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July 24th, 2012:

Peers back smoking ban for cars with children present

http://www.bbc.co.uk/news/uk-politics-18963680

24 July 2012 Last updated at 08:24 GMT

Description: Man smoking in car

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Peers have backed plans to ban smoking in cars when children are present, but supporters admit they do not have government backing for the move.

The House of Lords approved Lord Ribeiro’s private member’s bill to make offenders liable for a £60 fine or attendance at a smoke awareness course.

The measure would need the support of MPs to become law and David Cameron has questioned whether it is justified.

He has suggested it would have serious implications for personal freedoms.

Mr Cameron told MPs last year that while he backed the ban on smoking in pubs, he felt “more nervous” about proscribing what people should and should not do in private vehicles.

‘Raise the ante’

Parliament needed to have a “serious think” before taking such a step, he added.

The Lords voted through Lord Ribeiro’s bill – which was backed by many health campaigners and charities – on the nod on Monday.

The Conservative peer said there was not strong government support for legislation in the area, with ministers favouring education as a way of persuading parents to change their behaviour.

He said most smokers did not do so while driving their children but there was a “hard core” of parents whose behaviour had to be addressed.

The proposed legislation would “raise the ante” over the issue and remind ministers there were other options should their approach not succeed in protecting children from harm.

Labour MP Alex Cunningham introduced legislation urging a ban in the Commons last year but despite clearing its first legislative hurdle, it faced significant opposition from MPs of all parties

China The Big Brands Era Begins

How Ironic:

China’s vice-premier Li Keqiang charged with the wellbeing of the nation  and his brother Li Keming  who is the deputy head of the China State Tobacco Monopoly Administration.

Two brothers in charge of opposite causes.

http://www.tobaccoasia.com/features/385-china-the-big-brands-era-begins.html

China: The Big Brands Era Begins

By Allen Liao

China’s tobacco industry has ushered in an era of rapid development of its big competitive cigarette brands through a fundamental structural reform over the past few years, characterized by the appearance of well-known big brand families and the permanent disappearance of thousands of little-known small cigarette brands.

In 2010, there were 13 Chinese cigarette brands each with an annual sales volume of over 1 million cases (50 billion cigarettes), including six each with an annual sales volume of over 2 million cases.

Big brands structure

The year 2010 saw the rapid development of big competitive cigarette brands in China.

“In the year, we had 13 cigarette brands each with an annual sales volume of over 1 million cases and 15 brands each generating over RMB20 billion (US$3 billion) in annual commercial wholesale income,” director-general Jiang Chengkang of the State Tobacco Monopoly Administration (STMA) recalled recently. “Therefore, big competitive cigarette brands showed a greater role in dominating the marketplace.”

Of the 13 cigarette brands each with an annual sales volume of over 1 million cases in 2010, there were six each with an annual sales volume of over 2 million cases – Mount Hongtashan, Baisha (White Sand), Hongjinlong (The Red Golden Dragon), Honghe (The Red River), Double Happiness and Hongqiqu (The Red Flag Canal). In particular, Mount Hongtashan took the first place with an annual sales volume of 2.7452 million cases. In the year, key cigarette brands designated by STMA saw their value rising sharply. For example, Chunghwa saw its annual sales soar to RMB76 billion, while Yunyan (Yunnan Tobacco), Furongwang (The Hibiscus King), Mount Hongtashan, Liqun (Benefiting All) and Baisha each saw their annual sales rise to over RMB40 billion.

Of the 15 brands each generating over RMB20 in annual commercial wholesale income, there were six with annual commercial wholesale income reaching over RMB40 billion – Chunghwa, Yunyan, Furongwang, Mount Hongtashan, Liqun and Baisha. In particular, Chunghwa saw its annual commercial wholesale income exceed RMB74 billion in the year. For many consecutive years, Chunghwa has remained on top of the list of big Chinese cigarette brands in terms of annual commercial wholesale income.

The rapid development of cigarette brands in 2010 meant a great success for the tobacco industry, achieved in the first year of its five-year plan for stepping up brands development. In a work report delivered at the 2010 national tobacco work conference held in Beijing, Jiang Chengkang, for the first time ever, put forward the “532” and “461” brands development strategies of STMA.

