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Zimbabwe grows biggest crop in 14 years

| July 17, 2014

Zimbabwe’s flue-cured production has surpassed 210 million kg for the first time in 14 years, according to a story in NewsDay.

The last time output surpassed 210 million kg was in 2000 when it reached 227,726,000 kg.

By July 15, the day of mop-up sales, 210,598,690 kg had been sold for $668,002,625; at an average price of $3.17.

During the same period of last year, 159,852,776 kg had been sold for $590,116,320; at an average price of $3.69.

The 14.9 drop in average price is likely to be of concern to farmers because a growing proportion of the crop is now sold under contract (the figure is already more than 50 per cent) rather than across the country’s three auction floors, and contract prices have generally been higher than auction prices.

In May, representatives of the auction floors told the Parliamentary Portfolio Committee on Agriculture, Lands and Mechanisation that in the absence of funding from banks, farmers had to grow their crops under contract.

“Banks stopped funding farmers and it is contractors that fund them, which kills business at auction floors,” Premier Tobacco Floors managing director, Philemon Mangena, told the committee.

Meanwhile, Tobacco Industry and Marketing Board statistics show that 106,456 growers have so far registered to grow the 2014-15 crop, up from the 91,278 who had registered up to the same time last year.

SE approval for S&M’s Riverside

| July 16, 2014

S&M Brands has received substantial equivalent orders from the U.S. Food and Drug Administration on its redesigned Riverside cigarette brand. S&M Brands is one of the few companies, behind Lorillard, that has navigated the Tobacco Control Act to obtain approval of a new cigarette tobacco product, and the first to obtain approval of a full line of king and 100s in regular and menthol.

“We are treating this as a milestone in the industry, for our company and the industry as a whole,” says Steven Bailey, president, S&M Brands.

“Introducing a new tobacco product under FDA regulation is an arduous, technical and scientific process that takes substantial time and resources. We felt, however, that improving our Riverside product was paramount for our adult customers, so our excellent in-house team, together with our outside consultants, worked tirelessly with the FDA to navigate the substantial equivalent process.

“We believe this achievement demonstrates that our company is staffed up for regulatory compliance to be around for our distributor and retail partners and customers for the long haul.”

The redesigned Riverside brand will be distributed to retailers and available to consumers by Oct. 15, 2014.

Dismay in India over excise increases

| July 16, 2014

The Indian Finance Minister, Arun Jaitley, has steeply increased excise taxes on cigarettes as part of the 2014 Budget, prompting warnings about a rise in illicit trade, according to a number of stories in the latest issue of the BBM Bommidala Group newsletter.

The specific tax on cigarettes has been increased by 11-72 per cent, depending on the length of the product, with similar hikes being made on cigars, cheroots and cigarillos.

Excise has been increased from 12 per cent to 16 per cent on pan masala, from 50 per cent to 55 per cent on unmanufactured tobacco, and from 60 per cent to 70 per cent on zarda scented tobacco, gutkha and chewing tobaccos.

The Tobacco Institute of India said the steep duty increase on cigarettes, coming as it did on the back of sharp rises in the previous two years, would provide a further fillip to the growing illicit trade in India, which already accounted for 19 per cent of the cigarette market.

In particular, the 72 per cent increase on cigarettes in the less than 65 mm category would give a huge impetus to domestically manufactured, tax-evaded cigarettes.

‘Moreover, the very high increment will further accelerate the shift in tobacco consumption from cigarettes to cheaper and revenue inefficient tobacco products,’ the Institute said in a statement.

‘As a consequence the share of the legal cigarette industry, which is a mere 12 per cent of total tobacco consumption in India, will be further eroded.

‘In overall terms, the jump in duty on cigarettes will neither help revenue generation nor serve the objective of tobacco control.’

Meanwhile, flue-cured tobacco growers in Andhra Pradesh and Karnataka have also expressed dismay at the steep rises in tobacco taxes.

They believe that the increases could cause a dip in both domestic and export demand, a fall in prices and, therefore, a negative impact on their livelihoods.

High tobacco taxes increase revenue and reduce cigarette consumption in Turkey

| July 16, 2014

Smoking rates and cigarette consumption dropped dramatically in Turkey between 2008 and 2012/13, but tobacco tax revenue doubled, according to a story in the Daily Sabah quoting government figures.

The introduction of a ban on smoking in enclosed public places and an almost doubling of taxes saw the annual consumption of cigarettes fall by 15 per cent between 2008 and 2013, according to figures from the Turkish Tobacco and Alcohol Regulatory Authority.

And according to the 2013 World Health Organization’s Global Adult Tobacco Survey, the number of people smoking in Turkey fell by 1.2 million – or 7.5 per cent – to 14.8 million between 2008 and 2012.

But tax revenue from tobacco products rose from $5.2 billion in 2008 to $10.2 billion in 2013.

From May this year, taxes made up nearly 82 per cent of the retail price of a pack of cigarettes, making Turkey’s cigarette taxes the eighth highest in Europe.

Tobacco oligopoly is boon for taxman

| July 16, 2014

Commenting in Forbes on the recently announced proposed takeover of Lorillard by Reynolds American, Daniel Fisher said the deal would join the No.2 and No.3 US tobacco companies under the control of British American Tobacco, which would own 42 per cent of the combined company shorn by Imperial Tobacco of a number of brands and Lorillard’s distribution network.

‘In any other industry,’ he said ‘this concentration of market power would send Justice Department economists scurrying for their calculators to tot up the resulting Hirfendahl-Hirschman Index. ‘But tobacco is no ordinary industry. It’s already a virtual cartel, by design, thanks to the Master Settlement Agreement that the state attorneys general negotiated in 1998…’

Fisher went on to say that the stated premise behind the tobacco settlement, as well as Food and Drug Administration regulation of cigarettes, was to restrict the marketing and sale of cigarettes because they are deadly.

‘The reality is they are also one of the world’s most reliable sources of tax revenue, and tax authorities love the predictability of cartels,’ he said. ‘As the dominant companies’ continuing fight over how the settlement is enforced against new entrants shows, there is no incentive to let the unruly forces of market capitalism intrude into this industry.’

Fisher’s piece (which is well worth taking the trouble to check out) is at http://www.forbes.com/sites/danielfisher/2014/07/15/reynolds-lorillard-merger-will-create-just-the-kind-of-monster-tax-authorities-love/

RAI to webcast results conference call

| July 16, 2014

Reynolds American is due to host a conference call and webcast from 09.00 hours Eastern Time on July 29 following the release of its second-quarter 2014 financial results before the market opens on that day.

The conference call, which will be available on a listen-only basis, will hear from speakers Susan M. Cameron, president and CEO, Thomas R. Adams, CFO, and Morris L. Moore, vice president of investor relations.

The webcast will be at www.reynoldsamerican.com, where a replay will be made available.

Call-in numbers are: (877) 390-5533 (toll-free) and (678) 894-3969 (international).

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