China National Tobacco also operates import and export businesses. This, in turn, would lead to a gradual shrinking of domestic market share. The China National Tobacco Corporation (CNTC) was founded in 1982. As Holden et al. In 2004, sixteen industrial companies were established (Li, 2006). In 2001, STMA selected 36 brands to support through advantageous policies such as priority access to raw materials and technology. Profits and tax revenues were distributed among the central and provincial governments, CNTC and various subsidiaries (State Council, 1981). The company operates nearly 48 production facilities in 32 countries. As observed by industry analysts, As domestic firms in China mainly dominate the local cigarette industry, the industry’s globalization level is relatively low and is expected to remain low in the future … .The industry’s globalization level is low due to the low foreign ownership levels of the industry’s firms in China. It was founded in 1900 and currently owns 7 of the top 15 tobacco brands in the world, with a workforce of approximately 77,000 people. Following its establishment, this joint venture company will offer consumers a comprehensive portfolio of Chinese heritage brands globally, expand … The China Tobacco Yearbook (1981–2014) was reviewed for information on key strategies and annual industry performance. China National Tobacco Corporation. Nicotine, the psychoactive ingredient in tobacco, stimulates the adrenal glands that release epinephrine. In 2003, the industry was called upon to ‘actively implement the “go global” strategy to establish stable international markets’ (STMA, 2004), coinciding with the removal of the requirement for retail permits to sell foreign cigarettes in China (Tong et al., 2008). For example, RJR licensed the Xiamen Cigarette Factory to produce Camel cigarettes in 1980 (Lin, 1984). Second, official Chinese data are government controlled and not verified by independent sources. enhance our services. Source: Compiled from UN Comtrade Database (2015). E-Cigarette Market Report an Forecast 2019. The state monopoly China National Tobacco Corporation (CNTC) is the fourth largest Chinese company in terms of profit (Li, 2012), employing 510,000 people across 33 provinces (China Tobacco, n.d.), and contributing 7–11% of government tax revenues annually (Han, 2013). Aug.2013: CTBAT International Ltd: BAT entered into a joint venture with China National Tobacco Corporation.ref; 2012: CN Creative Ltd, a UK-based start-up company specialising in the development of e-cigarette technologies, was acquired. Total number of Chinese tobacco companies (1998–2009). Imperial Tobacco’s West brand was licensed to Hongta Group in 2003 (Hongta Group, 2014). China National Tobacco Corporation 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. Latest News. Read more Read Tobacco Asia Online . Gauging on revenues, CNTC is the largest company in the world that deal with tobacco products. 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 China Law Education website was searched for official decrees and statements related to the tobacco industry. In 2013, consolidation had reduced cigarette brands from around 2000 in the late 1990s to 90 (Figure 3). The compiling of trend data drew on the same sources where available for consistency. China National Tobacco Corporation is the largest tobacco producer in the entire world owned by the Chinese government (Young, 2006). May.2011: Protabaco, a Colombian company (Productora Tabacalera de Tabacos SA), was acquired.ref; Jun.2009: Bentoel Group: BAT acquired a 60% stake in … If successful, this will lead to increased global competition on price, new products and intensified marketing, all resulting in increased tobacco consumption. Local monopoly bureaus regulate and administer the industry at the provincial level (Xu & He, 2003). Four of the largest tobacco companies worldwide i.e. However, exports remained small-scale and distributed across many different companies. 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). The company was founded in January 1982 and is headquartered in Beijing, China. 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). View more. China’s tobacco industry adopts a system of unified leadership, vertical management and monopolized operation.The State Tobacco Monopoly Administration and China National Tobacco Corporation are responsible for centralized management of "staff, finance, properties, products, supply, distribution, and domestic and foreign trade" of the country’s tobacco industry. The resultant structure potentially dwarfs existing TTCs and serves as a springboard for globalisation. At the time of writing there are negotiations for a similar JV between Yunnan Tobacco Industrial and Imperial Tobacco (Yu, 2015). The profiles of some of the key players operating in the global tobacco market are as following: Founded in the early-1980s, China National Tobacco Corporation is a state-owned tobacco company, which is headquartered in Beijing, China. BAT and Yunnan Tobacco Company agreed in 1999 to ‘jointly develop and produce blended cigarettes’, in addition to leaf cultivation and training (BAT, 1999). One case contains 50,000 sticks of cigarettes. 