Altria 3rd-quarter profit beats estimates

Altria Group Inc posted a higher-than-expected quarterly profit as price increases and cost-cutting measures helped the parent of Philip Morris USA offset sales of fewer cigarettes.

The company also said it had fully committed financing for its $10.4 billion acquisition of smokeless tobacco maker UST Inc (UST.N: Quote, Profile, Research), but conditions in the public debt market meant it could no longer say if the deal would add to earnings within 12 months as originally planned.

Philip Morris USA shipped 4.8 percent fewer cigarettes, with the total falling to 44.9 billion. Rising taxes, the proliferation of bans on smoking in public places and widespread messages on the health dangers of smoking have all steadily eroded U.S. cigarette sales for years.

Source: Reuters UK, 23 October 2008
Link: http://uk.reuters.com/article/companyResultsNews/idUKN2353664520081023?sp=true

PQ: Action on Smoking and Health

Nicholas Soames (Mid Sussex, Conservative): To ask the Secretary of State for Health
(1) what steps he takes to audit funding provided to Action on Smoking and Health by his Department to determine what proportion is used to lobby his Department;
(2) how many meetings (a) he, (b) his ministerial colleagues and (c) his officials have had on the future of tobacco control with (i) charities, (ii) professional bodies, (iii) retail businesses and (iv) manufacturers in the last three years; which of the charities with which meetings have been held are funded by his Department; and in each case how much funding has been allocated to each charity.

Dawn Primarolo (Minister of State (Public Health), Department of Health; Bristol South, Labour): Action on Smoking and Health (ASH) received funding from the Department in the current financial year in accordance with the 'Section 64 General Scheme of Grants to voluntary and Community Organisations'. The standard conditions attached to these grants including audit procedures are published on the Department's website at: www.dh.gov.uk/en/managingyourorganisation/Financeandplanning/Section64grants/DH_076281
ASH has received this grant specifically to carry out a defined project entitled "Capitalising on Smokefree: the way forward". None of this funding is to be used for lobbying purposes.
The Department has completed a public consultation on 31 May 2008 on the future of tobacco control. This consultation was carried out in accordance with the Cabinet office code of practice. A copy of the, consultation document has already been placed in the Library.

More

Source: Hansard Source – 16/10/2008 Column 1446W
 

No plans to cut jobs, says Japan Tobacco

Rejecting media reports, Japan Tobacco has said that it has no intentions of eliminating domestic production jobs, revealed Bloomberg.

However, a report in the Nikkei newspaper has maintained that over the next three years, the tobacco company intends to downsize domestic cigarette production workforce by 30%, or 500 employees. This move is a consequence of dipping tobacco sales, the report said.

Bloomberg has cited Yukiko Seto, a spokesperson of Japan Tobacco, as saying that in an attempt to increase production, the company will spend about JPY10 billion to JPY20 billion annually.

Source: Datamonitor, 20 October 2008
Link: http://www.datamonitor.com/industries/news/article/?pid=A2347B6C-05C8-4DD7-A098-152EDFFE0DAC&type=NewsWire

Explaining the social gradient in smoking cessation: It's not in the trying, but in the succeeding

Abstract

OBJECTIVE: Smokers from more deprived socio-economic groups are less likely to become ex-smokers. This study examined how far this is attributable in England to a social gradient in quit attempts, use of aids to cessation, and/or the success of quit attempts.

PARTICIPANTS: 6,950 respondents aged 16 who had smoked in the past year of whom 2,983 had tried to stop in the past year and 469 reported having stopped at the time of the survey.

MAIN OUTCOME MEASURES: Reported attempts to stop smoking in the past year; use of stop-smoking medications; use of behavioural support; current smoking status.

RESULTS: There was a large difference in success rates of quit attempts: 20.4% in social grade AB versus 11.4% in social grade E of those who made attempts were still not smoking by the time of the survey (p<0.001). However, there was no difference across social grades in the rate of attempts to stop (42.7% in social grade AB to 41.3% in E), use of medications to aid cessation (46.7% of those making quit attempts in AB to 50.9% in E) or use of NHS Stop Smoking Services (7.0% of those making quit attempts in AB to 4.8% in E).

CONCLUSIONS: Smokers in more deprived socio-economic groups are just as likely as those in higher groups to try to stop and use aids to cessation but there is a strong gradient across socio-economic groups in success, with those in the lowest group being half as likely to succeed compared with the highest.

