Tobacco Asia

Volume 19, Number 4

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12 tobaccoasia FRONT PAGE NEWS 卷首新闻 WHO SAID WHAT? "On the whole, the introduction of the ban on open display probably went against the interests of the [Russian] government and the [Russian] consumer." - Sergei Kiselyov, vice president of corporate affairs and communications at Japan Tobacco International (JTI) Moscow office France Cameras 'Hooded' Over Plain Packaging Tobacconists in France are protesting against plans to force cigarette compa- nies to use plain, unbranded packaging by disabling traffic speed cameras. The protesters say the so-called radar "hooding" – the act of covering them with bin liners – is meant to be sym- bolic: a "cover up" that deprives the government of money in the same way that the anti-smoking legislation will reduce tobacco sales and tax revenue. As many as 20 of 97 districts had been affected by the campaign, said the Buralistes Confederation, the group representing France's "tabac bars". A spokesman said that it was "a sign that anger is mounting." French BFM TV showed a group of tobacconists wearing white masks on a night-time radar-hood- ing expedition. Many of the tobacco outlets, with their distinctive red cigar-shaped signs, are also bars and cafés. Some also sell stamps and newspapers, but they point out that a key function on their monop- oly on tobacco sales is collecting tobacco tax: €14 billion (US$15bn) for the French Treasury every year. France is one of four EU countries that plan to follow Australia's example and impose plain cigarette packaging in May 2016. A European Union law passed last year mandated that health warnings cover 65% of the front and back of cigarette packs, and 50% of the sides. The remaining space is available for branding, but the law allows member states to impose plain packaging rules when "justified on grounds of public health, are proportionate and do not lead to hidden barriers to trade between member states". Philip Morris International and British American Tobacco have sued the British government over its plan to require plain packaging, arguing that it would rob them of their intellectual property and restrict trade. Cuba Tabacalera Takes Aim One of the biggest beneficiaries of the diplomatic rapprochement between the US and Cuba is likely to be Tabacalera, a Spanish tobacco group. The Madrid- based company, which is part of Imperial Tobacco, owns a 50% stake in Cuba's state cigar export company, Corporación Habanos. Tabacalera has played a key role in the marketing and selling of Cuban cigars in more than 150 countries around the world since buying the stake 15 years ago. Now that Washington and Havana agreed to restore diplomatic relations, the company is hoping to take the US market – which accounts for two-thirds of premium cigar sales – by storm. Fernando Domínguez, executive chairman of Tabacalera, says nearly one in three premium cigars sold in the US may soon come from Cuba. This example demonstrates how the changing political situation is creating surprising opportunities for businesses, particularly those from Spain, which is the largest investor in Cuba. "Given the indisputable recognition of Cuban tobacco and its unique portfolio of brands, I think Habanos can capture 20 to 30% of the US cigar market in the first three of four years," he said. The US is the biggest market for puros, or premium cigars, with more than 300m smoked annually. For more than half a century, however, the import and sale of Cuban cigars from prized brands such as Cohiba, Montecristo, and Romeo y Julieta was strictly prohibited. Cuban cigars were banned in the US in 1962, at the height of the cold war. Famously, John F. Kennedy held back his signature until a member of his staff was able to snap up 1,200 of his favorite Cuban cigars from tobacco shops across Washington. (See story on Cuban cigars on page 28) Russia Illicit Floods Russia Russia is facing a growing problem of pirated tobacco flooding its domestic market, with the volume of counterfeit cigarettes rising sharply in the last year, including several incidents in which illegal supplies of cigarettes were found to have originated in China. In June 2014, the Russian govern- ment introduced a ban on the open display of cigarettes in stores. Since then it has been prohibited to put cigarettes in display cases. Sergei Kiselyov, vice president of corporate affairs and communications at Japan Tobacco International (JTI) stated that "on the whole, the introduction of the ban on open display probably went against the interests of the government and the consumer." He further ex- plained that it was now difficult for the consumer to identify if they were buying a legal or counterfeit product. According to Kiselyov, one of the reasons for the growth of counterfeit tobacco is the ban on the open display of cigarettes in stores. Moreover, JTI says the substantial growth of counter- feit tobacco is also conditioned by the growth of excise rates. Experts say Chinese production constitutes just 1% of counterfeit tobacco in Russia, since until recently Chinese tobacco was shipped to Western Europe, where prices are significantly higher than in Russia. However the growth in excise duty means that Russia has also become an interesting market for illegal produc- ers. The remaining 99% of counterfeit tobacco in Russia is produced internally and in Ukraine.

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