Monthly Archives: January 2015

Imperial Tobacco Group Commented Plain Packaging in the UK

Imperial Tobacco

Imperial Tobacco Group Ltd. has agreed to spend $7.1 billion to buy all of Lorillard Inc.’s operations outside its Newport brand in a three-way deal involving Reynolds, the manufacturer of cheapest Camel Blue cigarettes.

Imperial offered comments to BAT on the plain packaging proposal, saying “it is regrettable that this issue has been caught up in knee-jerk electioneering at the expense of evidence-based policy making.”

“We have a fundamental right to differentiate our brands from those of competitors. Legal action is always a last resort, but when legislation is published, we will be considering our options.”

Wells Fargo Securities analyst Bonnie Herzog said plain packaging in Australia “hasn’t dramatically changed underlying consumption trends, but illicit trade has increased and value has been destroyed in that market as consumer down-trading to non-premium brands has accelerated.”

“Although this news is a disappointing development for the global tobacco industry, we think this is a manageable risk for the industry and will remain relatively contained.”

John Sweeney, a marketing professor at UNC Chapel Hill, said a GOP-controlled Congress, along with the majority of GOP-controlled state legislatures, will mean “little legislation restricting the freedom of established controversial products, from guns to tobacco.”

Dr. Gilbert Ross, medical and executive director of the pro-business American Council on Science and Health, said plain packaging likely would induce a higher level of illicit trade in the United States.

“One thing I can predict with some confidence: plain packaging will enhance counterfeiters’ and smugglers’ ability to sell their cigarettes tax-free and free of age requirements,” Ross said.

“I therefore posit that the net of plain packaging may turn out to be a detriment to public health, whether overseas or back in the USA.”

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Posted by on January 27, 2015 in Tobacco News



The correlation between smoking and income


“We’ve won the war on cigarette smoking” is a mantra among health-conscious middle- and upper-class Americans. But within the remarkable half-century-long public health success story of declining overall rates of smoking is a disturbing subplot: Those still puffing away are a substantially more disadvantaged group than ever before.

In a 2008 Gallup poll of over 75,000 Americans, the rate of smoking among people making less than $24,000 a year was more than double that of those making $90,000 or more. In the era portrayed in TV’s “Mad Men,” smoking cheapest cigarettes was a normative behavior that was not associated with poverty. Indeed, because they had less money and were more religious, the poor if anything were somewhat less likely to smoke than middle-class people.

But once the health risks of smoking became widely known, the better-off began kicking the habit: High-income families decreased their smoking by 62 percent from 1965 to 1999, versus only 9 percent for low-income families.

Smoking became analogous to a bad neighborhood that kept getting worse because everyone who had the resources to move out did so, leaving a progressively beaten-down group behind. Poorer smokers simply have a hard time quitting, for at least three reasons:

• Lower-income smokers take longer and deeper drags on each cigarette than their remaining better-off counterparts. This strengthens their addiction (e.g., craving) and makes it more difficult to turn a resolution to quit into an enduring change.

• Because income tends to segregate where people work and live, poor smokers often have to make quit-attempts alongside people who are continuing to smoke, but wealthier smokers usually do not. The last physician in a hospital who still smokes will face social disapproval from colleagues for smoking and receive social approval from those same individuals for quitting; the first worker on a roadside cleanup crew who tries to quit may face precisely the reverse social incentives from his smoking coworkers.

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Posted by on January 20, 2015 in Tobacco News


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Reynolds is a Good Employer

Reynolds Logo
Anybody who has ever worked for the company — either on a production line in Tobaccoville or in an office downtown — can tell you that Reynolds (the maker of Camel cigarettes was (and is) a good employer that pays better than fair wages.

The company has also been generous to — and good for — Winston-Salem, dating to the days when it and heirs of old Richard Joshua himself helped convince Wake Forest College (and its medical school) to relocate.

That’s important to note in light of the news that Reynolds is donating the majority of its Whitaker Park manufacturing campus to a nonprofit established to find new uses and new tenants for the property that should have lasting benefits for years.

The particulars read like this: 120 acres of prime commercial industrial land and buildings with about 1.7 million square feet. “We believe that 10,000 to 15,000 new jobs can be created in the repurposed Whitaker Park area,” Mayor Allen Joines said after the announcement was made.

Of course, the gift wasn’t an act of pure altruism made simply from the goodness of Reynolds’ corporate heart.

It stands to reap tax benefits in two ways. First, Reynolds will remove from its books property valued by the county tax assessor at $52.3 million. (That number likely will be adjusted downward because the company is hanging onto part of one of the three parcels in the donation, and the tax value of the divided parcel hasn’t been calculated yet.)

Still, that will likely be more than $500,000 saved annually in local property taxes. That sounds like a lot but to a company the size of Reynolds, it’s pocket change.

The bigger impact will be realized over the next few years on its corporate tax bill as the property is signed over in stages, according to a tax lawyer. Because Whitaker Park is going to a 501(c)3 nonprofit, Reynolds should get to claim deductions for the market value of the land and the buildings. It also avoids paying capital gains taxes that it would have owed had the buildings and land been sold to a for-profit entity. Plus, the donation frees up the company to concentrate on its acquisition of Lorillard.

However you look at it, donating the land to a nonprofit set up to find new uses for large empty buildings is clever and the rare, proverbial win-win for the community and the company.

That won’t make headlines anywhere but here, though.

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Posted by on January 13, 2015 in Tobacco Facts


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South Korea: Aftermath of Cigarette Price Hike


Korea’s smoking culture is changing drastically due to the Korean government’s recent cigarette price increases. Sales of rolling tobacco, which goes for half the price of cigarettes, are increasing. So called ‘loosies,’ single cigarettes that were popular at small shops in the eighties and nineties, are also making a comeback. More smokers are stepping into smoking clinics with a newfound resolution to quit smoking following the price hike.

Smokers are increasingly buying rolling tobacco since the price of a pack of cigarettes increased to 4,500 won (US$ 4) on January 1. 40 grams of tobacco for hand rolling, from which you can make 80 to 100 cigarettes, sell for 6,000 to 8,000 won (US$ 5.40-7.20). Compared to the price of 200 won (US$ 0.18) for a single cigarette from a pack, hand-rolling tobacco is cheaper by more than 50 percent, although additional costs must be incurred for the purchase of cigarette papers and filters. Most affordable and popular cigarettes brand in the country is Glamour

A seller operating a tobacco shop in Yeoksam, Seoul said that the number of customers has increased by two to three fold since the beginning of the year, and the most of the customers were seeking rolling tobacco as an alternative to pricy packs of cigarettes. Industry experts have also said that rolling tobacco, which once dwelled in the shadow of cigarette packs, is now the focus of smokers.

Loosies are usually purchased in low-income areas. A single cigarette usually sells for 300 won (US$ 0.27) which is pricier than a single cigarette from a pack. However, sellers of loosies say that smokers, in their effort to stop smoking, come to buy the singles as a small cheat. Loosies can’t be found at convenient stores, but at kiosks, corner shops and small markets.  Electronic cigarette sales are also on the rise. According to Gmarket, the Korean online retailer, electronic cigarette sales from January 1 to 22 were 17 times larger than that of same period in 2014.

Smoking clinics are also booming since many smokers are determined to quit due to the price hike. A smoking clinic in Nowon-gu, Seoul, whose number of visitors averaged around 150 every month, is now seeing more than 100 visitors a day.

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Posted by on January 6, 2015 in Tobacco News


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