Jump to full article: China International Business (cn), 2009-12-22
Author: Mark Godfrey | From CIB December 2009 Print Edition
Intro: Mengcheng doesn't have the ring to it that Havana or Montechristo have. But for what this modest city in Anhui Province lacks in Caribbean romance it has in ambition, aiming to make its mark on the world with high-quality cigars. In true China style, rows of serious-looking female workers in grey overalls, hair in disposable white caps, roll brown tobacco leaf into fat fingers which are then shipped to another assembly line to be clipped, smoothed and stamped and boxed as Wangguan ("crown") cigars, which are then sent across China and the US to be sold.
China's tobacco industry as a whole is growing as ambitiously as Mengcheng. With the industry already contributing 8% to the country's total tax income there's little wonder China wants to be the largest tobacco exporter in the world by 2010, particularly because much of the cultivation takes place in the poorest rural areas of the country. But they must heed changing tastes, and a disorganized management system in order to achieve their goal. . . .
With their typically red-gold packaging, Chinese cigarette brands are produced by local cigarette factories, under the management of provincial tobacco firms, which are in turn controlled by the STMA, headquartered in Beijing. Even more than auto-making or coal mining, China's tobacco industry remains aligned with provincial government earnings.
In southern provinces like Yunnan, where the climate is suited to tobacco leaf growing, cigarette companies are behemoths. None other than the country's largest cigarette producer by volume, Hongta, is headquartered in Yuxi, one-hour south of Kunming. . . .
Cigarette makers depend on the country's tobacco-addicted working classes for the bulk of sales. Yet a perusal of STMA statistics for national sales shows an interesting shift in sales from the wealthier southeast provinces like Guangdong to inland regions like Henan and Hunan, mirroring the inland shift in migrant labor, following massive government infrastructure projects under the USD 586 billion economic stimulus plan.
The STMA has spotted the trend, says Li Ping, a section chief from Hongta's marketing department in Yuxi. "A priority for 2010 will be improving the rural distribution networks, so we have more sales in rural and western areas of China as it's clear that migrant workers and investment are both heading inland."
A bigger problem could be that Chinese consumers are beginning to wake up to the health issues of smoking. . . .
Rather than scaring people about the fact that one million Chinese die every year from smoking-related cancer, Chinese cigarette packs carry a polite warning in small print, on a background the same color of the rest of the box lest anyone might notice it. . . .
Challenged by rising taxes and the WHO-prompted push for more awareness about the dangers of smoking, China's cigarette industry is looking to female smokers and exports for future growth. . . .
While it may be raising awareness about the ills of smoking, China is vigorously promoting the growing of tobacco leaves. Though the country's output is crimped by a shortage of arable land, the STMA's well-trumpeted ‘Program for Sustainable Development of Leaf Tobacco Production' envisages rural China becoming the world's number one exporter of tobacco, with 150 million kilos a year by 2010.
It intends to reach that goal by chiming in with the government's policy of a wealthier rural China. . . .
And in "tobacco towns" entire cities are developed around cigarette companies. . . .
China has no plans to kick its most dangerous, and lucrative, habit any time soon.
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