ITC hikes Gold Flake cigarette prices but will it hurt growth?

Deutsche Bank believes price hike poses risk to short-term value growth trajectory for ITC‘s cigarettes. Earlier in 2014/15 when price-point of Gold Flake Kings (premium cigarettes of 84mm length) reached and crossed Rs 10 per stick it did result in a volume deceleration and decline.

January 18, 2017 / 08:23 IST

26 Aug, 2025 12:21

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Moneycontrol Bureau Shares of ITC rose over 1 percent intraday Tuesday after it increased cigarette prices. The FMCG major has recently increased price of its key brand Gold Flake 69 mm cigarette to Rs 90 per pack of ten from Rs 78 per pack. However, Deutsche Bank thinks effective price hike for the consumer is 25 percent considering 70 percent of cigarettes sold in India are lose as retailers are now charging Rs 10 per stick for Gold Flake 69 mm.

Deutsche Bank believes price hike poses risk to short-term value growth trajectory for ITC’s cigarettes. Earlier in 2014/15 when price-point of Gold Flake Kings (premium cigarettes of 84mm length) reached and crossed Rs 10 per stick it did result in a volume deceleration and decline.

"ITC will also have to dynamically manage the likely consumer downtrading to 64 mm from 69 mm. Moreover, the CPI in India is low currently; a headwind for price hikes in general. The last price hike in Gold Flake 69 mm was in March 2015 and hence there’s some headroom for price increases," Deutsche Bank says in a note. Gold Flake 69 mm accounts for 30 percent of volumes, 35 percent of value sales and 40 percent of cigarette EBIT.

ITC remains preferred pick for Deutsche Bank among staples reiterating buy rating with a target price of Rs 290. "The stock has performed well in 2016 , however, cheap valuations and reasonable earnings visibility are attractive factors in the current consumption uncertainty," it reasons.

At 12:33 hrs ITC was quoting at Rs 250.40, up Rs 1.60, or 0.64 percent on the BSE. Posted by Nasrin Sultana