China: Four Major Competitive Cigarette Brands Develop Rapidly

Source from:  Economic Observation newspaper 09/17/2004

Four major competitive cigarette Brands of Chinese tobacco manufacturers – Honghe, Hongmei, Hongjinlong and Baisha – have developed rapidly over recent years when the tobacco industry of China has been undergoing a fundamental reform to sharpen its competitive edge. [img border=0 hspace="4" vspace="4" align="left" src=http://www.tobaccochina.com/english/picture/10.jpg] Honghe, Hongmei, Hongjinlong and Baisha are four high-grade cigarette brands representative of their respective manufacturers – Honghe Cigarette Factory in southwest China's Yunnan Province, Hongta Group in Yunnan, Wuhan Tobacco Group in central China's Hubei Province and Changsha Cigarette Factory in south central China's Hunan Province – all among the 36 key Chinese tobacco manufacturers designated by the State Tobacco Monopoly Administration. To meet the increasingly intense competition from transnational tobacco giants in tobacco markets in China following the country's entry into the World Trade Organization (WTO) in 2001, the tobacco industry of China has been undergoing a fundamental restructuring reform initiated by the STMA, characterized with the reduction of small, loss-making cigarette factories to establish extra-large tobacco manufacturing groups and the reduction of the number of existing cigarette brands to develop a number of highly competitive ones. Therefore, Chinese tobacco manufacturers are all the more enthusiastic in the development of highly competitive brands. Although the tobacco industry of China has developed at a surprising speed over recent years, real competition is coming just now. In face of the advancement by powerful transnational tobacco giants to their doorsteps, Chinese tobacco manufacturers just look like scattered small boats. In an effort to counter competition from powerful foreign cigarette brands, the STMA has been taking a series of steps to greatly increase the competitiveness of Chinese tobacco manufacturers and their cigarette brands through structural reform. Because of efforts by their manufacturers and also care and support by the tobacco industry, Honghe, Hongmei, Hongjinlong and Baisha have emerged as four successful major competitive brands in the field of high-grade cigarette products of China. Before 1992, Honghe Cigarette Factory was but a small tobacco manufacturing enterprise mainly producing low-grade cigarettes. In 1992, Honghe Cigarette Factory decided to shift onto the production of Honghe as a single competitive brand family. In October 2000, Honghe Cigarette Factory developed two high-grade cigarette products of the Honghe brand family – Superior Hard-Packaging 88 and 89. As a result, Honghe became the second largest single cigarette brand family in 2001, ranking itself among famous, high-quality cigarette brands of China. In January 2002, Honghe Cigarette Factory won a further business success by developing another two high-grade cigarette products of the Honghe brand family – Superior Soft-Packaging 88 and 99. In 2003, Honghe Cigarette Factory saw its annual cigarette output reach 930,000 cases (46.5 billion cigarettes), up 11 times over 1991, and generated 5.1 billion yuan (614 million U.S. dollars) in taxes and profits, up more than 50 times over 1991, creating the so-called "Honghe miracle" in the history of the tobacco industry of China. In 2004, Honghe Cigarette Factory expressed an ambition to develop the highest-grade cigarette products in China. For Wuhan Tobacco Group – the manufacturer of Hongjinlong, it was once one of the four largest tobacco manufacturers in China. Chinese news media call it a century-old enterprise of China, along with Qingdao Beer Brewery, Zhangyu Winery, etc. In 1997 – the year of Hong Kong's return to China, Wuhan Tobacco Group developed Hongjinlong as a high-grade cigarette brand. As a matter of fact, Hongjinlong as a cigarette brand was created in 1916 by Nanyang Brothers Tobacco Co. Today, Hongjinlong and Baijinlong under the flag of Wuhan Tobacco Group are among the oldest cigarette brands of China. Over recent years, Hongjinlong has developed rapidly. In 2001, Hongjinlong was designated by the STMA as one of the 36 key Chinese cigarette brands. Driven by the marketability of Hongjinlong, Wuhan Tobacco Group ranked the first and second among the 36 key Chinese tobacco manufacturers in 2003 in terms of the annual cigarette sales volume and the annual total of taxes and profits. In 2004, Hongjinlong has become more vigorous as a result of Wuhan Tobacco Group's sponsorship of sports events. Over recent years, Changsha Cigarette Factory – the manufacturer of Baisha, has taken the lead in the development of cigarette brands in China. In 1995, Changsha Cigarette Factory developed the Superior Baisha using many achievements of scientific-technology research. From 1995 to 1998, Changsha Cigarette Factory produced 18.45 billion Baisha brand cigarettes (369,000 cases), generating 4.24 billion yuan (510 million U.S. dollars) in taxes and profits. In 2003, three new products of the Baisha brand family went on the market, all showing good performances and becoming new points of economic growth for Changsha Cigarette Factory. In particular, the second generation of blue-packaging superior Baisha has won great honors at the marketplace at a time when markets of high-grade cigarettes in China are basically saturated. In the first half of 2004, Changsha Cigarette Factory saw its biannual sales income and amount of taxes and profits go up respectively 15.58 percent and 20.5 percent over the same period of last year, with the sales volume of Baisha alone going up 11.1 percent. The biannual growth was the biggest six-month business success for Changsha Cigarette Factory over the past 20 years. In the years to come, the four major competitive brands are expected to achieve greater breakthroughs in further development. Enditem