Japanese Tax War on Smokers Chokes BAT

Source from:  Telegraph 11/17/2010

British American Tobacco has laid bare the risks to its business from tax increases after predicting a 17pc drop in sales in Japan following a record excise duty increase. Naresh Sethi, Japan chief at the tobacco giant, forecast that sales volumes would plummet in 2011 but said the company would recover the reduction via price increases. BAT, which holds a 10pc share of the Japanese market via brands including Kent and Lucky Strike, said the number of cigarettes sold in the Asian country would fall from a forecast 218bn in 2010 to 180bn next year. The Japanese Government is waging a tax war on smokers, increasing tobacco duty by 40pc in October in a bid to cut consumption in a country where over a third of men smoke. However, tobacco companies have passed the increase onto consumers, with an average pack of 20 cigarettes rising by over a third to 410 yen (£3.08). "I think the manufacturers have factored in the 17pc to 22pc industry decline in looking at what kind of pricing they must set and they will definitely be able to recover some of the profit losses coming due to the volume decline," Mr Sethi reportedly told Reuters. Last month, BAT unveiled a 3pc fall in sales volumes in the first three quarters of the year following growth in the illicit trade of tobacco, declining cigarette markets in the west and the devastating floods in Pakistan. Paul Adams, chief executive, said: "The recession's impact on consumers is still with us and shows no sign of abating." BAT's shares closed unchanged at £23.99. Enditem