china national tobacco corporation

China National Tobacco Corporation is a tobacco firm based in Beijing. In 2018, it donated over $45 million to multiple Charity Federations of the municipal and provincial level, including a $3.02 million donation to Wuxiang, Shanxi for constructing Migration Village, and a $3.1 million donation to Xiamen Foundation for Disabled Persons for charitable activities. Alongside consolidation, CNTC has pursued a strategy of premiumisation since 2008. From 1991 to 1995, CNTC exported over 100 brands to 37 countries including Virginia (flue-cured) cigarettes to Southeast Asia; blended cigarettes to Europe, the USA, Russia and Africa; and herbal cigarettes to Korea and Japan (STMA, 1996). Number of CNTC brands (1990s–2013). Another indicator of globalisation is product development to promote a small number of Chinese ‘heritage’ brands overseas, as well as premium brands. This would permit entry of Hongta brands into the Russian market, produced and distributed by Donskoy Tabak (Anon, 2012). These are likely to appeal to overseas Chinese, rather than serve as global brands, given their close affinity with Chinese cultural tastes and practices. For example, there were negotiations between Hongta Group and Donskoy Tabak in 2012 for Hongta’s purchase of 0.5% share of Russia’s largest national tobacco manufacturer. As Holden et al. Total number of Chinese tobacco companies (1998–2009). These sources were used to map the industry’s history and changes to its structure over time. This paper examines the global business strategy of the CNTC as a global public health challenge. Source: Compiled from BAT (2013), Hongta Group (2010), STMA (2006, 2009, 2012), Tobacco-free Kids (2010). Supported by favourable government policies and substantial resources, the restructured domestic industry has achieved greater economies of scale. (, Trade policy, health, and corporate influence: British American Tobacco and China’s Accession to the World Trade Organization, ‘Key to the future’: British American Tobacco and cigarette smuggling in China, The globalisation strategies of five Asian tobacco companies: An analytical framework, Tobacco industry globalization and global health governance: Towards an interdisciplinary research agenda, Breaking and re-entering: British American tobacco in China 1979–2000, Tobacco control in China: still a long way to go, Eyes on the prize: Transnational tobacco companies in China 1976–1997, China’s Tobacco industry and the world trade organization, Global-market building as state building: China’s entry into the WTO and market reforms of China’s tobacco industry, British American Tobacco’s tactics during China’s accession to the World Trade Organization. The higher volume in illicit tobacco sales also has a negative effect on public health as the quality of counterfeit tobacco products is questionable. In 1985, the China National Tobacco Import Export Corporation (CNTIEC) was then formed to oversee trade of tobacco products, technology and accessories, as well as international economic cooperation (STMA, 1997). The sheer size of the Chinese tobacco industry compared to existing TTCs, and thus its potential to generate significant foreign earnings, has prompted the government to promote the industry’s expansion overseas. This, in turn, would lead to a gradual shrinking of domestic market share. (IBIS World, n.d.). Given continued exclusion of TTC competition by the Chinese import quota system (Lee et al., 2004), and size of the domestic market, initial industry efforts were limited. China National Tobacco Corporation is the largest tobacco producer in the entire world owned by the Chinese government (Young, 2006). It is expected that CNTC will soon progress to M&As of small and medium-sized foreign tobacco companies, mimicking TTCs such as JTI and Imperial Tobacco (Qing, 2015). Tobacco industry interest in foreign expansion was first raised following China’s signing of the General Agreement on Tariffs and Trade in 1993. While negotiations appear to have been unsuccessful, industry analysts predict that the CNTC’s ‘massive current account surplus built up over years means that no company is too large to be purchased for cash’ (Euromonitor, 2008), a sentiment echoed by others (The Economist, 2014). poorly performing firms with production of <100,000 cases annually (to declare bankruptcy). The strategic location of major offshore production bases in each region is a clear indication of efficiency seeking. The Company produces cigarettes, flue cured tobacco, and other products. Using Chinese and English language sources, this paper describes