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February, 2008


Government may allow foreign tobacco companies into India

New Delhi - International tobacco majors like British American Tobacco and Phillip Morris may soon be able to set up operations in India. The government may free the industry from license norms, just as it had done for alcohol companies in 2007.

Current norms do not permit international tobacco companies to set up shops in India, either directly or indirectly. Foreign direct investment is not allowed in tobacco processing as well as cigarette manufacturing.

But once the licensing regime is eased, international companies can set up operations. In addition, the move would offer the government ways to open the sector to global companies for manufacturing, marketing, and retailing as well.

But, like the alcohol sector, the international companies may have to piggyback Indian partners to set up manufacturing facilities. The other option is to allow them to enter branding agreements with Indian companies so that domestic companies produce foreign cigarette brands in India and sell in the home market. The sales revenue of the cigarette industry in India was about Rs 17,500 crore in 2006–07.

“The government wants to open up the sector gradually, as there are many issues attached to such a move. A decision on this will be taken at the political level soon,” said a government official.

Currently, international companies are allowed to import a specified quantity of cigarettes using the duty-paid route. Besides, international cigarettes brands are also smuggled into India or are purchased by travelers at duty-free shops before they enter the country. De-licensing will go a long way towards eliminating smuggling of foreign brands that eat into the profit margins of domestic tobacco companies.

Critics raise stink about cigarettes with less tobacco smell
Ottawa - Mirage cigarettes are a new product, exclusive to Canada, that Japan Tobacco’s Canadian subsidiary, Mississauga-based JTI-Macdonald, is promising will have “less lingering tobacco smoke smell in an enclosed area when compared to a typical Canadian cigarette.”

Andre Benoit, JTI-Macdonald’s Vice-President of Corporate Affairs and Communication, says the cigarette paper for the new product has a vanilla aroma used to improve the smell of the smoke. He says neither the ads or packaging indicate Mirage cigarettes are less hazardous to health than other varieties.

Filtrona Filters opens new plant in Budapest
Budapest - World-leading tobacco filters-supplier, Filtrona, opened a new manufacturing plant on the outskirts of Budapest in Hungary.

The new plant officially opened for business in October 2007 and will continue to develop over the next two to three years to offer the full range of Filtrona’s specialist filters using state of the art manufacturing equipment and techniques, as well as providing increasing employment opportunities for the highly skilled and committed local workforce in Hungary.

Martin Dudley, Global Operations Director for Filtrona filters commented on the new site: “The Hungarian plant will help our customers capitalize on the shift in market demand to central and eastern Europe by providing them with reasonably priced and conveniently located access to Filtrona’s expertise and high quality service.”

He continued: “This modern, well equipped facility will provide our customers with a highly efficient Eastern European source of Filtrona products, supported by the full benefit of Filtrona’s extensive experience and technical knowledge.”

South Korea
KT&G signs deal to sell to Middle East and Russia
Seoul - South Korea’s largest tobacco producer KT&G Corp reported it has signed a deal worth $476 mn to sell cigarettes to Alokozay International Ltd.

The cigarettes, including its flagship Esse Lights, will be sold in the Middle East and Russia, the company said in a regulatory filing. The value of the contract is equivalent to 19.9% of the total revenue it made last year.

The United Arab Emirates-based Alokozay International is a unit of Alokozay Group, which has tea and cigarette businesses. KT&G shares finished up 1,300 won or 1.6% at 82,900 won, while the mainboard KOSPI closed down 3%.

United States
Evans MacTavish becomes Evans-MacTavish-Agricraft, Inc.
Wilson - Machine maker, Evans-MacTavish has officially changed their name to Evans-MacTavish-Agricraft, Inc. as of the first of the year. This reflects the company’s 2006 purchase of the Agricraft Company, whose product line consisted of fertilizer handling equipment and repair parts. The newly-dubbed company will continue to expand into all three of their major markets: tobacco processing equipment, metal fabricating, and fertilizer handling equipment.

General Cigar acquires sweet assets
Las Vegas - General Cigar announced in early December that it has acquired certain assets of Havana Honeys Holdings LLC, a privately-held company that manufactures and markets flavored cigars under the Havana Honeys brand.

Included among the acquired assets are the Havana Honeys trademark as well as inventory and related assets to support the premium cigar segment of Havana Honeys. Terms of the purchase have not been disclosed.

Under the agreement, General Cigar, a subsidiary of Swedish Match AB, will assume the production, marketing, and selling activities associated with Havana Honeys flavored premium cigars, one of the three business segments under the brand. Joe Gold, the founder of Honeys, will retain the marketing and selling activities associated with the two other business segments of Havana Honeys: the “little cigar” business and operation of the Havana Honeys retail outlet at McCarran International Airport in Las Vegas.

Established in 1997, Havana Honeys is one of the best-selling premium flavored cigar brands in the US, best known for its unique collection of flavor profiles and innovative packaging. General Cigar currently participates in the flavored premium cigar segment through Kahlúa Cigars Delicioso by Drew Estate and Helix Remix cigar brands.

Tobacco International - February, 2008

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