Tobacco Asia

14 tobaccoasia FRONT PAGE NEWS 卷首新闻 WORLD PMI-KT&G Partnership Philip Morris International Inc. has announced its partnership with KT&G Corporation and its plans to distribute KT&G's Lil vape products outside South Korea. Under the partnership, PMI will have the right to distribute Lil products outside of South Korea for three years, but the agreement will not restrict it from marketing its own products, such as the IQOS, or other third-party products. Lil products include heat-not- burn tobacco systems, e-vapor products, and their hybrids. André Calantzopoulos , PMI's c.e.o. said in a statement, "While we plan to broaden our portfolio by launching IQOS Mesh in the coming months, we believe that increased collaboration will benefit adult smokers by providing greater choice and drive accelerated adoption of smoke-free products worldwide." PMI has no plans to commercialize KT&G products in the US. Altria-PMI Merger Still Possible In an interview with Bloomberg News, Phillip Morris International (PMI) c.o.o. Jack Olczak indicated that an Altria-PMI merger was still a possibility, saying, "the chapter is closed but not the book." Altria and PMI continue to work together on the IQOS device, with Altria marketing the product in the US and PMI elsewhere. PMI c.e.o. Andre Calantzopoulos also reproved the World Health Organization (WHO) for rejecting engagement with any tobacco companies and for being "stuck in the past." He also contrasted WHO's stance with many national regulators, which have approved the sale of alternatives to cigarettes. INDIA Godfrey Phillips Up for Sale Cigarette maker Godfrey Phillips India, owned by late industrialist KK Modi, is up for sale, confirmed Lalit Modi, KK's son, in a tweet on January 27. stock dropped 7%, recording its biggest one-day decline since July 2017 and also ended as the biggest laggard on the Sensex. An analyst with Credit Suisse said, "This will require a 10-15% price hike, in a very weak macro environment causing high single-digit volume decline. Even after taking price hikes of over 10%, cigarette EBIT is likely to be flat in the best case in FY21." Phillip Capital and Edelweiss have downgraded ITC stock following the budget, estimating a 6-7% hike in cigarette prices by ITC. An Edelweiss analyst said, "The NCCD component has been increased by 2-4 times across stick sizes. This has resulted in tax hikes in the range of 9-15% thereof. The tax hikes, in effect, at the portfolio level is likely to be about 11% which means the company would need to raise MRP by 6-7% to offset the same." A Phillip Capital analyst said, "We believe ITC will have to take a price hike of at least 6-7% on a weighted average basis, even if it has to maintain similar EBIT in INR as it will deliver in FY20. ITC's volume growth for FY21 is likely to take a knock across all lengths, with maximum impact in DSFT due to a subdued economic environment and increased competition from GPI and VST Industries." US State Officials Unable to Enforce New Tobacco 21 Law A new federal law raising the legal age to purchase tobacco and vaping products to 21 has run into a bit of a snafu as Wisconsin state law enforcement officers are unable to enforce it as it conflicts with state laws. Wisconsin state laws say the minimum age to purchase tobacco or vape products is 18. Local law enforce- ment agencies enforce state laws and not federal laws, so police departments are unable to do anything if a business continues to sell tobacco or vape products to 18-, 19-, or 20-year-olds. The Wisconsin Chiefs of Police Associa- tion has sent a letter to state legislative leaders asking for Wisconsin's laws to be Krishan Kumar "KK" Modi, who was chairman of Modi Enterprises, passed away last November. His wife, Bina Modi, was named chairperson after his death. Godfrey Phillips, manufac- turer of Marlboro cigarettes in India, currently has two major stakeholders – Phillip Morris (which owns 25.1%) and the KK Modi Group (47.09%.). Other Modi Enterprise companies that are up for sale are Modicare, Modicare Healthcare Placement, and 24Seven convenience stores. Tobacco Institute Concerned about NCCD Hike The Tobacco Institute of India (TII) has raised concerns on the increase in National Calamity Contingent Duty (NCCD) on cigarettes, saying India may become a preferred destination for " smuggled cigarettes" as the tax hike will incentivize illegal cigarette trade operators. TII said illegal cigarettes have grown consistently in the country and now account for one-fourth of the Indian cigarette market. In a released statement TII said, "In the current economic environment the proposed increase announced in the Union Budget on NCCD will aggravate the pressure on the legal cigarette industry, encourage illegal cigarette trade and adversely impact tobacco farmer earnings whose livelihood is intrinsically connected with the legal cigarette value-chain." "In the interest of the FCV tobacco farming community and the legal cigarette industry which is reeling under huge pressure we appeal to the finance minister to reconsider the proposal and withdraw the NCCD levy." ITC May Need Cig Price Hike Analysts say ITC, India's largest cigarette maker may need a 10-15% cigarette price hike as volume growth takes a hit following India's finance minister, Nirmala Sitharaman's, proposed higher levies on cigarettes and other tobacco products in the Union budget. Following the announcement of the tax hike, ITC's

• Cover