Friday, October 24, 2014

British American Tobacco cigarette sales falling

British American Tobacco
 British American Tobacco reported an accelerated decline in the number of cigarettes sold, citing economic pressures on smokers around the world to rein in spending.

British American Tobacco’s shares fell after it joined other consumer goods makers that have been hit by cutbacks from cash-strapped consumers such as Reckitt Benckiser, Coca-Cola, Heineken and Nestle.

The maker of Pall Mall and Dunhill cigarettes said it sold 495 billion cigarettes in the nine months ended. Sept 30, a 1% fall from the year earlier, citing weakness in Russia, Vietnam, Brazil, Poland and Canada.

RBC Capital Markets said that the figure implied a worse-than-expected 2.2% drop for the third quarter, an acceleration from the 0.4% dip British American Tobacco reported for the first half.

The global cigarette market is expected to shrink this year as more people quit smoking or switch to e-cigarettes and as a weak global economy curbs their ability to spend.

“The trading environment remains challenging due to continuing pressure on consumer disposable income worldwide and the slow economic recovery in western Europe,” British American Tobacco said in a statement.

It added, however, that it was “on track to deliver another year of good earnings growth at constant rates of exchange”, as price increases on some brands offset competitive discounting and growth in the lower-priced segment in certain markets.

In the nine months ended Sept 30, revenue fell 9.6%, hurt by the weakening of various currencies relative to the British pound. Excluding the currency impact, however, revenue rose by 2.4%.

The company said volume sales were also being hurt by large excise-driven price increases, because many countries have been raising taxes on cigarettes in order to discourage smoking.

The World Health Organisation this month approved guidelines urging countries to increase tobacco taxes.

Thursday, October 23, 2014

Modern sustainability of tobacco sector

Falling cigarette sales
 Tobacco companies are often considered some of the most defensive stocks you can find in the market thanks to their great dividend yields. Indeed, industry leaders Philip Morris International are well known and respected for their shareholder returns, which are second to none. However, with the number of smokers worldwide in terminal decline, how safe are these payouts?

Tobacco companies did not get the reputation they have today by accident; they have built up their reputation for returns over decades without breaking any promises. For example, Altria and its tobacco sector peer Universal have both been paying and increasing their dividend payouts, without a single cut, for more than four decades.

Unfortunately, as of yet Philip Morris and its management team have not been around long enough to build up this kind of reputation. Nevertheless, Philip Morris' management appears to know what they are doing and in my opinion, the team has been extremely prudent in ensuring the long-term sustainability of the company's payout. In particular, after Philip Morris and Altria parted ways during 2008, in its first full year of independence Philip Morris' operations yielded $8.1 billion in cash, from which the company paid out a total of $5.1 billion in dividends to investors.

Now, Philip Morris could have paid out a lot more than this in theory, but it remained cautious and paid out only what it believed it could afford. Since then the company's payout has edged up, rising from an initial quarterly payout of $0.46 per share in 2008 to a quarterly payout of $0.94 per share at present.

However, while Philip Morris' payout has more than doubled, it has only grown in-line with funds generated from operations. Specifically, the company paid out 55% of cash from operations as dividends during 2013, 53% during 2012, 50% during 2011, and 54% during 2010. Over the same period the company's payout has risen from $0.58 to $0.94 -- impressive growth without putting an excessive strain on the company's cash flows.

Falling cigarette sales

Still, the major factor that threatens the dividend payouts of both Philip Morris and Altria is falling cigarette sales around the world, although it would appear that these tobacco behemoths aren't worried.

You see, big tobacco continues to increase prices to offset declining volumes. For example, back in December of last year Altria added $0.07 per pack to the price of Marlboro cigarettes. This follows a similar $0.06 increase in June.

According to data supplied by the Tobacco Atlas, a pack of Marlboro cigarettes within the United States costs $6.36 on average, which implies that the total price increase of $0.13 per pack for this year would be a 2% rise all-in-all. Note that this calculation includes taxes.

Now, we can factor this into Altria's results to see how it helps keep the company's profits rising.

Specifically, for the first nine months of this year, the volume of Marlboro cigarettes sold by Altria declined by 3.8%. However, with the company instigating a price increase of 2%, this effectively means that the revenue received from the volume of cigarettes sold declined by only 1.8%. These numbers, along with price increases across the rest of the company's tobacco portfolio and an increase in the volume of discount cigarettes sold, meant that Altria's revenue from cigarettes remained fairly constant throughout 2013.

What's more, lower costs and lower excise taxes helped Altria's adjusted operating income from smokeable products rise 16% year over year for the nine months ending in September.

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Falling cigarette sales around the world

World falling cigarette sales
 The volume of tobacco sales for tobacco companies is decreasing, especially in Western countries and mostly in Europe. The associated fall in sales and revenues has meant that certain companies are forced to shut down certain production units and lay off staff, as was the case in the recent decision by the British Company Imperial Tobacco, which announced its plans to close its last cigarette producing factory in England, located in Nottingham, with an ensuing loss of 540 jobs.

