How Governments Use the Health Card Selectively When They Are Lobbied by Tobacco Companies

Yesterday, the head of the Committee on Subordinate Legislation, Dilip Gandhi, stated that there was no Indian study that confirmed the link between the use of tobacco products and cancer. This came just as India defers its deadline to increase the size of pictorial warnings on tobacco products from 40 percent to 85 percent of the display area on its packaging. Gandhi also mentioned that the panel sought deferment of the date in order to examine the issue of tobacco cancer in the Indian context, because to increase the size of warning would be to put crores of tobacco workers in Madhya Pradesh, Andhra Pradesh, Maharashtra and Chhattisgarh out of work. In The Caravan’s September 2014 issue, Nikita Saxena investigated the marketing methods employed by tobacco companies to bypass India’s existing tobacco laws and restrictions on advertising. In this excerpt from that piece, Saxena reports on the sway tobacco lobbyists—from Marlboro, in this case—have over successive governments.

By all accounts the Indian tobacco industry is thriving. In the quarter ending in June 2014, Godfrey Phillips India, the company that partners with Philip Morris India in manufacturing Marlboros in the country, reported a 13.86 percent increase in net sales. Last year, a London-based market research firm found that Marlboro was India’s fastest-growing cigarette brand, and that its brand value in the local market between 2008 and 2012 increased by a staggering 330 percent. The British brand Benson and Hedges, which came in second, grew by a mere 113 percent in comparison.

And yet, Marlboro’s market share in India is just about half a percent, largely because it was a late entrant into a field dominated by native tobacco giants. Godfrey Phillips India, a joint venture between Philip Morris and the diversified KK Modi Group, produces popular local brands such as Four Square, Red and White, Cavenders and North Pole. ITC Limited, a Kolkata-based conglomerate, looms large over the industry—it makes Classic, Gold Flake and Navy Cut cigarettes, among others. A behemoth which began life as the Imperial Tobacco Company in 1910, ITC is not just India’s biggest seller of cigarettes; it also has interests in consumer goods, hotels, and information technology. Its cigarette business grew by 19 percent in the last quarter.

Marlboro was launched as an imported product in 2003, five years after the Indian cigarette market opened to foreign direct investment. (In 2009, the brand came under the control of a license agreement between Philip Morris India and Godfrey Phillips India.) While it may be easy to ascribe Marlboro’s rise in India to the overall growth in the tobacco market, the brand’s triple-digit growth, and the fact that its nearest competitor trails it by over 200 percent, makes it hard to attribute its success solely to a rising tide that lifts all boats.

A former programme manager and Leo Burnett India employee, on condition of anonymity, explained to me that ITC’s methods of dominating the market were impossible to emulate. Its equation with retailers around India was unbeatable; because of its comparatively low production costs, the company offered them the highest profit margins. The programme manager recalled that when Marlboro approached street vendors and stall owners in parts of north India, they were told point-blank that any special treatment, such as preferential placement of Marlboro products on shelves or displays, was out of the question. He attributed this to ITC’s ability to strong-arm shopkeepers. If anyone gave a non-ITC brand particular prominence, the company could simply withhold its own wares, and no vendors could afford to see Wills, Classic or Gold Flake cigarettes disappear from their shelves. I spoke to six vendors and stall owners in and around Delhi, who all said they gave ITC brands greater visibility. Two of them also admitted that they would not give Marlboro any preference because they feared being denied ITC products.

A number of the anti-tobacco activists I spoke to claimed that ITC’s ability to lobby politicians was also unmatchable. In April 2010, citing reasons of public health, the government again banned all foreign investment in the tobacco products market. This was a major blow to the ambitions of companies such as Japan Tobacco, maker of brands such as Winston and Camel, which withdrew from the country. But, a Delhi-based health activist claimed, the retraction was actually a consequence of ITC’s fervent lobbying with the health and finance ministries, meant to thwart attempts by its foreign investor, British American Tobacco (which currently has about a 30 percent stake in ITC), to become the majority stakeholder. The government’s selective use of the health card drew disapproval from both multi-national companies and critics of the tobacco industry. As several public health activists pointed out, domestic tobacco products were just as likely to injure consumers’ health as those sold by foreign companies.

This was the environment in which Marlboro, the world’s best-selling cigarette brand, set out to play catch-up. Its Indian adventure did not begin successfully. A former Leo Burnett official—not one who had doubled up as programme manager—told me that the “grey” market for counterfeit Marlboro cigarettes, routed into India via Nepal, Bangladesh and China, was then already well established. But the low quality of the fake Marlboros hawked to Indian smokers had damaged perceptions of the brand. The former Philip Morris India official concurred. By his account, changing this perception once the company started manufacturing in India was an arduous challenge. It needed to communicate, to both existing and potential consumers, that Indian Marlboros were authentic and of high quality—and it had to do so without violating the country’s plethora of regulations.

An excerpt from 'Smokescreen,' published in The Caravan's September 2014 issue. Read the story in full here.