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30 juin 2008

Big Tobacco

 

NEW YORK - Big tobacco companies should be able to raise prices and keep profits growing despite weakening sales, a Citi Investment Research analyst said Tuesday.

Adam Spielman said Philip Morris International Inc. could post 12 percent annual profit growth over the next few years, and Altria Group Inc. could grow at a 9 to 10 percent clip. That's as good as a lot of other big consumer product makers, he said, but the stocks are trading at a discount because of concerns about litigation and declining sales.

But the companies can keep increasing their profits as long as prices rise faster than sales fall, he wrote. Spielman said a pack of Marlboros costs $11 in the U.K., and prices are still going up to keep pace with wages.

"This implies U.S. prices have plenty of room to increase," he wrote. Costs are also coming down, he added.

Spielman expects the sector to outperform, and he started coverage of PMI and Altria with "Buy" ratings. He placed a "Hold" rating on shares of Reynolds American Inc., and said PMI and British American Tobacco PLC are his top picks.

He said fewer lawsuits are being filed against tobacco companies, so their legal risk has declined.  

23 juin 2008

IMPERIAL'S REIGN REACHES ITS END

Imperial Tobacco is closing its last factory in

Bristol

, bringing an end to a remarkable slice of the city's business history.

Bristol

was built on tobacco. The wealth of its tobacco barons, the Wills family, permeated the very fabric of the city.
The legacy of their generous endowments can still be clearly seen in landmark structures such as the

University

of

Bristol

's

Wills

Building

, the

Cabot

Tower

, the

City

Museum

and

Art

Gallery

, the

Homeopathic

Hospital

and St Monica's home for the elderly.

Their trade put money into these and countless other projects, as well as into the pockets of thousands of workers engaged in the production of the cigarettes and tobacco products which were puffed by millions right around the globe.
Now, finally, all that is about to come to an end.
The axe is falling on Imperial Tobacco's cigar factory in

Winterstoke Road

. With its closure and transfer of work to

Spain

, the long history of tobacco production will be over.
All that will remain is an Imperial administrative headquarters in Southville, not far away from what was once the hub of a vast business empire.
Today, as tobacco use is subject to endless assault and constraint from a Government still, ironically, happy to benefit from its taxation, and those who smoke in public are bracketed as social outcasts, the decision to shut up shop in

Winterstoke Road

will come as no real surprise.
But where did it all begin? Just how did

Bristol

become inextricably linked with tobacco?
For that you have to go back to the 16th century when tobacco - dubbed "the noxious weed" - was imported from British colonies in

Virginia

,

America

.
Up the

Avon

river and into what became the city docks came boats laden with tobacco leaf. Waiting to process it were numerous tobacco companies. Among them was one of the great names of the industry, WD and HO Wills.
It was founded in 1786 by Henry Overton Wills and was originally known as Wills, Watkins and Co. It only became WD and HO Wills in 1830 and traded as such until 1982.
However, it was also part of Imperial Tobacco, a company formed in 1901 to fight off American competitors. It was an amalgamation of Wills and a dozen other tobacco factories. Wills, though, kept its name as a division of Imperial.
It took a war to hook a nation on cigarettes. The Crimean War.
Troops fighting there picked up the Turkish habit of rolling tobacco up into thin paper before lighting and inhaling. As a consequence, in 1881, the first cigarette appeared.

Bristol

's tobacco factories never looked back.
Wills opened a succession of factories. Its East Street, Bedminster, one arrived in 1886, others in Ashton and Raleigh Road, Southville, followed. Business was booming, with sales of brands such as the world-famous Wills Woodbines,

Bristol

and Embassy.
In the early 1970s Wills took the logical step of any thriving firm. It upped sticks and moved out of town - to Hartcliffe. Bedminster and Southville economies were devastated. Wills workers were essential to the businesses in this part of town. It took years for the area to recover.
Yet the Hartcliffe complex was truly spectacular, both in its concept and its operation. It was the largest of its kind anywhere in

Europe

and provided work for 4,500 people who manufactured 350 million cigarettes every week.
Its vast assembly hall was unique. there were no internal supports and it was the size of a number of football pitches. Adjacent was an office block as well as the sort of facilities Wills workers had become used to - their own supermarket, post office, medical centre, dentist, bank, six restaurants and lounges, even a bus station. It cost £15m, covered

57 acres

, and by 1975 most of the old Wills operation had moved out there from Bedminster.
Many must have viewed it as a job for life. It always had been - surely, it always would be. They could not have been more wide of the mark.
In 1982, Imperial had abolished the old Wills board. Four years later Imperial was taken over by the Hanson Trust. By 1991 it was shut.
Drive by the site today and this spectacular and innovative factory has been replaced by an out-of-town retail park. Nearby work proceeds apace on converting the old shell of what was once the landscaped office block into an apartments scheme.
Back in Bedminster, the

East   Street

factory premises still exist, only in a new role as the frontage for yet another shopping complex, while architect George Ferguson's foresight has retained and transformed part of the old Southville site into a theatre, restaurant and bars.
Imperial HQ is close by in

Upton   Road

and is expanding its workforce.
That, however, should not detract from the fact that the company's decision to shut up shop at its last remaining

Bristol

production facility in

Winterstoke   Road

truly is the end of what has been an astonishing era.