The “532” development strategy provides that in a period of five years or longer, efforts will be intensified to develop two well-known cigarette brands each with an annual output of 5 million cases, three each with an annual output of 3 million cases and five each with an annual output of 2 million cases.

And, the “461” development strategy provides that by the year 2015, efforts will be intensified to develop 12 highly influential cigarette brands each capable of generating over RMB40 billion in annual sales income, including six each capable of generating over RMB60 billion in annual sales income, and one capable of generating RMB100 billion yuan in annual sales income.

License production

To promote development of big competitive cigarette brands, STMA stepped up efforts to urge tobacco manufacturers to introduce cigarette production under license in 2010. In the year, STMA promulgated the Opinions on Guiding the Work of Cigarette Production under License, worked out relevant plans, made relevant policies and issued rules for regulating accounting. It designated 18 cigarette factories to introduce cigarette production under license in the year.

Deputy director-general Li Keming of STMA said that introduction of cigarette production under license was an effective approach to reform the structure of resources for cigarette production, with development of big competitive brands at the core, and that it would play a crucial role in promoting cigarette production in China to a higher level.

In late 2010, China National Tobacco Corporation (CNTC) invested RMB10.885 billion in technological transformation of the enterprises designated to introduce cigarette production under license, to assure the quality of cigarettes produced under license. Commenting on prgress made in 2010, Wang Ping, director of the Economic Operation Department of STMA, said that breakthrough had been made in terms of the quantity of cigarettes to be produced, the scope of production, construction of production bases and the issue of annual cigarette production quotas.

In 2010, the designated enterprises produced 259 billion cigarettes (5.18 million cases) under license, up 25.4% year-on-year, including 205.66 billion cigarettes of key cigarette brands designated by STMA, accounting for 79.4% of the total. The introduction and development of cigarette production under license has played a great role in promoting the development of big competitive cigarette brands. In the year, Mount Hongtashan was the biggest winner in the introduction and development of this segment, with the output of cigarettes produced under license reaching 51.715 billion cigarettes, accounting for 35.91% of the total output of the Mount Hongtashan brand family in the year. For Baisha, its output of cigarettes produced under license reached 43.9 billion cigarettes accounting for 30.93% of its total cigarette output in the year. And, the output of cigarettes produced under license of Double Happiness brand family reached 31.125 billion cigarettes (622,500 cases), accounting for 29.71% of the total cigarette output of this big brand family in the year.

Wang Ping said that in 2011 STMA would increase annual quotas for the production of cigarettes under license by 50 billion cigarettes to a total of 309 billion cigarettes, from the level of 259 billion cigarettes in 2010.

According to STMA’s relevant development plan, the annual output of cigarettes produced under license by the tobacco industry will have reached 600 billion cigarettes by 2015, which will have accounted for almost half of the annual cigarette output of 1,450 billion cigarettes the cigarette brands covered by the “532” development strategy by the year.

Status of big brands

As far as the amount of sales income of cigarette brands in 2010 was concerned, Chunghwa proved itself as a big winner by generating RMB76.19 billion in annual sales income, while the top 12 brands in terms of the size of annual sales income generated a total of RMB488.214 billion in sales income, up 26.2% year-on-year.

The aforesaid figures suggest that big competitive cigarette brands are of an increasingly important status in the tobacco industry. Take Chunghwa for example. In 2005, the cigarette output of the Chunghwa brand family was barely more than 12 billion cigarettes.But in 2010, it reached a high of more than 35 billion cigarettes, meaning a sharp increase of 23 billion cigarettes, or nearly twofold, in a period of just five years. Computed by the sales volume in the first half of the year, the output of Chunghwa is expected totop 45 billion cigarettes in 2011.

In 2010, the top five grade one cigarette brands in terms of the annual sales volume were respectively: Furongwang, Chunghwa, Yuxi, Huanghelou (The Yellow Crane Tower) and Liqun, which took 68% of the domestic cigarette market shares. When the sixth and seventh brands (Yunyan and Suyan) were taken into account, the top seven grade one cigarette brands actually took over 80% market share in the year.

The rapid development of big competitive cigarette brands has the support of economic development. Along with rapid development of the Chinese economy, the number of Chinese high-end consumers, defined by Paris-based BNP Paribas as those with family assets worth RMB300,000 and higher, and with an annual family income of RMB100,000 or higher, is growing fast. In 2010, this group of people was estimated to number around 250 million. It is this group that directly supports sustained growth in the consumption of high-grade cigarettes.