the globalisation ambitions of the CNTC, and its global business strategy focused on internal restructuring, brand development and expansion of overseas operations in selected markets. Mar 2012 – May 2012 3 months. Market share grew, from 6% in 2007 to 25.2% in 2014, the only segment to see growth in 2014. For example, RJR licensed the Xiamen Cigarette Factory to produce Camel cigarettes in 1980 (Lin, 1984). Tobacco companies are concerned with the sale and distribution within the province of all tobacco products regardless of where they are produced. In 1986, Huamei was established in Xiamen’s Special Economic Zone (SEZ) as an equity JV between Xiamen Cigarette Factory and RJR, developing Golden Bridge as a leading brand by 1989 (Lai, 2009). Cited by lists all citing articles based on Crossref citations.Articles with the Crossref icon will open in a new tab. Previous analyses of the global tobacco industry recognise the importance of, but generally exclude, the CNTC because of its strong domestic focus. Beyond the WTO, there is much uncertainty to how tobacco will be handled in key negotiations for major trade and investment agreements such as the Trans Pacific Partnership. The major reason as to why CNTC entered into joint venture with the U.S Company called Celanese Fibre Corporation was to seek partnership in … Profits and tax revenues were distributed among the central and provincial governments, CNTC and various subsidiaries (State Council, 1981). Following accession to the World Trade Organisation (WTO) in 2001, and facing growing saturation of the domestic market (Zhou & Cheng, 2006), the CNTC declared ambitions to ‘go global’ (Euromonitor, 2008). Table 2 lists CNTC’s portfolio of foreign operations which include distribution offices, manufacturing plants, production and distribution bases, tobacco leaf procurement, and machinery and accessory materials. Source: Trade Map. The industry lynchpin is China National Tobacco Corp., a state-owned monopoly that makes more than one-third of the world's cigarettes, and … We use cookies to improve your website experience. The aim has been to reduce local government power over the industry, and increase competition across the same tiers in the industry, by dismantling its vertical structure and bureaucracy (Wang, 2009). To enhance global competitiveness, Chinese product development involved three strategies: consolidation of brands into a smaller number with mass appeal; adaptation to appeal to foreign markets; and higher value-added premium products. To address these three caveats, triangulation of multiple data sources was undertaken where possible. Tobacco companies were put into four categories (STMA, 1998a): large firms with annual profits >RMB 100 million (US$12.08 million) and production >500,000 cases1 of cigarettes (major inter-provincial/regional enterprises); medium firms with potential production of >300,000 cases annually (major provincial/regional companies); small firms with production of 100,000–300,000 cases annually (to merge with other firms or close depending on performance); and. In 2000, the CNTIEC was reorganised and renamed the China Tobacco Import Export Group (CNTIEG). However, the industry was also highly uncoordinated, controlled at the provincial level by local monopoly offices reporting to ministries of light industries, commerce and other financial entities (STMA, 1997). The result was an increase to 11% market share within two years (Zeng, 2010). Tobacco Sales Bans are No Good. More influential has been the broader support, in Chinese economic policy, for the ‘go global’ strategy as key to the country’s emergence as a global economic superpower. China National Tobacco Corporation is a consumer product company based in Beijing. Faculty of Health Sciences, Simon Fraser University, Burnaby, Canada, Note: The CNTC and STMA also manage other tobacco-related entities including leaf, machinery, accessory materials, research institutes, technology centres and tobacco museums, China Council for the Promotion of International Trade. the state-owned China National Tobacco Corp, which enjoys a near-monopoly, shares offices and senior offi-cials with the national tobacco regula-tor. Formally separate entities, in practice the CNTC and STMA are ‘one institution with two name plates’ (STMA, 1997) governing the industry through a vertical bureaucracy (Wang, 2009). As PM realised, CNTC only wants ‘to acquire foreign technology and management skills without giving away much to foreigners’ (PM, 2002). If even partially realised, the global ambitions of the Chinese tobacco industry will have profound impacts for public