Fate of Traditional Famous Cigarette Brand at Stake

Source from:  Shenyang Today newspaper 11/25/2004

The fate of a traditional famous cigarette brand of northeast China's Liaoning Province is at stake while the provincial tobacco industry embraces the production of more competitive brands in cooperation with Hongta Group - the largest Chinese tobacco manufacturer. For decades, Lanling (The Blue Plume) has been a traditional famous cigarette brand popular in Liaoning. Its future, however, has become questionable since the tobacco industry of China started a fundamental structural reform to greatly strengthen its competitiveness following China's entry into the World Trade Organization (WTO) in 2001. At a meeting on business development held by Shenyang City Tobacco Monopoly Administration earlier this month, the fate of Lanling became a hot topic of discussion. "We are glad to see that whether Lanling will disappear has become an issue catching so widespread attention. This means that the people of Liaoning are concerned about the fate of our own brands," Li Dexian, General Manager of Hongta Liaoning Tobacco Limited Liability Company, said in an interview with the Shenyang Today newspaper on November 17. Hongta Liaoning Tobacco Limited Liability Company was established in 2003 as a regional subsidiary of Hongta Group in Liaoning. Behind the establishment of the new subsidiary are two major factors -- the imminent influx of foreign cigarettes into Chinese markets and the fundamental structural reform of the China's tobacco industry. For the tobacco industry of Liaoning, it has had only one entry into the Catalogue of Top 100 Chinese Cigarette Brands - the well-known cigarette brand of Renmindahuitang (The Great Hall of the People). In August 2004, the State Tobacco Monopoly Administration (STMA), in a move to reduce the existing number of cigarette brands and improve the structure of cigarette products in China, issued the Catalogue of Top 100 Chinese Cigarette Brands. So far, a total of 121 cigarette brands of Chinese tobacco manufacturers have entered the catalogue. The number of cigarette brands in this catalogue is expected to become smaller to some 70 or 80 in 2005 as the reform of the national tobacco industry deepens. The entry of any cigarette brand into the catalogue is subject to the examination and approval of the STMA on the basis of reviewing the applications concerned from Chinese provinces or provincial-level administrative regions. Today, Hongta Liaoning Tobacco Limited Liability Company is producing cigarettes using two brands of Hongta - Hongmei and Gonghexinxi, Li said. When its technical transformation is completed, the company will be able to produce cigarettes using three other brands of Hongta - Mount Hongta, Ashima and Yuxi. Therefore, the tobacco industry of Liaoning is expected to have six entries into the Catalogue of Top 100 Chinese Cigarette Brands, according to Li. "For local residents, Lanling is a symbol of feelings. But the uncertainty of its fate is a symbol of the participation by the tobacco industry of Liaoning in the struggle against challenges brought by the WTO entry," Li said. He explained that the tobacco industry of Liaoning will strive to keep Renmindahuitang, Hongmei and Gonghexinxi as its three competitive brands. The annual output of Lanling is 25,000 cases (1.25 billion cigarettes) in 2004. Its sales to other Chinese regions is very little. In comparison, the annual output of Renmindahuitang stands at 57,000 cases (2.85 billion cigarettes) in 2004 while its annual sales to other Chinese regions is 5,000 cases (250 million cigarettes). Moreover, the output of Hongmei produced in Liaoning is expected to reach 120,000 cases (6 billion cigarettes) in 2004. Therefore, the fate of Lanling is becoming increasingly uncertain. Enditem