling that stated, "since pan masala, gutka and supari are eaten for taste and nourishment, they are all food." Following the reclassification of gutka - a form of chewing tobacco - as a foodstuff, 14 states in India 2 have now banned its sale, production and distribution . These states include Madhya Pradesh, Kerala, Bihar, Rajasthan, Maharashtra, Gujarat, Haryana, Chhattisgarh, Jharkhand, Tamil Nadu and Delhi. According to recent reports, the Uttar Pradesh government has already begun the process of 3 4 banning these products and the West Bengal government is mulling implementation as well . With nearly 13 out of every 100,000 Indians suffering from oral cancer according to the World Health Organisation, it is hoped the ban will help improve the nation's health.
The implementation on the ban of chewable tobacco in the form of gutka, pan masala, mawa, khaini or zarda has made an impact throughout the supply chain for these products. The implications or impact of the ban at various points in the supply chain is discussed briefly here: A. Raw Material Producers: The ingredients for preparation of gutka are crushed areca nuts (also called betel nut), tobacco, catechu, paraffin, slaked lime and sweet or savory 5 flavorings . Upon the implementation of the ban, producers of these products have suffered since the demand and consequently, the prices have fallen drastically. There is a fear of the market drying out in the years to come. B. Gutka Brand Manufacturers: The “chewing tobacco” product category accounted for 6 55.6% of the total market for tobacco in India in 2010, which was valued at $13,470 million . There are several manufacturers of chewing tobacco in the country and all firms in the business have been affected by the outlawing of the product. C. Supply and Distribution Chain: The distribution of chewing/smokeless tobacco is managed mainly by the manufacturers themselves whereby manufacturers appoint regional wholesalers and distributors for the distribution and management of their 7 products, allowing them to achieve deeper penetration . The ban has affected stakeholders present at each level of the supply chain. D. Consumers: Due to the addictive nature of tobacco consumption via smoking/ingestion, there is bound to be an impact on the consumers of smokeless tobacco. It remains to be seen what consumption trends emerge due to scarce or no availability of chewing tobacco. The broad objective of this project is to analyse what new dynamics have emerged in the market due to the ban, at all these levels, barring the consumers since we believe that it requires a detailed study to assess consumers as a segment given the size and diversity of the market in India. Several recent reports of reactions to the ban have brought to light various issues and in certain cases, controversies. Though the implementation of the ban itself is at best nascent, it is potentially a landmark development in the tobacco market of India. Since the ban has been proposed and discussed for the state of West Bengal as well, an attempt has been made to quantify the
implications for retailers in the city of Kolkata, specifically. The methodology for conducting the research is described briefly below.
A combination of...