Unless otherwise indicated, the reference for information in this section is reference 24.
Until May 1989, WD & HO Wills was the tobacco manufacturing subsidiary of Amatil, Australia's largest soft drink and second largest food manufacturer.(42) Its shareholders then endorsed resolutions allowing Amatil to sell its tobacco interests for $350 million into a new company, WD & HO Wills Holdings, to be floated off and controlled by BAT (British American Tobacco) Industries. BAT, previously the major shareholder of Amatil, has been replaced by Coca Cola.(43) BAT Australia Pty Ltd holds 67.3% of Wills' shares.
Amatil apparently decided to terminate its tobacco interests because of poor returns during a difficult period of rationalisation and relocation of its main factory to Pagewood (a suburb of Sydney), and an increasing emphasis on snack foods and soft drink. The tobacco segment had lost market share and was forced to add new brands and relaunch others in an effort to regain ground.(44)
The first two years of Wills' listing were poor for the company, with declines in profits and market share, and a lack of competitiveness in the 'value' brands segment,(45,46) resulting in speculation that its British parent could be prompted to consider making a full bid for the company.(47) Wills had evidently planned to avoid the large pack arena,(6) currently the most active segment in the market (see discussion on packaging in Section 14.12 below), but the company's poor performance forced it to review this decision, and Horizon 50s was launched in July 1990 in a belated attempt to recover market share.(48) The successful launch of this brand has helped pull Wills out of the doldrums, and Horizon is now Wills' most popular brand, overtaking the flagship Benson & Hedges. According to the company's 1993 Annual Report, Horizon achieved a market share of just over 12%, and three Horizon variants were launched. Benson & Hedges retained its position as market leader in the 'premium' segment of the market, despite competition from discounted brands. Stradbroke, initially launched in 35s and repackaged in a 40s format in 1992, has continued to lose market share. John Player Premium Blend 35s, in four different tar strengths, were launched in 1993.
During July 1994 Horizon was introduced in a 30s pack, in a direct attack on the popular Philip Morris brand Peter Jackson. Priced at 52 cents per pack less than Peter Jackson, this launch sparked off the damaging price war of mid-1994.(9)
Wills is the major Australian producer of pipe and roll-your-own tobaccos. In 1993 it held 56% of the pipe tobacco market and 41% of the RYO market, the balance for the most part being held by imports.(34)
Wills has undergone major reorganisation, including restructuring of sales and distribution, increasing manufacturing efficiencies, and moving to contracting certain services rather than providing them in-house.(49) The company's 1991 Annual Report noted a 25% drop in employment from December 1989, and the 1992 Annual Report stated that employment had been reduced by 37% since January 1990. In 1993, Wills installed the first high speed 50s packing machine in the world, and announced that it would be investing in a new $40 million primary leaf processing plant for Pagewood.
Wills' performance following its listing on the Australian Stock Exchange as an independent company was initially poor but recovered in 1992, with pre-tax consolidated operating profit increasing threefold (to $68.3 million) compared to 1991. The company attributes its improved results to increased sales volumes following its recovery of market share, lower levels of price discounting in the market place, continued cost reductions in manufacturing, and productivity improvements. The 1993 profit increased to $84.9 million, a sizeable proportion of which was ploughed back into further restructuring and reorganising. Interim figures since then have revealed that a new round of price discounting has slowed Wills' rate of growth.(8)
Wills' major shareholder is BAT Australia Pty Ltd. Like Rothmans Holdings Ltd, major shareholders of Wills include life offices, insurance companies and superannuation funds.
Wills' major shareholders, at 22 February 1994 were:
BAT Australia Pty Ltd
Potter Warburg Nominees Pty Ltd
Kotea Pty Ltd
National Nominees Ltd
State Authorities Superannuation Board
Perpetual Trustee Co Ltd
Westpac Custodian Nominees Ltd
Gammon Nominees Pty Ltd
ANZ Nominees Ltd
The Colonial Mutual Life Assurance Society Ltd
IOOF Australia Trustees (NSW) Ltd
Chase Manhattan Nominees Ltd
Tyndall Life Insurance Co Ltd
Victorian Superannuation Board
ANZ Life Assurance Company
The Equity Trustees Executors and Agency Company Ltd
Citicorp Nominees Pty Ltd
Perpetual Trustees Australia Ltd
The Colonial Mutual Life Assurance Society Ltd
MLC Life Ltd
Wills has profitable operations in Papua New Guinea, Fiji and the Solomon Islands. Tobacco products are exported to other territories from these overseas bases.(46)
WD & HO Wills Holdings Limited
WD & HO Wills Executive Superannuation Plan Pty Ltd
WD & HO Wills Superannuation Plan Pty Ltd
WD & HO Wills (Australia) Limited
Carreras Pty Ltd
John Player & Sons Pty Ltd
The Benson & Hedges Company Pty Ltd
TA Field Pty Ltd
Wills Sales (Aust) Pty Ltd
WSV Pty Ltd
Wills (PNG) Ltd
Papua New Guinea Tobacco Co Ltd
Paradise Tobacco Co Pty Ltd (PNG)
WD & HO Wills manufactures and distributes tobacco products in Australia, Papua New Guinea, Fiji and the Solomon Islands.
Cigarettes (locally manufactured): Ardath, Ascot, Barclay, Benson & Hedges, Capstan, Claridge, Commodore, Craven A, Escort, Freeport, Hallmark, Horizon, John Player, Kent, Kool, Sterling, Stradbroke, Turf, Wills. Imported brands: Lucky Strike and Pall Mall (Brown & Williamson Tobacco Corporation US) and Senior Service (J A Patrejouex UK).
Roll-your-own and pipe tobaccos (locally manufactured): Capstan, Champion, Dr Pat, Five Star, Havelock, Log Cabin, Port Royal, Rolly's, State Express, Stockmans. Imported brands: Borkum Riff, Erinmore.
Cigars (imported): Denver.
Wills owns its own distribution network, Wills Sales, but has recently contracted out its distribution business to Mayne Nickless, enabling Wills sales representatives to target their market more specifically.(8)