China's Tobacco Industry Develops Six Big Cigarette Brands

Source from:  STMA 12/31/2005

The tobacco industry of China is developing six big cigarette brands each with an annual output of at least 1 million cases (50 billion cigarettes), thanks to several years of structural reform that has lead to the merger of both tobacco manufacturing enterprises and cigarette brands. By the end of November 2005, the tobacco industry of China had already had four big cigarette brands each with an annual output of at least 1 million cases (50 billion cigarettes) - Baisha, Honghe, Hongmei and Hongjinlong. It is expected that two other big cigarette brands - Hademen and Huangguoshu - will see their output reaching at least 1 million cases (50 billion cigarettes) by the end of 2005, according to data released by the State Tobacco Monopoly Administration (STMA). Chinese tobacco manufacturers view their brands as the most valuable assets in their transition to become subjects of a market economy. Besides, the tobacco industry of China is developing a so-called "second echelon" of big cigarette brands each with an annual output of 500,000 cases to 1 million cases (25 billion cigarettes to 50 billion cigarettes), including Hongqiqu and Jinxuchang. Since China's entry into the World Trade Organization (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. The year of 2005, therefore, is called the Year of Structural Reform by the tobacco industry of China. From January to November, the tobacco industry of China produced 1,811 billion cigarettes (36.22 million cases), with the annual output in the whole of 2005 expected to reach between 1,950 billion cigarettes and 2,000 billion cigarettes (between 39 million cases and 40 million cases). In the same period, the number of Chinese tobacco manufacturing enterprises declined to 46 from the level of 57 in 2004. In the 11-month period, the number of cigarette specifications declined to 325 from the level of more than 400 in 2004 while the average single-brand output grew to 111,400 cases (5.57 billion cigarettes) from the level of 70,900 cases (3.545 billion cigarettes) in the same period of 2004. Also from January to November, the Top Ten Chinese cigarette brands accounted for 26.3 percent of the total cigarette output and 40.8 percent of the Top 20, respectively going up 5 percent and 6 percent year-on-year, with the ratio of concentration of both tobacco manufacturing enterprises and cigarette brands increasing by relatively big margins. These developments indicate that the structural reform policy of the STMA is working well. Enditem