BAT luck fizzles out
No foreign company was more successful in pre-communist China than British American Tobacco (BAT).
It started importing cigarettes into China in the second half of the 19th century and opened its first factory in Pudong in 1902. Before 1925, it accounted for up to 80 per cent of the market, until nationalist campaigns against foreign goods reduced the figure to 60 per cent by the time of the Japanese invasion in 1937.
The 1930s were the peak years for sales, which exceeded 55 billion cigarettes in 1937, a 67 per cent share of the China market and almost 40 per cent of BAT's global volume at that time. It ran sleek advertising campaigns with elegant models who made their brands, such as Hademen and Tianqiao, household names across China.
Its success was more remarkable for the fact that it was achieved during a half-century of civil war, revolution, invasion and strong anti-foreign sentiment, with boycotts against 'imperialist' products.
In Shanghai, it established one plant to make packets and four cigarette factories. It also set up plants in Hankou, Shenyang, Harbin, Tianjin, Qingdao, Yingkou, Liaoyang, Niuzhuang and Hong Kong. It used leaf from the US and several Chinese provinces and set up the first tobacco curing factory in China, in 1917.
It benefited from its privilege as a foreign company, which the Kuomintang government did not dare to tax as heavily as domestic tobacco producers, of whom the strongest was the Nanyang Tobacco Company. It also imported American leaf and used western-style advertising techniques, calling its most expensive brand 'Liberty Bell'.
To gain the right political connections, BAT invited H.H. Kong and T.V. Soong, two brothers-in-law of Song Meiling, wife of Chiang Kai-shek, to invest in its Xuchang factory in Henan province.
But antagonism from the 48 local tobacco companies was so intense its Chinese general manager was assassinated in December 1935, and its foreign adviser a year later, forcing BAT to pull out of Xuchang.
Japan's invasion of China in 1937 damaged many of the factories but production continued in Shanghai, which was protected as an international settlement. After Pearl Harbour, the Japanese occupied Shanghai, used its factories to make their own brands and the packet factory to print money.
Between 1946 and 1949, the company resumed limited operation but declined to invest heavily because of the civil war. It sold its last cigarettes in 1951.
In 1952, the new communist government took over all of BAT's factories and turned them into China Tobacco Company. They formed the core plants of what became the most lucrative industry of the new state. Apparently, BAT received no compensation.
