Tobacco giants merge and are set to flood Third World with deadly habit
Tuesday 12 January 1999
The merger of British American Tobacco (BAT) and Rothmans International was hailed by the City, which sent their shares spiralling upwards, but was condemned by anti-smoking campaigners who said it amounted to a declaration of war on the developing world.
The deal will create a global corporation producing a staggering 900 billion cigarettes a year at a time when tobacco sales are declining in the West.
With a war chest swollen by savings from rationalisation - jobs will go, a BAT spokesman admitted yesterday - the new multi-national is expected to target the growing markets in China, Africa, India and the Far East. In doing so, it is set to cause more deaths than any war, disease or famine has yet claimed.
It is estimated that cigarettes will claim four million lives a year worldwide by 2000 and ten million a year by 2030, of which seven million will be in the developing world, according to health experts.
But the question is whether the tobacco industry dies before its customers.
The Nineties has been a decade of unparalleled turmoil for the industry in the West, with anti-smoking legislation and a clutch of multi-billion dollar lawsuits turning smokers into social pariahs. The marriage of BAT and Rothmans is set to be followed by further partnerships as the industry retrenches and repositions itself.
The anti-smoking pressure group Ash claimed yesterday that more people would die worldwide as a result of the deal.
The British Medical Association said: "This is an industry on the defensive. What is alarming is that it is overtly striving to recruit new smokers in the developing world because it is under huge pressure in Western markets."
The deal will reinforce BAT's position as the world's second biggest private cigarette company, behind the United States company Philip Morris, makers of Marlboro. Rothmans is the fourth largest cigarette group and the combined operation, which employs 2,300 people in the United Kingdom, will control more than 16 per cent of the global cigarette market, 1 per cent less than Philip Morris's share.
The new company will still be well behind the state-owned Chinese National Tobacco Corporation, thought to hold about one-third of the market.
Only Rothmans, which makes Peter Stuyvesant, Dunhill and Winfield and has an agreement with Philip Morris to market Marlboro in Britain, has significant sales in the UK. BAT's international brands include State Express 555, Lucky Strike, Kent, Players and Pall Mall. It also makes Benson & Hedges for sale outside the UK - Britain's B&Hs are made by Gallaher. Despite the retreat from smoking in the West, global sales are continuing to rise, up by one-quarter since 1980. Estimates suggest that smoking is declining by 1 per cent a year in industrialised countries but rising by 2 per cent a year in the developing world.
BAT has cashed in on this growing Third World market. It sells 240 brands manufactured in more than 50 countries and owns the top selling brand in 30 markets.
Analysts calculate, however, that Western companies have barely scratched the surface of markets in the developing world - for instance, in China barely one in ten cigarettes sold comes from a Western manufacturer, the remainder being produced by the state-owned corporation.
Partly because of government involvement in the industry, China is heading for the world's greatest smoking disaster, claiming the lives of an estimated 100 million Chinese men now under 30, one-third of the young male population.
The figure is based on the world's largest study of the hazards of tobacco in which scientists from China, the US and Britain interviewed the families of one million people who died between 1986 and 1988.
Professor Richard Peto, of Oxford University, one of the principal authors of the study published in the British Medical Journal, said Chinese adults severely underestimated the risks of smoking, with 60 per cent unaware that it caused lung cancer.
Yesterday, Professor Peto said: "If this merger means more cigarette sales it'll mean more cigarette deaths because half of all smokers eventually get killed by their habit unless they can manage to quit.
BAT and Rothmans currently provide one-sixth of the world's tobacco. The cigarettes sold by these two companies are already causing more than half a million deaths a year and 20 years from now they will be causing a million deaths a year worldwide."
Tobacco companies are already targeting young people in promotional events across the developing world. In 1997, BAT sponsored China's first rave event in the town of Shenzen.
The company logo was displayed prominently on video screens and elsewhere in the night club. In Malaysia, the company evades the ban on direct advertising by promoting the "Benson and Hedges Bistro" - a coffee shop in Kuala Lumpur. Advertisements for the cafe are broadcast across the country.
Shares soar, page 13
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