Computed by a same standard, the sales volume of grade one cigarettes in China reached some 125 billion cigarettes in 2007. But in 2010, it reached a high of 229 billion cigarettes, meaning a sharp increase of 100 billion cigarettes in a period of just three years, with an average annual increase of over 20%. It is expected that the market share of grade one cigarettes in China in 2015 will have reached nearly 45 billion cigarettes, double the amount in 2010.

Hopes and worries

In 2011, the tobacco industry is expected to give birth to big competitive cigarette brands each with an annual sales volume of 150 billion cigarettes or higher, while sources with the tobacco industry generally have high expectations on the development potential of Mount Hongtashan, Baisha and Double Happiness.

Computed by the sales volume of key cigarette brands in the first half of 2011, the annual sales volume of Mount Hongtashan is expected to top 150 billion cigarettes in the whole of 2011; there will be four cigarette brands with annual sales volume to topping 100 billion cigarettes in the year; the brands of Baisha, Double Happiness, Honghe and Yunyan will continue to take the lead in the annual production capacity; Baisha and Double Happiness are expected to top 150 billion cigarettes in terms of the annual sales volume on the basis of further development; the number of cigarette brands with an annual sales volume of 50 billion cigarettes or more is expected to reach a total of nine by the end of the year; and such high-end brands as Furongwang and Liqun are expected to rank themselves among those with annual sales volumes of 50 billion cigarettes or more by the end of the year.

It is expected that Chunghwa will generate over RMB90 billion in annual wholesale income in 2011 – almost reaching the goal of RMB100 billion in annual wholesale income. In the year, there will be five cigarette brands each with their wholesale income exceeding RMB50 billion; Yunyan, Furongwang and Double Happiness will see their annual wholesale income each reach or exceed RMB60 billion; Mount Hongtashan and Liqun are only one step away from reaching the goal of generating RMB60 billion in wholesale income; and Baisha, the Yellow Crane Tower and Yuxi will see their wholesale income each exceed RMB40 billion.

Therefore, we can say that the development of cigarette brands in China will officially enter the era of “150 billion cigarettes” and “RMB90 billion” in 2011, when big competitive cigarette brands will be in a period of continued rapid growth.

However, behind the rapid development of big competitive cigarette brands, there also exist some worries. Although Chinese cigarette brands are in a favorable trend of development, some brands have problems.

While national-level cigarette brands have seen their national production capacity grow year-on-year, their market shares increase steadily and their degree of concentration further rise, it has become a relatively serious problem that some brands still comprise low-grade products. For example, of the 29 key cigarette brands designated by STMA, 15 have a single-case sales income below the national average. In 2010, these 15 brands generated a total of RMB268.38 in annual sales income, up 16.1% year-on-year. The growth mainly relied on enlargement of the annual production capacity. For these 15 brands, growth in the annual sales volume contributed to driving up growth in the annual sales income by 64.9%, but contributed to driving up structural growth by only 35.1% in the year.

Another relatively serious problem is that cigarette brands do not appear to be powerful enough despite their large size. Over recent years, although STMA has done a great deal to reduce the number of existing cigarette brands in China year-on-year, some cigarette brands have continued creating more and more specifications. Many tobacco manufacturers, in seeking effects of “enlargement”, have chosen to adopt simple and relatively easy approaches to reform the structure of their brands merely by converting their phased-out brands into new specifications of their remaining leading brands.

To solve such problems, steps should be taken by tobacco manufacturers to reduce the number of existing specifications, conduct in-depth research towards improving the structure of cigarette products, focusing their energy on developing leading specifications that will be highly competitive in future. In the process of research and development of new products, besides attaching importance to catering to the favorite taste of consumers, doing a good job of reducing the content of tar and other harmful substances in cigarette products and creating remarkable, unique products, tobacco manufacturers need to develop a rational product range in accordance with the status of their brands.

Although there will be one challenge after another in the process of development, there will be final winners in the game. The brands emerging victorious will definitely be those with a long-term development capacity and that are well received by consumers which will be able to overcome all the obstacles and squeeze out the competition.