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 building a tow-making plant back in China. Source: Compiled from BAT (2013), CTI (2014a), CTIEC (n.d.), Hongta Group (2010), MOFCOM (2015), Namibia Oriental Tobacco (n.d.), STMA (2006), STMA (2009, 2012), Tobacco-free Kids (2010), United Castle America (n.d.) and Zhejiang Tobacco Industrial (2015). In 2013, CNTC sold 70 billion sticks overseas comprising 74 brands. Corporate governance reforms were also accelerated in 2005, with manufacturing facilities becoming limited liability companies led by boards of directors (Liu, 2006). Previous analyses of the global tobacco industry recognise the importance of, but generally exclude, the CNTC because of its strong domestic focus. Export markets have also begun to diversify beyond Asia. CNTIEG became the parent company of all CNTC overseas operations and export branches of provincial companies (STMA, 2005). China National Tobacco Corporation (CNTC)is a state owned Chinese company and the biggest cigarette corporation of the world. 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. 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). In 2012, luxury brands sold over 2 million cases and enjoyed a 20% increase from the previous year (Anon, 2013a). , SWFI has 2 subsidiaries, 1 personal contacts available for CSV Export. TTCs sought to negotiate a return to the Chinese market, as the ‘ultimate prize’, from the 1980s (O’Sullivan & Chapman, 2000). The Chinese tobacco market is dominated by the government monopoly China National Tobacco Corporation (CNTC). Tobacco Sales Bans are No Good. China does not have one comprehensive tobacco control law, but several national laws and regulations that legislate tobacco. The industry anticipated change following WTO accession. As the market has become increasingly saturated, and potential foreign competition looms, the company has turned to expansion abroad. This paper examines the ambitions and prospects of the CNTC to ‘go global’. First, historically, a large number of Chinese companies manufactured thousands of local brands at many different price points (Anon, 2014). Provincial tobacco companies, delinked from manufacturing and now reliant on sales, only purchased products that sold well (Xie, 2003). Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine. Tobacco farming is a lucrative business in China since it employs just about 17 million individuals. 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. Headquarter is set in Vancouver, BC and operation center in Toronto, ON. A ‘long-term strategic cooperative partnership’ with PMI agreed in 2005 involves licensed production and distribution of Marlboro in China, and the establishment of jointly-owned China Tobacco Philip Morris International (CTPMI) to launch and distribute Chinese brands in foreign markets. In exchange, PMI and the China National Tobacco Import and Export Group Corp. (CNTIEGC) established a 50-50 joint venture to offer a range of Chinese brands on the global market, expand the export of tobacco products and tobacco materials from China and explore other business opportunities. On a global scale, CNTC profits exceed British American Tobacco (BAT), Philip Morris International (PMI) and Altria combined (Bloomberg News, 2012). 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 Great Leap Forward (1958–1960) and ensuing famine (1959–1961) slowed production to 5.1% annually (Benedict, 2011). Despite its negative effects, there has been a rise in the demand for tobacco across the globe. For example, Yunnan Tobacco would target Southeast Asia (Zhu & Tian, 2007). These are likely to appeal to overseas Chinese, rather than serve as global brands, given their close affinity with Chinese cultural tastes and practices. Third, CNTC is an ‘efficiency seeker’, setting up overseas operations in key strategic areas to target-specific markets. The company expects to use the raised money to acquire brands and expand distribution channels into global markets. Exports have grown rapidly by volume (Figure 6) following the establishment of five export manufacturing facilities in 2013. However, without the existence of a specialized central government agency in charge, it was impossible to … However, the company has recently announced that it plans to list its international unit, China Tobacco International, on the Hong Kong stock exchange. The new variants, namely IQOS 3 and IQOS 3 Multi, were launched with Dubai Duty Free in July 2019. 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). However, ratification and implementation of the FCTC since 2005 has increased support for the adoption of stronger tobacco control measures, albeit tempered by weak political will and enforcement. China National Tobacco Corporation is the largest tobacco producer in the entire world owned by the Chinese government (Young, 2006). View more. The restructuring of the industry from the mid-1990s saw the closure of several export arms of provincial companies (STMA, 1998b). Overseas, premium brands are seen as key to efforts to improve the perceived quality of Chinese products (Feng, 2014b). Tobacco imports rose in value and quantity from 2001 (Table 1). The US-based tobacco and cigarette company, Philip Morris International sells its products in over 180 countries. 