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Key Tobacco Manufacturer Targets High-Grade Cigarette Market Source from: China: Huaxi Capital newspaper 09/29/2004 ![]() Kunming Cigarette Factory in southwest China's Yunnan Province, which is one of the 36 key Chinese tobacco manufacturers designated by the State Tobacco Monopoly Administration (STMA), is targeting the high-grade cigarette market in the neighboring Sichuan Province.
Through one and a half years of efforts, Kunming Cigarette Factory has succeeded in developing a new high-grade cigarette product – Yunyan Impression, which will soon go on markets in Chengdu, the capital city of Sichuan, at a surprisingly high price of 600 yuan (72 U.S. dollars) per carton.
On September 17, Director Zhu Shaoming of Kunming Cigarette Factory, which is actually the No. 3 Chinese tobacco manufacturer, led a big delegation to Chengdu to launch a high-profile promotional campaign, in a bid to take greater shares of the high-grade cigarette market in the city.
According to Zhu, the entry into Sichuan of Yunyan Impression signifies that Kunming Cigarette Factory's strategy to greatly develop its Yunyan brand family has entered a new phase, and that the high-grade cigarette market in Sichuan is of vital importance to the factory.
[b]STRATEGY: DESIGNATION OF BIG STORES FOR SALES OF YUNYAN IMPRESSION[/b]
The beautiful looking Yunyan Impression is made with many new technologies. Its unit price of 600 yuan (72 U.S. dollars) per carton is absolutely high at the marketplace. Then, why is it so expensive?
In a recent interview with the Huaxi Capital newspaper, Zhu gave an answer: There has always been a lack of high-grade cigarette products in China. In the process of developing Yunyan Impression, Kunming Cigarette Factory chose the best from hundreds of high-quality leaf tobacco products of different grades and different types from Zimbabwe, Brazil and Yunnan Province of China to conduct physical and chemical analysis of their quality. On the basis of repeated comparison and appraisal, the factory selected a number of high-quality leaf tobacco products that had been naturally alcoholized for two years or more for making Yunyan Impression. Moreover, it conducted some 100 tests to determine the blending formula for making the high-grade product.
The development of Yunyan Impression conforms to the direction of China's tobacco industry to develop low-tar-level cigarette products. With a tar level of 12mg/per cigarette, Yunyan Impression is made mainly from natural materials, with the core manufacturing technology possessed by Kunming Cigarette Factory itself. High-technology means are used to control all the processes of its production, contributing to guaranteeing its high quality, Zhu explained.
In realizing the strategy to gain greater market shares in Sichuan, Kunming Cigarette Factory has designated a number of big stores in Chengdu for selling limited quantities of Yunyan Impression. Zhu said that Kunming Cigarette Factory was very strict in selecting cooperation partners in this respect. Although many dealers wished to sell Yunyan Impression, it eventually designated only 10 big stores in Chengdu for selling Yunyan Impression. To make the supply short of demand is a unique marketing tactic of Kunming Cigarette Factory, Zhu said.
[b]TARGET: TO REGAIN CONTROL OF MARKETS LOST[/b]
Zhu said that Kunming Cigarette Factory is planning to generate 9 billion yuan (1.08 billion U.S. dollars) in taxes and profits in 2004. He expressed the belief that the presentation of Yunyan Impression to the market will contribute to positively changing the structure of cigarette products on domestic markets.
The development of Yunyan Impression was particularly intended to take greater shares of high-grade cigarette markets. Therefore, Yunyan Impression has been given the great task of reviving sales of Yunnan-made cigarettes on domestic markets and regaining control of markets lost.
Before 1998, Grade One cigarettes – the highest of the five grades of cigarettes in China – produced in Yunnan took 18 percent or more of the domestic market shares. However, as a result of fierce competition from other Chinese tobacco-producing regions and regional tobacco trade protectionism in China, Yunnan-made cigarettes have lost much ground over recent years, taking only 10 percent of the domestic market shares now.
According to analysts with China's tobacco industry, Chinese tobacco manufacturing enterprises will be in a continued structural reform in 2004 and 2005. For advantaged enterprises, the structural reform means a fine opportunity to sharpen their competitive edge and develop highly competitive brands.
For the tobacco industry of Yunnan, known as the kingdom of tobacco in China, it will certainly be playing a major role in the structural reform characterized with corporate reorganization through acquisition, merger and association. The development of high-grade cigarette products, which well embody the technological advantage and competitiveness of the tobacco industry of Yunnan, will be an indispensable approach of it to support its strategy to this effect, the analysts said.
The analysts predicted that the entry into Sichuan of Yunyan Impression will contribute to making competition in the high-grade cigarette market in Sichuan all the more intense. Enditem
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