BAT profits rise 17% as cigarette demand grows

British American Tobacco (BAT), the world’s second-biggest cigarette maker, said that its third-quarter earnings were up by 17 per cent as Eastern European countries started smoking more premium brand cigarettes.  The company, which makes Dunhill, Kent, Pall Mall and Lucky Strike cigarettes, said that it is continuing to perform well despite the downturn in consumer spending on other goods.

Paul Adams, chief executive of BAT, said: “It would be foolish to ignore the fact that the economic situation may have an impact on us, but at the moment we are not seeing that impact and it’s difficult to predict.” Volumes of cigarettes sold rose an underlying 1 per cent in the first nine months of 2009 after rising 1 per cent in the first-half, compared to its 1 to 1.5 per cent annual growth target. The top four brands were up 17 per cent, boosted by strong growth in Russia and Romania.

Sales also benefited from the purchase of Turkish tobacco manufacturer Tekel for $1.72 billion, and the £1.15 billion purchase of the cigarette businesses of Skandinavisk Tobakskompagni, the Danish owner of Prinz cigarettes, earlier this year. Profits fell in Latin America, following price rises in Mexico and Venezuela caused by excise duty increases.

Mr Adams said that the company was “pretty strong” on liquidity with a £1.57 billion debt facility, so it is able to make further acquisitions when they arise. Philip Morris and Reynolds American have also posted better than expected results in recent weeks, indicating that people in many countries are continuing to spend money on cigarettes.

Source: Times Online, 30 October 2008
Link: http://tiny.cc/koQXO

Smoking out the smugglers

It is an illicit global trade in the hundreds of billions of dollars that affects the health of millions.  It's not heroin or cocaine, but tobacco smuggling. Countries have tried to combat it for years. Now negotiators for 150 countries are working to forge a global agreement that should give some muscle to those efforts. And it will mean having tobacco companies shoulder more of the burden.

Under proposals for an international agreement being considered, cigarette makers would be required to disclose the identities of the providers of the raw materials like tobacco and paper. The companies would also have to identify which wholesalers are buying their products. Companies that refuse to reveal the information could be barred from making or selling cigarettes.

These measures, advocates say, will allow government investigators to penetrate the delivery chain, which is said to be dominated by organized crime in some countries. "When the government seizes smuggled Marlboro cigarettes, in many countries, customs officials send the cigarettes to Philip Morris International to verify that the cigarettes are counterfeit," said Kathryn Mulvey, international policy director of antitobacco campaigner, Corporate Accountability International.

"This is like a police officer calling a known drug dealer to ask if the shipment of cocaine waiting in the dock belongs to him. If the cigarettes are authentic, the tobacco giant could be in big trouble, so there are strong incentives for the corporation to determine they are counterfeit," she said from Geneva, where she was monitoring the negotiations.

Among the steps being weighed in Geneva is requiring cigarette makers to track their cigarettes—from creation to consumption—with packs and cartons carrying bar codes or holographic stamps. Another proposal is to step up the prosecution of smuggling and to increase the penalties.

If negotiators can hammer out an agreement, a new global pact would follow on the 2005 World Health Organization treaty against tobacco use that bans sales to minors as well as tobacco advertising and sponsorships. Countries that signed the treaty are participating in rounds of negotiations, the most recent of which concluded last weekend, to work out what is called a protocol to the 2005 treaty.

Much is at stake. Some 11 percent of worldwide cigarette sales, or about 600 billion cigarettes a year, are contraband. An estimated $50 billion in tax revenues is lost every year as packs and cartons pass under governments' tax radar. That money goes to fund criminal enterprises and, in some cases, terrorism. Big tobacco can't participate in the talks, but it has put a congenial face on the stringent measures. While industry revenues are up because of higher prices and lower operating costs, fewer cigarettes are being shipped.

Tobacco companies worry that consumers' crimped buying power will mean cutting back on extras like cigarettes, and that states could raise taxes to regain revenues being lost during tough economic times. British American Tobacco, which is the second largest global company, said it would not oppose proposals to trace the manufacturing and delivery chain. One reason the company offered is that it had learned this month that one of its subsidiaries in Brazil had used an intermediary to supply dried tobacco to a Russian factory in Kaliningrad. A B.A.T. spokeswoman, Catherine Armstrong, said the company had taken measures to prevent further sales to any illegitimate customers. But companies are not the only offenders.

According to the U.S. Center for Public Integrity, a foundation-funded investigative group, Russia shipped more than $1 billion worth of cigarettes to Europe last year, and only a fraction were seized by customs officials. Most every country worldwide is affected, and some recognizable names have popped up. Last year, for example, Slobodan Milosevic's widow was charged with smuggling tobacco products. Earlier this month, Switzerland charged 10 people with laundering some $1 billion in cigarette-smuggling profits. Even some monks in Italy were once accused of taking part in the profitable underground trade.