Source: Tob Control. 2008 Oct 20. [Epub ahead of print]. Kotz D, West R., Maastricht University Medical Centre, Netherlands;
Link: http://tobaccocontrol.bmj.com/cgi/content/abstract/tc.2008.025981v1

Scottish smoke-free legislation and trends in smoking cessation

Abstract

AIM: To investigate trends in smoking cessation before and after the introduction of Scottish smoke-free legislation and to assess the perceived influence of the legislation on giving up smoking and perceptions of the legislation in smokers.

DESIGN, SETTING AND PARTICIPANTS: Longitudinal data on smoking cessation were obtained from 1998 to 2007 on a cohort of 3350 Scottish adults aged between 50 and 75 years at baseline. All members of the cohort were participating in a clinical trial of aspirin in people at moderately increased risk of cardiovascular events. A subgroup of 474 participants who had smoked in the year prior to the introduction of legislation in March 2006 also completed a questionnaire on the influence and perceptions of the smoke-free legislation following its introduction.

MEASUREMENTS: Smoking status was recorded yearly, including dates of quitting and restarting. Participants who gave up smoking for at least 3 months were recorded as having quit smoking. The questionnaire included scales on whether the smoke-free legislation had helped/influenced cessation, made the individual think about/prompt them to quit and perceptions of the legislation.

FINDINGS: The odds of smokers quitting annually increased throughout the 7-year period prior to introduction of the smoke-free legislation to 2 years afterwards (odds ratio 1.09, 95% confidence interval 1.05–1.12, P < 0.001). During 2006, the pattern of quarterly quitting rates changed, with an increase in quit rates (to 5.1%) in the 3-month period prior to introduction of the legislation (January–March 2006). Socio-economic status was not related to smoking cessation. In the subgroup completing the questionnaire (n = 474), 57 quit smoking between June 2005 and May 2007 and 43.9% of these said that the smoke-free legislation had helped them to quit. Most (>70%) smokers were positive about the legislation, especially those from more affluent compared with more deprived communities (P = 0.01).

CONCLUSIONS: The Scottish smoke-free legislation was associated with an increase in the rate of smoking cessation in the 3-month period immediately prior to its introduction. Overall quit rates in the year the legislation was introduced and the subsequent year were consistent with a gradual increase in quit rates prior to introduction of the legislation. Socio-economic status was not related to smoking cessation, but individuals from more affluent communities were more positive about the legislation.

Source: Addiction, Volume 103 Issue 11, Pages 1888 - 1895
Link: http://www3.interscience.wiley.com/journal/121458999/abstract

Progress Towards WHO Pact on tobacco smuggling

A draft protocol to eliminate all forms of illicit trade in tobacco products, such as contraband, illegal manufacturing and counterfeit cigarettes, has been outlined at the World Health Organisation (WHO).  The second meeting of the Intergovernmental Negotiating Body in charge of drafting the protocol, which ended on Saturday, debated the possibility of creating a group of experts to review certain initiatives, including the feasibility of an international system for monitoring and tracking tobacco products.

The system must have international standards and be appropriate for low- and middle-income countries, said Eduardo Bianco, a Uruguayan doctor and the Latin American head of the Framework Convention Alliance on Tobacco Control (FCA), a network of non-governmental organisations. It must include elements of technology, like special markings and labels for cigarette packs and cartons, so that they can be traced from the producer to the end user to ensure that they do not deviate from legal sales channels, Bianco told IPS. The protocol must contain cooperation commitments that apply across national and regional boundaries, because a product can be shipped from the United Kingdom to the Middle East, return to Europe and end up back in the U.K., he said.

Similarly, in Latin America, tobacco products originating in, or in transit through, countries like Paraguay or Panama are sent on circular journeys and return to the same countries, where they are sold at lower prices. That is why international cooperation is needed, Bianco emphasised. In Chile, international and intersectoral cooperation policies have contributed to reducing the share of contraband cigarettes from eight percent to just two percent of total consumption, Manuel Navarrete, head of the internal revenue service's illegal trade office, told IPS.

Fighting contraband is part of the provisions of the Framework Convention, the first international health treaty, which the WHO began to shape nine years ago. The first working group session was held on Oct. 25, 1999. The final text of the Convention was approved in 2003, and it entered into force in 2005. It has been ratified by 160 states so far, making it one of the most rapidly and widely embraced United Nations instruments. Controlling illicit trade in tobacco products is a major issue, because such criminal activity puts cheaper cigarettes on the market and therefore contributes to the smoking epidemic, which is costing millions of lives, said Brenda Abrar-Milani, a WHO spokeswoman.

