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March, 2008

Renegade-Auction

BAT wins auction for Turkish tobacco giant Tekel

London - British American Tobacco has won the auction for Tekel, the state-owned Turkish tobacco group, with a bid of $1.72 bn (£894 mn), marking the company’s first major takeover since 2003.

This acquisition comes shortly after the Turkish parliament passed a law raising the consumption tax on tobacco while simultaneously banning smoking in public areas. According to BAT, though the ban would lower consumption, it is not expected to decrease more than 10%.

The acquisition of Tekel gives BAT 36% of the market, and Turkey comprises one of the eighth largest tobacco markets with annual consumption figures reaching 115 bn cigarettes a year.

BAT manufactures Dunhill, Kent, Pall Mall and Lucky Strike cigarettes.


Germany
Altadis is coming to Inter-tabac
Dortmund - For the first time, Altadis U.S.A. will be a major exhibitor at Inter-tabac in 2008. Some of the brands that Altadis plans to feature in Dortmund are Don Diego, Santa Damiana, Flor de Copan, AyC, Phillis, Hav-a-Tampa, Dutch Masters, and Backwoods.

Inter-tabac 2008 takes place from the 19th to the 21st of September in the Messe Westfalenhallen Dortmund in Germany with exhibitors from more than 20 countries. This year marks the 30th anniversary of the trade fair.


India
South America tobacco group enters India
Mumbai - The cigarette smoking community of India has a new brand to puff away, coming from the South American continent. The South American Tobacco Group, better known as SATG, has just introduced its V8 Filter Kings in three centers in Gujarat, with plans to move through urban areas across India.

The Managing Director of SATG said he believes the Filter Kings have prospered in India due to the rapid changes in the urban Indian way of life. “We feel that offering a good blend with convenient pricing and an innovative approach can make the difference.” India is the one of the largest tobacco producers in the world.


Nigeria
Nigerian state withdraws $23 bn tobacco lawsuit
Lagos - The Nigerian state of Lagos has withdrawn it’s 2.7 tn naira ($22.9 bn) lawsuit against British American Tobacco, Philip Morris International, and Nigerian International Tobacco Ltd.

Lagos, Kano, and Gombe sued for a grand total of $38.6 bn in May of 2007, seeking damages for what they claimed to be public health costs for treating smoking-related diseases and illnesses.

It is not currently known why Lagos withdrew its case.

This case was stirred by lawsuits against the tobacco industry coming from the United States during the 1990’s.

The government of Lagos aims to ban the sale of cigarettes to citizens under the age of 18, end youth-targeted advertising, and discontinue the sale of tobacco within one kilometer’s distance from playgrounds, theatres, hospitals, schools, and other locations used by children and teenagers.

They also accuse tobacco companies of targeting young smokers through the sale of individual cigarettes, thereby skirting and weakening the disuasive power of the mandatory health warnings printed on the pack.


Spain
Imperial Tobacco files offer for Logista
Leganes - Imperial Tobacco Group PLC has announced the filing of their offer for any shares of Logista not owned by Altadis, the current owner of nearly 60% of Logista’s shares.

Logista is one of the leading logistics operators for the tobacco industry, handling the document, book, and publication sectors in Portugal and Spain, offering storage and stock management, invoicing, collection management, warehousing, product and facility insurance, distribution and return services.

Altadis made its offer at approximately 52 euros per Logista share, and is waiting for formal authorization from the Spanish Securities and Exchange Commission.


United States
Pepin to leave Padilla
Miami - Jose “Pepin” Garcia is officially no longer working as the manufacturer of Padilla Cigars.

Garcia worked with Padilla since 2005 in the El Rey de los Habanos factory in Miami and the Tabacalera Cubana S.A. in Nicaragua. Garcia will continue to make the Tatuaje and 601 in addition to his own Don Pepin cigars. He recently acquired Ashton Cigar Distributors as a client in San Cristobal.

Padilla Cigar’s 1932, 1948, and Padilla Miami will now be rolled in a factory soon to be opened by Padilla in Miami, Florida in the near future.


China and Tobacco in 2007: A Retrospective
By Max Gartman

A glance back at China, one of the most quickly growing tobacco industries, with figures, brands and a strange occurrence that reminds us why China is worth watching.


The tobacco industry of China saw a steady and stable improvement and development in 2007, through the definite increase of cigarette production, sales, and stocks; the price kept stable, and economic efficiency went up.

The industry sold 213.95 bn cigarettes (42.7918 mn cases) in 2007, up 5.1% on a year-on-year scale. 3,566 cases of cigarettes were sold per month, up 0.201 mn cases from 2006. The top 10 brands of grade one sold 1.9814 mn cases and the top 10 grade two brands sold 2.0463 mn cases. 700.31 bn low grade cigarettes were produced in 2007, a decrease of nearly 7.56% from last year.

At the end of 2007, two brands, Hongmei and Baisha, came out with sales of over 2 mn cases in China, and 13 others, including Hongjinlong, Honghe, Hademen and Huangguoshu, with sales over 1 mn cases. The top 10 brands make up 37.8% of the cigarette industry, up almost 6% from 2007. The tobacco industry has generated 388 bn yuan in taxes from manufacturing and commercial sales, and earned over 160.3 bn yuan total, 99.8 bn yuan of which came from commercial profits.

Not long before the Spring Festival holiday season, Shandong Provincial China Tobacco Industry Corporation, the Shandong Province tobacco industry operator, provided a presentation for its new high-grade Mount Tai cigarette brand: Mount Tai (Confucian Style). Mount Tai (Confucian Style) retails at a price of 800 yuan (110 US dollars) per carton, while Yunyan (Soft Gift Impression) retails at 1,200 yuan (167 US dollars) per carton. Other new brands introduced included Honghe (Road), the Hibiscus King (Blue Starry Sky) and Yunyan (Soft Gift Impression).

According to the new standards for grade one, the top ranked brands are Chunghwa, the Hibiscus King, Yuxi, Yunyan, Liqun, the Yellow Crane Tower, Nanjing, and Suyan.

Many brands whose cigarettes are not grade one meet the standards for high-grade, if not top-grade tobaccos. For instance, Guiyan has met top-grade specifications for the Shengshi series, retailing at 1,000 yuan (139 US dollars) per carton; Pride meets top-grade specifications for the Heavenly Pride (Gold) series retailing at 600 yuan (83 US dollars) per carton; and the Seven Wolves meets top-grade specifications for the Shengdian Wolves series retailing at 1,000 yuan (139 US dollars) per carton.

All of the top-grade cigarette brands in China registered a rapid growth of sales in 2007 with sales figures for Chunghwa, the Hibiscus King, Yuxi, the Yellow Crane Tower, Suyan, and many other top-grade brands outselling most medium-grade brands. These brands cannot continue to be measured with outdated standards; their efficiency and capacity continue to increase.

It’s worth noting that some of the high-grade brands have suffered from the problem of overstretching their grades one, two and three cigarettes. Some of the high-grade brands have top-class cigarettes retailing at 1,000 yuan (139 US dollars) or more per carton in addition to their low-class cigarettes retailing as low as tens of yuan (several US dollars) per carton, making for a surprisingly broad range of products, each of which has a vastly different retail price.


Tobacco International - March, 2008
BMJ


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