Tag Archives: British American Tobacco

Big Tobacco Earns €104m in Profits From Sales in Ireland

cigarettes

Earlier the information about how much tobacco companies earn in Ireland was hidden from public but today the value of the Irish market to Big Tobacco has been revealed for the first time.

A new study says that the Big Tobacco in Ireland in 2011 made  €227 on sales and profits of €104m. Moreover, after excise duties they enjoyed profit margins of up to 55% which is 3 times more than achieved food and drink manufacturers.

The study was conducted by Dr Robert Branston of the University of Bath. He said that Ireland is one of the easiest markets in Europe for cigarette companies to get a profit. 79% of the cost of a cigarettes package goes to the state in form of taxes and the rest is profit for manufacturers.

The study showed that leading tobacco maker Japan Tobacco International, which produces Benson & Hedges and Silk Cut, sold €112m worth of tobacco to Irish consumers in 2011.

Imperial Tobacco, the maker of Davidoff and Richmond, made €80m. British American Tobacco which produces famous Lucky Strike cigarettes made about €35m. As to new competitors, these days it is hard for them to enter the Irish market due to severe control on tobacco ads.

Dr Branston said that while Ireland earned €1.42bn in taxes on tobacco during 2011, this amount dropped by €2bn cost of caring for smoking-related diseases.

Tobacco companies can continue to modify premium prices and make big profits because their products are very cheap to make and competition in such a highly regulated market is very limited. What makes tobacco companies to fight tobacco control measures is great profitability.

The study was commissioned by the Irish Heart Foundation and the Irish Cancer Society. They say that the Department of Health is allowing these big profit margins through ineffective tax policies. They require tobacco taxes to be increased.

British cigarette branding plan retains

Lucky Strike Pack

The British authorities is still looking at banning branding on cigarette packages despite the fact that it disregarded recommendations from its legislative agenda presented in parliament on Wednesday, Prime Minister David Cameron said.

Britain had seemed to become the first European nation to make tobacco companies to remove brand names and to use standardized packaging, a move opposed by the cigarette makers, which sees it as affecting their earnings.

Queen Elizabeth made no reference to the strategies in a speech placing the government’s legislative plans for the year ahead, attracting criticism from opposition lawmakers and dissatisfaction from anti-smoking groups.

Nevertheless, Cameron told parliament that the authorities were still looking at the issue.

The Department of Health carried out four months of consultations in 2012 to collect evidence on whether plain tobacco packaging would help young smokers stop smoking and help existing smokers forget the habit.

In 2012, Australia enforced a law declaring tobacco products have to be sold in olive green packages with graphic health warning labels.

Cuba, whose high class cigars are world famous and feature exclusive packages, released a challenge against the Australian law at the World Trade Organisation last week.

Despite its lack from the government’s plans, the chief of the opposition Labour Party suggested to help speed through any proposed regulation.

Miliband also asked the role of government adviser Lynton Crosby in the decision, indicating his consultancy firm had worked with cigarette makers.

A spokesman for David Cameron said Crosby cannot influence over the contents of the Queen’s speech.
Campaign groups wrote to Health Minister Jeremy Hunt indicating dissatisfaction over the lack of the plan from the government’s programme.

“The failure to bring forward regulation fatally undermines the Government’s credibility on public health concerns,” said the letter from the Smokefree Action Coalition, an alliance of over 100 health organisations.

Cigarette makers such as Philip Morris and British American Tobacco are worried about that standardized packaging would eat into sales of higher margin brands and say it would lead to the global black market in tobacco.

Imperial Tobacco shares have grown slightly since reports published in the British media that Cameron had dropped the initiative.

British American Tobacco trims pay as some markets drop short

Kent HD Packs

Nicandro Durante had his pay cut from £3.6m to £3.4m in 2012

Nicandro Durante,  chief  of  British American Tobacco, had his pay cut from £3.6m to £3.4m in 2012, as his performance-based reward was cut to 170 % of his salary, down from 200 % in 2012.

