Tag / BAT

by Mike Poverello

Tobacco in South Africa

smoke-cigaretteCigarette volume sales increase in 2011 – Retail volume sales grew by 1% in 2011, following declines throughout the review period. Retail value sales grew significantly due to a general price increase to cater for taxation increases, as well as rising production costs for manufacturers.

Porous borders continue to influence the growth of illicit cigarette sales – Volume sales of illicit cigarettes continued to grow during 2011, despite efforts by the police and tobacco industry stakeholders to combat illicit trade. Porous borders have been identified as the key factor behind the rise in the amount of illegal cigarettes being smuggled into the country. The Beitbridge border post between South Africa and Zimbabwe was identified as the main point of entry for illicit cigarettes from Zimbabwe.

High import duties restrict the growth of the cigars category – The performance of the cigars category remains suppressed due to high import duties on all cigars. The unit price on most cigars increased significantly in 2011 to accommodate import duty increases. Local distributors were reluctant to import new cigar brands due to a low turnover for existing brands. Consumption of cigars declined in 2011 due to higher unit prices for leading brands, with only festive seasons seeing some respite.

Consumers continue to favour buying tobacco products from supermarkets – The supermarkets channel remains the major point of access for most tobacco products in South Africa. Supermarkets tend to sell tobacco products at relatively low profit margins when contrasted with other channels, such as tobacco specialists. With the rising cost of living, smokers still prefer to use supermarkets to buy tobacco products due to the lower prices.

Retail volume sales expected to decline over the forecast period – Slower but relatively stable growth is expected for retail plus illicit volume sales over the forecast period, however retail sales alone are expected to decline. Category performance is expected to be restricted by legislative restrictions, such as a ban on the advertising of tobacco products in any way other than at points of sale. The Government of South Africa is also considering a total ban on the display of tobacco products at points of sale. Thus, retail volumes are expected to decline, while illicit sales will continue to rise during the forecast period.

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Source: Euromonitor.com

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by Mike Poverello

Hijackers bleed cigarette exporters

While the world’s health authorities rally for legislation outlawing or at least curbing tobacco abuse, it seems there is a world of intrigue deep in the heart of the tobacco trade. 

Zimbabwe is investigating possible industrial espionage amid reports that South African tobacco firms are hiring hijackers to pounce on export cigarette consignments in transit to that country. In the past year or so, indigenous producers exporting to South Africa lost an estimated R100 million worth of cigarettes to armed robbery syndicates. Among the affected companies are Kingdom, Savanna Tobacco, Breco (Fodya), Cutrag, Trednet and Chelsea.

Savanna Tobacco has confirmed losing cigarettes worth over R18 million through hijackings and robberies while their warehouse in SA has been broken into several times. Only British American Tobacco Company has been spared. At least eight Zimbabweans were arrested at Savanna Tobacco in Harare on suspected espionage. Cosygene Dekeya, a former army military intelligence operative and Edmore Muronzerei appeared in court last week.

Investigations by The Herald showed that the Tobacco Institute of South Africa contracted a security firm, Forensic Security Service, to monitor Zimbabwean cigarette manufacturers, whose brands are giving their South African counterparts stiff competition. Stephen Botha, a former apartheid military supremo owns Forensic Security Services, the company that allegedly recruited spies within the workforce of Zimbabwean cigarette manufacturers. The spies allegedly supply consignment export details, enabling the cartel to track, intercept and hijack. FSS is said to have engaged a local business mogul (name supplied) who owns one of the largest courier service companies to co-ordinate the spies and their payments. The mogul’s trucks have also been hijacked in what might turn out to be inside jobs. Local (Zimbabwean) companies now suspect BAT of being behind the formation of TISA, which has since been regionalised.

Savanna Tobacco executive chairman Mr Adam Molai said it was shocking that South Africans were infiltrating local security organisations to commit economic crimes and bleed the economy. “It is deplorable, you cannot have foreign agencies working for our competitors to distabilise our operations in Zimbabwe. We hope our authorities will ensure that issues of this nature are dealt with accordingly,” said Mr Molai.

Trednet administrative manager Mr Graham Acutt said his company had reduced production by 70 percent. “We are aware of the under cover operations for quite some time now. This is tantamount to industrial espionage and it is highly illegal and frowned upon the world over. Imagine people spying on you and following your consignment. It becomes sensitive and clients will stop buying your product,” he said.

Mr Acutt said he was aware that police were investigating and he was willing to assist as much as he could. “We need more help from the authorities in Zimbabwe to investigate those who are actually behind this. We will assist where we can. This espionage has compromised our ability to export and obviously to earn foreign currency for the country,” he said.

Breco, which is now trading as Fodya said their market intelligence has over time indicated that there were clandestine activities being undertaken by some organisations to disrupt their business. “We understand most companies in this industry experienced this form of activity in one form or another,” said Breco in an e-mail to The Herald. “What is most alarming is that some of the organisations involved in these activities are externally-based and being assisted by local Zimbabweans. If the activities of these institutions or organisations are the real basis for our reduced capacity, then it is illegal,” it said. Source: The Herald (Zimbabwe)

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by Mike Poverello

Tobacco Wars Heating Up

Australian courts this week threw out the bid by tobacco conglomerates to block government from introducing plain packaging for cigarettes. Tobacco product distributors operating in Namibia have been banking on a victory in the Australian courts to strengthen their arguments against similar plans by the Namibian government. Namibia Gazetted the Tobacco Products Control Act of 2010 that introduced plain packaging and ban the use of words such ‘mild’ or ‘light’ on cigarette boxes or any other tobacco products sold in Namibia.

The world’s biggest and the Namibian market leader in tobacco products, British American Tobacco (BAT) has been fighting the Act with serious threats to take the government to court if it dared to implement the Act. BAT has been citing the Australian court case as an example of how far it is prepared to go to fight the Namibian government over what it says is tantamount to expropriation of its trademarks properties. BAT also says plain packaging takes away its trade rights to freely communicate to consumers the nature of their lawful products on offer.

The Australian government’s victory now exposes BAT, along with Japan’s Tobacco International (JTI) and Imperial Tobacco to similar laws across the world. Britain, Canada, New Zealand, China, France, India, South Africa, Norway and Uruguay are already considering implementing the plain packaging measures. Southern Africa Customs Union (SACU) member states intend to adopt the generic Tobacco Products Control Act of South Africa that is in line with the World Health Organisation (WHO)’s pressure on the use of tobacco products, through the Framework Convention on Tobacco Control. BAT has been saying the proposed branding would exacerbate the illegal tobacco trade in Namibia where about 225 000 cigarettes are illegally sold every day.

BAT has a market share of about 85 percent of the Namibian tobacco market, selling just over 330 million cigarettes every year in the country. Namibians are said to smoke 75 000 packs of 20 cigarettes each per day or an equivalent of 1.5 million cigarettes each day. The court ruling in Australia makes Australia the first country in the world where cigarettes are sold in drab, olive coloured packets with graphic health warnings and no logos.

The Tobacco Products Control Act of 2010 also mandates the establishment of a fund from levies on sales of tobacco and other sources.The fund would partly use the money to pay for treatment of tobacco-related illnesses. The new proposed packaging features graphic pictures depicting the ill health associated with smoking. These range from stained teeth, throat cancer to damaged lungs and breast cancer with appropriate warnings underneath the picture. If the new legislation is implemented fully there would be a total blackout on advertising, promotion and any public relations activities around tobacco products or companies whose names are directly associated with tobacco products. Source: New Era, Namibia.

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