A photo of cigarettes sold in Shanghai on March 7, 2022.
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China is counterattacking Global Smoking Trends As cigarette sales surge in the country, “The largest tobacco company most people have never heard of“.
China National Tobacco Corporation, commonly known as China Tobacco, has a virtual monopoly on the tobacco industry. Tobacco product sales in ChinaDespite relative obscurity abroad, the state-owned company has grown into the world’s largest cigarette maker.
Euromonitor data shows that China’s cigarette retail sales have been growing in the past four years and will reach 2.44 trillion cigarettes by 2023. The research team predicts sales will continue to grow year over year, reaching $2.48 trillion by 2028.
Euromonitor adds that this growth coincides with the growing popularity of “slim” cigarettes (often marketed as “low tar”) and various types of flavored cigarettes.
These trends, driven by China Tobacco, come against the backdrop of a long-term decline in global cigarette sales. Euromonitor data shows that between 2019 and 2023, global annual sales of cigarette sticks fell by approximately 2.7% to 5.18 trillion sticks.
According to the National Bureau of Statistics, China has more than 300 million smokers, making it the country with the largest number of smokers in the world, accounting for nearly one-third of the world’s total smokers. World Health Organization.
And Beijing Commitment made In an effort to curb the smoking epidemic, it does not appear to have had a significant impact on tobacco sales.
The State Tobacco Monopoly Administration, which oversees China’s tobacco operations, reported that China’s tobacco industry achieved revenue of about 1.5 trillion yuan ($210 billion) in fiscal 2023, an increase of 4.3% from the previous year. China Tobacco’s expected production 97% of the country’s tobacco Production and sales.
Philip Morris International, the world’s second largest tobacco company, reported net income It will reach US$35.2 billion in 2023.
“conflict of interest”
Experts told CNBC that the World Health Organization Framework Convention on Tobacco Control, which aims to reduce tobacco use around the world, is one of the major factors in reducing tobacco use around the world, especially in rich countries.
“In countries where the tobacco industry is able to influence government policy, we tend to see less progress,” said Quan Quan, senior vice president of tobacco control at Vital Strategies.
In the case of China Tobacco, industry and government policies overlap directly. The company was founded in 1982 with the express purpose of bringing the industry to An umbrella for centralized planning.
Quan said China’s State Tobacco Monopoly Administration is directly involved in the formulation of national tobacco control policies. Therefore, China Tobacco is both a company and the regulator of China’s tobacco market, creating a “clear conflict of interest.”
He added: “China Tobacco has been exploiting this internal position and using its influence within the government to effectively block the implementation of tobacco control policies.”
By 2014This behemoth has more than 500,000 employees and controls 33 provincial tobacco regulatory bureaus, 57 cigarette companies, and more than 1,000 other small commercial enterprises.
The company expects to contribute Up to 12% of China’s tax revenueAccording to the University of Bath.
Judith Mackay, director of Asia Tobacco Control Consulting, told CNBC that China views tobacco cultivation as vital to farmers and tobacco taxes as an important contributor to the country’s economy, which are among the obstacles to greater government regulation.
China Tobacco and its Hong Kong subsidiary China Tobacco International (Hong Kong) did not respond to CNBC’s inquiries.
global expansion
Jennifer Fang, a researcher and project manager at the Pacific Institute of Pathogens, Epidemiology and Society, told CNBC that China Tobacco’s monopoly has driven its strong domestic growth, coupled with China’s large number of smokers and lack of competition from Western brands .
Although brands such as Philip Morris’ Marlboro are sold in China, it is through License agreement and China Tobacco.
Given its domestic dominance, China Tobacco has focused almost entirely on the Chinese market for most of its history. For that reason, Fang said, it has been under the spotlight in tobacco control research, which has focused on multinational tobacco companies considered “Big Tobacco.”
However, her research on China Tobacco between 2016 and 2020 shows that the company has been expanding globally under Beijing’s Belt and Road Initiative but faces the possibility of a more saturated domestic market and tighter tobacco regulations.
As of 2019, China Tobacco has expanded its global operations to 20 countries and operates through 34 offshore facilities, including sales offices, manufacturing plants and professional tobacco purchasing companies. According to Fang.
Judging from China’s exports in recent years, this trend seems to be continuing.
China Tobacco Strong export growth reported It will be US$9.173 billion in 2023, an annual increase of 22.2%.
An important part of the recent expansion is its subsidiary China Tobacco International (Hong Kong), which was listed on the Hong Kong Stock Exchange in June 2019.
The company’s share price has risen more than 376% since its listing in Hong Kong, according to calculations based on London Stock Exchange Group (LSEG) data. It’s up nearly 160% so far this year.
Before and after the IPO, Tobacco control analysts write “The goal of the IPO is to fund market expansion in China Tobacco Corporation’s target markets and establish strategic cooperation with other cigarette companies.”
McKay of Asia Tobacco Control Consultants said the expansion showed China Tobacco was eager to follow in the footsteps of international tobacco giants such as Philip Morris International and British American Tobacco Plc..
“The ultimate goal is to sell more cigarettes or nicotine products — that’s the goal of every tobacco company,” she said. “The impact can only be detrimental.”
—CNBC’s Sonia Heng and Evelyn Cheng contributed to this report
