Chinese Province Strives to Develop Competitive Cigarette Brands

Source from:  The Southeast Express newspaper 03/15/2005

The tobacco industry of southeast China's Fujian Province is striving to develop competitive cigarette brands and reform the structure of existing brands in efforts to strengthen its capacity. Recently, the provincial tobacco industry held a meeting on reforming the structure of existing cigarette brands, mapping out strategies for the development of competitive brands and reforming the structure of existing ones, as competition at tobacco markets in China has turned increasingly intense since China's entry into the World Trade Organization in 2001. [img border=0 hspace="4" vspace="4" align="left" src=http://www.tobaccochina.com/english/picture/050314fujiantp.jpg] [b]DESIGNATION OF BRANDS FOR PRIORITY DEVELOPMENT[/b] In Fujian Province, the Gutian cigarette brand long favored by local cigarette smokers has given converted into the Seven Wolves brand, Sansha has been replaced by Ping'anshi and Fujian has been renamed as Shishi. On March 10, sources with Fujian Provincial Tobacco Monopoly Administration and Fujian Provincial China Tobacco Industry Corporation told the Southeast Express newspaper of China that according to a plan for reforming the structure of existing cigarette brands adopted at the recent meeting, the tobacco industry of Fujian will begin to implement the strategy of reforming the structure or existing cigarette brands in April. Under the strategy, the provincial tobacco industry will give priority to the Seven Wolves in developing its high- and medium-grade cigarette brands, and also give priority to Shishi in developing its medium- and low-grade cigarette brands, in order to realize smooth progress of the structural reform and rapid enhancement of the capacity of the provincial tobacco industry. [b]CHEAP NEW PRODUCTS TO GO ON MARKET IN APRIL[/b] "Presently, there is no member of the Shishi (The Stone Lion) brand family sold at three yuan (36 U.S. cents) a packet in Fujian. But there will be one in April. This means that the famous Shishi brand is going on the market of medium- and low-grade cigarette products, and will become a new heavyweight of medium- and low-grade cigarette products and also a popular brand for ordinary consumers," a source with Fujian Provincial China Tobacco Industry Corporation was quoted as saying by the newspaper. After Baijinlang (The White Golden Wolves) went on markets across Fujian in early March, the 100 yuan (12 U.S. dollars) per packet Zaohonglang (The Date Red Wolves) and the 150 yuan (18 U.S. dollars) per packet Ruanhonglang (The Soft-Packaging Red Wolves) will go on markets across the province in April. While stabilizing and well operating the production of high-grade members of the Shishi brand family, Xiamen Cigarette Factory - the manufacturer of Shishi - will gradually present to the market new members of Shishi with a retail price of 30 yuan to 50 yuan (3.6 U.S. dollars to 6 U.S. dollars) per packet. Two new members of Shishi with a retail price of 30 yuan to 40 yuan (3.6 U.S. dollars to 4.6 U.S. dollars) per packet will go on markets across Fujian in April. [b]JOINT DEVELOPMENT OF COMPETITIVE BRANDS[/b] According to sources with Fujian Provincial China Tobacco Industry Corporation, the manufacturing and commercial sectors of the tobacco industry of Fujian are stepping up efforts to strengthen cooperation in jointly developing competitive cigarette brands. Meanwhile, Longyan Cigarette Factory and Xiamen Cigarette Factory - the two tobacco manufacturers based in Fujian - will sign an agreement on mutual use of each other's cigarette brands gratis, to realize the sharing of brands and mutual increase of taxes and profits, according to the sources. This means that the two tobacco manufacturers will license each other in organizing cigarette production, in efforts to make a maximum use of each other's strong points. [b]HIGHER PRODUCTION TARGETS[/b] In 2004, Longyan Cigarette Factory and Xiamen Cigarette Factory were given annual cigarette production quotas totaling 1.13 million cases (56.5 billion cigarettes). In 2005, the total of annual cigarette production quotas for them is nearly 1.2 million cases (60 billion cigarettes). Presently, there are more than 150 brands or specifications of Chinese and foreign cigarette products sold on markets in the provincial capital city of Fuzhou, including 40 manufactured locally in Fujian Province. Of those manufactured locally, the Seven Wolves and Shishi have taken the dominant position. In 2004, the annual sales volume of the Seven Wolves reached 222,500 cases (11.125 billion cigarettes), taking the first place, and Shishi 102,000 cases (5.1 billion cigarettes), taking the second place. So far, both the Seven Wolves and Shishi have been included into the list of the 36 priority Chinese cigarette brands designated by the State Tobacco Monopoly Administration of China. Fujian Provincial China Tobacco Industry Corporation, which is responsible for overseeing the operation of the tobacco manufacturing enterprises in Fujian, has formally announced that "along with the gradual implementation of the strategy to develop competitive brands, we are striving to attain the target of spending the next two to three years increasing the annual output of the Seven Wolves to 400,000 cases or 500,000 cases (20 billion cigarettes or 25 billion cigarettes) and Shishi to 500,000 cases or 600,000 cases (25 billion cigarettes or 30 billion cigarettes). Since China's entry into the WTO in 2001, particularly since the beginning of 2004, the tobacco industry of China has been undergoing a fundamental structural reform intended to greatly enhance its ability to compete against 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. Enditem