Tobacco Asia

Volume 18, Number 2

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40 tobaccoasia TOBACCO MANUFACTURING 制造新闻 NETHERLANDS/ AUSTRALIA PMI to Shut Dutch and Aussie Facilities Philip Morris International (PMI) plans to shut down its manufacturing facility in Bergen op Zoom, Netherlands. Although still pending approval from the supervisory board at Philip Morris Holland, the move will result in the loss of 1,230 jobs, or 90% of the workforce at the plant, which is PMI's largest production facility worldwide. The reason for PMI's plan can be attributed to falling demand for cigarettes in Europe (PMI has seen a 20% drop in sales volume over the past four years) due to higher health aware- ness, a weak economy, higher taxes on tobacco products, larger warning labels on packets and an EU tobacco-control law banning flavored cigarettes. PMI also warned that tougher regulations on tobacco products will actually encourage illicit cigarette trade. The announcement of PMI's plans for its facility in the Netherlands came on the heels of an announcement a few days prior that after nearly 60 years of manufacturing in Melbourne, it would stop making cigarettes in Australia by the end of 2014, shifting production to its plant in South Korea and causing a loss of as many as 180 jobs. EU TPD to Cost BAT up to 200m Euros Compliance with new European regulations on cigarettes is expected to cost British American Tobacco (BAT) an estimated €100-200 million (US$138- 277 million) over the next two years. This estimated cost is the investment involved in BAT having to upgrade machines in all its factories to meet new regulations as stated in the European Commission's Tobacco Products Directive (TPD), which bans flavors in cigarettes and requires that cigarette packs feature graphic health warnings covering 65% of the surface. BAT plans to spread the cost across its seven plants in Europe, especially its largest factory in Bayreuth, Germany. However, it does assure that none of the 1,400 jobs at its Bayreuth facility will be lost, despite the high cost. BAT and its competitors including Philip Morris International (PMI) and Imperial Tobacco are already suffering dwindling sales volumes in many European markets due to more stringent regulations, higher taxes, and an increasingly health-conscious public smoking less. Prior to this, Imperial Tobacco had announced it would be closing its factories in England and France. US Tobacco's Big 3 Invest Big in e-Cigs Altria, Reynolds American, and Lorillard have all been investing heavily in the e-cigarette market, oftentimes even at the expense of Marlboro, Camel, and Newport cigarettes which still remain the bulwark of their portfolios. While this may raise some eyebrows, Wells Fargo analyst Bonnie Herzog has shared at the NATO Show in Las Vegas that this shift can be attributed to three factors. First is the shift in consumer preferences and thus the companies' long-term financial incentives. With e-cigarettes becoming increasingly popular with consumers and traditional cigarettes seeing falling demand, it only makes sense for the Big Three to start diversifying. Secondly, the Big Three are soon to be receiving huge sums of cash, includ- ing US$1 billion each with the expiration this year of the 10-year-old Tobacco Transition Payment Program signed by President George W. Bush back in 2004. Third is the 1998 Tobacco Master Settlement Agreement (MSA), which requires manufacturers to pay the states an annual fee based on the amount of cigarettes sold. Lower cigarette sales result in lower MSA payments. These three factors combined provide the Big Three with the incentive and the extra cash to aggressively invest in the growing e-cigarette industry. According to Herzog, the e-cigarette retail industry has topped US$2.2 billion. How the FDA regulates this fast-grow- ing sector will determine the direction of it growth. Herzog predicts that electron- ic cigarettes – including vaping, tanks, and mods – will exceed traditional cigarette sales within a decade. She also expects Reynolds American and Altria to rapidly grow their market share as they launch their e-cigarette brands Vuse and MarkTen this year. New Global Op VP at NDC Mahesh Havildar has been appointed NDC Infrared Engineering's new Vice president of global operations for its sensors, systems, and metals divisions. A 20-year veteran in manufacturing, operations, and product engineering both in aerospace and the automotive industry, Havildar is responsible for NDC's overall manufacturing operations including production, quality, supply chain, material planning, project management, shipping logistics, radiation safety and product engineering. He holds a masters degree in engineering from Lamar University in Texas and an MBA from the University of Michigan. Headquartered in Irwindale, CA, US, Maldon in the UK and Alleur, Belgium in Europe, NDC Infrared Engineering offers the world's most extensive range of non-contact sensors and systems for measurement of moisture, fat, and other constituents in tobacco, food and bulk products, basis weight and thickness in continuous web processes, and thick- ness, flatness, and width in metal sheet goods.

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