Cigarette Sellers Cash in on Foreign Brands

Source from:  02/17/2004 02/17/2004

Cigarette seller Wu lights up with joy when his mind turns to the opportunities that will come his way thanks to the lifting of restrictions on the sale of imported brands. "I can't wait to get my hands on them," says the young retailer, who started his career selling his wares on the streets, before opening his own local shop. Wu is one of the nation's four million cigarette retailers eager to get their hands on a licence that will allow them to start selling imported cigarettes after the restriction was lifted early this year. "If all goes well, I will have the licence this week," Wu told China Daily. China, which lights up more cigarettes than any other country in the world, abandoned its restrictions on the sale of imported brands on January 1, part of the nation's commitments to the World Trade Organization. Only a handful of retailers were allowed to sell imported cigarettes before that date. Now, everyone is free to obtain a licence to sell both domestic and foreign-made cigarettes and other tobacco products. Freeing up the cigarette market will offer a potential bonanza to the nation's millions of vendors, who will get the chance to rake in higher profits from selling more expensive imported brands. The cash will also be flowing into their tills due to the demand for imported cigarettes, which is higher than that for their domestic counterparts. Wu said that getting a chance to sell imported brands would give him a chance to win back recently lost business. "My business declined steadily in the past three years because many customers are switching to fancy imports," Wu says. However, the cancellation of the special licences does not mean vendors like Wu will be able freely import foreign-made cigarettes. "Production, trading and sales of tobacco and cigarettes are still under a State monopoly," said Jiang Chengkang, director of the State Tobacco Monopoly Administration (STMA), China's tobacco industry watchdog. Retailers can only obtain foreign cigarettes from STMA-designated State-run tobacco import and export firms. "So, the move will not in theory have much of an impact on the imports and prices of foreign cigarettes, as some have thought," Zheng Fugang, deputy secretary-general of the China Tobacco Society, said in a telephone interview. But Zheng cautioned that "lowering the threshold of selling imported cigarettes is likely to lead to an increasing number of smuggled and fake cigarettes." Zheng could sadly be proven right, as it is an open secret that many vendors have access to the foreign cigarettes other than from the STMA sources. "I have already started to sell foreign cigarettes in my shop," said Wu, revealing the foreign cigarettes that are hidden in little boxes under the counters - famous brands like 555, Marlboro and Mildseven. "Which brand would you like?" he asks with a wink. Wu confesses that all these cigarettes are illegally obtained. The "only" difference after he gets the new licence is - he can sell them openly instead of under the counter. And one more change is that Wu will obviously have to dismantle the sign which has stood in front of his shop for years, which reads "sale of domestic cigarettes." Wu is confident that he will witness a bumper year based on the prediction that lots more new customers will visit his shop to buy foreign cigarettes. "Now I am able to sell them legally," Wu says joyfully. Wu's current business is the very practice the STMA will crack down on. The administration has issued a set of regulations to ensure retailers will legally obtain their cigarettes. Regular checks will be carried out by the relevant departments, and retailers violating the regulations will not get a licence, STMA sources have revealed. But illegal practices will remain rife due to the large profits to be gained from selling smuggled cigarettes. Li Wu, who works with a trading company, said:"Smuggled cigarettes are 20 to 30 per cent cheaper than those from legal channels. "The profit will be much larger from illegal cigarettes. So retailers will not give up their 'underground' channels." "I will not get foreign cigarettes from STMA channels if the price they offer is higher than I can handle in my own way," Wu says. Chinese smokers consume 1.7 trillion cigarettes every year, 30 per cent of the world's annual cigarette consumption. However, foreign cigarettes legally imported into China have only taken a 3 per cent market share. Enditem SOURCE FROM: China Daily Feb 17,2004