While BAT, the maker of Kent cigarettes and Lucky Strike cigarettes, improved operating income 15 % to ?5.4bn in 2012, the company dropped a bit short of extending market share goals in major countries, the company’s yearly report displays.

The decrease in Durante’s pay was also because of a £143,000 grant for moving from Brazil in 2011, in comparison to just £14,000 for travel expenses in the previous year.

The overall amount does not contain long-term incentive payments of more than £2m, which vested on March 25 but were awarded in 2010, when Durante was chief operating officer.

Nicandro Durante is also sitting on a pension pot worth almost £7.8m, putting over half a million pounds to its value over the year.

The Brazilian-Italian chief executive has controlled a 40% increase in the company’s shares since working at the top job in March 2011.

Finance chief Ben Stevens was spent £2.4m in 2012, a bit up on 2011, and chief operating officer John Daly was granted £2.06m.

Australians Face Gangrene Photos as Tobacco Brands Vanish

Plain Package

Australians purchasing smokes are now assured to deal with warnings that consist of pictures of a gangrenous limb and a cancer victim as the world’s first law demanding tobacco sales in standard packages comes into effect.

Starting with December 1, all cigarettes in Australia have to be sold in the standard drab brown packs, with the brand name placed at the bottom of the package. The change from branded cigarette packages to standard packaging started in October.

“Plain packs are so horrifingly unpleasant that they are remarkable,” Fiona Sharkie, executive director of anti-smoking campaigner Quit Victoria, stated. Some people said that the packaging was the “final factor” they needed to quit smoking, she said.

The Australian government deals with A$31.5 billion ($33 billion) in yearly health costs from smoking. It fended off a challenge from cigarette makers, which lost a bid to prevent the plain packaging rules on August 15 when the High Court of Australia declined a claim that ban of the display of logos resulted in an illegal seizure of their property.

The volume of the illegal tobacco market in Australia is the same as 13.4% of the legal industry, Deloitte LLP explained.

“This year’s Deloitte report into illicit tobacco identified that almost $1 billion in tobacco excise income was lost to organized crime gangs,” Scott McIntyre, a spokesman for British American Tobacco Plc (BATS) in Australia. “The tobacco companies expect that the black market will grow because all packs will be easier to duplicate because of plain packaging.”

Australian Customs and Border Protection arrested a shipment of more than 10 million illicit branded-package cigarettes on November 28 as the new rule came into effect.

Customs officials identified the contraband while reviewing a sea cargo container destined for Sydney, which was stated to have ceramic tiles. The shipment represented almost A$4 million in unpaid taxes, the agency said.

Customs and Border spokesman Campbell Massie rejected to say which cigarette brand was seized.

The Australian government has also improved punishments for smuggling cigarettes, raising the highest charge to 10 years in jail or a fine similar to five times the duty evaded, or both.

British American Tobacco is the maker of Dunhill, Pall Mall and Australia’s best-selling cigarette brand, Winfield.

Philip Morris International is also sticking with the case in international arbitration. The Australian proposal violates a treaty with Hong Kong and may cause billions of dollars in damages, the maker of Marlboro cigarettes said.

Big Tobacco accused of new smokescreen

Tobacco Cigarettes

Cigarette firms have been taken down once again over their absence of compliance with new plain packaging regulations just day before the law becomes operational.

Health Minister Tanya Plibersek is requiring two industry giants – Imperial Tobacco and British American Tobacco – take away ringed watermarking from their cigarette paper that seem to make their appearance more stylish.

The new regulations demand plain paper.

And she has also told BAT not to place obvious travel destination sources in the batch coding on their cigarettes.

The coding on its cigarettes read LDN, NYC, AUS or OZ in a way the minister says was intended to make people who smoke think of the “glamour of travel”.

“There is a precise set of regulations about what is permitted and if we start permitting variations then the cigarette firms will push the boundaries,” she told.

Its just one of a series of strategies cigarette firms have been using to subvert the new regulations that from December 1st require all cigarettes be sold in olive packaging with graphic warning labels covering 75%  of the front of the pack.

