BAT’s Premium Brand Segment Gains Share

British America Tobacco (M) Bhd (BAT), the country’s largest tobacco company, sees its premium brand segment gaining market share this year, despite challenges from the illicit cigarette trade.

BAT Premium Brand Segment Gains Share

“The premium brand segment is very well established in Malaysia, which accounted for three quarter of the market, and we believe this is going to continue,” managing director Stefano Clini said.

The group’s market grew by 1% to 62%, maintaining its position as the market leader of legal Malaysia tobacco industry. Dunhill’s market share expanded 1.3% to 47.6%.

Clini said although there were some consumers switching from the premium brand segment to value-for-money segment, the main concern was illicit cigarettes.

He was speaking to reporters after the group’s AGM yesterday.

The legal cigarette industry sales volume declined almost 17% in the fourth quarter 2013, due to excise-led price increase. At the same time illicit trade increased by 4.5%, according to the 2013 Illicit Cigarette Study.

Malaysia ranks third highest among 11 Asian countries in terms of illicit cigarette consumption, according to the Asia 11 Illicit Tobacco Indicator 2012 report.

BAT chairman Datuk Mohamad Salim Fateh Din said any further increase in excise duties would fuel the illegal cigarette problem.

“It was particularly notable in 2013, that despite excise increases in both 2012 and 2013, the group’s excise and duty payments to the Government declined, versus 2012.

“This is a strong indicator that any further increases will continue to drive excise and duty payments down, given the loss of legal cigarette volumes to illegal cigarette trade,” he said in the group’s 2013 annual report.

BAT’s net profit in the fourth quarter ended Dec 31 fell slightly to RM189.9mil compared with RM197.7mil in the previous corresponding quarter. Revenue was flat at RM1.09bil.

Nonetheless, the group recorded a net profit growth of 3.3% to RM823mil for its financial year 2013 (FY13) from RM798.3mil in FY12.

Salim said the group capital expenditure for this year remained consistent as the previous year and it would continue to strive in managing its operating expenses.

The group last year ceased its tobacco leaf operations in Kota Baru due to uncompetitive local leaf prices, unsustainable yields for the growers and climate issues.

Salim said the group had no plans to restart its leaf growing operations in Malaysia and will import its requirement from overseas.

“The farmers decided to move into products with better yields, we have to opt to take other measures to get the supply,” he said.

According to its annual report, the cost associated with the cessation of leaf operation in Malaysia was RM12mil. Enditem