China's tobacco enterprises are speeding up the industry's
reorganization to foster brand awareness and improve the sector's
competitiveness.
Twenty-six of the country's major cigarette makers met in
southwest China's Chongqing
Municipality in late October to discuss ways to expand strategic
cooperation for mutual success.
The Chongqing Company of the China Tobacco Corporation, the
organizer of the meeting, proposed five methods of building brand
recognition and adjusting the market.
The proposal, drawn under the guidelines of the State Tobacco
Monopoly Administration (STMA), received support from other
participants.
The STMA created a list of the country's top 100 cigarette
brands in August to guide the industry's restructuring. The
administration plans to establish 30 to 50 key enterprises through
mergers and acquisitions in three years, and close small cigarette
factories --those with annual production capacity of less than
100,000 cartons -- by the end of this year.
The number of brands is expected to shrink from the current
300-plus to about 100.
At the meeting, the 26 enterprises also agreed to eliminate
provincial and regional trade restrictions to build an open and
unified domestic market.
The tobacco monopoly bureaus of the five southwestern provinces
and Chongqing agreed to unify the regional market beginning this
month, selling same-brand cigarettes for identical prices
throughout the region.
"The purpose is to break market barriers and beat the illegal
marketing channels created by differentiated prices," said Sun
Zezhi, deputy general manager of the Sichuan Cigarette Selling
Co.
He indicated that gross profit on cigarette sales in the
province should increase 2 percent under the plan.
The 26 companies did not sign contracts holding them to the
plan, but all expressed willingness to cooperate.
"Many local markets are moving toward the establishment of an
open market," said Hu Xinhua, deputy director of the STMA's general
office. "The purpose of the industry reshuffle is to help domestic
tobacco companies deal with mounting competition from big foreign
counterparts."
In accordance with its World Trade Organization commitments,
China lowered its import tariff on leaf tobacco to 10 percent at
the beginning of this year from the original 40 percent, and
tariffs on cigarettes from 65 percent to 25 percent.
China is currently the biggest tobacco producer and consumer in
the world, with an annual output of 18 trillion cigarettes and 320
million smokers, according to the Ministry of Health.
(China Daily, China.org.cn November 8, 2004)