 

Altria stubs out Marlboro Ultra Smooth

NEW YORK - Altria Group Inc's Philip Morris USA has cancelled its Marlboro Ultra Smooth cigarettes, highlighting challenges it faces in trying to grow its tobacco business despite a decline in U.S. cigarette sales, The Wall Street Journal reported on Monday.
Altria gets nearly all its revenue from Philip Morris USA after spinning off its Philip Morris International operations, the Journal reported.
Philip Morris's sales volume fell 4.6 percent last year, worse than the 4 percent decline in the overall U.S. cigarette market, the Journal reported. Underlying sales volume fell 3.6 percent, the Journal added.
The company expects overall cigarette sales to fall at an annual rate of 2.5 percent to 3 percent in coming years, the Journal reported.
Philip Morris has turned to developing tobacco products that are not as risky to their user's health, the Journal said. Ultra Smooth cigarettes include an activated carbon filter that delivers nicotine but with potentially less exposure to the carcinogens of conventional cigarettes, the Journal reported.
A Philip Morris spokesman was unavailable for comment.

04 juin 2008

N.Y.'s cigarette tax climbs to nation's highest

ALBANY, N.Y.— New Yorkers start paying the highest cigarette taxes in the nation Tuesday with the latest $1.25 spike per pack that officials expect to bring in $265 million a year.

Convenience stores across the state and the smokers who will be paying the price are angry about the change, but health officials hail the tax increase as a success. Cigarette taxes will raise a total of $1.3 billion for the state budget in fiscal year 2008-2009, including the new tax.

"Isn't that something — to say that I'm excited about a tax increase? But I am," said Dr. Richard Daines, the New York health commissioner. "This is a public health victory. We know one of the really effective tools to get people off of their nicotine addiction is to the raise the price."

Smokers will be paying $2.75 per pack in state taxes, a jump from the previous tax of $1.50. Before the new tax, the average price of a pack of cigarettes was $5.82 statewide, and about $8 a pack in New York City, which levies its own taxes, Daines said. The new retail price for a pack in the city could now soar past $10 depending on the store.

An estimated 140,000 New Yorkers will stop smoking with this tax increase, Daines said. That number is based on prior tax increases and cigarette consumption.

"Youth are particularly sensitive to the price of cigarettes, so this price increase is expected to prevent 243,000 youth from smoking," Daines said.

Daines said the tax increase is just one part of an $83 million anti-smoking effort that includes advertising and public service announcements, attempts to get tobacco consumption out of youth rated movies and cessation centers around the state.

"What we really want people to do is not to pay the price, but to stop smoking," he said.

Audrey Silk, who heads NYC Citizens Lobbying Against Smoker Harassment, said it's ridiculous to expect smokers to quit just because the price is climbing. She switched to rolling her own cigarettes since the last New York City tax increase and suggests other smokers will find similar ways to satisfy nicotine cravings.

"No product has a tax at this rate on it," Silk said. "If there was, there would be screaming, but since we've been beaten into submission and nobody listens to us, what else is there to do? It's unjustifiable and you turn to alternatives, and any consumer group would do the same."

Convenience stores, which historically count on cigarette sales, have also objected to the tax, saying it will drive smokers — and dollars — elsewhere.

"The tax increase is only going to feed that epidemic," said Jim Calvin, president of the New York Association of Convenience Stores. "More and more smokers in New York state are going to abandon our stores that have to charge the tax and shift their purchases to places that don't charge the tax, most notably Native American stores, the Internet and bootleggers."

New York Smokers Cross the Line for Cheaper Cigarettes

A new cigarette tax in New York has smokers flocking across the border to Pennsylvania.

On any day it's not hard to find New York license plates in Great Bend Township just a few miles across the border from the Empire State.

On this day there was car after car after car of cigarette smokers who are now coming to Pennsylvania to buy their favorite pack.

It comes after New York hiked its tax on cigarettes an additional $1.25 a pack.

Stanley Potter drove

13 miles

to get there from Binghamton.

"Because they went up a buck and a quarter up there in New York. The taxes are outrageous! I'm not going to pay $6.50 for a pack of cigarettes anymore," Potter said.

His pack of Marlboros is less than $5 at Smokin' Joe's in Great Bend Township.

Next door, at Tobacco Junction, Bob Auble noticed a lot of New Yorkers coming in to buy smokes, even before the new tax.

"They were coming in buying two or three cartons at a time. It's going to be even worse now," Auble said.

New York's new cigarette tax is considered the highest in the nation.
Smokers there now pay $2.75 a pack just in taxes alone. It's even worse in New York City, which has it's own tax on cigarettes. Smokes in the Big Apple could now cost more than $10 a pack.

Dave Homza of Kirkwood sums up his reaction. "I'm going to try to quit. It's easier said than to be done," Homza said. He's not alone.

The Empire State's health commissioner expects 140,000 New Yorkers to quit smoking because of the increase.

Stanley Potter knows he won't be one of them. "Either that or quit smoking. I'd rather just come down here, you know," Potter added.

Now the bad news for smokers here in Pennsylvania.

There's a proposal in Harrisburg this year to hike Pennsylvania's cigarette tax an extra 10-cents per pack to help pay for expanded health care coverage.