bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Ralph Jennings

Government-run Taiwan Tobacco & Liquor expects to increase sales of its  top cigarette brands on the  mainland and penetrate further the world's  biggest population of smokers despite the  steep entry barriers.
The 98-year-old corporation, which  ships 20 million  mid- and  high-end cigarettes to the mainland a year, has  targeted the market across the strait for its 2011 Changshou brand cigarettes.
'They've made us a promise we can sell more,' company spokesman Su Kui-yang said. 'We're talking to the mainland and have sent representatives there for meetings.'
Mainland smokers, about 350 million, or a quarter of the world's total, suddenly wanted the sweet-scented Taiwanese brand, made partly from Taiwan's small tobacco crop, after visiting the island on tours in recent years, Su said. Mainland  tobacco has a 'smokier' taste in comparison. 
Mainland tobacco firms sell 1.7 trillion cigarettes a year. In 2009, the tobacco industry grossed 513.1 billion yuan, according to China Daily.
Mainland  authorities, for their part, see profit potential for firms that  partner with Taiwan Tobacco to sell more of  its  products.
Beijing's recent display of political goodwill toward Taiwan won't  hurt, either. Since 2008, it has offered Taiwan economic sweeteners to further its long-term goal of reunification with the self-governing island after more than six decades of hostilities.
In 2009, the mainland allowed Taiwan Tobacco to sell its signature Taiwan Beer on the mainland. Sales of the lager beer, popular in Taiwan, are expected to earn the company US$31 million annually, local news reports say.
 Beijing, which wants to protect its own  tobacco industry, normally levies import tariffs so high that foreign brands can hardly compete with the local goods. It  may also ask producers of  offshore brands  sign licensing agreements that ensure local tobacco rollers get a cut. 
Foreign tobacco brands make up about 3 per cent of the mainland market today, selling 51 billion cigarettes a year. 
Taiwan Tobacco has lobbied  for additional mainland sales, adding to its four Changshou lines now available across the strait, as the number of smokers in Taiwan declines with a surge in new regulations.
'Chinese consumers know Changshou and want to buy more of it, but due to the restrictions we can't export much more,' Wang Chin-hsiang, acting assistant manager of TTL's tobacco affairs department, said. 'We, of course, want to export more. Mainland China is our most important target market.'
Taiwan Tobacco still does most of its business in Taiwan, where it sold some 360 million cigarettes last year.  But Taiwan's Tobacco Hazard Prevention Act of January 2009 raised prices, banned smoking in public and snuffed out the marketing of cigarettes. As a result, Taiwan's smoking population has declined, undercutting cigarette sales. 
Taiwan Tobacco, the island's largest and best-known cigarette maker, lost more in Taiwan in 2009 than other major multinational brands, according to a report by the market research agency Euromonitor International. 
That's because, as a state-owned enterprise, it was obliged to discourage smoking while still developing tobacco products.
The subtropical island 160 kilometres southeast of the mainland  produces about 14,750  tonnes of tobacco  a year, with labour costs and limited availability of arable land holding output at about the same level in recent years, Wang said.
Taiwanese firms had long had a knack for finding soft spots in Beijing's business rules to out-sell other offshore firms, John Eastwood, corporate lawyer and Eiger Law partner in Taipei, said. 
The biggest risk for Taiwan Tobacco, he said, might be the illegal but hard-to-catch mainland  knock-offs of the Changshou brand.
'China has been pretty good about letting Taiwan stick its neck out and sell stuff in its territory,' Eastwood said. 'If [Taiwan Tobacco] goes for organic or says it tastes better, they could compete in China against the lowest end, as there's a little bit of cachet to Taiwan.'
 However, he said that in the short term there were likely to be fake 'Made in Taiwan' cigarettes on the mainland,  which is known for trademark violations in many industries.
Marketing is an obstacle. Due to the limited sales volume, Changshou cigarettes  were available at just 180 locations and were advertised on only 63 billboards, all in major mainland cities, the company spokesman said. 
The mainland does not allow tobacco advertising other than on billboards.
The mainland was likely to open its market of smokers - more than the total US population of about 308 million - to outside firms only if its  brands could in return raise their profiles abroad, Euromonitor tobacco account manager Zora Milenkovic said. 
'China has a tobacco monopoly and is a producer of tobacco itself, so it is only natural that it has a protectionist stance in terms of opening its doors to foreign imports,' the London-based Milenkovic said. The only reason for China to relax import quotas, she said, was 'if there is scope to further its own brands'.
Ralph Jennings is a freelance writer who has reported on Taiwan and the mainland since 2000
Butting in
Taiwan Tobacco and Liquor Corp has seen its income slump since the island introduced legislation that banned smoking in public places, ended cigarette marketing and raised prices
The company hopes to solve its problems by targeting the mainland market, where it sold 20 million cigarettes last year
A quarter of the world's smokers are mainlanders 350 million people
1.7 trillion cigarettes sold on the mainland each year
513.1 billion yuan grossed by the mainland tobacco industry In 2009
Foreign tobacco brands make up only abou 3 per cent of the mainland market, selling 51 billion cigarettes per year



Taiwan eyes mainland smokers