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). Registered in England & Wales No. 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’. Foreign operations established during the early 1990s were limited in scope and focused on Asia, notably Laos, Cambodia and Myanmar. Eight of these FCTC countries own 100% of at least one tobacco company, including China, Iran, Iraq, Lebanon, Syria, Thailand, Tunisia, and Vietnam. The primary and secondary data sources were compiled into a chronological narrative according to these three questions. Source: Anon (2014). In 2000, the CNTIEC was reorganised and renamed the China Tobacco Import Export Group (CNTIEG). While they pressed for full or part-ownership of local manufacturing, the STMA limited JVs to leaf production and licensed manufacturing of foreign brands by Chinese companies (Lee et al., 2004). Chinese data are thus limited in scope and content. Gauging on revenues, CNTC is the largest company in the world that deal with tobacco products. This restructuring supported the STMA’s vision of fostering ‘large-scale enterprises, big brands and large markets’ (Zhou, 2004). Additionally, the government under China National Tobacco Corporation (CNTC) manufactures tobacco products which accounts for approximately a third of global consumption. The findings of this paper suggest, however, that the Chinese industry has been steadily positioning itself to become a global player since the late 1990s. As stated by STMA Director Jiang Ming, to ensure long-term development of the tobacco industry, ‘we must follow a “Big Tobacco” strategy’ (Huang, 1993). Export value (unadjusted) has also increased, from US$100 million in 1999 to US$500 million in 2013 (Figure 4). To address these three caveats, triangulation of multiple data sources was undertaken where possible. Japan Tobacco International, or JTI, is the international unit of a Japan-based tobacco company, JT Group, which was established in the mid-1980s. Supported by favourable government policies and substantial resources, the restructured domestic industry has achieved greater economies of scale. In 2000 RJR agreed to develop a jointly-owned brand for sale in China and the US (RJR, 2000). China’s Tobacco Monopoly Law grants the State Tobacco Monopoly Administration (STMA)/China National Tobacco Corporation (CNTC) power to devise and enact any and all regulations related to tobacco products. 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). Source: Compiled from STMA (1997) and Zhou (2004). It also engages in the tobacco management, importation, and export trade. Figure 6. The majority of the products manufactured by China National Tobacco Corporation are distributed domestically. By the late 2000s, Chinese overseas supply chain has also improved. China’s tobacco industry adopts a system of unified leadership, vertical management, and monopolized operation.The State Tobacco Monopoly Administration and China National Tobacco Corporation are responsible for centralized management of “staff, finance, properties, products, supply, distribution, domestic and foreign trade” of the country’s tobacco industry. Eleven relevant documents met our … CNTC annual production and export in billions of sticks (1980–2013). As well as fending off global brands such as Marlboro in the domestic market, consolidation aimed to create global Chinese brands for foreign markets. Over the past 60 years, the CNTC has been focused on supplying a huge domestic market. The authors are solely responsible for the contents of this paper. In 2012, CTPMI opened an office in the Democratic Republic of Congo to launch heritage brands (CTI, 2014c). In China, luxury brand cigarettes are an important currency of guanxi (a system of social networks and influential relationships to facilitate business and other dealings). Domestically, the market has neared saturation among adult males with 53% smoking prevalence rates. The tobacco industry contributed ¥840.4 billion (equivalent to about US$122 … The company was founded in January 1982 and is headquartered in Beijing, China. This increased to 44 billion sticks (two-thirds of global sales) in 2013 (Zhang & Zhang, 2013). This was reduced to 30 brands by 2014, with many tailored to key markets (Feng, 2014a). Third, we found inconsistencies in data on key indicators from different sources. Future growth is likely to come from population growth and increasing female smoking rates (currently 2.4% for adult females). Shanghai Tobacco licensed production of Zhongnanhai, Golden Deer and Red Double Happiness to JTI for distribution in Russia (Zhang & Zhang, 2013). As the market has become increasingly saturated, and potential foreign competition looms, the company has turned to expansion abroad. 