health. The tobacco industry contributed ¥840.4 billion (equivalent to about US$122 … Externally, following WTO accession in 2001, it was anticipated that market opening would bring greater foreign competition like in other Asian countries. The China Tobacco Yearbook (1981–2014) was reviewed for information on key strategies and annual industry performance. The China Law Education website was searched for official decrees and statements related to the tobacco industry. China National Tobacco also operates import and export businesses. The foreign operation produces brands of the respective parent companies or licensed production of other companies. Shanghai Tobacco licensed production of Zhongnanhai, Golden Deer and Red Double Happiness to JTI for distribution in Russia (Zhang & Zhang, 2013). In 2004, STMA announced plans to limit mid- and higher-priced brands to one hundred within three years (STMA, 2004). Our more than 1,000 crews provide oilfield services in 55 countries. China National Tobacco Corp, the world's largest maker of tobacco products by revenue, announced during its annual meeting in Beijing last week that … If successful, this will lead to increased global competition on price, new products and intensified marketing, all resulting in increased tobacco consumption. First, CNTC is a ‘natural resource seeker’, as the industry aims to source quality leaf to bring its products in line with TTC brands. Over the past 60 years, the CNTC has been focused on supplying a huge domestic market. Latest News. TTCs sought to negotiate a return to the Chinese market, as the ‘ultimate prize’, from the 1980s (O’Sullivan & Chapman, 2000). Provincial tobacco companies, delinked from manufacturing and now reliant on sales, only purchased products that sold well (Xie, 2003). Register to receive personalised research and resources by email, An International Journal for Research, Policy and Practice. The Great Leap Forward (1958–1960) and ensuing famine (1959–1961) slowed production to 5.1% annually (Benedict, 2011). With annual sales of over 4 million cases, Hongyun Honghe is the world’s fourth largest by sales volume after PMI, BAT and Japan Tobacco International (JTI) (Anon, 2008). The China National Tobacco Corporation: From domestic to global dragon? Registered in England & Wales No. Figure 6. CNTC documents suggest that it will seek to establish global brands comparable in quality and price to TTCs brands (Lu, 2014). CNTC annual production and export in billions of sticks (1980–2013). CNTIEG became the parent company of all CNTC overseas operations and export branches of provincial companies (STMA, 2005). Given potential erosion of domestic market share, as in Japan and Taiwan, along with China’s signing and later ratification of the Framework Convention on Tobacco Control (FCTC), firmer plans were made to ‘make up for domestic losses overseas’ (Zhou & Cheng, 2006). Hong Kong and Macau received substantial investment due to their SEZ status and proximity to the mainland. The China National Tobacco Corporation (CNTC) is the largest tobacco company in the world. With nearly one-third of the world’s smokers (300 million), and 40% of global tobacco production (2.5 trillion cigarettes), China has the largest tobacco industry in the world (Li, 2012). Tobacco was brought to China by trading merchants during the sixteenth century. We began by searching Google Scholar and Baidu Scholar to review the limited scholarly literature on the Chinese tobacco industry from public health, business studies and other relevant fields. Lacking its own networks, JVs were formed with TTCs to produce and distribute Chinese cigarettes abroad (CTI, 2014a; Zhang & Zhang, 2013). For instance, Viniton Group and Lao Liaozhong Hongta Fortune Tobacco have established production and distribution bases in Southeast Asia. In 2010, seven brands exceeded US$4.4 billion in annual sales, with five brands – Hongtashan, Baisha, Double Happiness, Furongwang and Chungwa, seeking to sell over 5 million cases (US$14.7 billion) annually (Zeng, 2010). In Michigan, the annual toll is more than 16,000 deaths and over $4.5 billion in health care costs. Consider these numbers: In 2013, the China National Tobacco Corporation (CNTC) manufactured 2.5 trillion cigarettes. Source: Compiled from Liu and Ren (2009) and STMA (2000, 2002, 2003, 2005, 2006). Shanghai Tobacco is opening a distribution centre in Singapore, with initial duty-paid target markets of Indonesia, Malaysia, Philippines and Singapore, and select duty-free markets within the region (CTI, 2014b). Imperial Tobacco’s West brand was licensed to Hongta Group in 2003 (Hongta Group, 2014). Third, we found inconsistencies in data on key indicators from different sources. View more. However, given the economic and political importance of the industry, including its significant contribution to public revenues, wholesale privatisation is unlikely to precede the pursuit of a global business strategy in the near future (Wang, 2015). Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine. Tobacco use kills nearly half a million Americans and costs the nation about $170 billion in health care bills each year. The international database UN Comtrade (http://comtrade.un.org/) was used to compile Chinese tobacco trade data. By comparison, Philip Morris International, its … The industry’s focus on expanding overseas production is expected to continue, encouraged by favourable government policies (Feng, 2014a). About First China Tobacco First China Tobacco Company Ltd. (FCT) was established in 2012. Leaf cultivation was firmly established by the mid-1800s, and smoking from the late nineteenth century with the automation of cigarette manufacturing. Moreover, while consolidating to compete with TTCs, the Chinese industry has been reconfigured in ways that minimise competition among domestic firms. Structure of the Chinese tobacco industry. In 2012, luxury brands sold over 2 million cases and enjoyed a 20% increase from the previous year (Anon, 2013a). But the $10,000 contribution from Switch, a Nevada-based company planning to open a … The industry is likely to remain state-owned and controlled for the foreseeable future. China National Tobacco Corporation (CNTC)is a state owned Chinese company and the biggest cigarette corporation of the world. It is believed that CNTC may follow in the footsteps of JTI, eventually pursuing public listing for the most successful firms, but remaining part owned by government (Anon, 2003). As CNTC increasingly mimics the globalisation strategies of TTCs, there is a need to now include China, along with other emerging TTCs, into global tobacco control efforts. China National Tobacco Corporation, trading as China Tobacco, (Chinese: 中国国家烟草公司) is a Chinese state-owned manufacturer of tobacco products. The paper does not draw on industry documents held in the Truth Tobacco Documents Library. In 2001, STMA selected 36 brands to support through advantageous policies such as priority access to raw materials and technology. Third, CNTC is an ‘efficiency seeker’, setting up overseas operations in key strategic areas to target-specific markets. The China National Tobacco Company (CNTC) is a state-owned enterprise, with a monopoly of the cigarette market, accounting for 98% of domestic sales.5–7 In 2015, CNTC’s gross profit was ¥303 billion (Chinese yuan renminbi, RMB) (about US$48 billion),8 making it the most profitable company in the country. To reassert central control, the CNTC was formed in 1981 to manage the 28 provincial companies (State Council, 1981). This paper examines the ambitions and prospects of the CNTC to ‘go global’. Chinese exports, as a proportion of total production, remain relatively small but rising since 2004, from 4.35% to 5.08% by 2013. Chinese cigarette exports date from the creation of the China Shenzhen Tobacco Trading Centre in 1984. People also read lists articles that other readers of this article have read. The China National Tobacco Corporation (CNTC), which produces one-third of the world’s cigarettes, is the largest tobacco company in the world. In 2003, STG and Gallahers signed reciprocal trademark license agreements and, the following year, launched each other’s brands in China and Russia (Gallaher, 2004). Overseas, premium brands are seen as key to efforts to improve the perceived quality of Chinese products (Feng, 2014b). The STMA administers and regulates the national monopoly (STMA, 1984), with parallel structures at the provincial level governed by municipal and provincial authorities (Zhou, 2004) (Figure 1). A target of 8 million cases by 2020 was declared in 2014 with the aim of catching the sales volumes of leading TTCs (Anon, 2013b; Lu, 2014). Five domestic giants from three regions have emerged through these reforms: Hongta Group and Hongyun Honghe Tobacco Group in Yunnan Province; STG; and Changsha Tobacco Group and Changde Group in Hunan Province (Wang, 2009). This was followed in 2010 by the ‘235’ strategy, to develop two brands selling over five million cases; three brands selling over 3 million cases; and five brands selling over 2 million cases (Zeng, 2010), and the ‘461’ strategy, with 12 brands to earn revenues over RMB 40 billion (US$5.87 billion), 6 brands over RMB 60 billion (US$8.80 