Ms Plibersek attacked cigarette firms in September for perpetrating a “sick Joke” when they started providing new plain packs that stated “It’s what’s on the inside that counts.”

At the same time, Action on Smoking and Health says that cigarette maker Imperial Tobacco has been providing roll-your-own smokers with free tins placed with the old branded packaging name “Champion”.

And two weeks before plain packaging appeared, a new brand of cigarette has been released called “Ice” – the term of an illegal drug, as outlined by ASH chief executive Anne Jones.

Imperial Tobacco refused that JPS Ice was a drug reference. A spokesperson stated that it is a mint flavoured cigarette and the name `Ice’ is a typical descriptor used by the tobacco industry to differentiate equally flavoured cigarettes.”

The minister has as well charged Philip Morris of “deliberately trying to create chaos” around the launch of plain packaging by declining to change branded packs held by small businesses for plain packaged packs.

Domenico Greco from the Combined and Mixed Business Association said that the firm was not changing packs if small businesses bought fewer than 4000 cigarettes per week.

The company did not discuss the association’s accusation head-on, but spokeman Chris Argent said that Philip Morris has been cooperating with the federal government and retailers to guarantee an easy transition to plain packaging.

The minister said that her major goal is the cigarette firms and that small-business owners who break the new cigarette plain packaging regulations that come into effect from December 1 are more probably to be “educated” than fined up to $1 million for selling tobacco products with branding.

BAT Nine-Month Cigarette Shipments Fall on Europe and Brazil

BAT Building

British American Tobacco Plc, the biggest tobacco company in Europe, reported that shipments dropped during the first nine months of the year due to lower cigarette consumption in Brazil and Western Europe.

The amount of cigarettes marketed decreased to 517 billion from 523 billion in 2011.

Shipments in Western Europe dropped 5%, whilst volume declined in Brazil after a price rise in May. BAT, which produces well-known Lucky Strike and Pall Mall cigarettes, has increased prices to balance out dropping tobacco consumption and raised government limitations on smoking. The tobacco market remains tough and growth of illicit trade is steal a threat, the company said.

Conditions in Brazil are showing signs of damage after the 21% price increase, analyst David Hayes said. Brazil makes up about 10% of the company’s volume, he said.

The cigarette maker’s shares dropped 0.8% to 3,138.5 pence. The stock has advanced 2.6% this year, getting its market value to 60.7 billion pounds ($97 billion).

BAT as well experienced volume declines in Japan, Italy, Turkey and Egypt. The group’s four key cigarette brands, including Dunhill and Kent, showed a volume gain of 3%, a drop from the 8% advance in the same period in 2011.

Philip Morris International, the biggest cigarette maker in the world, last week announced third- quarter income after sales tumbled 15% in Europe, where smokers have switched to contraband cigarettes or roll-your-own varieties.

Hayes said the company is in a “better place” in Europe as 22% of its revenue derives from that region, a lower share than both PMI and Imperial Tobacco Group, the U.K.’s largest cigarette company.

Tobacco companies including London-based BAT and New York-based PMI are also suffering from a smoking crackdown in Russia, the largest cigarette market after China, whose government is demanding an eightfold boost in cigarette taxes in addition to a bill that prohibits smoking in public places and cigarette sales in kiosks. BAT has around 21% of the Russian tobacco market, behind Japan Tobacco and PMI.

British American Tobacco said that nine-month company income increased 4% at constant exchange rates.

The group said it has acquired back 30 million shares so far this year for 978 million pounds ($1.6 billion).

Value of the worldwide tobacco market continues to grow

Tobacco And Cigarette

Global marketplace

The worldwide tobacco market is appreciated at around £450 billion and the industry creates about 5.5 trillion cigarettes per year. While cigarette sales in developed countries keep on to drop a little bit year on year, total global market drops are demonstrating signs of moderating. Current developments reveal that individual smokers will consume fewer cigarettes each and smaller percentages of populations will smoke. Nevertheless, continual volume growth is widely expected in emerging markets, motivated by population growth and raising disposable earnings.

