We also searched other English-language business news sources, notably Euromonitor, Tobacco Journal International and Tobacco Reporter. Mar 2012 – May 2012 3 months. Register to receive personalised research and resources by email, An International Journal for Research, Policy and Practice. 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. But the $10,000 contribution from Switch, a Nevada-based company planning to open a … As Holden et al. He envisioned the establishment of overseas companies and diversification into non-tobacco sectors (Huang, 1993). The paper adopts the framework set out in Lee and Eckhardt (2016) to organise and analyse the factors assessing the global business strategy of CNTC including the key factors driving the strategy, key tactics used, and the extent to which the company has succeeded to date. 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 reduced to 30 brands by 2014, with many tailored to key markets (Feng, 2014a). As the market has become increasingly saturated, and potential foreign competition looms, the company has turned to expansion abroad. 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). Tobacco was brought to China by trading merchants during the sixteenth century. The restructuring of the industry from the mid-1990s saw the closure of several export arms of provincial companies (STMA, 1998b). Source: Compiled from STMA (1997) and Zhou (2004). Foreign operations established during the early 1990s were limited in scope and focused on Asia, notably Laos, Cambodia and Myanmar. This, in turn, would lead to a gradual shrinking of domestic market share. Chinese cigarette exports date from the creation of the China Shenzhen Tobacco Trading Centre in 1984. 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). The paper concludes that the company has undergone substantial change over the past two decades and is consequently poised to become a new global player in the tobacco industry. 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. The authors are solely responsible for the contents of this paper. On a global scale, CNTC profits exceed British American Tobacco (BAT), Philip Morris International (PMI) and Altria combined (Bloomberg News, 2012). CNTIEG became the parent company of all CNTC overseas operations and export branches of provincial companies (STMA, 2005). 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). Previous analyses of the global tobacco industry recognise the importance of, but generally exclude, the CNTC because of its strong domestic focus. 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). Mid-priced products saw modest growth, while the economy segment fell dramatically from 59.7% to 28.3% during the same period (Euromonitor, 2013, 2015). View more. Global market leader Philip Morris’ IQOS brand and other products that heat tobacco instead of burning it are banned in China, where state monopoly China National Tobacco Corp. accounts for nearly all tobacco sales and generates important tax revenues for the country. One case contains 50,000 sticks of cigarettes. 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). 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). 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. This paper examines the ambitions and prospects of the CNTC to ‘go global’. Headquarter is set in Vancouver, BC and operation center in Toronto, ON. Registered in England & Wales No. For example, RJR licensed the Xiamen Cigarette Factory to produce Camel cigarettes in 1980 (Lin, 1984). Chinese data are thus limited in scope and content. Over the past 60 years, the CNTC has been focused on supplying a huge domestic market. Provincial tobacco companies, delinked from manufacturing and now reliant on sales, only purchased products that sold well (Xie, 2003). 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(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. CNTC has been exporting since the 1980s, but the scale and reach of exports since the late 2000s suggests a more concerted strategy. China National Tobacco Corporation is the largest tobacco producer in the entire world owned by the Chinese government (Young, 2006). Premium brands enjoyed rising sales, as the economy boomed, with manufacturers releasing luxury versions of familiar brands or new brands. The international database UN Comtrade (http://comtrade.un.org/) was used to compile Chinese tobacco trade data. Source: Compiled from STMA (1996–2014). Source: Compiled from UN Comtrade Database (2015). 55 Yuetan South Street The CNTC undertakes central planning, manages raw materials, sets regional production quotas for leaf and products, and is the umbrella company for provincial firms. Read more Most notable has been the domestic restructuring of the industry, as a whole, and of individual firms. The China National Tobacco Corporation (CNTC), which produces one-third of the world’s cigarettes, is the largest tobacco company in the world. Consider these numbers: In 2013, the China National Tobacco Corporation (CNTC) manufactured 2.5 trillion cigarettes. Cited by lists all citing articles based on Crossref citations.Articles with the Crossref icon will open in a new tab. Focusing on quality over quantity, underperforming brands and markets were subsequently dropped, and exports declined to an all-time low in 1998–1999 (STMA, 2000). However, exports remained small-scale and distributed across many different companies. The paper assesses the extent to which this strategy has been successful to date, the likely prospect that China will join the ranks of existing TTCs, and the implications for tobacco control worldwide. 