Business Plan for Cigi

Entrepreneurship & New Venture

Creation

Name: Artem Kozadaev

Date: 25.10. 2021
Professor: Prof. De Jong
Executive summary
The market for tobacco in India is extremely big – could be as big as $734 billion. It is also a
good place to be in, since almost 267 million Indians smoke regularly. We propose a business
solution that will provide single cigarette sales in India (other possible countries: Bangladesh,
Pakistan, Thailand). We also want to differentiate by providing customizable cigarette packs. For
example, a person might construct a pack of up to 20 cigarettes of different brands. We assume
that such a strategy is not only profitable, but also better for an average smoker’s health since
each would theoretically smoke less because they would buy as many cigarettes as they need.

As for marketing, we plan to create ourselves a reputation of the smoker’s friend. We want
people to trust the quality of the goods we sell because many single cigarettes sales in India
include counterfeit cigarettes which are even more dangerous than regular cigarettes. It is also
important that we only target the audience of above 18 years old.

The designs of our custom packs would vary for different age, gender, and income group. We
want to create a tobacco store that will satisfy the needs of both lower-income people and the
higher.

According to our pricing formula, the minimum price per pack would be around 3.5 USD which
is fairly affordable.

Our legal position in India is quite promising: there are no restrictions for foreigners willing to
open a business structure in India. However, the taxation system in India might be a bit pricy for
us, as tobacco retailers. Luckily, the amounts of possible profits in such a market is so big that
we can still reach a very high profit level.

We calculated that average daily profit of 100 stores serving 100 clients would be around 8000
USD.

In theory, such a scenario would break even roughly in 17 months.

Table of Contents
1. Introduction................................................................................................................................ 5
1.1 Entrepreneur’s presentation............................................................................................................ 5
1.2 Key considerations ............................................................................................................................ 5
2. Purpose ....................................................................................................................................... 5
2.1 Inspiration ......................................................................................................................................... 5
3. Defining Our Business .............................................................................................................. 5
3.1 Business model outline ..................................................................................................................... 5
3.2 Corporate identity ............................................................................................................................ 5
4.Setting Objectives ........................................................................................................................ 6
4.1 Our main objectives .......................................................................................................................... 6
4.1.1 Financial .......................................................................................................................................................6
4.1.2 Social ............................................................................................................................................................6
4.1.3 Legal .............................................................................................................................................................6
5. Marketing Planning ................................................................................................................... 6
5.1 Needs & Wants .................................................................................................................................. 6
5.2 Good & Service Description ............................................................................................................ 6
5.3 Sector analysis ................................................................................................................................... 6
5.3.1 Competition ..................................................................................................................................................6
5.3.2 Trends ...........................................................................................................................................................6
5.4 Market analysis ................................................................................................................................. 7
5.4.1 Target customers ..........................................................................................................................................7
5.4.2 Potential Market size ....................................................................................................................................7
5.5 SWOT Analysis ................................................................................................................................. 7
5.5.1 Strengths .......................................................................................................................................................7
5.5.2 Weaknesses ..................................................................................................................................................7
5.5.3 Opportunities ................................................................................................................................................7
5.5.4 Threats ..........................................................................................................................................................7
5.6 Value proposition .............................................................................................................................. 7
5.7 Branding Policy ................................................................................................................................. 7
5.8 Policy of Goods .................................................................................................................................. 8
5.8.1Packaging ......................................................................................................................................................8
5.8.2 Features ........................................................................................................................................................8
5.8.3 Quantity ........................................................................................................................................................8
5.8.4 Health ...........................................................................................................................................................8
5.9 Communication Policy ..................................................................................................................... 8
5.9.1 Distribution...................................................................................................................................................8
5.9.2 Pricing ..........................................................................................................................................................8
5.9.3 Associated services ......................................................................................................................................9
6. Productions and Operations Plan ............................................................................................. 9
6.1 Our Production ................................................................................................................................. 9
 6.2 List of Resources ............................................................................................................................... 9
6.2.1 Technical ......................................................................................................................................................9
6.2.2 Raw materials ...............................................................................................................................................9
6.2.3 Human Resources .........................................................................................................................................9
6.3 Costs of Goods ................................................................................................................................... 9
6.3.1 Wholesale cigarette prices in India ..............................................................................................................9
6.3.2 Cost of labor .................................................................................................................................................9
6.4 Other Considerations ..................................................................................................................... 10
6.4.1 Quality control............................................................................................................................................10
6.4.2 Ethics and sustainability .............................................................................................................................10
7. Organization Plan .................................................................................................................... 10
7.1 Our Structure .................................................................................................................................. 10
7.2 Tasks ................................................................................................................................................ 10
7.2.1 Financial .....................................................................................................................................................10
7.2.2 Marketing ...................................................................................................................................................10
7.2.3 Production and Operation...........................................................................................................................10
7.2.4 Retail ..........................................................................................................................................................11
7.3 Human Resources Planning ........................................................................................................... 11
8. Legal ......................................................................................................................................... 11
8.1 Legal form ....................................................................................................................................... 11
8.2 Documentation and further papers ............................................................................................... 11
8.2.1 Licenses ......................................................................................................................................................11
8.2.2 Registration ................................................................................................................................................11
8.3 Brands and patents ......................................................................................................................... 11
8.3.1 Ownership of pack designs ........................................................................................................................11
8.3.2 Relationships with cigarette manufacturers ...............................................................................................11
8.4 Tax obligations ................................................................................................................................ 11
8.4.1 Indirect .......................................................................................................................................................11
8.4.2 Direct ..........................................................................................................................................................11
9. Financial Planning .................................................................................................................. 12
9.1 Investment Plan .............................................................................................................................. 12
9.1.2Approx. per store opening cost ...................................................................................................................12
9.2 Profit and loss forecast ................................................................................................................... 12
9.3 Break-even Analysis ....................................................................................................................... 12
Bibliography ................................................................................................................................. 13
Appendices.................................................................................................................................... 15
1 .............................................................................................................................................................. 15
2. ............................................................................................................................................................. 16
3. ............................................................................................................................................................. 17
1. Introduction
1.1 Entrepreneur’s presentation
Artem Kozadaev,20, is the main influencer of this business plan. He is currently enrolled in the
Bachelor of Business Administration program at EU Business school in Geneva. Artem had
experience in physics, music production and marketing.
He takes role in marketing planning, financial planning and legal analysis.

