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Tobacco Set for Industry Reshuffle
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China's tobacco industry is likely to see cross-province reshuffles this year.


The State Tobacco Monopoly Administration will accelerate the restructuring of the industry through mergers and reorganizations in 2007, spokesman Zhang Xiulian said yesterday.


"Substantial progress will be seen in cross-province mergers in 2007" based on the already-completed restructuring of factories within individual provinces, he said.


The number of cigarette factories was cut to 31 by the end of last year, from 47 in the middle of 2006. The number of brands, which stood at around 1,800 in 2001, decreased to 224.


The administration is trying to establish around 10 large-scale tobacco enterprises through mergers and reorganizations, producing some 10 major brands.


Zhang said the restructuring of the sector will improve the competitiveness of China's tobacco industry.


Last year, only eight brands managed sales in excess of 1 million cartons, or 50 billion cigarettes. But the administration expects big enterprises will be able to focus their resources to build key brands with annual sales of at least 3 million cartons, or 150 billion cigarettes.


The administration started closing inefficient and small cigarette factories and restructuring the sector in 2001. At that time the market was flooded by 185 enterprises, producing 1,800 brands.


Currently a merger between two cigarette manufacturers in Guangdong Province and Guangxi Zhuang Autonomous Region is on the cards, but the implementation has been postponed.


Reports said restructuring in the sector would ultimately result in three tobacco centers, in northern, central and southwestern China.


Zhang said the tobacco industry has steadily developed over the past year.


Statistics from the administration show China produced 2.02 trillion cigarettes, or 40 million cartons, 3.5 percent more than a year earlier.


A total of 2.03 trillion cigarettes were sold in 2006, up 3.9 percent from the previous year.


According to Zhang, 757 billion cigarettes, or more than 37 percent of the total production, were marketed at low-end customers.


"This part of the market has very slim profits but is necessary for low-income consumers," he said.


Trying to sharpen the competitive edge of China's tobacco industry, the administration has also stepped up efforts to fight the production and sale of counterfeit and shoddy tobacco products.


Last year, 384 illegal cigarette sales networks were closed, compared to only 23 in 2005.


Also, 907,000 cartons of counterfeit cigarettes were confiscated in 2006 and 4,296 illegal production sites closed.


(China Daily January 12, 2007)


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