Bloomberg BusinessWeek, Dec 15, 2014 (II)

choi

Andrew Martin, The Chinese Government Is Getting Rich Selling Cigarettes.
www.businessweek.com/articles/20 ... -selling-cigarettes

Quote:

(a) "The China National Tobacco Corp 中国烟草总公司 [based in Beijing], which serves China’s 300 million smokers, is by far the largest cigarette maker in the world. In 2013 it manufactured about 2.5 trillion cigarettes. Its next largest competitor, Philip Morris International, produced 880 billion.

"In terms of market share, China National is bigger than its next five competitors combined; its growing sales have accounted for a net increase in global production, even as volume at its competitors has fallen. While Marlboro remains the most popular cigarette in the world, China National boasts 7 of the top 10 brands, including Red Pagoda Mountain 红塔山 and Double Happiness 双喜. In all, the company made 43 out of every 100 cigarettes in the world last year, according to Euromonitor International. Despite its size, China National is little known outside of China: Almost all its cigarettes are sold in the country, where it has no real competition.

"A conglomerate on the order of the old Gulf + Western, China National runs more than 160 cigarette brands, manufactured in about 100 factories across the country, and uses its earnings to invest in banks, luxury hotels, a hydroelectric plant, a golf course, and even drugmakers. Most of its money goes to its owner, the Chinese government; the tobacco industry accounts for about 7 percent of the state’s revenue each year, and China National controls as much as 98 percent of the market. All told, the industry in China employs more than 500,000 Chinese. * * * The extent to which the government is interlocked with the fortunes of China National might best be described by the company’s presence in schools. Slogans over the entrances to sponsored elementary schools read, 'Genius comes from hard work. Tobacco helps you become talented 天才出于勤奋，烟草助你成才.'

"The government runs China National as a largely opaque monopoly. * * * It generated about $170 billion in revenue in 2012, more than Apple.

" While the growth of its cigarette production has slowed, the company is making more money than ever in the same ways its Western competitors do: by pushing premium brands. Some are low-tar, some are organic, and some feature tobacco from American farmers, whose fortunes have risen along with the demand from China.

(b) "China National was founded in 1982

(c) "The company got crucial early help from a scientist with the US Department of Agriculture, which was eager to expand scientific cooperation and trade as relations between the countries thawed. Tien-chioh TSO 左 天覺, a slight, bespectacled Chinese man, had immigrated to the US to accept a fellowship at Pennsylvania State University, where he pursued a graduate degree in phytochemistry and agronomy. His career was devoted to tobacco research; he quit smoking in 1964. He died in 2013, at the age of 95.


Note:
(a) This article is one of the two feature stories in this issue (usually there are three).
(b) Gulf and Western Industries
en.wikipedia.org/wiki/Gulf_and_Western_Industries
(logo:  Gulf + Western); a conglomerate; 1934-1994; later in its existence focused on its primary asset, Paramount Pictures; acquired by Viacom in 1994)