Kartem Zazadaev,20, another contributor of the business organization. He had the same experience
as his college, Artem, since they have went to the same school, same activities and lived together.
He is the main spokesperson.

1.2 Key considerations

The main considerations for this business plan and our team are to attract enough investment in
order to meet our financial, marketing, sales and production goals

2. Purpose
The main purpose of our business project is to provide more flexibility to smokers who have to
sometimes look for compromises which makes their experience of consuming nicotine worse.

2.1 Inspiration
As for inspiration, Artem Kozadaev took it from his friends who have indicated that his idea would
be appreciated in the smokers’ community. He has received many complaints from his smoking
friends who have noticed that sometimes they find it “boring” to smoke 20 cigarettes of the same
kind.

3. Defining Our Business

3.1 Business model outline
Our business model is to sell customizable cigarette packs on demand. The main feature of such
an approach would be that a customer would not need to stay with a pre-defined pack – they would
be able to pick different cigarettes (up to 20 cigarettes). They beauty of such a solution is that our
consumers would be motivated to buy our product due to saving opportunity that they get. Indeed,
they wouldn’t have to purchase excess cigarettes which they will be eventually bored of. They
could construct a pack that they would find exceptionally interesting only for them. Furthermore,
we can also buy up (or give them franchising) already existing independent/illegal tobacco shops.

