Imperial’s Four Key Brands Account for 33% of Sales

Imperial Tobacco’s £1.2bn writing off of amounts of its Spanish business is a surprise. The manufacturer is the giant operator in the recession-hit country, where a half of the personnel is unemployed.
Volumes are declining and companies as Imperial have been raising prices in order to increase profitability. It has also been paying attention on its key brands such as Gauloises, Davidoff and West. These are higher margin products as well as Imperial’s rolling tobacco as Drum and Golden Virginia brands, which have been declining to. Whole sales of these fine cut tobaccos increased by 13%, with premium cigar sales up 10%.

The manufacturer has also been implementing innovation, as for instance its “Glide Tec” packages, which demonstrated positive results and great demand among many smokers. These packages have a little “window” on the front of the package which permits the smoker to slide up the inner package with their thumb, thus opening the pack with only one hand. In the year to September, net profit from tobacco increased 5% at constant currencies, with volumes of cigarettes sold dropped 2.5%. After the write-down, pre-tax revenues declined to £1.1bn from 2.2bn.

What is the most ethical tobacco company or cigarette brand?

• I believe American Spirit purport to be made from 100% organic tobacco with no chemical additives. The purpose of many of the additives in cigarettes is to affect the body in various ways so as to make it more susceptible to nicotine. Choosing not to put them in is either an ethical choice or a clever marketing ploy.
  Seth, Edinburgh, Scotland

• How can any tobacco company be ethical? They target children worldwide as the next generation of smokers, expand sales in developing countries with less stringent advertising regulations and lower public awareness) are desperate to induce even more women into smoking by associating cigarettes with "caring /feel-good" factors. And from an economic perspective (which seems to be the only thing that counts these days), our increasingly ageing populations simply cannot afford to lose their expensively educated young people so prematurely.
  Sheila Kirby, Esbjerg, Denmark

• I back what Vince says. People have many ideas of what "ethical" is, and it changes over time. The American Indian peace pipe has a different ethical tone to it than the much-maligned Marlboro co. To me, there's a good side and bad side to all things, and since all things are connected, we all have links to something "unethical". Eg: computers run off electricity, which is generally sourced from a mix of fossil fuels, nuclear and renewables, produced by various companies for mixed motives, operated by many different people, who have a much better chance of getting to know each other (and themselves) if they can access the internet and have these discussions. Peace (& yes, I smoke, but not 100% of my time is spent smoking!)
  René Thomas, Huddersfield, UK

• I am a Mohawk living on a reservation in NY, USA. People here do make cigarettes but we encourage young people not to smoke and leave that to a decision made by adults. I do not apologize for my people trying to survive by making a legal product. Also, a company here exports cigarettes to the UK called 1st-nation. These are made with ethically sourced tobacco from Malawi benfitting the underpaid farmers there, and employs Mohawk Natives living on our reservation. I believe these are the first ever Ethically Sourced cigarette. Thanks
  Andre, Akwesasne New York, USA

• 1st-nation have recently launched in the UK and are probably the closest thing to Fairtrade that we are going to get. They voluntarily pay the farmers a premium and also invest in agricultural diversity for these farmers. The various Fairtrade organisations have illogically refused to provide support to tobacco products, so 1st-nation is working with local Malawi farming authorities to set their own ethical standards. Additionally, the brand is priced similarly to other mainstream brands.
  Pritesh Mody, London UK

• Tobacco producers started adding a pesticide to their crops in the 1950's. Cancer was never linked to tobacco previous to this pesticide being added to the crop. Is organic tobacco the answer for those who choose to smoke?
  Andrew, South Shields England

Trends in Asian tobacco industry

Because in addition to the Chinese market, 42% of the market in Asia has not been occupied by multinational tobacco companies, tobacco companies around the active participation of local competition for market share.

Of local tobacco companies throughout Asia, they have a competitive advantage: implementation of ASEAN's internal policies and regulations on tobacco, and from Union countries to trade outside the tobacco companies will be punished, which means that they double-digit sales in the cigarette growth in the region by trade protection and benefit from. However, the multinational tobacco companies, the Asian market is still full of temptation. Vietnam tobacco in state ownership and local ownership on the relationship is unclear, leading to poor access to cigarette sales in the country, perhaps on the part of tobacco companies to privatize is an effective way to solve this problem. South Korea's KT & G Club will be the Asian region's most attractive acquisition targets, as Indonesia and Thailand Djarum tobacco company attractive. In addition to individual countries such as Singapore, most Asian countries, tobacco is still relatively moderate policy, and that in the short term there will be no significant change.