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. These remaining brands held larger domestic market share. The China National Tobacco Corporation (CNTC) controls 44 percent of the global cigarette market, making it the biggest cigarette company worldwide. Jennifer Fang http://orcid.org/0000-0003-2676-8571, 1. During 2011-2018, the global tobacco market size expanded at a CAGR of around 1.5%, reaching a volume of 8.2 Million Tons in 2018. Chinese-language secondary literature (dissertations, articles and industry reports) was identified through the China Knowledge Network. Tobacco Company Profile - The China National Tobacco Corporation (CNTC) Summary The China National Tobacco Corporation (CNTC) is the largest cigarette producer in the world, with domestic and export sales totaling 2,589.08 billion pieces in 2015, approximately two and a half times that of the world's leading multinational tobacco companies, Philip Morris International and British American … 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). First China Tobacco Company Ltd. (FCT) was established in 2012. In 1963, the China Tobacco Industrial Corporation was established to try to achieve greater efficiencies through centralised management of procurement, production and sales (STMA, 1997). 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 a company. The higher volume in illicit tobacco sales also has a negative effect on public health as the quality of counterfeit tobacco products is questionable. Final touch up will be done after meeting with Yunnan crew in August; Heat not burn product, MC, working in process with Yunnan … 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). If even partially realised, the global ambitions of the Chinese tobacco industry will have profound impacts for public health. British American Tobacco (BAT) is a multinational tobacco company, which is headquartered in London, United Kingdom. Additionally, the government under China National Tobacco Corporation (CNTC) manufactures tobacco products which accounts for approximately a third of global consumption. Request Profile Update; Download Data Some of the key players profiled in the study are VMR Products, Imperial Brands, Korea Tobacco & Ginseng Corporation, Philip Morris International, Japan Tobacco, China tobacco… To reassert central control, the CNTC was formed in 1981 to manage the 28 provincial companies (State Council, 1981). Figure 1. 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. , SWFI has 2 subsidiaries, 1 personal contacts available for CSV Export. Provincial governments also introduced protectionist measures in the 1990s, including near monopolies, to protect local companies regardless of productivity and efficiency (Wang, 2009). However, by volume this represents a 60% increase from 16.3 to 26 billion sticks (STMA, 2005, 2014), surpassing Korean company KT&G to become the world’s fifth largest exporter (Zhang & Zhang, 2013). Finally, trends in exports suggest an increasingly outward looking Chinese industry. The CTIEC targets Europe, while United Overseas (Panama) produces Chinese brands for the Americas (CTI, 2014, 2014c). The domestic industry grew rapidly, with the building of many small factories, increasing annual cigarette production on average 11% annually between 1949 and 1958 (Benedict, 2011). The company produces flue cured tobacco, cigarettes and other products. The industry is likely to remain state-owned and controlled for the foreseeable future. China’s tobacco industry adopts a system of unified leadership, vertical management and monopolized operation.The State Tobacco Monopoly Administration and China National Tobacco Corporation are responsible for centralized management of "staff, finance, properties, products, supply, distribution, and domestic and … Estimated MC H-n-b will be launch at end of this year. China National Tobacco, a state monopoly that is by far the biggest cigarette maker in the world, plans to list its international unit on the Hong Kong stock … The Chinese Government largely controls China’s tobacco sector and limits the investment of foreign manufacturers in China. Estimated MC H-n-b will be launch at end of this year. In 2007, the so-called ‘two leaps’ was emphasised whereby leading provincial brands were encouraged to enter the national market, and strong national brands to enter the global market (Zeng, 2010). Hong Kong and Macau received substantial investment due to their SEZ status and proximity to the mainland. Company in 89 by China, huabei oilfield evaluation for fixed-point procurement enterprises, in 93 by the China national tobacco corporation evaluation for adhesive fixed-point production enterprise, has the strong ability of product research and development, and north China, huabei oilfield, and a number of scientific research units, schools in the China national tobacco corporation established a research … It is supervised by the State Tobacco Monopoly Administration, while the People's Republic of China acts as a shareholder. 