<strong>China: Luxury Cigarette Prices Fall after Beijing Ban</strong>

Source from:  WantChinaTimes 01/07/2014

Prices of luxury cigarettes have been slashed in Beijing following the Chinese government's ban on extravagant official spending, reports the Beijing Youth Daily, the official newspaper of the Communist Youth League in Beijing.

The upcoming Lunar New Year holiday is a traditional peak season for cigarette sales but tobacco firms are struggling to strengthen the management of luxury cigarettes after the government's frugality drive and recent announcement that it will ban officials from smoking in public.

An owner of a cigarette and liquor shop told the paper that luxury cigarette sales are lackluster. Some cigarettes that were previously sold for as high as 2,000 yuan (US$330) per carton are now priced at only 950 yuan (US$160), he said.

Xu Yunbo, chief tobacco analyst at the state-run Xinhua News Agency, said that the ban was the harshest ever in the country's history. The government usually only restricts purchase, but now it is making efforts to limit smoking altogether, Xu said, adding that a majority of government officials do not want to cross the line, which will definitely hurt luxury cigarette sales.

The Beijing Youth Daily also found that luxury cigarettes have become a rarity in the tobacco market. Chunghwa Cigarettes, a premium but less expensive brand of Chinese cigarettes, for example reported strong sales in January last year but was quickly rendered out of stock.

Despite concerns, Xu noted that high-end cigarettes enjoy a relatively stable market share because cheap cigarettes are not profitable from retailers' point of view. At present, there are 5.18 million retailers nationwide for rolled cigarettes and given rising sales costs they hope to increase their income by selling more expensive brands.

Sales of luxury cigarettes have been affected due to the government's ban, but many cigarette vendors have shifted their focus to cigarettes priced between 500-1,000 yuan (US$80-US$165), which includes Chunghwa cigarettes sold at 700 yuan (US$115) per carton.

Figures showed that luxury cigarettes are expensive because rare and top-quality tobacco leaves are hand-picked during the manufacturing process to meet certain standards, while some expensive Chinese herbs and unique spices are also added, the paper said. Enditem