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). BAT and Yunnan Tobacco Company agreed in 1999 to ‘jointly develop and produce blended cigarettes’, in addition to leaf cultivation and training (BAT, 1999). annual report to shareholders). Third, CNTC is an ‘efficiency seeker’, setting up overseas operations in key strategic areas to target-specific markets. 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). 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 … In 2013, consolidation had reduced cigarette brands from around 2000 in the late 1990s to 90 (Figure 3). This work is supported by the National Cancer Institute, US National Institutes of Health [grant number R01-CA091021]. The development of new brands, to appeal to a wider global market beyond Chinese diasporas, is likely to increase via JVs with existing TTCs. Organized a group of 10 students and coordinated with China National Tobacco Corporation to tour and assess its logistics center in Sichuan province 2. CNTC stands for China National Tobacco Corporation (also China National Tobacco Company and 35 more ) What is the abbreviation for China National Tobacco Corporation? Our more than 1,000 crews provide oilfield services in 55 countries. For example, the removal of provincial protectionism allowed provincial manufacturers to sell their brands nationally, fuelling domestic competition and, in turn, product and brand development, and the expansion of successful companies (Wang, 2009). By the late 2000s, Chinese overseas supply chain has also improved. Figure 6. Moreover, while consolidating to compete with TTCs, the Chinese industry has been reconfigured in ways that minimise competition among domestic firms. Alongside consolidation, CNTC has pursued a strategy of premiumisation since 2008. (IBIS World, n.d.). Hong Kong and Macau received substantial investment due to their SEZ status and proximity to the mainland. 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. 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). Source: Trade Map. Second, official Chinese data are government controlled and not verified by independent sources. China National Tobacco Corporation (China Tobacco) is a State Owned Enterprise located in Beijing China, Asia., SWFI has 2 subsidiaries, 1 personal contacts available for CSV Export. Political instability and conflict over decades undermined attempts to regulate the industry (STMA, 1997). 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). Source: Compiled from BAT (2013), Hongta Group (2010), STMA (2006, 2009, 2012), Tobacco-free Kids (2010). Structural reforms, described as ‘grasping the large and letting go of the small’ (Wang, 2009), were introduced to boost efficiency, productivity and product quality. 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). In 2008, a ‘merger of two giants’ occurred between Yunnan’s Hongyun and Honghe Groups, forming the Hongyun Honghe Tobacco Group. Joint brands include Win and Xingxin, developed by Hongyun Honghe Group and Myanmar’s Fu Xing Brothers Group (Lei, 2013), and Zhongnanhai (Totem) developed by Shanghai Tobacco and the Chinese-Mongolian JV (CTI, 2014a). Tobacco companies are concerned with the sale and distribution within the province of all tobacco products regardless of where they are produced. Total number of Chinese tobacco companies (1998–2009). Hover over the donut graph to view the FC output for each subject. Profits and tax revenues were distributed among the central and provincial governments, CNTC and various subsidiaries (State Council, 1981). 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). Establishing local leaf procurement companies in key tobacco growing regions of Brazil, Zimbabwe and the USA ensures a steady supply to feed growing industry needs both domestically and abroad. 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). China’s export-led growth, and status as the ‘world’s factory’ (Zhang, 2013), faced growing competition from lower-wage emerging economies by the late 1990s. 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). In 2011 the first annual meeting on tobacco market expansion was held which adopted a three-step strategy for export growth: (a) market entry and establishment of a distribution network; (b) licensed production by local manufacturers; and (c) establishment of local production facilities (Ju, 2011). 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 industry’s focus on expanding overseas production is expected to continue, encouraged by favourable government policies (Feng, 2014a). Over the past 60 years, the CNTC has been focused on supplying a huge domestic market. 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). The scale and enable marketing abroad or licensed production of < 100,000 cases annually (,. Resultant structure potentially dwarfs existing TTCs and serves as a government-controlled monopoly, the collection is limited to TTC dating! The mainland the company produces cigarettes, flue cured Tobacco, and individual... Of companies to one-sixth ( Figure china national tobacco corporation ) following the establishment of five export manufacturing facilities in 2013 CNTC! 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