Also an issue of concern is: As cigarette taxes increase, the illegal cigarette trade has become increasingly rampant. Such as Malaysia, the domestic cigarette smuggling, cigarette smuggling in Asia accounted for 30% of total; and India, its domestic cigarette smuggling, cigarette smuggling in Asia accounted for 10% of the total to 15%. Asia, unlike Europe or Latin America, the overall situation as bad, but the local government should be noted that before the situation gets worse, "the smuggling of excise tax increase and the proportion of" problem.

In addition, Asia is still a good supply of leaf area. The development of tobacco production in India and Indonesia, the Philippines, Thailand, Vietnam and the expansion of tobacco farming in Bangladesh making Asia and Latin America, Africa is also important tobacco supply zones. All EU tobacco producers rely heavily on imported tobacco, especially cigarettes and opponents in the current consumer demand for home-made cigarette case. To meet the needs of the EU tobacco companies, tobacco suppliers in Asia need to use its tobacco processing methods. Meanwhile, Asia is growing different spices spices smoke to reduce smoke production uncertainty due to the Turkish adverse effects. Looking ahead, the major tobacco-growing countries in Africa as the uncertainty of production and leaf production in Brazil by the Brazilian domestic economy and the impact of currency appreciation in Asia have the opportunity to become the world's most important tobacco supply zones.

Cigarette consumption as an important tobacco market and supply areas, the next decade, Asia may become the world tobacco trade on the market the most active areas. Any company seeking to participate in the tobacco growing business in Asia to be necessary, of course, is difficult to enter the market early.

One of the most profitable industries in the world: Tobacco

The tobacco industry is one of the most profitable industries in the world. To market their deadly products, tobacco companies use their enormous wealth and influence both locally and globally. Even as advocacy groups and policy makers work to combat the tobacco industry’s influence, new and manipulative tactics are used by tobacco companies and their allies to circumvent tobacco control efforts. It is important for tobacco control advocates to know which companies are present, how and where they operate, the types and quantity of products sold, and marketing tactics used to sell tobacco products. By being informed about all aspects of the tobacco sale industry within a country, advocates are better equipped to fight the tobacco industry and its allies on multiple levels.
It is important to note that the tobacco companies typically report market data annually at least several months after the end of the fiscal year. By its nature, annual market data reported by analysts and tobacco companies are one or two years old. Therefore, general trends, forecast data, and tobacco industry positioning within the market contained here are the most recent we are able to obtain from tobacco analysts, Euromonitor International, and other sources.

Big tobacco gears up for awesome fight

Big tobacco is gearing up for the fight of its life against the federal government's plan to introduce plain packaging for cigarettes.

The industry has lodged 19 freedom of information (FOI) requests with the health department ahead of possible legal action against the reforms.

The requests seek thousands of official papers dating back to the early 1990s, including all documents created within the first Rudd/Gillard government relating to Labor's preventative health policies to reduce smoking.
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Health department secretary Jane Halton made public the scope of the industry's demands during a budget estimates hearing on Wednesday.

She was responding to a question from Australian Greens health spokesman Rachel Siewert.

"We have 20 FOIs at the moment in respect of this particular issue (tobacco)," Ms Halton said.

"Nineteen of the 20 are from tobacco companies."

The senior bureaucrat tabled the specifics of all 20 requests. She is taking further legal advice before possibly releasing the names of those behind the requests.

In April this year, Labor announced that from mid-2012 cigarettes would have to be sold in plain packets devoid of brand logos, images and colours.

Big tobacco immediately flagged possible legal action against the laws on the basis they would involve acquiring companies' intellectual property.

The government has said it expects cigarette manufacturers to use their combined resources to try to scuttle the move, which would be a world first.

The industry argues plain packages could easily be counterfeited and allow cigarettes to circulate without health warnings and ingredient reporting.