3.2 Corporate identity

Our idea is to create our brand the reputation of the smoker’s friend. Our company would not
present itself as an opposer of nicotine.
However, our firm strictly discourages minors to smoke. It is not only illegal, but immoral in our
view.
4.Setting Objectives
4.1 Our main objectives
4.1.1 Financial
• Our financial objective is to provide our investors a profitable project from which we can
mutually benefit in a financial way.
• To open up to 100 retail points.
4.1.2 Social
• To reduce the number of cigarette packs sold per individual. Our prediction is that
customizable cigarette packs would reduce the overall amount of nicotine consumption by
a population.
• To provide a better experience for smoker’s reducing their stress levels and lifting some
financial pressure.
4.1.3 Legal
• To demonstrate possible positive effects of regulated single cigarette sales.

5. Marketing Planning
5.1 Needs & Wants
Needs: The main need of our intended customers is to smoke cigarettes. We address their need by
selling them tobacco-based products such as cigarettes.

Wants: At the same time, our audience would most likely want to spend less money on sustaining
their habit. Our idea is to convince them that by selling single cigarettes (even with a higher per
assembled pack price) they would save because they would eliminate excess purchases. Some
mind not need 20 cigarettes of Marlboro Red, for example.

5.2 Good & Service Description

Our good is a reassembled customizable cigarette pack containing up to 20 cigarettes of different
brands. As part of the service, the customization process is included in the purchase.

5.3 Sector analysis

5.3.1 Competition
• Our competitors are all the shops which sell cigarettes or tobacco containing goods.
• It is possible that we would also compete with gift stores as our customizable cigarette
packs might make a good gift.

5.3.2 Trends
In our intended markets (e.g India, China, Bangladesh), single cigarette sales are a popular
trend which dominates in lower-income segments. About 75% of all cigarette sales in India
are single cigarettes (Lal et al., 2015).
5.4 Market analysis
5.4.1 Target customers
Age: Adults of 18+ years old. To appeal to younger consumers, we would produce more
colorful designs which refer to popular trends.
Gender: Both genders. However, men smoke more. According to The Times of India,
about 70% of Indian males smoke, compared to only 15% of women (Choudhari, 2019).
Income: It is believed that single cigarette sales are mostly apparent in lower income
societies (Lal et al., 2015). However, we personally think that in a controlled environment,
people of higher income levels would also buy our solution in order to enrich their smoking
experience with new pack designs and personalized cigarette choices.
Place: We plan to be a big retail tobacco chain. However, since single cigarette sales are
more demanded in lower-income areas, we will start there.
5.4.2 Potential Market size
• Combined market size: 267 million people (Tobaccofreekids, n.d).
5.5 SWOT Analysis
5.5.1 Strengths
The main strength of our good is its necessity. For many people cigarettes are a necessity
good which insures our sales in the long run. Furthermore, the innovation part in the form
of customizable designs might attract new clients.
5.5.2 Weaknesses
Possible weaknesses are basically related to higher price per pack. As we have seen
before, many Indian smokers are within a lower income class. Especially those who buy
single cigarettes.
5.5.3 Opportunities
India (and other available markets) is a massive market with nearly 270 million possible
clients. Roughly, if every smoking Indian buys a minimum priced pack at our store, we
would gain (267 million * $3.5) $934.5 million.
5.5.4 Threats
The threats associated with our operation cannot be underestimated. The global fight
towards reducing the number of smokers has the potential of threatening the existence of
our business.
5.6 Value proposition
Our potential target audience has to clearly understand the value of our product:
• Money-saving opportunity due to less cigarette packs purchased in the long run. Our clients
wouldn’t buy extra cigarettes that they don’t need. At least they would think so.
• Attractive pack designs would make it a better experience.
• Controlled environment. Many single cigarettes in India are a bootleg. Our brand
guarantees factory level quality. Therefore, good brand image and trust are definite.
5.7 Branding Policy
Our chosen name for the brand: Cigi

Our branding objectives:

• To create a “smoker’s friend” reputation.
• To create cigarette pack designs which appeal to the maximum number of people.
5.8 Policy of Goods
5.8.1Packaging
The packaging of our goods would be one of the main selling points. Our idea is to provide
cigarette packages of different color, material and design. We also want to differentiate
between different regions. For example, seasonal designs to appreciate holidays in China.
This would also encourage people to buy more of our customizable packs in different
countries to collect all regional exclusives.
5.8.2 Features
The main feature of our good and service models is the ability of having a personalized
cigarette pack with different cigarettes inside.
5.8.3 Quantity
There will be up to 20 cigarettes per pack.
5.8.4 Health
It is planned that we put a warning sticker on top of each pack in order to comply with
international health regulations. However, we personally believe that some people would
actually both consume and spend less due to our business model.
5.9 Communication Policy
5.9.1 Distribution
Our plan is to create our own brand image. That is why we want to have our separate retail
points where we can put our own personnel, logos and decoration.
5.9.2 Pricing
We are using this calculation to find the minimum price. The reason for that is the low-
income level in India. By evaluating the minimum possible price level we can judge
whether our solution would sell:

𝑃 𝑚𝑖𝑛 = (𝑃1 × 𝑄) + 𝐶 + 𝑀
𝑃 − 𝑀𝑖𝑛𝑖𝑚𝑢𝑚 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 "𝑐𝑒𝑒𝑔𝑒𝑒" 𝑝𝑎𝑐𝑘
𝑃1 − 𝑀𝑖𝑛𝑖𝑚𝑢𝑚 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑐𝑖𝑔𝑎𝑟𝑒𝑡𝑡𝑒
𝑄 − 𝑀𝑎𝑥𝑖𝑚𝑢𝑚 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝑐𝑖𝑔𝑎𝑟𝑒𝑡𝑡𝑒𝑠 (20)
𝐶 − 𝑀𝑖𝑛𝑖𝑚𝑢𝑚 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 (𝑝𝑒𝑟 𝑝𝑎𝑐𝑘) + 𝑀𝑖𝑛𝑖𝑚𝑢𝑚 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 (𝑝𝑒𝑟 𝑝𝑎𝑐𝑘)
𝑀 − 𝐴𝑟𝑡𝑖𝑓𝑖𝑐𝑖𝑎𝑙𝑙𝑦 𝑎𝑑𝑑𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 (𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑜𝑓 𝑃)

Since India is one of the biggest markets available to us, we will calculate an approximate price
for Indian market:

P (min. per pack) = 220 Rupees = $2.94 (Jaiswal, 2020).

P (min. per cigarette) = $0.147
Q = 20
C production (a worker in store)= ($108.3(monthly)/31*24*60) * 3 (estimated time per customer)=
$0.0073 (Paycheck, 2021)
C operation = to be defined
M = 0.5527 (18.8% of pack’s original price)
P min total = $3.5
 5.9.3 Associated services
• Associated services include regular cigarette sales in case some people decide not to have
a customizable pack.
• Furthermore, our customers might ask our employees to construct a pack for a gift.
• Possible production of pack designs on demand.

6. Productions and Operations Plan

6.1 Our Production
Despite us being a tobacco-related company, the only production that is involved is the production
of customizable cigarette packs. As we have found out, cigarettes packs are literally built around
the cigarettes themselves to keep them fresh (Shrink Wrap, 2017). For that reason, we will bulk
buy prepacked cigarettes. We will only open a pack once a number of cigarettes is demanded.
Then, this pack would be sealed again, with the use of vacuum machine.
In order to minimize the costs in the beginning, we would bulk buy blank cigarette packs from
Custom Boxes Zone firm. However, as soon as we reach economies of scale, we could think about
starting our own production.

6.2 List of Resources

6.2.1 Technical
• Vacuum machine – to seal opened packs to preserve cigarettes inside.
• Cash register – to receive cash payments.
• Credit card terminal – to receive credit card payments.
• Cigarette pack machine (in future) – to reduce our per pack cost.
6.2.2 Raw materials
• Cigarettes – we will bulk buy cigarettes directly from manufacturers.
• Paper, cardboard, foil – to run our own packaging manufacturing process in future.
6.2.3 Human Resources
• Sellers – have to know how to operate a vacuum machine.
• Designers – will design cigarette packs.
• Packaging machine operators
6.3 Costs of Goods
6.3.1 Wholesale cigarette prices in India
Unfortunately, we were unable to find any data on Indian wholesale prices on cigarettes.
However, according to Department of Taxation and Finance in New York, a wholesale
price on a cigarette pack is usually twice as low as a retail price (Department of Taxation
and Finance, 2021). Therefore, we can assume that the minimum price that we are to pay
per pack in India is 110 RS (depending on cigarette brand)

