Big Chinese Cigarette Brands Develop Rapidly Through License

Source from:  Beijing City 12/23/2004

Three big Chinese cigarette brands – Honghe (The Red River), Hongmei (The Red Plum Blossom) and Baisha – have developed rapidly so far in 2004 as a result of license in production by their manufacturers, with the single-brand output all topping the 1-million-case (50-billion-cigarette) level in the first 11 months of the year. Official statistics from the State Tobacco Monopoly Administration (STMA) indicate that from January to November 2004, the output of the Hongmei brand family of Hongta Group in south central China's Yunnan Province reached 1.133 million cases (56.65 billion cigarettes), up 42 percent year-on-year; the output of the Baisha brand family of Changsha Cigarette Factory in south central China's Hunan Province reached 1.113 million cases (55.65 billion cigarettes), up 18.9 percent year-on-year; and the output of the Honghe brand family of Honghe General Cigarette Factory also in Yunnan Province reached 1.028 million cases (51.4 billion cigarettes), up 18.8 percent year-on-year. In the eleven-month period, the sales volume of all the three big brands also exceeded the 1-million-case (50-billion-cigarette) level, with Honghe at the first place, Hongmei the second and Baisha the third, according to the STMA statistics. Hongta Group, Changsha Cigarette Factory and Honghe General Cigarette Factory are all among the 36 key Chinese tobacco manufacturers designated by the STMA. All have licensed other tobacco manufacturing enterprises in China to produce cigarette using their brands, in accordance with the STMA's reform policy of "deepening reform, promoting reorganization, developing association and seeking common development." The rapid development of the three big brands has been largely attributed to license in production by their manufacturers. In 2004, Hongta Group licensed tobacco manufacturing enterprises in other Chinese provinces or provincial-level regions including Hainan, Jilin, Liaoning and Guangxi to produce 250,000 cases (12.5 billion cigarettes) of the Hongmei brand family, up 150,000 cases (7.5 billion cigarettes) year-on-year; Honghe General Cigarette Factory licensed Chuncheng and Zhaotong Cigarette Factories in the same province as well as other cigarette factories in Chongqing City and Liuzhou City, also in southwest China, to produce 240,000 cases (12 billion cigarettes) of the Honghe brand family; and Changsha Cigarette Factory licensed other cigarette factories in Hunan and other Chinese regions to produce 35,600 cases (1.78 billion cigarettes) of the Baisha brand family. The cigarette products of the three big brands produced under license have all been well sold, contributing to increasing their market shares and enhancing their competitiveness in China. Since China's entry into the World Trade Organization (WTO) in 2001, the tobacco industry of China has been undergoing a fundamental structural reform initiated by the STMA which is intended to greatly enhance its ability to compete with foreign rivals. The reform is mainly characterized with corporate shutdown, acquisition, merger, association and reorganization as well as rapid reduction of the existing number of cigarette brands. In 2004, great progress was made in both the structural reform of tobacco manufacturing enterprises and reduction of the existing number of cigarette brands. So far in 2004, the number of Chinese tobacco manufacturers with the legal person status has declined to 57 from the level of 84. In particularly, there have occurred 15 big Chinese tobacco manufacturers or tobacco manufacturing enterprise groups each with an annual production capacity of 1 million cases (50 billion cigarettes) or larger. From January to October 2004, the existing number of Chinese cigarette brands shrunk to 428 from the level of 550 in the same period of 2003, down 132. Meanwhile, the average annual single-brand output of cigarettes in China reached 71,800 cases (3.59 billion cigarettes), up 19,100 cases (955 million cigarettes) year-on-year. Enditem