In the FOI requests, big tobacco seeks all documents created between January 2008 and mid-2010 by the National Preventative Health Taskforce relating to "anti-counterfeit measures" and "any anticipated increase in illicit trade".

Among the avalanche of requests, there is also a demand for papers relating to the 1992 legislation regarding advertising bans and the 1994 introduction of health warnings on cigarette packets.

Hot air from Big Tobacco

Any company selling products that addict and eventually kill 400,000 customers annually might well be reluctant to point out the health dangers.

So the federal courts should be mighty skeptical when Big Tobacco screams about its First Amendment rights to keep peddling cigarettes without the oversize health warning labels ordered by Congress this year.

With a free-speech lawsuit filed last week, the nation's largest tobacco companies challenged marketing restrictions and a mandate from the Food and Drug Administration to cover the top half of cigarette packages with graphic warnings by next year.

The glaring warnings on cigarette packs are among the directives provided under the FDA's new oversight of tobacco products approved in landmark public-health legislation signed by President Obama in June.

Along with the warning labels and limits on tobacco advertising, the FDA won the right to ban toxic substances in cigarettes and restrict levels of addictive nicotine.

But the trade-off was a major victory for tobacco companies such as giant Philip Morris U.S.A. that assured nicotine would never be banned. And now the industry can market its products as having the FDA's stamp of approval, even though smoking-related illnesses will continue to kill thousands.

Even with those gains in hand, there was little doubt that cigarette makers would try to wriggle out from under the FDA advertising and labeling mandates. In fact, it took just a few months.

For decades, tobacco firms hid the devastating health risks of smoking, made bogus safety claims, and pitched smoking to teens.

Despite that history as a rogue industry, the tobacco companies contend in their lawsuit that tobacco products are legal and, therefore, they have a right to market widely and refuse labels that "stigmatize their own products."

The case likely will reach the Supreme Court, which decisively struck down restrictions on billboard tobacco ads on free speech grounds in 2001. Were the industry's broad legal challenge to succeed, FDA regulation of tobacco would be virtually meaningless.

Maybe Big Tobacco will be able to hide behind the Bill of Rights, but Americans should have a greater right to public-health efforts designed to safeguard them from the deadly ills of smoking.

Tobacco Maker Names Chairman

British American Tobacco PLC on Wednesday tapped former Bank of Ireland PLC Governor Richard Burrows as its new chairman.

Mr. Burrows will take over from Jan du Plessis, who will become chairman of Rio Tinto PLC, on Nov. 1.

Mr. Burrows resigned from the Bank of Ireland in May, following a troubled fiscal year in which the bank's net profit dropped to €69 million ($97.5 million) from €1.7 billion a year earlier and had to seek €3.5 billion in financial assistance from the Irish government. Mr. Burrows apologized to investors at the time for the loss of shareholder value and the cancellation of the company's dividend.

BAT, meanwhile, demonstrated the resilience of the tobacco industry last month when it posted a 16% rise in first-half net profit to £1.45 billion ($2.4 billion).

Sales of cigarettes are continuing to hold up pretty well in the recession because smokers are reluctant to give up tobacco. Also, any dropoff in volume can be offset with price increases. The company's shares have risen 3.4% in the past year.

Analysts weren't concerned by Mr. Burrows's Bank of Ireland record, concentrating instead on his highly successful career in the fast-moving consumer-goods industry.

He was chief executive of Irish Distillers from 1978 until its takeover by Pernod Ricard SA in 1988. He continued to work within the French drinks company and eventually served as co-chief executive of Pernod Ricard from 2000 to 2005.

The BAT chair is a nonexecutive position, but a higher-profile role than at other similarly sized companies. During his five years in the job, Mr. du Plessis took responsibility for commenting on any political issues -- such as antismoking legislation -- leaving Chief Executive Paul Adams to concentrate on operational matters.

Mr. Burrows will be paid an annual salary of £525,000 and will work a two-day week for BAT. The salary is below the £686,000 Mr. du Plessis received to reflect the short working week, the company said.

Tobacco farming killing food production in West Nile

During the recent Jinja Agricultural Trade Show, I went to the World Food Programme (WFP) stall to find out if our small farmer groups in West Nile can benefit from P4P initiative supported by Bill Gates and Melinda, unaware of the fact that the region is not a beneficiary because of her inability to produce, even feed her own people.

