Key Tobacco Manufacturer to Establish Regional Processing Base

Source from:  Chongqing Evening News newspape 07/27/2004

Honghe Cigarette Factory in southwest China’s Yunnan Province – which is a key Chinese tobacco manufacturer – will establish a regional processing base in Chongqing City, a provincial-level municipality also in southwest China, in a bid to enlarge its cigarette production capacity. In an interview with Chongqing Evening News newspaper on July 21, a source with Honghe Cigarette Factory said that the regional processing based to be established in Chongqing City will annually process 30,000 cases (1.5 billion cigarettes) of the Honghe (The Red River) brand family. [img border=0 hspace="4" vspace="4" align="left" src=http://www.tobaccochina.com/english/picture/040727.jpg] Recently, Honghe Cigarette Factory sent a delegation to Chongqing City to negotiate with leaders of the tobacco industry of Chongqing on bilateral cooperation in the establishment of Honghe’s regional processing base as well as the development of a cigarette marketing network for Honghe Cigarette Factory in Chongqing. For Honghe Cigarette Factory, the bilateral cooperation in Honghe brand cigarette processing in Chongqing is in preparation for development markets in the city. Along with the continuation of a fundamental structural reform of the tobacco industry in China, regional cigarette trade barriers in China are being torn town one after another. As a result, Honghe’s annual cigarette sales volume in Chongqing has increased to 3,000 cases (150 million cigarettes) from the level of 200 cases (10 million cigarettes) a few years ago. However, as compared with the big annual cigarette marketing capacity of 800,000 cases (40 billion cigarettes) in Chongqing, Honghe’s increased sales volume in the city is still small. In 2003, Hongta Group, also a key Chinese tobacco manufacturer based in Yunnan, sold 43,000 cases (2.15 billion cigarettes) in Chongqing. Therefore, Chongqing City is a too attractive market area for Honghe Cigarette Factory. Presently, Honghe Cigarette Factory has an annual cigarette production capacity of 932,000 cases (46.6 billion cigarettes). The Honghe brand now ranks the fifth among all the cigarette brands in China in terms of the penetration force. Honghe Cigarette Factory wishes to take advantage of its already well-established cigarette marketing system in Chongqing to extend sales to the neighboring province of Sichuan – the most populous region in China. As far as the tobacco trade in Chongqing is concerned, local cigarette brands are mostly small regional brands that are unmatchable with their counterparts from other Chinese regions in terms of the penetration force. Therefore, the tobacco industry of Chongqing expects its cooperation with Honghe to benefit its own cigarette sales to other Chinese regions. Besides, the bilateral cooperation in processing Honghe brand cigarettes in Chongqing will contribute to generating profits and tax income for the City. Previously, the tobacco industry of Chongqing reached agreement on association with Hongta Group and Chengdu Cigarette Factory in Sichuan Province. Enditem