Tobacco Asia

16 tobaccoasia FRONT PAGE NEWS 卷首新闻 As previously reported, KT&G and PMI signed a 15‑year cooperation agreement in 2023 focused on expanding the overseas sales of KT&G's heated tobacco product lil. Under the core structure of the deal, KT&G supplies lil devices and consumables, while PMI manages commercialization and distribution in international markets outside South Korea. The updated disclosure clarifies how the partnership will evolve in its next phase, particularly in relation to technology rights and volume commitments, as the two companies continue to coordinate on global heated tobacco expansion. China Orders Full-Chain Illicit Crackdown: Now Includes Any Nicotine/Oral Products China's State Council General Office on December 18 issued a high‑level policy opinion calling for a comprehensive, full‑ chain crackdown on illicit tobacco‑related activities, expanding enforcement to traditional tobacco, e‑cigarettes, and nicotine‑ containing oral products. According to Xinhua News Agency, the document— Opinion on Cracking Down on Tobacco‑Related Illegal Activities Across the Entire Chain—targets long‑standing problems such as counterfeit manufacturing, illegal sales, and smuggling. It calls for tighter enforcement across every stage of the supply chain, including production, warehousing, logistics, distribution, retail, and cross‑border trade, with the goal of cleaning up the tobacco market and protecting state interests and consumer rights. The State Council General Office issued the opinion, elevating it above previous tobacco enforcement notices typically released by the State Tobacco Monopoly Administra‑ tion or local governments. The document directs local authorities and relevant departments to assume full enforce‑ ment responsibility, strengthen inter‑agency coordination, and ensure consistent oversight throughout the supply chain. It also emphasizes improving vertical management within the tobacco regulatory system and refining delegated enforcement mechanisms. For the first time in a policy document issued by the State Council General Office, the opinion explicitly prohibits the unlicensed production and sale of oral tobacco products, nicotine pouches, and nicotine gels containing tobacco or nicotine substances. The policy places nicotine‑containing oral products squarely under tobacco enforcement without providing any licensing pathway. The opinion also calls for strict action against the illegal manufacture and sale of products that resemble cigarettes in appearance, use, or primary function. These include empty cigarette tubes, herbal or tea‑based smoking products, and simplified cigarette‑making machinery. E‑cigarette oversight is further strengthened, with specific reference to illegal practices such as "export reflow," where products declared for export re‑enter the domestic market through illicit channels. China brought e‑cigarettes under the tobacco monopoly system in 2022 and adopted product standards that permit only 101 approved additives, effectively preventing the domestic sale of fruit‑flavored e‑cigarettes. Regulators have previously said illegally re‑imported flavored e‑cigarettes raise concerns over product safety, ingredient compliance, and tax losses. The new opinion calls for stricter supervision of e‑cigarette manufacturing, storage, logistics, transportation, distribution, online sales, and tougher enforcement against illegal production and trade. The document also stresses closer coordination between tobacco regulators and criminal justice authorities, along with enhanced cooperation among customs, public security, market regulation, and postal agencies, with particular focus on smuggling routes involving borders, ports, international mail, and cross‑border e‑commerce. BAT Exits Mozambique Market; and Cuba is Next British American Tobacco (BAT) will exit the Mozambican market, a decision that sharpens pressure on South African authorities to curb the spread of illicit cigarettes that has heavily undermined the company's regional business. According to Business Day, the Johannesburg‑ and London‑listed group confirmed that it plans to withdraw from Mozambique but did not give reasons for the move. BAT Mozambique previously ranked among the country's leading cigarette manufacturers and distributors and at one point held more than 90% market share. "For next year, we also have some exit markets to lap, like Mozambique. And as you know, we have the expectation to leave Cuba as well," said Tadeu Marroco, c.e.o., member of management board & executive director of British American Tobacco. BAT spokesperson Daniel Munden declined to comment on the timing of the exit or potential job losses. He said the decision reflects a broader strategy to streamline operations and redeploy capital. "In terms of the rationale, this is part of a broader strategic decision to reduce our footprint and reallocate resources to where we can maximize returns. This is something we've been doing for a while and we have reduced our global footprint from circa 170 markets to 140 in recent years," Munden said. He added that the group continues to review its international presence, including South Africa and Cuba. The Africa Organized Crime Index identifies the Maputo and Beira corridors as key smuggling routes for illicit cigarettes between Mozambique and South Africa. BAT South Africa has reported a 40% drop in sales volumes since 2020, which it attributes to the rapid expansion of illegal cigarettes in the market. The decline has led to workforce reductions of more than 30% over the same period. BAT's presence in South Africa dates back to 1904, with the establishment of the United Tobacco Company. A 1999 merger with Rothmans International formed BAT South Africa. Early last year, the Rupert family exited the tobacco sector after selling more than 43 million shares for £1.221 billion. The Tobacco Institute of Southern Africa has urged authorities to prioritize enforcement measures, including placing customs officials at cigarette factories. The group estimates illicit trade costs the fiscus about SAR100 million a day (US$5.3 million), or roughly SAR28 billion a year (US$1.5 billion). An Ipsos study commissioned by BAT found illicit cigarettes are now widely available, with nearly 8 in 10 retailers selling them. About 69% of retailers sold cigarettes below SAR20 (US$1.05) per pack, while nearly 80% sold below the SAR26.22 (US$1.38).minimum collectible tax BAT's 2023 results included a £291 million impairment related to South Africa, reflecting what it described as the continued negative impact of illicit trade.

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