Smuggling and illicit trade of cigarettes and tobacco products pose a serious threat to the industry as well, but the major challenge that the tobacco companies are called to face are government decisions which greatly increase the regulation in the industry. The changes to packaging, advertising bans etc. mean increased costs to companies and seriously affect their revenues and profit making ability.

In 2012 Australia became the first country to force tobacco companies to change their packets and replace them by plain olive green packaging with images depicting the damaging effects of smoking. Now it seems that Britain is ready to follow suit and become the second country in the world to impose such demands on tobacco companies and the first country in Europe to enforce the decision about selling cigarettes in plain packets. Indeed, within the government effort to improve the health of the citizens and limit the number of children smokers, the UK authorities have announced that within a year the relevant law will be passed forcing companies to sell their cigarettes in packets without branding but only space for graphic health warnings. For these warnings to be accommodated on the packets, the actual size of the cigarette packets will have to be increased. To be able to do this, tobacco producing companies will have to make huge expenses to buy new packaging machines and also incur additional costs for the designing of the new packets.

Up until today the additional cost required to implement these new packaging requirements had not been estimated, however with the new rules appearing as a certainty, senior executives of Europe’s largest cigarette maker, British American Tobacco have done their maths in order to be able to put a price tag on the costs that these new legislation will entail and have announced that these costs could exceed £200m also mentioning that they could even spiral to to just under £1billion.

No matter what the actual additional cost will be in the end, it is certain that companies will want to fund this through their profits, meaning that once the legislation is passed smokers can certainly expect to be called to pay more for each packet of cigarettes. Therefore, consumers should be prepared for yet another price hike will tobacco companies that increases in price will most probably mean a further reduction in sales volumes in the developed world.

Friday, October 10, 2014

Cigarette taxes in US

In the United States cigarettes are taxed at both the federal and state levels, in addition to any state and local sales taxes and local cigarette-specific taxes. Cigarette taxation has appeared throughout American history and is still a contested issue today.

One of the biggest critiques of the passing of this bill comes from economists who believe that an increase in the federal cigarette tax will lead to decreased funding for state programs that rely on their own state cigarette taxes.

Another argument against this bill claims it to be regressive, holding that the tax increase unfairly targets the poor because according to the Centers for Disease Control and Prevention more than half of all smokers are low income. Further, lower-income communities also suffer from tobacco-related illnesses at a disproportionately higher rater than their higher-income counterparts.

One of the reasons for the support of increased cigarette taxes among public health officials is that many studies show that this leads to a decrease in smoking rates. The relationship between smoking rates and cigarette taxes follows the property of elasticity; the greater the amount of the tax increase, the fewer cigarettes that are bought and consumed.

The federal excise tax on cigarettes is $1.01, which is not included in the rates shown above. Most states charge a sales tax on top of the retail price and the excise taxes. A few municipalities levy a local sales tax in addition to the state tax.

American states Tax rates Per Pack (USD)

Alabama 0.425
Alaska 2.00
Arizona          2.00
Arkansas        1.15
California       0.87
Colorado        0.84
Connecticut 3.40
Delaware        1.60
Florida            1.339
Georgia           0.37
Hawaii 3.20
Idaho 0.57
Illinois            1.98
Indiana            0.995
Iowa              1.36
Kansas 0.79
Kentucky         0.60
Louisiana         0.36
Maine 2.00
Maryland         2.00
Massachusetts 3.51
Michigan         2.00
Minnesota       2.83
Mississippi 0.68
Missouri         0.17
Montana          1.70
Nebraska         0.64
Nevada 0.80
New Hampshire 1.68
New Jersey 2.70
New Mexico 1.66
New York 4.35
North Carolina 0.45
North Dakota 0.44
Ohio 1.25
Oklahoma 1.03
Oregon 1.31
Pennsylvania 1.60
Rhode Island 3.50
South Carolina 0.57
South Dakota 1.53
Tennessee 0.62
Texas 1.41
Utah                 1.70
Vermont            2.62
Virginia             0.30
Washington 3.025
West Virginia 0.55
Wisconsin 2.52
Wyoming           0.60
District of Columbia 2.50
Northern Marianas Islands 1.75
Puerto Rico 2.23
Guam 3.00
American Samoa 2.50
Virgin Islands 1.78

Taxes on smokeless or chewing tobacco, as well as (and often concurrent with) snuff, cigars and pipe tobacco, are also common in the United States. Of the 49 states that do impose in this category, Florida does not tax cigars, though all other tobacco products are taxed. The U.S. federal government charges different non-cigarette excise taxes, according to the following 6 categories: snuff, chewing tobacco, pipe tobacco, roll-your-own, large cigars, and small cigars. Cigarette papers and tubes are also taxed.

