10.4 The tobacco companies operating in Australia

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10.1 The global tobacco manufacturing industry

10.2 The manufacturing industry in Australia

10.3 Retail value and volume of the market

10.4 The tobacco companies operating in Australia

10.5 Major importers operating in the Australian market

10.6 Market share and brand share

10.7 Trends in products and packaging

10.8 The tobacco growing industry

10.9 The tobacco industry and the illegal tobacco market

10.10 The tobacco industry exposed: tobacco industry document repositories

10.11 Corporate responsibility and the birth of good corporate citizenship

10.12 The tobacco industry's revised stance on health issues

10.13 Encouraging young people not to smoke

10.14 The environmental impact of tobacco production

10.15 Ethical farming issues

10.16 The environmental impact of tobacco use

10.17 The tobacco industry's response to tobacco litter

10.18 Corporate links with charities and social causes

10.19 Tobacco industry lobbying—overview

10.20 Tobacco industry lobbying—the tools

10.21 Tobacco industry lobbying—the targets

10.22 Donations to political parties

10.23 Public attitudes to the tobacco industry

10.24 The future of the tobacco industry

Acknowledgments

References

The tobacco market in Australia is dominated by three major companies, of which the largest is BATA. In the financial year ending in June 2007, the three tobacco companies had a combined turnover of almost $2.5 billion, made a combined net profit after taxes of $586 million and employed about 2000 people (Table 10.6).

10.4.1 British American Tobacco Australia Ltd

British American Tobacco Australia (BATA) is a wholly-owned subsidiary of British American Tobacco (BAT).19 BAT is a publicly listed company on the London Stock Exchange.

BATA was created in 1999 by the merger of WD and HO Wills Holdings Ltd (controlled by BAT) and Rothmans Holdings Ltd.22 The merger of the two Australian companies mirrored the international merger of BAT with Rothmans International, making the newly formed BATA the largest tobacco company operating in Australia. The then Chairman of Wills (and former Premier of New South Wales), Mr Nick Greiner, subsequently became Chairman of BATA.22 The new corporate entity soon realised higher profits due to sales growth, cost reductions and distribution advantages arising from rationalisation of resources.23

The head office and main manufacturing base for BATA are located in Eastgardens, in suburban Sydney.19 In addition to engagement in manufacturing, marketing and distribution of tobacco products, BATA owns its own packaging arm. Formerly a subsidiary of Rothmans, Anzpac is a specialist printing and packaging company which now provides for BATA's tobacco packaging requirements, as well as servicing the fast food, breakfast cereal and confectionery industries.24

BATA employs about 1100 people in Australia, mostly in manufacturing. Taking into account the wider region, British American Tobacco Australasia employs a total workforce of about 2300, with additional manufacturing facilities in Papua New Guinea, New Zealand, Fiji, the Solomon Islands and Western Samoa. BATA also produces tobacco goods for export throughout other Pacific Island nations, through its own export division.1 BATA imports some tobacco products, and is under contract by Imperial Tobacco Australia to manufacture a range of products (see Section 10.4.3).

Since BATA is wholly-owned by its UK parent BAT, financial data specific to BATA do not need to be made publicly available. In BAT's annual company reports, Australia is included in the Asian-Pacific region, for which results from New Zealand and the South Pacific, and Asian countries including Indonesia, Malaysia, India, Pakistan, Bangladesh, South Korea and Vietnam are pooled.25 Limited financial information for BATA is compiled and published annually as part of Business Review Weekly's (BRW) and IBISWorld's annual '1000 Index.' Information from recent BRW reports is presented in Table 10.7. Because these data collapse the Asian-Pacific region, as do BAT's annual reports, it is not possible to isolate Australian performance.

For the year 2006, the Business Review Weekly21 ranked BATA at 190 out of Australia's top 1000 companies on the basis of total revenue, and 70th out of 1000 for net profit after tax. Within the food, beverage and tobacco manufacturing sector, BATA was the third largest company in 2006, ranking behind the Foster's Group and Cadbury Schweppes.21

BATA claims market leadership in Australia and the Pacific, with about 46% of market share in Australia, 75% in New Zealand and 100% throughout the Pacific Islands. BATA's major brands in Australia are Dunhill, Winfield and Benson & Hedges.1 BAT's annual reports since 200325, 30-32consistently allude to increasing profits in Australia, attributing this success to higher margins, reductions in overheads and improved supply chain efficiencies, and strong performances by its key brands, Winfield, Dunhill, Benson & Hedges and Holiday. Table 10.8 presents BATA's Australian brand portfolio.

10.4.2 Philip Morris (Australia) Ltd

Philip Morris (Australia) Ltd is the Australian subsidiary of Philip Morris International (PMI), based in Lausanne. Philip Morris (Australia) Ltd (PMA) was established in 1954, the first overseas affiliate to be set up by PMI.5 PMA's Australian head office and main manufacturing facility are located in Moorabbin, a suburb of Melbourne, Victoria. The Australian headquarters provides support to Philip Morris interests in other countries in the Asian region, including Hong Kong, Japan, Malaysia, the Philippines and India.5 PMA also manages the ordering, sales and distribution of its products locally.5

On the basis of market share, PMA is the second largest tobacco company in Australia.5 Since its delisting as a public company during the 1990s, PMA has had no formal requirements to publicly lodge annual reports or financial statements specifying results from its Australian operations. No Australia-specific information is reported in PMI's annual reports. However, limited information is available through the annual listings compiled by the Australian Business Review Weekly and IBISWorld. Data from these sources are presented in Table 10.9. For 2006 PMA was rated 464th out of Australia's top 1000 enterprises on the basis of total revenue, and 143rd out of 1000 for profit after tax.21 PMA's brands are shown in Table 10.10.

10.4.3 Imperial Tobacco Australia Ltd

Imperial Tobacco Australia (ITA) Ltd is the smallest and most recently formed of the tobacco companies operating within Australia. ITA was established to coincide with the merger of WD & HO Wills Holdings Ltd and Rothmans Holdings Ltd as British American Tobacco Australia. At the time of the proposed merger, concerns were raised about the likelihood of reduction in competition in the Australian marketplace, thereby potentially causing a breach of Section 50 of the Trade Practices Act. The Australian Competition and Consumer Commission agreed to permit the merger to proceed, on condition that another tobacco company enter the Australian market. The UK-based Imperial Tobacco Group was invited to enter the Australian market and in September 1999, ITA commenced operations.34, 35 As part of the agreement allowing the formation of BATA, ITA was sold a portfolio of cigarette, roll-your-own tobacco and cigarette paper trademarks previously owned by Rothmans or WD & HO Wills for the sum of $325 million. The purchase gave ITA an opening market share of 17.1%.35 For the year 2006, ITA was rated 695th out of Australia's top 1000 enterprises on the basis of total revenue, and 693rd out of 1000 for profit after tax.21

Table 10.11 shows a range of ITA's performance indicators between 2002–06.

The head office for ITA is located in the suburb of Baulkham Hills, north-west of Sydney. Regional offices operate in Melbourne, Adelaide, Perth and Brisbane. In 2006, ITA employed about 320 personnel.34 ITA does not own manufacturing plant in Australia, but subcontracts BATA to produce its Australian-made range of cigarettes and tobaccos.35 Additionally, ITA imports a range of cigarettes and loose tobacco products from its international stable of brands.

According to ITA, it holds the 'most fragmented brand and product portfolio of all the Australian tobacco manufacturers.'34 ITA's overall market share in Australia in 2007 was 17.5%, slightly down from 17.8% in 2006.20 ITA's brand portfolio is shown in Table 10.12.