Tobacco companies

Global status

Three of the world’s five largest tobacco companies (excluding the Chinese state tobacco monopoly) are based in the UK. BAT, with 11% of the global market, is the world’s second largest tobacco company, after Philip Morris which has 18%, while Imperial Tobacco and Gallaher hold fourth and fifth places respectively. Japan Tobacco is the world’s third largest tobacco manufacturer. [1]

UK market share

The cigarette and tobacco market in the United Kingdom is dominated by two firms, Gallaher and Imperial Tobacco, who between them control around 80% of the market. British American Tobacco (BAT), manufactures cigarettes in the UK but sells most of them abroad.

Company profiles

Gallaher: By the end of 2005, Gallaher’s share of the UK cigarette market was 37.1%. [3]. Total group sales in 2004 amounted to 170.6 billion cigarettes. The company recorded operating profits (including overseas sales) of £551 million. [4] Gallaher has increased international sales in central and eastern Europe through its acquisition of Austria Tabak and Liggett-Ducat.

In March 1999, Gallaher acquired the UK business of RJ Reynolds from RJR-Nabisco Corporation and acquired the UK distribution rights to Camel and More. Gallaher now operates in 68 countries. International sales accounted for 80% of Gallaher’s sales in 2004, up from 38% in 1998.

Imperial Tobacco Group PLC: Imperial’s share of the UK cigarette market has been steadily increasing in recent years and now stands at 44.9% (up from 42.9% in 2003). [3] In 2004 the company reported overall operating profits of £1,218 million, of which £454m were derived from UK sales.

In 1997 Imperial Tobacco bought Rizla, the hand-rolling cigarette paper company. In 2002 it acquired the German tobacco company Reemtsma. [5] Imperial also has a 43% stake in the Swedish snuff producer, Skruf.

British American Tobacco: BAT is the second largest tobacco company in the world (excluding China) but has just 6.0% of the UK market. [3] Most of BAT’s global tobacco activities outside the USA, Brazil and Germany are run by BAT in the UK.

In 2004, BAT produced 853 billion cigarettes worldwide and reported an operating profit of £2,830 million [6]. BAT, principally through its former US subsidiary Brown & Wiliamson, has been the subject of thousands of product liability cases for a number of years. By 31 December 2004 the company had 3,867 cases filed against it by, or on behalf of individuals in the United States. However, following a merger between Brown & Williamson and the US company RJ Reynolds, BAT will be indemnified from current and future litigation. [7].

Altria: Altria is the parent company of Philip Morris, the world’s largest tobacco company. Philip Morris’s share of the UK market is 8.8%, primarily through its Marlboro brand [3].

Japan Tobacco: Bought the international tobacco operations of RJ Reynolds in 1999 and is now the world’s third largest international tobacco company, producing 8% of the world’s cigarettes [1]. Brands include Mild Seven and the former RJ Reynolds brands, Winston and Camel. The company reported net sales from tobacco operations of 4,284 billion yen - US$36.9 billion during the financial year ending 31 March 2005 [8].

Production, sales & exports

In 2004-2005, 51,667 million cigarettes were released in the UK for consumption – 47,224 million home produced and 4,444 million imported [9]. In 2004, 40% of UK manufactured tobacco products were exported. [10]

Employment

In the UK, the tobacco industry has been steadily reducing its workforce, largely as a result of mechanisation and rationalisation. [11] One study found that of the 19,400 jobs lost between 1963 and 1985, 16,000 (82%) could be attributed to general factors such as productivity improvements. [12] According to the latest official estimates, in 2003, 3,217 people were employed in tobacco manufacturing, with a further 7,611 employed in the sale and distribution of tobacco products. [13]

Tobacco related organisations

The Tobacco Manufacturers Association (TMA). The TMA is the trade association of companies manufacturing tobacco products in the UK. Its members are the major manufacturers: BAT, Gallaher, Imperial Tobacco and a number of smaller companies. The TMA provides information on subjects related to tobacco and plays a role on behalf of its members in discussions with the Government on matters such as tobacco taxation.

Freedom Organisation for the Right to Enjoy Smoking Tobacco (FOREST). A group which aims to maintain the right of adult individuals to freedom of choice, in particular their rights to personal pursuits such as tobacco smoking. FOREST gets well over 90% of its income from the tobacco companies.

Tobacco Alliance. A tobacco industry funded group representing independent tobacco retailers. The Alliance has created further campaigning groups including the lobby group Retailers Against Smuggling.

Tobacco Workers Alliance. A group supported by the tobacco industry and trade unions which represents workers in tobacco manufacturing.

References

[1] Global tobacco market. Tobacco Journal International [poster], 2005

[2] Up in smokes. Retail Newsagent, 15 April 2005

[3] Tobacco market shares. AC Nielsen, cited in The Grocer, 25 February 2006

[4] Gallaher Group plc Annual Review and Summary Financial Statement 2004

[5] Imperial Tobacco Group plc Annual Report and Accounts 2004

[6] British American Tobacco Review & Summary Financial statement 2004

[7] Teather, D. BAT escapes US smoking lawsuits. The Guardian, 24 June 2004

[8] Japan Tobacco International Annual Report 2005.

[9] HM Revenue and Customs Annual Report, 2004-05. The Stationery Office, 2005.

[10] Product Sales and Trade: Tobacco Products PRA 1600. National Statistics, 2004

[11] Buck, D. et al. Tobacco and jobs - the impact of reducing consumption on employment in the UK. Centre for Health Economics, University of York, 1995.

[12] Godfrey, C. & Hartley, K. Employment. In Maynard, A. & Tether, P. Preventing alcohol and tobacco problems, Vol. 1. Aldershot, Avebury Gower, 1990.

[13] Annual Employment Survey, Great Britain. ONS, 2003.