Tuesday, October 7, 2014

Smoking Jennifer Lopez

Smoking  Jennifer Lopez
Jennifer Lopez has never been caught smoking or drinking alcoholic beverages. But the celebrity was seen puffing away on a cigarette last week while performing a disappointed mother on the Atlanta set of her movie Lila & Eve. As Eve Rafael, the 44-year-old singer showed up to take pleasure in miming a cigarette habit at a church. In the episode – due out next year -Jennifer Lopez and Viola Davis play mothers whose kids have been shot. The distracted women then form groups for take revenge for their kids’ deaths after local authorities do not succeed in punishing murderers justly.

Jennifer has been smoking cigarette even making rings while at the same
time showing her silver manicure. The Parker celebrity was wearing a fur-collared soft trench, grey sweatpants, blue fingerless gloves, and gold sneakers.
Jennifer Lopez at movie Lila & Eve

Jennifer Lynn Lopez was born in the Castle Hill section of the South Bronx on July 24, 1969. She is the middle of three musically-inclined sisters, Leslie Lopez, a homemaker, and Linda Lopez - a DJ on New York's WKTU, a VH1 VJ, and a morning news show correspondent on New York's Channel 11.

Jennifer always dreamed of being a multi-tasking superstar. Jennifer's parents, Guadalupe Rodriguez and David Lopez, were both born in Ponce, Puerto Rico, the second largest Puerto Rican city. The two were then brought to the United States in their childhoods and, eventually, met while living in New York City.

Jennifer Lynn Lopez
 After a two-year stay at In Living Color where actress Rosie Perez served as choreographer, Lopez then went on to dance for famed singer-actress Janet Jackson. Her first major film was Gregory Nava's My Family (1995), and her career went into over-drive when she portrayed slain Tejana singer Selena Quintanilla Perez in Selena (1997).

My Family (1995)                  $50 000
Money Train (1995)               $200 000
Jack (1996)                           $200 000
Blood and Wine (1996)          $250 000
Selena (1997)                        $1 000 000
Anaconda (1997)                   $1 000 000
U Turn (1997)                       $1 000 000
Out of Sight (1998)                $2 000 000
Antz (1998)                           $500 000
The Cell (2000)                     $4 000 000
The Wedding Planner (2001)  $9 000 000
Angel Eyes (2001)                 $9 000 000
Enough (2002)                       $10 000 000
Maid in Manhattan (2002)      $12 000 000
Gigli (2003)                          $12 000 000
Jersey Girl (2004)                 $4 000 000
Shall We Dance (2004)          $15 000 000
Shall We Dance (2004)          $14 000 000
Monster-in-Law (2005)          $15 000 000
An Unfinished Life (2005)      $4 000 000

Friday, October 3, 2014

Top 10 selling cigarettes in all world

For those who smoke just for the sake of smoking, brand really doesn’t matter. But the real ones, they want elegance even in their brand of cigarettes. So the companies manufacturing these have been striving to upgrade the quality and advertise in a way that appeals gravely to these conscious minds. 

We take a look at some of the brands that have been at the top of the race in the making of quality cigarettes all over the world. This chart shows top 10 best selling cigarettes.

1. Marlboro cigarettes
Marlboro cigarettes

Marlboro cigarettes are maddeningly popular brand of cigarettes, and favorite of every second smoker you may meet. Made by the company Philip Morris, these are the largest selling cigarettes in the world. The main aspect that made it such a success was the advertising. The cowboy ad appealed to the masculine segment of the population to a very large extent.

These elegant cigarettes were however, introduced for women in 1924, and emphasized on its feminine features, which included a red band to hide the lipstick stains from the filter! However, it gained its market among men after 1950, when the cigarettes began to be more generalised in make. 

Marlboro cigarettes provide a completely different smoking experience, because of the strong yet smooth flavour. Philip Morris always targeted the youth through its advertisements and was no doubt immensely successful. Marlboro is a high quality cigarette at a price not to balk at. No wonder the young and old men favor it alike.

2. Mild Seven cigarettes
Mild Seven cigarettes

Mild Seven is a brand of cigarettes produced by Japan Tobacco. Mevius cigarettes are the fifth widest smoked cigarette in the world with 76.5 billion around the world, behind Marlboro and Camel. 

Mild Seven has been a top seller since its launch in 1977 and enjoys leading positions in Asian markets including South Korea and China. They are now also manufactured under license in Switzerland for the growing European Market. The brand is the second largest cigarette brand in the world. Mild Seven is a premium brand and distributed in over 40 countries.

3. L&M cigarettes
L&M cigarettes

L&M cigarette brand was introduced by the Liggett & Myers Company in 1953. Owing to such well-known taste L&M is a confident leader of sales and the favorite among different levels of smokers for more than a century.