While Food and Agriculture Organisation’s latest estimates put the number of chronically hungry people at 1.02b, up from 915m in 2008, Uganda’s West Nile region isn’t exempt from these global figures save for reasons that force people to go hungry. In an earlier article, I stressed the need for tobacco firms to be socially responsible, well aware of colossal cost we could one day pay for sticking to this cash crop.

Tobacco growing has partly contributed to the famine in West Nile. First and fore most, tobacco growing has led to destruction of forests and fruit trees to the point that the region now faces drought, reduced honey production and general environmental degradation-- a typical example of collapse Jared Diamond talked about in his book ‘Collapse: how Societies choose to Succeed and Fail’ in which he referred to Haitain society that ended up in cannibalism after destroying the vegetation on which their survival depended.

Because tobacco production also requires dedicating labour, land and other resources at the expense of growing subsistence crops, the potential for hunger and starvation is imminent. My estimation is that over one million people are engaged in tobacco value chain in Uganda. According to BAT, there are 17,500 registered tobacco farmers in West Nile. With such a high number of people engaged in tobacco and neglecting food production, what do we expect?

The health effects of tobacco production such as nicotine poisoning, pesticide exposure, respiratory effects, musculoskeletal and other injuries have consumed parts of the household incomes that would have gone to food production and purchase. Planting of eucalyptus with very high transpiration rate has drained a lot of water from the soils. Just imagine how much water has been drained from West Nile soils since the introduction of tobacco in the 1930s if over 100,000 combined farmers plant 100 eucalyptus seedlings each year with each tree sucking about 5 litre a day?

According a study by Prof. Zake of Makerere University, Ugandan soils have lost Nitrogen, Potassium and Calcium minerals. In tobacco growing areas, because of high population pressure, land is never allowed to rest to regain fertility. Remedial-yearly-application of fertilizers to increase tobacco yields seemed to have changed the soil PH, water retention and other properties of the soils thus contributing to the infertility.

In this catastrophe where governments and aid agencies strive to help the starving population, promoters of tobacco have done nothing to rescue their farmers? I thought the dramatic camping of two women with children at Arua Police Station could have sharpened their zeal to help but did it?

Above all, in West Nile, tobacco is grown by the poor, sold at throwaway prices determined by tobacco companies, processed by low-paid workers, sold to the poor and used by the poor, the majority of whom starve, stay poor, get sick while generating wealth for multinationals. With most profits going to middle men (tobacco buyers) and multinationals, farmers are left with no option but starvation after failure to raise enough money to buy food whose production is often ignored.

Sudan now offered unprecedented market and production stimulus for West Nile but this largely remained untapped because farmers opted for tobacco, insisting there is ready market.

The government should inform of seed inputs and subsidies support shift from tobacco to cultivation of other alternative crops with less requirements than tobacco. I also request WFP, as part of P4P initiative, to support tobacco farmers so as to increase food production in Maracha and Terego.

Philip Morris, Reynolds Top Analyst Profit Estimates

Philip Morris International Inc., the world’s largest publicly traded tobacco company, and Reynolds American Inc., the second-largest U.S. cigarette maker, reported second-quarter profit that topped analysts’ estimates and raised their 2009 earnings forecasts.

Higher prices helped Philip Morris, the maker of top- selling Marlboro cigarettes, earn 83 cents a share excluding some items, beating the average analyst estimate of 77 cents. Reynolds’ profit of $1.29 a share topped analysts’ expectations by 13 cents.

Philip Morris and Reynolds joined Altria Group Inc., the largest U.S. tobacco company, in saying price increases contributed to earnings and helped counter declining or little- changed shipments. Altria reported second-quarter earnings yesterday that also exceeded analysts’ projections.

“Everybody’s pricing has been impressive and shows the resilience of the tobacco space,’‘ Brian Barish, who manages Philip Morris and Altria shares at Cambiar Investors, said today in an e-mail. The Denver-based firm oversees $4.7 billion.

Philip Morris advanced $2.14, or 4.9 percent, to $46.02 at 4 p.m. in New York Stock Exchange composite trading. The shares have risen 5.8 percent this year. Reynolds gained $1.04, or 2.5 percent, to $42.22.