Despite its status as one the globe's top smuggling destinations, the United States won't have a definitive say in the international antismuggling efforts because it has not signed onto the 2005 global treaty. Some members of Congress are trying to tackle the lucrative smuggling trade, arguing that illicit sales help fund suspect groups, including the militant Shiite group Hezbollah, and deprive the government of revenues.

Between $2 billion and $4 billion in lost taxes could be recouped by requiring cigarettes to carry high-tech tags to identify where the tobacco was grown and equipment-registration requirements, argued Lloyd Doggett, Democrat of Texas, who introduced one of the bills. Last month, the House of Representatives overwhelmingly passed a bill to crack down on such contraband, making it a felony to sell tobacco in violation of any state tax law.

Still, antitobacco campaigners charge that U.S. customs fail to stop much of the illicit tobacco trade, and that a globally coordinated effort would bolster American efforts. But Deborah Arnott, director for the nonprofit group in Britain, Action on Smoking and Health, who attended the negotiations, warned that "a lot more work needs to be done," as countries continue to hash out some often-technical details of setting up a new tracking structure and parry tobacco giants' efforts to fend off changes in their industry.

Source: portfolio.com, 29 October 2008
Link: http://tiny.cc/kPyTw

Driver jailed for smuggling four million cigarettes

The driver of a Ripley-bound lorry carrying more than four million smuggled cigarettes has been jailed for three and a half years. Maidstone Crown Court heard how Alexander Kindred, 55, of Glennturret Terrace, Perth, Scotland, was intercepted by HM Revenue and Customs (HMRC) officers at the Inward Freight controls at Dover Docks on April 26, 2007.

He was driving a British registered vehicle and said the trailer had been loaded in Germany with boxes of biscuits which were to be delivered to Ripley. Customs officers examined the vehicle and its load. Hidden within the pallets of brown boxes containing the biscuits they found a number of white unmarked boxes containing 4,229,200 cigarettes.

The revenue evaded on the tobacco was £580,000, the court heard. Jennie Kendall HMRC spokesperson for HMRC said: "This sentence will serve as a deterrent to others. Selling smuggled tobacco products is not a harmless tax fiddle – it cheats the Government of Revenue, which can be used to fund vital public services, and jeopardises the trading of law-abiding tobacconists. I would urge anyone with knowledge of others importing or dealing in smuggled cigarettes to contact the Customs Hotline on 0800 59 5000."

Source: Ripley & Heanor News, 29 October 2008
Link: http://tiny.cc/ztrbC

CORRECTION: Nicotine story reported in yesterday's Daily News

Correction to article: 32% of Americans are nicotine dependent, ASH Daily News 30 October 2008

32% of people are not addicted to nicotine in the USA but instead those who are classified as highly nicotine dependent has increased by 32%.

ASH would like to apologise for any inconvenience this may have caused.

Source: ASH Daily News, 30 October 2008
Link:  http://www.ash.org.uk/ash_7yfdg9m2.htm

Tobacco giant calls experiential pitch

Gallaher, the tobacco company that owns Benson & Hedges and Hamlet cigars, is on the hunt for an agency to provide experiential and field marketing for its range of products.

The experiential aspect involves activity in specific bars and clubs across the UK, as well as at music festivals and other selected events. A number of major cigarette brands are included in Gallaher's portfolio, including Benson & Hedges, Silk Cut, Mayfair and Sovereign. In December 2006, Gallaher was bought by Japan Tobacco, which owns Camel and Mild Seven cigarettes, for about £9.6 billion.

Tobacco companies are still permitted to run experiential and field marketing campaigns, although advertising has been banned in most other areas. In February 2003, advertising was prohibited on British billboards and in newspapers, magazines and cinema.

Source: Brand Republic, 30 October 2008
Link: http://tiny.cc/8hCuC

Fright ad aimed at smoker parents

A new television advertising campaign is being launched by the Department of Health portraying children's fear of parents dying through smoking.  The NHS Scared campaign features a young girl saying she is "scared of my mum smoking". She then reveals she is also afraid "that my mum will die".

Jen Anderson, NHS Stop Smoking adviser for Newcastle and North Tyneside, said "lots of parents" know their smoking has negative impacts on their children. "Local NHS Stop Smoking Services are here to help anyone who wants to stop smoking, making it up to four times more likely you'll stop smoking successfully," she said.

Graham Taylor, 40, is a former smoker from Walker, Newcastle, who lives with partner Julie, 37, and 10-year-old son Ellis who is diabetic. He said he knew that his and his partner's smoking habits "must have played" on his son's mind. Mr Taylor added: "I know that smoking can affect kids negatively - it can prompt them to start smoking far too early. "Going smokefree is good for us all but it really benefits Ellis as it means he has a healthier lifestyle in a smokefree environment. For him as a diabetic it's especially important, as his lower immune system means he is prone to infection."

Source: BBC News, 31 October 2008
Link: http://tiny.cc/PK0FF