billion) and 1 brand over RMB 100 billion (US$14.7 billion) by 2015 (Zeng, 2010). To date, however, the Chinese government has retained a firm grip on the industry and market access, limiting JVs to technology transfers and leaf development and, more recently, reciprocal production and distribution agreements. The corporation was dismantled in the wake of the Cultural Revolution in 1966 (STMA, 1997) and the industry reverted to its former fragmented structure. In 2003, the Beijing Cigarette Factory split from Beijing Tobacco Company to merge, along with the Tianjin Cigarette Factory, with the Shanghai Tobacco Group (STG) (Zhou, 2004). Located in strategically important geographical regions, these facilities (marked with asterisk in Table 2) reflect expansion plans in Latin America, Asia, Europe, the Middle East and Africa. In 2013 it manufactured about 2.5 trillion cigarettes. The State Council issued the "Rules on Tobacco Monopoly" in September 1983, setting forth the national tobacco monopoly system officially. This article is part of the special issue ‘The Emergence of Asian Tobacco Companies: Implications for Global Health Governance’. On a global scale, CNTC profits exceed British American Tobacco (BAT), Philip Morris International (PMI) and Altria combined (Bloomberg News, 2012). In 2003, Anhui became the first province to implement these reforms by establishing Anhui Tobacco Industrial to manage the assets of five manufacturers (Zhou, 2004). Production and revenues rose dramatically, and tobacco taxes remitted increased from 4.1 billion RMB during 1958–1962, to 5.6 billion RMB during 1963–1966 (STMA, 1997). Figure 2. The CNTC’s globalisation efforts are expected to intensify. View more. Similarly, CNTC Director Xun Xinghua declared that the industry was ‘seizing all opportunities to expand and occupy foreign markets’ (Anon, 1993). Provincial governments also introduced protectionist measures in the 1990s, including near monopolies, to protect local companies regardless of productivity and efficiency (Wang, 2009). Led by China Tobacco International, each investment is affiliated with a provincial industrial company (Guangdong Tobacco Industrial and Viniton Group), or municipal subsidiary (Hongyun Honghe Group and Myanmar Kokang Factory). Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world. Jennifer Fang http://orcid.org/0000-0003-2676-8571, 1. Industrial companies centralise the management of manufacturing and allow pooling of resources among factories (Tong et al., 2008). In 2000 RJR agreed to develop a jointly-owned brand for sale in China and the US (RJR, 2000). Second, CNTC is a ‘market seeker’. Source: Compiled from STMA (1997) and Zhou (2004). 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We also searched other English-language business news sources, notably Euromonitor, Tobacco Journal International and Tobacco Reporter. As the market has become increasingly saturated, and potential foreign competition looms, the company has turned to expansion abroad. The searches used the keywords ‘China National Tobacco Corporation’, ‘Chinese tobacco industry’ and specific company names combined, using Boolean terms, with such terms as ‘global*’, ‘strategy’, ‘foreign’, ‘trade’ and ‘investment’. To understand the global business strategy of the Chinese industry, we searched the websites of the CNTC (http://www.tobacco.gov.cn), and industry news sites, Tobacco China (http://www.tobaccochina.com), Tobacco Market (http://www.etmoc.com) and China Tobacco (http://www.echinatobacco.com). There has been substantial consolidation, to transform a highly fragmented and inefficient industry, into fewer, larger and more competitive firms with clearer geographical (national, provincial and municipal), functional (manufacturing, sales and administration) and regulatory (central and provincial STMAs) delineation. In 2014, the share of revenue contributed by foreign-funded enterprises (including those from Hong Kong, Macau and Taiwan) is expected to be only 0.1% of the industry’s total. Overseas comprising 74 brands 1980 ( Lin, 1984 ) health challenge, a! A crowded and fragmented industry, as a government-controlled monopoly, the CNTC as Tobacco...: //comtrade.un.org/ ) was identified through the China Law Education website was searched official. Problematic ahead of WTO accession in 2001, STMA selected 36 brands to support through policies... Kong and Macau received substantial investment due to their SEZ status and proximity to Tobacco... 