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). In 2015, a link between the ‘One Belt, One Road’ and ‘Go Global’ strategy was announced to improve CNTC’s access foreign markets (Qing, 2015). During the first half of the twentieth century, the industry was dominated by BAT with 82% of market share (Tong, Tao, Xue, & Hu, 2008), and a handful of domestic companies (Benedict, 2011). Tobacco is used in various products, such as cigars, cigarettes, snuff, chewing tobacco and dip. The overall vision of provincial reforms has been to establish a three-tiered system, with municipal factories becoming subsidiaries (with legal authority) or branches (without legal authority) of provincial industrial companies, and the latter acting as CNTC subsidiaries (Liu, 2006). Lacking its own networks, JVs were formed with TTCs to produce and distribute Chinese cigarettes abroad (CTI, 2014a; Zhang & Zhang, 2013). Import quotas remained in place, but import tariffs were reduced from 70% in 1996 to 25% in 2004, along with opportunities for wider distribution of foreign brands. The paper does not draw on industry documents held in the Truth Tobacco Documents Library. Chinese exports, as a proportion of total production, remain relatively small but rising since 2004, from 4.35% to 5.08% by 2013. Tobacco industry interest in foreign expansion was first raised following China’s signing of the General Agreement on Tariffs and Trade in 1993. China has by far the biggest tobacco company in the world by market share (China National Tobacco Corp; CNTC), and Japan’s ranks fourth (Japan Tobacco; JT).5 In Japan, the Finance Ministry by law retains a minimum one third stake in JT, the successor company to the nation’s former tobacco monopoly, which was ostensibly privatised in 1985. No potential conflict of interest was reported by the authors. While the Chinese tobacco industry is likely to remain, in the medium term, primarily dependent on its huge domestic market of 350 million smokers, indicators suggest the emergence of a new Chinese TTC in the next decade. 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). In 1991, BAT agreed to license manufacturing of Derby by the Wuhu Cigarette Factory, while Rothmans was licensed by the Shandong-Rothmans JV (Lai, 2009). The limited scholarly attention to globalisation and the CNTC to date has come largely from business studies (Wang, 2009). 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). Source: Compiled from STMA (1996–2014). Political instability and conflict over decades undermined attempts to regulate the industry (STMA, 1997). Further reforms under discussion include reduced political involvement from the commercial side of the industry, as opposed to its regulation and administration, and even privatisation (Liu, 2014; Wang, 2015). In 1998, President Jiang Zemin called on Chinese companies (including state-owned enterprises) to improve product development, pursue foreign markets, and establish manufacturing abroad (CCPIT, 2007). China National Tobacco Corp, the world's largest maker of tobacco products by revenue, announced during its annual meeting in Beijing last week that … Despite the size of the Chinese industry, given its domestic orientation, analyses of tobacco industry globalisation to date have focused on leading transnational tobacco companies (TTCs) (Lee, Eckhardt, & Holden, 2016). High profits and tax revenues sustained government support in China for cigarette manufacturing at the provincial, municipal and county levels over many decades. The China National Tobacco Corporation: From domestic to global dragon? (2010) describe, TTCs pressed hard to access the closed Chinese market during accession negotiations. This site uses cookies (including third-party cookies) to record user’s preferences which help us to (2016), for which there is available data, CNTC appears poised to ‘go global’, but its global business strategy is unlikely to follow the pattern of existing TTCs. The strategic location of major offshore production bases in each region is a clear indication of efficiency seeking. China: Revenue in the Tobacco Products market is projected to reach US$234,628m in 2020. The State Tobacco Monopoly Administration controls the China National Tobacco Corporation, which is a state-owned monopoly and the largest single manufacturer of tobacco products in the world. Within the Chinese guanxi system, tobacco is still a ubiquitous gift acceptable on any occasion, particularly outside of urban areas. There is also rapid growth of Chinese offshore production with over half of the 50.4 billion sticks of Chinese cigarettes sold internationally (2011) produced overseas (STMA, 2012). 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). The international database UN Comtrade (http://comtrade.un.org/) was used to compile Chinese tobacco trade data. This paper examines the global business strategy of the CNTC as a global public health challenge. 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 CNTC undertakes central planning, manages raw materials, sets regional production quotas for leaf and products, and is the umbrella company for provincial firms. To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy. 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