Between Oct. 25, 1999 and 09:00 Geneva time (08:00 GMT) on Saturday, 39,850,410 people around the world died from illnesses related to smoking or passive exposure to tobacco smoke, the Alliance of non-governmental organisations said. But the effects of illicit trade in tobacco products are not restricted to public health, as it also has a profound economic effect on countries, with losses of tax revenues amounting to some 50 billion dollars a year worldwide, Abrar-Milani said.

And that figure is just an estimate; it may be much greater, she said. The draft protocol on illicit trade in tobacco products includes the idea of introducing a licensing system to identify those who work in the chain of manufacturing and marketing of these products. If any legal obligations are broken, they will lose their licences, Bianco said.

Other measures that have been proposed are aimed at combating money laundering and the adoption of minimum standards on crimes, as well as heavy penalties to act as a deterrent. In Uruguay, smuggling cigarettes does not carry a prison sentence. The smuggler simply pays a fine and continues his or her illegal work, because it is classified as an economic crime, Bianco said.

The proposed group of experts will also be asked for its opinion on duty-free sales of tobacco products. Tobacco companies make high profits from duty-free sales, as the cigarettes are sold at lower prices but no taxes are paid, Bianco said. They also transport their goods under the protection of "In Transit" or "Duty Free" labels, he said.

The European Travel Retail Council (ETRC), an organisation of companies related to duty-free shops, commented this weekend that the working group in Geneva had discussed the inclusion of a clause calling for a ban on duty-free tobacco. "This came as a surprise, as duty-free was not a high profile issue during the first round of discussions on this protocol in February," said Keith Spinks, the secretary general of the ETRC. Abrar-Milani told IPS that "no decision was taken on a ban on duty-free" by the Intergovernmental Negotiating Body, "but it was strongly supported."

"The duty-free companies reacted strongly, because they have huge financial interests" to lose, she said. "It's a good sign for us. It means that the negotiations were positive because they reacted immediately," even though no decision had yet been made. The negotiating body will meet again in June 2009 in Geneva for further work on the protocol. At the current pace of discussions, there may be consensus on a final document at the third session, or at the meeting after that, Bianco said.

Source: IPS News, 27 October 2008
Link: http://www.ipsnews.net/news.asp?idnews=44460

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://business.timesonline.co.uk/tol/business/industry_sectors/consumer_goods/article5046182.ece

Can smoking cessation services be better targeted to tackle health inequalities? Evidence from a cross-sectional study

Abstract

OBJECTIVE: To investigate how smoking cessation services could be more effectively targeted to tackle socioeconomic inequalities in health. 

DESIGN: Secondary analysis of data from a household interview survey undertaken for Middlesbrough Council in north east England using the technique of Qualitative Comparative Analysis.

SETTING: Home-based interviews in Middlesbrough.

METHOD: Qualitative Comparative Analysis of data for 2882 respondents aged 16 years or over. Smoking prevalence was calculated for different combinations of respondents' characteristics: worklessness, income, education, neighbourhood liveability and neighbourliness.

RESULTS: Smoking prevalence ranged from 74.5 per cent to 10.3 per cent across 19 combinations of the selected characteristics. Almost all combinations with smoking rates higher than 50 per cent included worklessness. One other combination exceeded 50 per cent and included respondents reporting all of the following: unhelpful neighbours, no further education, low liveability and low income. The combinations with the lowest smoking prevalences had only one or two of these characteristics present and the very lowest prevalence of 10.3 per cent was associated with all being absent. If unhelpful neighbours were present in any combination smoking rates were moderately high (32.4 per cent or higher).

CONCLUSIONS: The analysis points to important features of the context of smokers' lives. By improving these conditions, appreciable reductions in smoking prevalence are likely. These reductions might be even greater if interventions to improve neighbourhoods and job opportunities are combined with the timely provision of smoking cessation services. Targeting these transitions could be a more effective strategy than simply targeting all deprived neighbourhoods.

Source: Health Education Journal, Vol. 67, No. 2, 91-101 (2008), Tim Blackman, Durham University
Link: http://hej.sagepub.com/cgi/content/abstract/67/2/91

Growth in Duty-free tobacco sales

Based on actual audits of retail sales among a panel of locations worldwide, the TREND Tobacco Index shows that nine months into 2008 global duty free and travel retail tobacco sales have advanced 6.2% as compared to the same period in 2007. "The development in the Middle East has been especially encouraging", says Yngve Bia compiling the TREND Tobacco Index on behalf of TREND. "Here we see a double-digit growth at 13.5% in the first three quarters of 2008 against the same period in 2007".

