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To differentiate 64mm, ITC ups Gold Flake price

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In less than four months, cigarette-maker ITC has again hiked the prices of Gold Flake, its largest selling brand.

Now, a pack of 10 Gold Flake Filter cigarettes will cost Rs 59, up from Rs 55. The price of Gold Flake Premium has been upped by Rs 3 to Rs 58.

ITC confirmed the price hike but refused to comment on its pricing strategy.

The second round of price hikes comes after the Budget hiked excise duty on cigarettes by 18%. Also, states had increased value added tax (VAT), which had resulted in a hike of around 350 basis points.

Before the round of price hikes in April this year, both Gold Flake Filter and Gold Flake Premium were retailing at Rs 48.

Abneesh Roy of Edelweiss Securities believes a second round of price hike was needed to cover the increase in costs on account of excise duty and VAT hikes.

However, it is likely that most consumers will not really feel the pinch. According to estimates, close to 70% of the cigarettes are sold loose, not in pack formats.
And retailers had anyway been selling the cigarettes at Rs 6/per stick.

Analysts said a second round of price hikes in just four months proves the company is confident about its volumes.

Going ahead, price hikes are expected in other brands, too, they said.

Experts believe the latest price hike will increase the ‘premium’ quotient in the Gold Flake brand and help increase the gap between the 64 mm and 69 mm cigarettes.

ITC has started rolling out its small-sized cigarette – the 64 mm segment – nationally. Price hikes will, to some extent, ensure that the threat of cannibalisation is removed, said experts.

“We also believe this presents an opportunity for the Gold Flake consumer to upgrade as the price differential between Gold Flake regular filter and Gold Flake Kingsize narrows to Rs 1/stick. And that is a much better value positioning,” said Sunita Sachdev of UBS.

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