Shanghai Tobacco Group Reforms Structure of Cigarette Brands

Source from:  Daily Economic News newspaper 12/23/2004

East China's Shanghai Tobacco Group, which has significantly enlarged itself through corporation acquisition, is taking steps to reform the structure of its cigarette brands by developing eight big leading brand families on the basis of merging the existing 22 brands. On December 7, 2004, Shanghai Tobacco Group officially took over Tianjin Cigarette Factory in north China in a second corporate acquisition in a year. In November 2003, Shanghai Tobacco Group acquired Beijing Cigarette Factory, also in north China in the first corporate acquisition. With the two acquisitions, Shanghai Tobacco Group has completed a process of enlargement through acquisition, and also the establishment of the so-called "Beijing-Tianjin-Shanghai Delta" tobacco-manufacturing structure in its interregional strategic corporate reorganization in China. Consequently, Shanghai Tobacco Group has re-emerged as the second largest Chinese tobacco manufacturer in China, only after southwest China's Hongta Group. In a recent interview with the Daily Economic News newspaper of China, Tang Xu, a high-level official with Shanghai Tobacco Group, said that Shanghai Tobacco Group, in accordance with an instruction from the State Tobacco Monopoly Administration (STMA) to reform the structure of existing cigarette brands, will spend the next three to five years merging more than a dozen of its existing brands into five big leading brand families of Grade One cigarettes – The Panda, Chunghwa, The Red Double Happiness, Peony, Daqianmen (The Great Front Gate). Meanwhile, it will give priority to the development of two big leading brands of Beijing Cigarette Factory – Zhongnanhai and Beijing – and also one big leading brand of Tianjin Cigarette Factory – Hengda. Therefore, Shanghai Tobacco Group will focus its energy on the development of these eight big leading brands in reforming the structure of existing cigarette brands over the next few years, according to Tang. For the other existing smaller cigarette brands of Shanghai Tobacco Group, they will be phased out in the structural reform, Tang said. These smaller brands mainly include such regional brands as Dunhuang, Gaole, The Gold Deer and Shanghai, each with an annual output of between 30,000 cases or 40,000 cases (1.5 billion cigarettes or 2 billion cigarettes) and 70,000 cases or 80,000 cases (3.5 billion cigarettes or 4 billion cigarettes). Meanwhile, such smaller brands of Beijing Cigarette Factory as Badaling, Mount Xiangshan, Changle and Jinjian will also be phased out. The annual output of these brands is merely several thousand cases (tens of thousands of cigarettes). In a related development, the competent government authorities have recently approved a 1-billion-yuan (120-million-U.S. dollar) project to relocate and technically transform Beijing Cigarette Factory as a subsidiary of Shanghai Tobacco Group. The relocated and technically transformed Beijing Cigarette Factory is expected to go into operation in 2007. After completion of the technical transformation, Beijing Cigarette Factory will be capable of annually producing cut tobacco for making 25 billion cigarettes and manufacturing 15 billion cigarettes, larger than its current production capacity by one time, paving the way for further development of Shanghai Tobacco Group, according to Tang. Enditem