6.3.2 Cost of labor

See 5.9.3 Pricing.
6.4 Other Considerations
6.4.1 Quality control
One of the ideas of our business is to provide a safer environment for single cigarette sales.
For that reason, we will use original cigarettes and vacuum machines (to keep opened packs
fresh). Our employees on site and managers would make sure that all these safety measures
are kept.
6.4.2 Ethics and sustainability
• Selling cigarettes is unethical for many reason. However, since the market for single
cigarette sales in India is significantly large and uncontrolled, our operations would
improve the situation.
• Our theory is that buying single cigarettes in a controlled environment helps to reduce the
overall amount of nicotine consumed.

7. Organization Plan
7.1 Our Structure

Our structure is tall since many Asian markets really appreciate such a structure. It would
be easier for local employees to adapt to it.
7.2 Tasks
7.2.1 Financial
1. Accounting.
2. Investment attraction.
3. Funding.
7.2.2 Marketing
1. Advertising.
2. Market analysis.
7.2.3 Production and Operation
1. Printing pack designs.
2. Pack production.
 7.2.4 Retail
1. In-store sales.
2. Packaging.
7.3 Human Resources Planning
Our business model is only applicable to some countries like India, Bangladesh and others. We
want to use local workforce. Such an approach would have two benefits: 1) lower wages; 2) better
integration.

8. Legal
8.1 Legal form
Our operations will begin in India due to some limitations in Europe. Since there are no limitations
related to nationality of a business in India it will be a good starting point. We have decided to
adopt Public Limited Company (Ltd.) legal form.
8.2 Documentation and further papers
8.2.1 Licenses
According to Get License – Indian firm, providing legal services, - our business model has
to get the tobacco license. You can see the prices for getting such license in Appendix 1.
8.2.2 Registration
The registration process in India is fairly simple and has few limitations. The main
requirements are: 1) 3 Directors with minimum 5 RS lakh shares; 2) payment of registration
fees of about 2000 RS. You can also see the full list of requirements and documents needed
in Appendix 2.
8.3 Brands and patents
8.3.1 Ownership of pack designs
Our customizable pack designs are to be our intellectual property.
8.3.2 Relationships with cigarette manufacturers
To eliminate possible legal conflicts, we will not use any brand names in our designs. It
will only be possible if a cigarette brand agrees to it.
8.4 Tax obligations
8.4.1 Indirect
Service Tax: 14%, added to price of goods
Sales Tax: 18% (different in each state)
VAT: Up to 15%
GST: 28% for tobacco, 18% for packaging.
8.4.2 Direct
MAT: 18.5%
Corporate Tax: Depends on revenue, up to 41.2%
Capital Gains Tax: 20%
Income Tax: Up to 30%
9. Financial Planning
9.1 Investment Plan
9.1.2Approx. per store opening cost
• According to InstorIndia, it would cost maximum 15 RS lakhs or about 20,000 USD
(Instor India, 2021). Let’s imagine that we will eventually open 100 stores, which would
cost a maximum of 2,000,000 USD.
• A professional vacuum machine could cost 1500 USD. If we buy a machine for each of
our 100 stores, we have to invest 150,000.
• Total investment for 100 stores: 2,000,000.
9.2 Profit and loss forecast
• Average Indian smokes about 8.2 cigarettes a day (Rawar et al., 2014). If we reach at
least 1% of all smokers in India (2.67 million people), we can sell 21.9 million cigarettes
a day which is $3,219,300 ($0.147 * 21.9 million) a day. We understand that this is a
distant figure, but it still shows the potential. It is also possible, because our business
might replace all the illegal cigarette shops in India.
• In case we look at an individual shop we can assume that at least 100 people buy a pack
in our store. That would be 2200 RS – 10000 RS (30 – 130 USD, average of 80 USD).
Unfortunately, we can’t know how many people would visit a single store. It could be
more. So, a hundred stores would bring us EBIT of 8000 USD daily (2,880,000 USD
yearly).
9.3 Break-even Analysis
Let’s assume that we pay a total of 50% in taxes. That brings our profit after taxes to the level
1,440,000 USD per year and 120,000 USD montly. Furthermore, if we look at the salary needed
to pay to the workers at the store, we would get 12996 USD yearly. Theoretically, we could
break-even about in 17 months.
Bibliography
Admin (n.d.). How to Get Tobacco License Registration in India? [online] Get License.
Available at: https://getlicense.in/how-to-get-tobacco-license-registration-in-india/ [Accessed 30
Oct. 2021].