The largest single tobacco market is China, where the industry is the property of the state, with some 350 million smoking people who make up for more than 40% of the worldwide total consumed.

The four largest global cigarette firms, including British American Tobacco, Imperial Tobacco, Japan Tobacco and Philip Morris International, make up about 45% of the worldwide market, or about three-quarters of the market outside China.

Cigarette firms deal with a significantly competing marketplace but the total value of the worldwide market keeps growing. This value is predicted to exceed £500 billion by 2015, despite stronger rules, worldwide economic uncertainty and high unemployment rates in developed markets. Consumers worldwide are increasingly looking for real value, which means that quality and advancement will both play an increasing} role in providing market share.

Illicit trade

Cigarettes are among the most frequently marketed products on the black market because of high profit margins, the relative ease of production and movement, together with low recognition rates and fines. It is a common problem that is made worse by regulatory policies in some countries.

Data suggest that more than 660 billion counterfeit cigarettes are smoked yearly. This has a adverse effect on consumers, retail dealers, governments and cigarette firms. For smokers, illegal cigarettes mean no quality controls and no health warnings, while smuggled real products may have health warning labels that do not satisfy local government rules.

As counterfeit cigarette sales are efficiently not regulated, criminals also have no qualms with supplying anyone with their products, including minor smokers.

It is calculated that governments around the world are losing up to US$40 billion a year in excise and other duties. Tackling this unlawful trade effectively demands cooperation between the industry, regulators and enforcement specialists, supported by the establishment of acceptable duty policies, strong control and powerful enforcement.

South Africa aims to stub out tobacco branding

Cigarette

Health department director for health promotion Vimla Moodley said that they will be follow Australia in plain packaging plan. That means that there will be no branding on tobacco products sold in South Africa.

After the discussion of members of Parliament’s health portfolio committee about proposed new smoking rules, she said that the department was as well testing the use of “images” on cigarette packaging.

These images consist in representation of the “health effects” of smoking.

“Till now, the rules allowed text messages demonstrating health warning labels, for example ‘tobacco is harmful to your health’.

But on the basis of international guidelines they need to implement warning labels, which are images of health effects of smoking tobacco products, she added.

Now the health department is analyzing pictures together with the health messages in Gauteng and the Western Cape.

The full report would be presented by December this year.

Moodley noted that Australia has already introduced regulations urging cigarette makers to use plain, non-branded packaging.

Moodley said that if there is support for introduction of the plain packaging rule, they will follow Australia.

Cigarette makers, especially British American Tobacco, Philip Morris and Imperial Tobacco, strongly opposed Australia’s plain-packaging laws. However, the companies got a set-back on August when the country’s highest court approved the new rules, which are established to become operational on December 1 this year.

Moodley added that the new South African rules, which are still under review, could be implemented by as early as next year.

The suggested rules as well will mean the ban on smoking in public places and “certain outdoor places”.

Moodley told the committee that present rules permit 25% of the floor space in a restaurant or an indoor facility to be used as a smoking area.

These new rules will mean that indoor public places should be 100% smoke free. Those spaces will no longer have an area for indoor public tobacco use.

Other places that are considered by the department to be 100% smoke free included “entrances to public spaces, outdoor eating and drinking areas, health facilities, schools, child-care facilities, covered walkways and in stadiums”, she said.

In accordance with the latest data, so-called “smoking prevalence” in South Africa is decreasing, though nearly 44,400 deaths in the country each year are “related directly to smoking”.

Cigarette Filter Dimensions

Camel Cigarettes

Nowadays tobacco companies manufacture filtered cigarettes and unfiltered ones as the preferences of smokers are different.  The cigarette filter is considered to be one of the most significant elements of a cigarette. The main aim of the cigarette filter is to lessen the amount of tar and smoke that smokers inhale when the cigarette is exposed to the process of combustion. Besides, it as well reduces the harsh effects of smoke. The major material that is used to produce filter is cellulose, which is derived from wood. In addition, cigarette filters are available in various dimensions.

