Official smoking ban likely to affect sales

Sales of high-end cigarettes will be hit hard due to a new regulation forbidding smoking and giving cigarettes to officials at all levels of government though this will create a favorable environment for consolidation of the tobacco industry, analysts said Monday.

The General Office of the Communist Party of China Central Committee and the State Council, the country's cabinet, jointly released a notice Sunday that demanded Chinese officials take the lead in obeying the ban, according to the website of State Council, as well as reiterating the existing smoking ban in public places.

The notice stated officials are prohibited from smoking in public, including schools, hospitals, sports venues, and public vehicles, since this affects the environment, people's health and the image of the Party and the government.

Officials are also banned from smoking or offering cigarettes to others at work and the notice forbids smoking and the selling of cigarettes in Party and government office buildings.

Moreover, officials are banned from buying cigarettes with public funds, according to the notice.

Since the end of 2012, the central government has started a campaign against extravagance and the waste of public funds. The cigarette industry has been impacted because cigarettes are a popular gift in China, Li Hua, an analyst at Shenzhen-based industry research website askci.com, told the Global Times Monday.

In the first 10 months of this year, China's cigarette inventory was 3.408 million boxes, 7.2 percent higher than the same period of last year, Li said, noting the inventory increase means sales pressure.

The ban on cigarettes will be a hard blow for the industry, but this will mainly affect high-end cigarettes rather than middle or low-end ones, Li said.

This year's total sales are almost the same as last year but the sale of high-end cigarettes, which usually cost above 500 yuan ($82.50) for a carton, dropped dramatically this year, the owner of a tobacco store located on Cuiwei Road in Beijing, who asked to be anonymous, told the Global Times Monday.

"Usually the month before Spring Festival is the peak time for cigarette sales, but now I only have a few customers even though Spring Festival is just a month away," she said.

The smoking population in China is growing, indicating an expanding market for middle and low-end cigarettes, Li said, noting the total sale of cigarettes in the first 10 months of this year witnessed 1.3 percent year-on-year growth, although lower than the 2.4 percent growth achieved last year.

Therefore tobacco companies should pay close attention to the market and adjust output to keep a balance between supply and demand, Li said.

The notice is a double-edged sword, which will cause obstacles for the growth of high-end cigarettes but will also build a better industry environment, according to a research report from Everbright Securities Co Ltd cited by financial news portal stcn.com Monday.

Tobacco companies cannot get listed in China and the tobacco industry is under the control of the State Tobacco Monopoly Administration, which could not be reached for comment by press time.

The Chinese Association on Tobacco Control (CATC), Chinese Center for Disease Control and Prevention, Chinese Preventive Medicine Association and the medicine research institute of Beijing Normal University held a forum in Beijing Monday, supporting the cigarette ban.

Sixty-one percent of male civil servants are smokers, and 52.7 percent of these smokers never tried to quit smoking, so the notice released by the central government will encourage them to join in efforts to create a smoke-free environment, CATC told the Global Times Monday via e-mail.

Beijing is promoting smoke-free government offices now, which 172 departments have joined, and the notice is a great boost for the effort, Liu Zejun, vice director of Beijing Patriotic Health Campaign Committee, said at the forum, according to the statement from CATC.