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June, 2008

SMOKE Magazine - Cigars, Pipes, and life's other desires

Argentinean Cigarette Market Grows

Buenos Aires - The total cigarette market grew 6.7% for the first-quarter 2008. PMI said its cigarette shipment volume increased 10.2%.

For 2007, British American Tobacco reported that its profit in Argentina grew as prices increased after the severe price competition of 2006. Other factors included a better product mix and cost-saving initiatives. Its shipment volume and market share, however, were both down. - Bickers

Logistics Technology Company wins bid for transformation of Fujianese tobacco manufacturer
Fujian - Southern China’s New Trend International Logistics Technology Ltd. won the bid for the technical transformation of the Seven Wolves brand superior-class cigarette production lines and establishment of a logistic automation system at Fujian Provincial China Tobacco Industry Corporation (FPCTIC).

There were three divisions of FPCTIC up for bidding, “formulas, auxiliary materials and finished product,” “cut tobacco container storage,” and “filter tip curing,” all of which were won by New Trend International Logistics Technology Ltd. These divisions covered six subsystems: formulas and cigarette packaging, cut tobacco container storage, Grade One storage of auxiliary materials, auxiliary materials balance, finished products, and filter tip curing.

Japan Tobacco net profit up
Tokyo - Japan Tobacco Inc. (JT) said its net profit rose 13.3% over the course of 2007, and the disadvantage of weaker business in Japan was offset by the acquisition of Gallaher Group Plc, makers of Benson & Hedges and Silk Cut cigarettes, and Hamlet cigars. Overseas business doubled its operating profit to 205.3 bn yen, with focus directed at expanding markets in eastern Europe, Russia, Ukraine, and Kazakhstan.

JT may possibly also raise the price of domestic cigarettes, marking its first non-tax related price hike in over a decade. This hike coincides with other price increase throughout Japan on commodities from gas to beer to noodles. JT spokeswoman Yukiko Seto said that there is a motion to move consumers towards higher-cost value-added products, and if this tactic did not reduce JT’s costs, then it would “consider” raising prices.

Consumption holding stable
Mexico City - The total cigarette market was stable for the first-quarter 2008, reported Philip Morris International (PMI). PMI’s cigarette shipment volume increased significantly, it said, driven by Marlboro, the market leader.

Industry volume in Mexico hasn’t recovered from a large excise-driven price increase at the beginning of 2007, according to British American Tobacco. This, together with a lower market share and a weaker currency, resulted in lower profit for the company through the end of last year. - Bickers

Philip Morris doubles tobacco purchase to 5.2 mn kg
Luzon - Tobacco farmers of Northern Luzon made a comeback from natural disasters in 2005, and as a testament to their recovery, Philip Morris Philippines Manufacturing Inc. (PMPMI), makers of Marlboro, bought a total of 5.2 mn kg of Virginia and Burley tobacco in 2007, more than double the 2.4 mn kg of 2005.

PMPMI’s Managing Director, Chris Nelson, congratulated the farmers as well as assuring them that PMPMI would purchase nearly all of their tobacco harvests, and if the quality of the crop were high, PMPMI would again facilitate the exporting of local tobacco abroad.

When disaster struck in 2005, PMPMI allocated over 4 mn pesos for the relief and rehabilitation assistance to all the affected tobacco farmers.

United Kingdom
British American Tobacco profit up, despite difficulties
London - British American Tobacco PLC announced a 12% profit jump in the first quarter, with global sales offsetting a decline in US sales.

According to BAT, “The benefits from higher cigarette pricing was more than offset by a number of factors that lowered volumes, including higher prices, wholesale inventory shifts and continuing weakness in the US economy.”

According to Richard Hunter, analyst at Hargreaves Lansdown Stockbrokers, “Not only is the group increasing sales in the emerging economic regions to counterbalance the threats to its traditional marketplaces (and at generally higher prices), it is also looking to use the lower cost wages of such regions.”

United States
Philip Morris USA raises prices for Marlboro and others
Chicago - Philip Morris USA has raised the price on Marlboro, Basic, L&M, and most of its other cigarette brands by nine cents per pack.

This was done by reducing the promotional discount given to wholesalers, and these reductions are “typically passed on to consumers in the form of higher prices,” according to Reuters.

PM USA says that the average price for a pack of Marlboros had been $4.27 in the first quarter.

By this same process, wholesalers lost their 20-cent promotional discount on Parliament cigarettes.

South Africa
Tobacco giant tackles new bill
Johannesburg - Philip Morris SA, a division of Philip Morris International, has urged MPs to change the Tobacco Products Control Amendment Bill’s definitions of advertising and promotion, arguing that the present wording would prevent legitimate communication within the industry.

The bill aims to add greater restrictions to the advertising, sponsorship, and promotion of tobacco products is currently before Parliament, and includes “all commercial communication or action brought to the notice of any member of the public” as part of the definition of advertisement, and says “the practice of fostering awareness of positive attitudes towards a tobacco product or manufacturer for the purposes of selling” falls under promotion. Philip Morris spokesman Neetesh Ramjee said, “If strictly interpreted, a phone call, a price list or a job advertisement would have tobacco companies falling foul of the law.”

The current law says that all signs for tobacco must be placed within a 1m radius of the point of sale, and carry health and minimum age warnings, as well as price and availability information; the bill proposes limiting these to a single sign at the point of sale.

Tobacco International - June, 2008
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