Marketing Strategy of the UK Cigarette Industry, Communicaton

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Introduction I’m looking at this issue for unit communication. The subject of this report is “Marketing Strategy of the UK Cigarette Industry”. It would cover the information about the main manufacturers such as “Imperial Tobacco”, “Gallaher Group Ltd” and “British American Tobacco” in the UK. The whole point of this report is aimed at talking about marketing strategies that the tobacco manufactures are using for staying in the market. Three of the world’s five largest tobacco companies are based in the UK.  BAT, with 11% of the global market, is the world’s second largest tobacco company, after Philip Morris which has 18%, while Imperial Tobacco and Gallaher hold fourth and fifth places respectively Imperial Tobacco Imperial Tobacco Group is the

world number four in the cigarette manufacture and distribution sector. Its brands are divided into several ranges so as to reach a wide a market as possible. They include Embassy and Regal, Davidoff (so-called "luxury" cigarettes), SuperKings and John Player Specials (mid-priced), and Lambert & Butler (more cheaply priced). However the group's business does not focus just on cigarettes. Imperial Tobacco also produces cigars, pipe tobacco brands, and is also the world leader in hand-rolling tobacco with the Drum brand. Not to mention RIZLA, making the firm a giant in the cigarette paper market too (in 1997 Imperial Tobacco bought Rizla, the hand-rolling cigarette paper company). Imperial’s share of the UK cigarette market has been steadily increasing in recent

years and now stands at 44.9%. In 2004 the company reported overall operating profits of Ј1,218 million, of which Ј454m were derived from UK sales. In 2002 it acquired the German tobacco company Reemtsma. Imperial also has a 43% stake in the Swedish snuff producer, Skruf. British American Tobacco British American Tobacco (BAT), the world's second largest tobacco company, is based in Britain. It is the world's most international tobacco group, with brands sold in 180 markets around the world. STRAT The tobacco industry as a whole is suffering from growing awareness of the health risks of smoking and aggressive anti-smoking legislation, particularly in developed markets. The tobacco companies have managed to offset declines in developed markets by expanding to underdeveloped

markets and in the short to medium-term at least, falls in volumes in developed markets will be offset by increases in underdeveloped markets. Tobacco stocks are thus far from the greatest growth story around; however, what they do offer investors is fairly strong cash flows and dividends. Years of working around the anti-smoking lobby and government legislation have kept the industry on its toes; tobacco bosses stand accused of many things but sloth and inefficiency are not amongst them; which is good from an investor’s point of view. The company says that a combination of good operational performance, effective cash management and a continued focus on reducing costs, leaves it well placed to build on this positive momentum - sentiments that we are inclined to agree with. We

and several other tobacco companies, including the other two largest international companies – Philip Morris and JT International – have worked together to develop new, globally consistent International Marketing Standards for the appropriate promotion and distribution of tobacco products world wide. They represent a ‘raising of the bar’, and establish a benchmark for the industry world wide. Launched in September 2001 and building on our existing principles, the International Marketing Standards set down detailed guidance on all aspects of tobacco marketing, from print, billboards and electronic media to promotional events, packaging and sponsorship. We believe the Standards will have a real impact in many parts of the world where restrictions on tobacco