 L&M cigarettes are among best sellers on the tobacco market in USA, Latin America, Europe and Middle East. Smokers all over the world admire L&M cigarettes for their high quality, real tobacco flavor and affordable price.

4. Winston cigarettes
Winston cigarettes

Winston cigarettes are manufactured by R.J. Reynolds Tobacco Company. The cigarettes derive their name from the town in which RJR is based: Winston-Salem, North Carolina. The brand was introduced in 1955, and became the best-selling brand of cigarettes in the United States. If one was asked to describe the qualities of Winston cigarettes brand, one would characterize it as a tobacco product, which possesses great qualities: it is without any additives, has a natural and unforgettable taste.

Winston cigarettes are made in the best American tradition. Americans love these cigarettes because their taste provides the smokers with the real American spirit and dream. So, it is not only the matter of the cigarettes, but of the significance it has.

5. Camel cigarettes
Camel Cigarettes

A product of R.J Reynolds, Camel cigarettes may as well be the most smoked cigarettes, being a high quality smoke at a reasonable price. They developed a flavour of their own using the best of Virginia and Turkish tobacco. The packaging of Camel cigarettes has been quite famous because of their attractive graphic design and catchy quotes, besides the use of Turkish paper in the fashion of Egyptian cigarettes. 

For decades, Camel has been a male-focused cigarette; but R.J.Reynolds began to produce Camel cigarettes aimed for females. Camel No. 9 cigarettes come in a package that is hot-pink with the slogan, "Light and luscious." The new variation, Camel No. 9, has a name that evokes women's fragrances like Chanel No. 19, as well as a song about romance, "Love Potion No. 9." 

Constant modifications in marketing and publicity have kept the sales on high for this brand. One of constituent parts of Camel cigarettes success is a combination of a high quality tobacco and the product's low price.

6. Cleopatra cigarettes
Cleopatra Cigarettes

Cleopatra cigarette brand is the leading product of Egypt-based Eastern Company S.A.E. The brand is selling in almost all African countries, and several Middle East and Asian countries.

7. Derby cigarettes
Derby cigarettes

Brazil’s top-selling brand, Derby, has held this position of leadership since it was launched in 1993, accounting for one out of every three cigarettes sold legally in Brazil. In May 2008, the Brazilian Patents and Trademarks Office (INPI) awarded Derby the highest protection rating given to a brand in Brazil: “High Renown”.

8. Pall Mall cigarettes
Pall Mall cigarettes

Pall Mall cigarettes are a brand manufacturing by R.J. Reynolds Tobacco Company since 1899 with hope to introduce fashion society with the first "premium" cigarette. In 1907 Pall Mall cigarettes were subjected to some changes in their design - standardization of a cigarette's length and a new way of tobacco packing. Pall Mall brand reached the peak of its popularity in 1960, being the Number One brand of high-class cigs in America. 

Pall Mall is a classic cigarette brand that has been associated with highest quality, unique flavor and style. Moreover, Pall Mall keeps up with modern trends what results in new innovative designs and developments. Pall Mall cigarettes are sold in over 60 countries what makes them one of the most popular tobacco brands around the globe.

9. Kent cigarettes
Kent cigarettes

The brand of cigarettes, named Kent cigarettes, was launched by British American Tobacco in America in 1952. As soon as it was marketed, it gained great popularity despite the cigarettes' light taste. But the taste was changed and there was elaborated a powerful one. These cigarettes satisfy all capricious and demanding smokers. The brand owes its name to Herbert Kent, who was an executive at Lorillard Tobacco Company. Nowadays Kent is a propriety of British American Tobacco group. 

At the period from March 1952 until at least May 1956, the Micronite filter in Kent cigarettes had a form of asbestos. At Present Kent uses charcoal filters (a kind of activated carbon).  

If in the last decades these smoking cigarettes were fabulous among older generation smokers, after re-make, Kent tobacco becomes very well-known among the younger generation. This puffing smoke encourages stylishness and originality. Now, these cigarettes are sold in 70 countries of the world.

10. Gold Flake cigarettes
Gold Flake cigarettes

Gold Flake is an Indian cigarette brand. It is sold in various varieties, including Gold Flake Kings, Gold Flake Kings Lights, Gold Flake and Gold Flake Lights. It is a well-positioned brand in India. This brand is owned, manufactured and marketed by ITC Limited, the leading cigarette maker in India.

The single largest brand in the country in value terms (approx 14% of the US$ 150 million market) is Wills Navy Cut, which was launched in July 1963.

People’s reasons for smoking are as varied as their brands and the tobacco industry is worth an estimated $ 200 billions in US alone, with global revenues estimated to be at least twice as much. Out of these, some tobacco companies have managed to emerge as clear victors and have come to symbolize the very act of smoking itself.