Net income at New York-based Philip Morris, which generates all of its revenue outside of the U.S., fell 8.6 percent to $1.55 billion, or 79 cents a share, in the second quarter from $1.69 billion, or 80 cents, a year earlier. Revenue declined 8.9 percent to $15.2 billion.

Philip Morris Forecast

Higher prices in Argentina, Germany, Russia and other major markets added to Philip Morris’ earnings while shipments of 223.2 billion cigarettes were little changed.

The company said currency fluctuations will hurt earnings less than it anticipated this year. It expects to earn $3.10 to $3.20 this year, higher than its February forecast of $2.85 to $3 a share.

Some analysts such as Christopher Growe of Stifel Nicolaus & Co. in St. Louis already raised their full-year expectations because of currency changes, pushing the average estimate to $3.11 a share.

The higher forecast “should bolster investor confidence that Philip Morris can sustain its solid underlying business momentum,’‘ Judy Hong, a Goldman Sachs Group Inc. analyst in New York, wrote today in a note to clients. She recommends buying the stock.

Through yesterday, the U.S. currency had fallen over the past month against all 16 most-traded currencies tracked by Bloomberg. The dollar’s decline helps revenue by increasing the value of overseas sales when converted to the U.S. currency.

Reynolds Earnings

Reynolds, based in Winston-Salem, North Carolina, said higher prices countered a 6 percent drop in shipments in the second quarter to 22.4 billion cigarettes.

Camel’s share of U.S. cigarette sales remained unchanged at 7.5 percent, while Pall Mall‘s share rose 2.6 percentage points to 5.2 percent. Reynolds’ total market share increased to 28.7 percent.

Reynolds “gained market share at the retail level, the first time in many years that the company was able to accomplish this,’‘ Thilo Wrede, a Credit Suisse analyst in New York, wrote today in a note to clients. He rates the stock as “neutral’‘ and said promotions contributed to the market share gain.

The company’s smokeless tobacco unit increased its market share to 29.4 percent from 27.5 percent, led by Grizzly snuff.

Reynolds projected 2009 profit of $4.40 to $4.60, an increase from a forecast of $4.15 to $4.45 in April.

Altria, based in Richmond, Virginia, reported yesterday adjusted earnings of 50 cents, helped by price increases and manufacturing cost cuts. The profit beat the average analysts’ estimate by 3 cents. Altria also raised its full-year profit forecast.

Philip Morris to Acquire Protabaco for $425 Million

Philip Morris International Inc. agreed to buy Productora Tabacalera de Colombia, Protabaco Ltda. for $452 million, its second acquisition this month as tobacco demand rises in emerging markets.

The purchase of Colombia’s second-largest tobacco company needs regulatory approval and is expected to be completed within six months, New York-based Philip Morris said today in a statement. The maker of Marlboro cigarettes bought Colombia’s biggest tobacco company, Compania Colombiana de Tabaco SA, in 2005.

Philip Morris, the world’s largest publicly traded tobacco company, agreed to buy Swedish Match AB’s South African unit for $224 million last week. Spun off last year from Altria Group Inc., Philip Morris generates all its sales outside the U.S. Revenue from Latin America and Canada rose 11 percent in the first quarter while falling 12 percent in Europe, the company said in April. Shipments in Colombia declined during the period, Philip Morris said.

Closely held Protabaco sells the Mustang, Premier and President brands. It had about 32 percent of Colombia’s cigarette sales last year, with revenue of $107.6 million and shipments of 6.1 billion cigarettes, Philip Morris said.

Philip Morris rose 1 cent to $42.35 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 2.7 percent this year.

EU wants 8.1 per cent rise in cigarette prices by 2014

Maltese smokers will have to fork out more money to keep puffing in the next few years as the European Commission yesterday laid out new plans aimed at narrowing the difference in price levels of tobacco products in the 27 member states while cutting tobacco consumption.

According to computations made by the EU, the price of a packet of standard cigarettes in Malta will have to increase by 8.1 per cent by 2014 in order to conform to the new rules on minimum taxation of tobacco products. At the same time, Brussels said that the increase in price in Malta should contribute to a reduction of 3.5 per cent in demand. The new proposed directive will need the green light of all the 27 EU member states in order to enter into force.