The Dimensions of a Cigarette Filter

In point of dimensions, the mean length of a cigarette filter is about 3 centimeters. When dealing with diameter, it usually has similar value as the entire cigarette, which is about 0.8 centimeter. Some versions may be slightly bigger or a bit smaller than these measurements. Originally filters were made of raw material that is called crepe paper.

Extra Facts and Other Interesting Details

In 1925 the right for the process of using crepe paper to make a cigarette filter was granted to a Hungarian inventor Boris Aivaz. He revealed it while carrying out tests.  Aivaz worked at an industrial factory that was owned by the outsourcing business Bunzl plc. In 1927, he invented the first filter under the auspices of Filtronic subsidiary under Bunzl. But, the absence of machinery led to its low uptake.

In 1935, the production of cigarettes with tipped filter was on the rise and that was due to the machine that was created by a British company at that time. Until 1954, filters were considered as specialty items. When the quantity of such machines increased, the use of these filters widely spread in various areas. At that time, cigarettes and especially cigarette use were widely criticized as there are many speculative affirmations made by researchers and physicians that associated smoking with health diseases.

Nowadays, almost all filters are made of cellulose acetate. The leading cigarette maker, British American Tobacco, affirms that the time needed for filters to break varies from 10 months to 15 years. This is the primary reason why they conduce greatly to major problems like environmental damage and littering. According to the findings taken from the International Coastal Cleanup in 2006, 27.4% of the whole litter was comprised of cigarettes and cigarette butts.

As for light cigarettes, the filters in such cigarettes have tiny holes, the aim of which is to dilute the smoke for less inhalation of nicotine and tar.

Early in 1950s, the filters were used only in Kent cigarettes and contained crocidolite asbestos.

Plain packaging passes High Court hurdle

Plain Packaging

On August 15 the Australian High Court decreed that the federal government is granted a right to demand that cigarettes are sold in plain packaging beginning with December, according to a local media.

In fact plain packaging is packaging created under the authority of the government to be as unappealing as is possible. The larger half of plain packaging consists of graphic health warnings and a standardized olive color at a little background. There are no logos, but name of brand is presented only in a small, standardized font.

The attorney-general, Nicola Roxon, said that the decision of the court was approved by all those families who had negative experiences with tobacco.

The Australian Associated Press reported a quote of British American Tobacco Australia that said it accepted the court’s decision, but declared that the law was not so good and would lead to a hike in illegal cigarette sales.

There is a note on the BAT’s website presenting three key legal argument of the High Court:

- that items including logos, copyright, designs, patents, goodwill, physical products and packaging constitute property;

- that plain packaging law would see BAT missing any right to this property; and

- that a related profit had been passed on to the Australian government as a result.

There was written in the note that the decision of the Australian High Court did not have a full written judgement pointing the rationale for their decision.

As well the note said that the company, which produces popular Dunhill and Lucky Strike cigarettes, is disillusioned by the decision of the Court and it is still assured that the Tobacco Plain Packaging Act is not only a bad law, but that it is one that will have many unexpected effects for years to come.

Besides, this decision is fully separate from the various other investment and trade-related debates which Australia is now facing owing to implementing the Tobacco Plain Packaging Act. The question is about Australia’s World Trade Organization debate with Honduras, Dominican Republic and Ukraine, and the claim Australia is experiencing for breaking its Bilateral Investment Treaty with Hong Kong.

BAT respect any form of evidence-based legislation but there is no evidence that plain packaging of tobacco products will bring positive effects in discouraging youth to take up smoking or encouraging smoking cessation by current smokers.

‘Indeed, plain packaging would only strengthen an already big illicit tobacco problem, and would have other essential negative unexpected effects including decreasing prices which would lead to increased smoking while reducing government tax earnings.’

British American Tobacco will continue to assume necessary measures to protect their valuable tobacco brands and their right to participate in global markets as a legitimate commercial business dealing with the sale of a legal product, based on the full legal use of their intellectual property rights.