Signing of Reciprocal License Agreements
03 November 2003 - 8:38PM
UK Regulatory
3 November 2003
GALLAHER GROUP PLC
SHANGHAI TOBACCO AND GALLAHER SIGN RECIPROCAL
LICENSE AGREEMENTS FOR CHINA AND RUSSIA
Shanghai Tobacco (Group) Corp. ("STG") and Gallaher have signed reciprocal
trademark license agreements to manufacture, distribute and sell one of each
other's brands in China and Russia. This follows last year's signing of a
co-operative Letter of Intent with the China National Tobacco Corporation
("CNTC"), together with the State Tobacco Monopoly Administration ("STMA").
Under the license agreements, STG has nominated one of its key brands, Golden
Deer, to be manufactured, distributed and sold in Russia by Gallaher, through
its Liggett-Ducat operation, and Gallaher has nominated one of its key brands,
Memphis, to be manufactured, distributed and sold by STG in China.
The products are planned to be launched in the first half of 2004, and
initially will be distributed and sold in the Shanghai and Moscow
municipalities. Thereafter they may be rolled out to other cities and provinces
across China and Russia.
Under the terms of the agreements, a Business Co-ordination Committee has been
established to prepare the brands for launch in each company's respective
markets, and to co-ordinate co-operation and communication between the parties
for the development of the business.
Mr Dong Hao Lin, General Manager of STG, said: "The agreement signed today is a
significant milestone for Shanghai Tobacco, and is an important co-operation
with an overseas company. I believe that after this co-operation, Shanghai
Tobacco and Gallaher will gain significant success in international markets.".
Mr Jiang Chengkang, Director General of STMA, said: "The signing of the
agreement today is the result of friendly co-operation and hard work by all
parties. The China Tobacco Industry is based on the principles of fairness and
mutual benefit, and this has resulted in the friendly co-operation with
Gallaher.".
Nigel Northridge, Chief Executive of Gallaher, said: "These reciprocal
agreements result from the successful efforts of the joint project team formed
with Shanghai Tobacco - and I am delighted that we have moved into the next
stage of our mutual collaboration.
"Today marks further progress in Gallaher's Eurasian vision.".
For further information, contact:
Claire Jenkins, Director, Investor Relations Tel: 01932 859777
Anthony Cardew, CardewChancery. Tel: 020 7930 0777
Notes to Editors
- The State Tobacco Monopoly Administration of the P.R.C. ("STMA") is the
Government administration department with responsibility for: managing
the tobacco industry; working out principles and policies; enforcing laws
and regulations; practicing the monopoly administration over tobacco
commodities' production, marketing, importation and exportation; and,
overseas economic and technical co-operation.
Mr Jiang Chengkang is the Director General of STMA, and the General
Manager of CNTC.
Further information on STMA is available on its Chinese language joint
website with CNTC: www.tobacco.gov.cn
- The China National Tobacco Corporation ("CNTC") reports to STMA, and is
the corporation that organises the production, marketing, importation and
exportation of tobacco commodities (including: cigarettes; cigars; cut
tobacco; re-dried tobacco; tobacco leaf; filter rods; cigarette tow; and,
tobacco machinery).
A subsidiary of CNTC operates a website which focuses on tobacco and
cigarette related news: www.tobaccochina.com
- Shanghai Tobacco (Group) Corp. ("STG") is the second largest tobacco
company in China with annual production volumes of some 70 billion
cigarettes.
The corporation operates two factories and employs around 7,000 people.
STG products are distributed throughout China and are sold in overseas
markets including Australia, Hong Kong, Singapore, and, in conjunction
with Gallaher, the UK.
Mr Dong Hao Lin is the General Manager of STG, and the Director General
of the Shanghai Tobacco Monopoly Administration.
Further information regarding STG is available on its Chinese language
website: www.sh-tobacco.com.cn
- China is the world's largest tobacco market, with annual volume sales of
some 1.7 trillion cigarettes (almost one-third of the world's
consumption). CNTC brands account for over 98% of the market.
The Chinese cigarette industry is currently undergoing restructuring in
order to enhance efficiency. This involves a reduction in the number of
manufacturing facilities and brands.
At the same time various restrictions applicable to imported brands are
in the process of being relaxed to allow foreign companies wider access
to distribution.
- Gallaher has built its presence in China since gaining an import listing
for its Sobranie brand in 1997. Sobranie has been established in
Shanghai, Beijing and Guangzhou and is supported in these areas by the
Group's three representative offices. These were acquired from its former
agent, Gold Bond, in January 2003.
Sales of Sobranie have increased by some 60% in 2003 and the brand now
has a share of imported cigarettes of around 3.5%.
Gallaher has developed a close relationship with STG over the past 7
years. STG has actively helped Gallaher build its Sobranie brand in
Shanghai, providing effective distribution, sales support and
merchandising throughout the province. The companies' relationship was
strengthened further when Gallaher introduced STG's most prestigious
brand, Chunghwa, into the UK in 2001.
- Russia is the world's fifth largest market, with annual consumption of
around 300 billion cigarettes. The four leading international
manufacturers in Russia account for some 68% of consumer sales.
- Liggett-Ducat, a wholly-owned subsidiary of Gallaher, sold 63 billion
cigarettes in 2002. This represented an increase of 13.1% over the
previous year. The company operates a single production facility in
Moscow.
Since acquiring Liggett-Ducat in 2000, Gallaher has invested in the
factory - increasing production capacity of hard-box filter brands - and
has significantly extended its nationwide distribution network.
By the first half of 2003, Gallaher's market share in Russia had reached
14.5% (2001 H1: 13.9%).
- Gallaher acquired the American blend brand Memphis on its acquisition of
Austria Tabak in 2001. In 2002, Memphis' total volume sales were 6.9
billion cigarettes. In addition to Memphis' growing positions in Central
and Eastern Europe, the brand house was the leading cigarette in Austria
in 2002, with a market share of 27.5%.
- Gallaher Group Plc, the international tobacco manufacturing and wholesale
company with headquarters in the UK, has leading positions in Austria,
Estonia, Germany, Greece, Kazakhstan, Republic of Ireland, Russia, Sweden
and the UK. Gallaher's comprehensive brand portfolio includes Benson &
Hedges, Silk Cut, Mayfair, Sovereign, Sobranie, Dorchester, Troika, LD,
Memphis, Milde Sorte, Ronson, Blend, Hamlet, Old Holborn, Amber Leaf and
Condor.
The Group employs over 10,000 people, with manufacturing plants in the
UK, Austria, Sweden, Poland, Russia, Kazakhstan and Ukraine. Gallaher's
shares are listed on the London Stock Exchange and its ADRs are traded on
the New York Stock Exchange.
Further information on Gallaher is available on the Company's website:
www.gallaher-group.com
END