Smokers in the new EU member states are likely to be the most affected as taxes on cigarettes in these countries are still considered to be very low when compared to the EU average. Malta is however an exception as retail prices are already close to the average price in the EU. Currently, 60.82 per cent of the price of a packet of cigarettes goes to the Exchequer in excise duty and VAT. Still, the EU say this is not enough.

According to the EU, its proposal, part of a four-year review of tobacco duties, would reduce smuggling.

The Commission's primary tool would be to increase the minimum tax that member states impose on cigarettes.

At present, this minimum has two elements: the tax levied as a percentage of a packet's price, which must translate into a minimum price per 1,000 cigarettes. As a percentage, tax would have to rise from 57 per cent to 63 per cent by 2014 or from €64 per 1,000 cigarettes in the most popular price category to €90 for all categories.

Duties on loose-leaf tobacco would also be hiked to bring them more closely into line with those imposed on cigarettes.

A second element in the EU's plan is to tighten definitions of tobacco products because, during the past years, manufacturers have been able to re-classify products in order to quality for lower taxes.

Although through this new directive Maltese smokers would be badly hit, the impact on fellow smokers in some of the other new member states would be dramatic. According to EU calculations, while in countries like Denmark or Finland the price increase will be of about six per cent, in countries like Poland it will rise by 46 per cent.

Statistics show that in the five-year period between 2002 and 2006, excise duties in the EU rose by 33 per cent on average and cigarette consumption dropped 10 per cent.

Are Electronic Cigarettes Better For Your Health?

Ontario's anti-smoking law is one of the toughest in the country. So is Toronto's own bylaw.
Both ban smoking in offices and enclosed spaces. And both force puffers to head outside for a butt - even in the dead of a -30C winter or the heat of a 40-plus humidex.
Smokers have been forced to grin and bear it all these years, while crying they've been discriminated against. And many have been looking for loopholes to get around the all encompassing bans. And now some think they've found it, thanks to an electronic cigarette.
They're made by a company called Crown Seven. The user puts a nicotine capsule inside, then puffs on one end. The other end lights up just like cigarettes even though this product does not burn.
The gizmo delivers a hit of nicotine but lets out a puff of odourless water vapour instead of a plume of smoke. It only contains nicotine and not the hundreds of other chemicals that can be in a standard smoke.
It comes with a rechargeable battery that heats up the liquid nicotine and turns it into a gas. And since it's not technically cigarettes and doesn't threaten anyone else's airway, it may not fall under the strict laws regarding indoor puffing. But how does it taste?
"It's got a bit of a bite, sort of tobacco-like bite but it doesn't really taste like tobacco," reports volunteer Leo Jablonski.
They're for sale all over the Internet at a range of strengths and prices, and advocates insist they have lots of benefits. There's no chance of fire since you don't light them, they don't stain your teeth, there's no second-hand smoke and they may make quitting easier.
But vendors also claim they don't harm your health because the tar and smoke that comes with normal coffin nails isn't present.
"I think people need to be cautious," warns Dr Roberta Ferrence, director of the Ontario Tobacco Research Unit. "It's an unknown."
"The concern is that the product will probably be promoted as something that's safer than smoking," she adds.
Dr Ferrence doesn't think they're safe at all.
In an interview with CityNews Medical Specialist Dr Karl Kabasele, she pointed out the many disadvantages of this "smokeless" cigarette:
We don't know for certain that they are less harmful than regular cigarettes. They're not regulated, and because they're available in different strengths, it's difficult to gauge the danger.
It keeps smoking visible, and therefore increases its social acceptance, at a time when the Ontario government is working to make smoking "uncool."
Kids will have easier access to the gadget, and it may act as a gateway to the real thing.
It's not a tool to help you quit smoking; it's just a way to get around the smoking ban laws. There's no evidence that it can help with smoking cessation.
Finally, inhaling nicotine is the most addictive of all delivery modes.
However, the company never claimed it could be used to help you quit smoking.
"It's intended just for smoking alternative...for smokers to get their nicotine in nonsmoking environments," agrees Ron MacDonald, President and CEO of Crown Seven.