Choudhari, A. (2019). “There is increased acceptance to women smokers in society” | Nagpur

News - Times of India. [online] The Times of India. Available at:
https://timesofindia.indiatimes.com/city/nagpur/there-is-increased-acceptance-to-women-
smokers-in-
society/articleshow/67917739.cms#:~:text=According%20to%20a%20study%20published
[Accessed 28 Oct. 2021].

ClearTax (2013). Public Limited Company. [online] cleartax.in. Available at:

https://cleartax.in/s/public-limited-company-india.

Department of Taxation and Finance (2021). Minimum wholesale and retail cigarette prices.

Government of India (n.d.). Tax System. [online] www.startupindia.gov.in. Available at:

https://www.startupindia.gov.in/content/sih/en/international/go-to-market-guide/tax-system-
india.html.

Instor India (2021). How Much Money Is Required To Open A Kirana Store | Instor. [online]
Instor India. Available at: https://www.instorindia.com/how-much-money-is-required-to-open-a-
kirana-store/ [Accessed 30 Oct. 2021].

Jaiswal, P. (2020). Now smoking will cost you more! ITC hikes cigarette prices by 10-20% post
budget announcement. [online] www.indiatvnews.com. Available at:
https://www.indiatvnews.com/business/news-itc-cigarette-prices-hike-by-10-20-per-cent-
nirmala-sitharaman-budget-excise-duty-tobacco-cigarettes-588514 [Accessed 28 Oct. 2021].

Lal, P., Kumar, R., Ray, S., Sharma, N., Bhattarcharya, B., Mishra, D., Sinha, M.K., Christian,
A., Rathinam, A. and Singh, G. (2015). The Single Cigarette Economy in India - a Back of the
Envelope Survey to Estimate its Magnitude. Asian Pacific Journal of Cancer Prevention, 16(13),
pp.5579–5582.

Maps of India (n.d.). Types of business entities in India. [online] business.mapsofindia.com.

Available at: https://business.mapsofindia.com/doing-business-in-india/types-of-business-
entities-in-india.html [Accessed 30 Oct. 2021].
Paycheck (2021). Minimum Wage Check. [online] WageIndicator subsite collection. Available
at: https://paycheck.in/salary/minimumwages/17875-jharkhand/17881-any-shop-or-
establishment [Accessed 28 Oct. 2021].

Rawar, P.S., Pednekar, M.S. and Fong, G.T. (2014). The relation between price and daily
consumption of cigarettes and bidis: findings from the Tobacco Control Policy Evaluation Wave
1 Survey.

Shrink Wrap (2017). Cigarette Packaging Explained. [online] ME Shrinkwrap. Available at:
https://meshrinkwrap.com/news/cigarette-packaging-explained/.

Tobacco Control Laws (n.d.). Compare Countries | Tobacco Control Laws. [online]
www.tobaccocontrollaws.org. Available at:
https://www.tobaccocontrollaws.org/legislation/compare/restrictions/15 [Accessed 25 Oct.
2021].

Tobacofreekids (2017). The Toll of Tobacco in India. [online] Campaign for Tobacco-Free Kids.
Available at: https://www.tobaccofreekids.org/problem/toll-global/asia/india.
Appendices

(Admin, n.d)
2.

(ClearTax, 2021)
3.

(Government of India, n.d)