Transnational Leaf Tobacco Giants Eye China Market

Source from:  Special Report by TobaccoChina Online 11/19/2004

The three biggest transnational leaf tobacco giants all participated in the 2004 International Tobacco Symposium & Tradefair held in southwest China's Kunming City on November 16-18, indicating that the world's big leaf tobacco companies are attaching greater importance to China as the largest single tobacco market in the world. [img border=0 hspace="4" vspace="4" align="left" src=http://www.tobaccochina.com/english/picture/041122gw.jpg] Dimon, Universal and Continental were among the more than 150 specialized companies from around the world that participated in the three-day 2004 International Tobacco Symposium & Tradefair. In recent years, exhibitions or trade fairs of the tobacco industry were held in China almost once a year. Although not as big as world tobacco expositions, they were able to have the participation of many well-known tobacco manufacturers in the world, but big transnational leaf tobacco companies rarely showed up at such events in China. Things, however, have changed fundamentally now. Since China's entry into the World Trade Organization (WTO) in 2001, the tobacco industry of China has been undergoing a fundamental structural reform, intended to gradually turn it into a new giant in the global tobacco industry. As a result, China's tobacco growing technology has kept improving. With high-quality leaf tobacco, the tobacco industry of China is ranking itself among the big leaf tobacco producers in the world. Therefore, big transnational leaf tobacco companies have gradually shifted their attention to China, which can be well proven by the participation of the Big Three in the 2004 International Tobacco Symposium & Tradefair. It was the first time for the Big Three to participate at a same time in an international tobacco symposium and trade fair in China. In 2003, China's leaf tobacco exports accounted for 7 percent of the world's total. Just a few years ago, China's leaf tobacco exports were so little that they could be ignored, let alone the quality of export-oriented leaf tobacco. It is understandable that transnational leaf tobacco giants would not bother to have a look at the China market in those years. Since China's WTO accession, the management of leaf tobacco production and trade in China has become increasingly well regulated while links between Chinese leaf tobacco producers and big foreign companies have turned increasingly close. The two sides have successfully cooperated with each other in improving the production technology of Chinese leaf tobacco producers, contributing to rapidly improving the quality of leaf tobacco produced in China. The high quality of leaf tobacco produced in China and the stability of leaf tobacco supply from the country have attracted the attention of big transnational leaf tobacco companies. Consequently, China's leaf tobacco exports have kept increasing over recent years, in the interest of the rapid development of China's tobacco industry. In considering their long-term development strategies, Dimon, Universal and Continental have all been in close contracts with Chinese enterprises or regions in seeking business development opportunities over recent years. In the form of technological and trade cooperation, Dimon has invested in the establishment of exclusive tobacco plantations in southwest China's Yunnan Province – the largest tobacco producing region in China known as the kingdom of tobacco. Dimon applies the GAP management in the exclusive tobacco plantations and has committed itself to purchasing the leaf tobacco grown there. For Universal, it is both the biggest supplier and a big buyer of leaf tobacco to the tobacco industry of China. Universal has also invested in the establishment of leaf tobacco processing bases in Yunnan. Continental has invested in the establishment of exclusive plantations for growing Oriental tobacco in Chinese regions including Yunnan Province and northwest China's Xinjiang Region. All these developments have indicated that the Big Three are paying greater attention to the development of China's tobacco industry, and are all placing a high hope in it. The tobacco-growing business in Zimbabwe has shrunk seriously over recent years, resulting in breaking the balance of the global leaf tobacco trade. As leading players in international leaf tobacco markets, the Big Three have started to look for new cooperation partners. They know well whoever has got advanced management methodology and technology and has the capacity to control leaf tobacco quality and supply stability today will become a star tomorrow and will have the future of international leaf tobacco markets. For the Big Three, China enjoys favorable natural conditions for growing tobacco and has cheap labor for tobacco production, which are all attractive to them. Therefore, they have all started cooperation with Chinese enterprises or regions in various forms, including joint development of fine tobacco varieties, introduction of high-quality agricultural production management, extension of technical support, development of better leaf tobacco purchasing modes and assistance in exporting leaf tobacco to other parts of the world. For China's tobacco industry, such forms of cooperation are mutually beneficial, and are conducive to improving its overall production technology, improving its production and trade management and raising its economic efficiency. Besides the big three transnational leaf tobacco companies, participants in the 2004 International Tobacco Symposium & Tradefair also included the four global tobacco giants of Philip Morris, British American Tobacco, Imperial Tobacco and Japan Tobacco Inc., and also a large number of big Chinese companies. At the trade fair, they showed their products like leaf tobacco supply and tobacco packaging equipment, factory machinery, chemical preparations, equipment for chemical tests and experiments, cigarette materials, filter tips, cigarettes, cigars and cut tobacco. Enditem