Duty free and travel retail tobacco sales in Asia were up 7.9%, while sales in The Americas grew by 5.6%. "In Europe, duty free and travel retail tobacco sales calculated in Euros show a small drop as compared to last year. It is especially duty-paid sales to intra-EU travellers that have been suffering. Duty free sales to travellers with destinations outside the EU actually show a slight increase as compared to last year", says Bia.

As reported before in TREND, the European Commission has plans to try and harmonise tobacco taxes across EU. Any plan to harmonize taxes across the 27-nation bloc would hit eastern European smokers hardest where taxes are much lower than in countries such as Britain. But the EU claims that higher prices would reduce cigarette use by a tenth over the next five years.Regulators say they want tax to amount to 63% of the retail price of all cigarettes across the European Union by 2014, instead of the current average of 57%. This would mean that tax on the sale of 1,000 cigarettes would have to rise to at least € 90.00 (US$ 144.00).

"The tobacco industry does not have any friends in politics and the duty free industry and may also soon find itself without an audience for its representatives. We must act now to ring-fence the duty free trade from further regulatory action against the products that provided the foundation of our industry", says Keith Spinks, ETRC (European Travel Retail Council) Secretary General.

Philip Morris International is the leading tobacco company in global duty free and travel retail, and of its total estimated 2008 cigarette sales of some 900 billion sticks, about 9 billion (1.0%) will be sold in duty free and travel retail shops. The importance of the duty free and travel retail channel is even greater to the world's No. 1 brand, Marlboro.

From total estimated 2008 sales of 320 billion sticks (excluding parent company Altria's sales in the US), no less than 2.5% or 8 billion Marlboro sticks will be sold in duty free and travel retail this year. JT International – now the world's third largest international manufacturer of tobacco products – estimates total global cigarette sales of 450 billion sticks in 2008, with about 5 billion sticks (1.1%) destined for sale in duty free and travel retail shops.

In 2007, Imperial Tobacco's duty free and travel retails sales of cigarettes (excluding the Altadis range – deal completed only in January 2008) reached some 1.7 billion sticks, equal to 0.9% of the global total of 200 billion sticks.

Top 15 Cigarette Brands in Duty Free & Travel Retail Tobacco by Sales Value in 2007:

1. Marlboro (Philip Morris International)
2. Camel (JT International)
3. Silk Cut (JTI)
4. B & H (BAT)
5. Mild Seven (JTI)
6. Gauloises (Imperial Tobacco)
7. Dunhill (BAT)
8. Prince (BAT)
9. John Player (BAT)
10. Barclay (BAT)
11. Benson & Hedges (PMI)
12. Lambert & Butler (Imperial)
13. Winston (JTI)
14. Superkings (Imperial)
15. State Express 555 (BAT)

Source: TRAQ Tobacco 2008 / Generation Research, Sweden, 27 October 2008
Link: http://www.trend-news.com/default.asp?sel=gr&gr=TRENDTobacco&newsid=5352

Philip Morris lifts earnings 21%

Philip Morris International underscored the tobacco sector's reputation as a haven for investors after it delivered a 21 per cent rise in third-quarter earnings and increased its quarterly dividend payout. The group, which was spun off from Altria Group this year, bucked the gloom surrounding the slowdown in consumer spending to report net income of $2.08bn, or $1.01 per share, for the quarter, compared with $1.72bn, or $0.82 a share, the year before.

In spite of signs in other consumer sectors that people are adopting thriftier habits, the company said smokers in emerging markets were still trading up to dearer brands. "The downtrading that everyone is referring to or afraid of, we have just not seen," Hermann Waldemer, chief financial officer, said. Net revenue rose 22 per cent to $17.3bn, helped by a weak dollar and volume growth of 4 per cent to almost 226bn cigarettes.

Strong sales growth in eastern Europe and Asia has helped offset volume declines in western Europe. PMI, the largest publicly listed tobacco company, said it remained confident of meeting its 2008 forecast of earnings of $3.32 to $3.38 a share. Dividend for the quarter was increased by 17.4 per cent to 54 cents a share.

Source: Financial Times, 23 October 2008
Link: http://www.ft.com/cms/s/0/6be6110a-a09a-11dd-80a0-000077b07658.html?nclick_check=1

Parliamentary Bills

Criminal Justice and Immigration Bill – Royal Assent. It is now an act of parliament and comes into force in April 2009. This includes banning orders for retailers who persistently sell tobacco to persons under 18.

Link: http://services.parliament.uk/bills/2007-08/criminaljusticeandimmigration.html