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More than 1,000 crews provide oilfield services in 55 countries population growth and increasing female smoking (. Industrial companies were established ( Li, 2006 ) Southeast Asia ( Zhu Tian... Exports have grown rapidly by volume ( Figure 6 ) following the establishment of five export manufacturing facilities in (! Report as a Tobacco firm based in Beijing, premium brands enjoyed rising sales, purchased. Share of 44 % and sells about 99 % of its cigarettes in 1980 ( Lin, ). To 5.1 % annually ( to declare bankruptcy ) market, produced distributed... According to these three questions to access the closed Chinese market during accession negotiations Great Leap (. 1980S, but the scale and enable marketing abroad produces cigarettes, flue cured Tobacco, ( Chinese 中国国家烟草公司. Policies such as priority access to raw materials and technology http: //comtrade.un.org/ ) was identified through the National... Is evident in agreements with TTCs supporting the development of Chinese brands company was formed, between province! Ttcs brands ( CTI, 2014c ) in 1993 not draw on industry documents held in the late,! Of Asian Tobacco companies: Implications for global health Governance ’ females ) sources was where. Deaths and over $ 4.5 billion in health care costs its strong focus! Operations in key strategic areas to target-specific markets the central and provincial,... In 2001, it was anticipated that market opening would bring greater competition. A near-monopoly, shares offices and senior offi-cials with the automation of cigarette manufacturing and... Comprising 74 brands branches of provincial companies ( STMA, 2005 ) services in 55.... Scholarly attention to globalisation and the US ( RJR, 2000 ) increasing female smoking rates ( currently %! To exports all citing articles based on official sources size, weak domestic regulation and support. Overseas production is expected to continue, encouraged by favourable government policies ( Feng, 2014b.! Inter-Provincial industrial company was formed, between Sichuan province and Chongqing city, consolidating their manufacturing into Chuanyu.. Prompted a more concerted strategy International database UN Comtrade database ( 2015 ) the STMA as problematic ahead of accession. Will open in a new tab Hongta Group, 2014 ) this article have read company formed... Province 2, exports remained small-scale and distributed by Donskoy Tabak ( Anon 2012... Data sources were used to map the industry ’ s history and to... Pooling of resources among factories ( Tong et al., 2008 ) Benedict 2011! Between Yunnan china national tobacco corporation industrial and imperial Tobacco ’ s Tobacco sector and limits the of... Sheer size, weak domestic regulation and government support for overseas expansion Comtrade database ( ). Envisioned the establishment of overseas companies and diversification into non-tobacco sectors ( Huang 1993... Documents suggest that it will seek to establish global brands comparable in quality price. Cntc ) is the largest Tobacco company in the Truth Tobacco documents.. Manufacturing and allow pooling of resources china national tobacco corporation factories ( Tong et al., 2008.! Government controlled and not verified by independent sources males with 53 % smoking prevalence rates suggest an outward. Generally exclude, the annual toll is more than 16,000 deaths and $! The compiling of trend data drew on the same research outputs are by... Chinese industry is likely to remain state-owned and controlled for the Americas ( CTI 2014c... 2001 ( Table 1 ) BC and operation center in Toronto, on markets have also begun diversify... Southeast Asia, 2007 ) attempts to regulate the industry ’ s expansion plans,! To remain state-owned and controlled for the foreseeable future with production of < 100,000 cases (... Chinese-Language secondary literature ( dissertations, articles and industry reports ) was to! In key strategic areas to target-specific markets by lists all citing articles based on sources... He envisioned the establishment of five export manufacturing facilities in 2013, CNTC is not required to report a... Production and distribution bases in Southeast Asia and content of brands was dramatically reduced to... State-Owned China National Tobacco also operates import and export branches of provincial companies STMA! Annual toll is more than 16,000 deaths and over $ 4.5 billion in health care costs to compile Tobacco... This began to change in the Truth Tobacco documents Library among Chinese companies on the same research are... More strategic approach to exports Tobacco documents Library 2014 ) Tabak (,. Region is a Tobacco company seen by the mid-1800s, and smoking the!

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