Provincial Tobacco Industry to Further Reduce Cigarette Brands in Reform

Source from:  Orient Today newspaper 02/24/2005

The tobacco industry of central China's Henan Province will further reduce the number of its existing cigarette brands in a structural reform intended to strengthen competitiveness. In 2004, the tobacco industry of Henan took steps to reduce the number of its existing cigarette brands to 14 from the previous total of 26, phasing out 12 in just one year. In accordance with the Catalogue of Top 100 Chinese Cigarette Brands issued by State Tobacco Monopoly Administration (STMA), the tobacco industry of Henan can maintain a total of nine cigarette brands after the structural reform. Hence, Henan Provincial China Tobacco Industry Corporation will take steps to further reduce the number of its existing cigarette brands to nine from the current level of 14 in 2005, meaning that five more cigarette brands of Henan will be phased out in the year. In August 2004, the 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. For Chinese tobacco manufacturers, cigarette brands mean passes to production and marketing. The Catalogue of Top 100 Chinese Cigarette Brands is so vital to Chinese cigarette brands that those included into it can rest easy while those excluded from it will have to die. According to the plan of the STMA for the structural reform of China's tobacco industry, the number of Chinese tobacco manufacturers will be reduced to 30 to 50 over the next two to three years while the number of existing cigarette brands in China will be reduced to some 100. Nationwide, over 400 Chinese cigarette brands will be phased out. The nine cigarette brands to be maintained by the tobacco industry of Henan will be The Red Flag Canal, The Gold Mango and Luoyan of Xinzheng Tobacco Group; The Golden Leaf, Sanhua (Scattered Flowers) and Shahe (The Sandy River) of Zhengzhou General Cigarette Factory; and Dihao and Jinxuchang of Xuchang General Cigarette Factory and Qunyinghui of Nanyang Cigarette Factory. Tobacco manufacturers in Henan are generally not surprised at the news of further reduction of cigarette brands. "Last year, our Caidian (The Colorful Butterfly) was phased out. We are focusing our energy on the development of the existing brands," a source with Zhengzhou General Cigarette Factory said in a recent interview with the Orient Today newspaper. In China, the tobacco industry has always been one highly monopolized by the government. In the ongoing structural reform, the tobacco industry of Henan managed to re-incorporate the cigarette factories in the province into three big tobacco manufacturing enterprise groups in July 2003 – Xuchang General Cigarette Factory, Xinzheng Tobacco Group and Zhengzhou General Cigarette Factory. As a result of the re-incorporation, the tobacco industry of Henan in 2004 generated 6.383 billion yuan (769 million U.S. dollars) in taxes and profits, an increase of 1.298 billion yuan (156 million U.S. dollars) year-on-year, as compared with 3.539 billion yuan (426 million U.S. dollars) in 2001. Specifically, Xuchang General Cigarette Factory was reincorporated on the basis of merger of the former Xuchang and Zhumadian Cigarette Factories. Besides, the former Xinzheng, Anyang and Luoyang Cigarette Factory merged into the Xinzheng Tobacco Group while the former Zhengzhou and Luohe Cigarette Factories formed Zhengzhou General Cigarette Factory in the structural reform. The three newly incorporated tobacco manufacturers are now the three pillars of the provincial tobacco industry. In a next step of structural reform, Xuchang General Cigarette Factory and Nanyang Cigarette Factory – the fourth existing tobacco manufacturer in Henan – are expected to merge in the first half of 2005. So far, the plan for the merger has been approved by the STMA. Enditem