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December, 2007

2007: A Year of Big Changes in a Shrinking World

Remember 2006? Remember back a year ago when Gallaher and Japan Tobacco (JT) were two separate multi-national tobacco entities? Now, courtesy of JT’s acquisition of Gallaher, one-in-ten sticks smoked anywhere on the globe (of the legal variety) are produced by the newly-engorged JT Group. You also may remember that back in 2006 Imperial and Altadis were two different companies—in fact, the 5th and 6th largest in the world—but after a protracted bidding war, and for a mere $16 bn, Imperial acquired Altadis and can now lay claim to being the 4th largest tobacco honcho on the planet. And if you can recall all the way back to the wee weeks of 2007, you might even remember when Altria still had a hand in the food industry with its majority stake in Kraft foods—that all ended with a spin-off completed in March. And of course, speaking of spin-offs as they relate to Altria—up to a few months ago, it was an undisputed fact that Altria had two inseparable arms of its Phillip Morris holdings: Phillip Morris International (PMI) and Phillip Morris USA (PM USA). But in all likelihood, by this time next year, the flourishing PMI will be amicably-divorced from Altria, while PM USA will remain state-side, still grasping for the large, but steadily evaporating pot of USA tobacco money. What a difference a year can make.

We saw 2007 continue the steady migration of the industry into the East—in both production and its emphasis on consumer markets. But this year also found another uniquely Western export start to seep eastward: tobacco regulation. This year we covered stories on smoking bans and anti-cigarette campaigns in China and Africa, we saw the big cigarette manufacturers getting netted in the civil legal systems of Saudi Arabia and Nigeria, and, of course, watched a steady line of cigarette taxes get levied the world over.

This year we saw high-quality cigars starting to become fashionable among the young, hip, and urban in both China and India in a trend reminiscent of the West in the ’90s. Snus are making the jump from Scandinavia into markets the world over (outside of the EU, where, aside from Sweden, they are prohibited), not just as alternatives to smoking but as paths to a complete cessation from cigarettes.

While we have seen some hints of what the calendar year ahead holds, the fast changing nature of this market insures this time next year, we will find editorials and industry commentary the world over, astonished at all the changes in the year that was.

- Evan D. Dashevsky

Tobacco International - December, 2007

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