Monday 12th June 2017
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The government received a total of $1.7 billion in duty on tobacco sales in 2016 from the big three producers, British American Tobacco, Imperial Tobacco and Philip Morris, which all lifted sales in New Zealand last year.
British American Tobacco Holdings (New Zealand), the biggest of the three, had sales of $1.4 billion in calendar 2016 and paid excise of $1.13 billion. Profit fell to $22 million from $344 million a year earlier, mainly reflecting a one-time gain a year earlier from the sale of trademarks and brand names.
BAT NZ, whose cigarette brands include Benson & Hedges, Holiday, Pall Mall, Rothmans, Winfield, Pacific No 1 and Topaz and its loose-leaf tobacco brands include Park Drive and Port Royal, also paid a $41 million dividend, down from $117 million the previous year. .
"While smoking rates in NZ have declined, many smokers still choose to smoke our brands," a company spokeswoman said. "BAT NZ had a solid year in 2016 recording slight market share growth."
She said the financial accounts reflect the results of the reorganisation in the previous year, which left the company focussed on trade marketing and distribution, which had changed its profile of functions, costs and commercial risks.
Philip Morris (New Zealand) recorded a 27 percent gain in sales last year to $197 million, while excise paid rose 17 percent to $161 million. Its profit slipped to about $2.2 million from $2.9 million, partly reflecting increased administrative and marketing expenses. Its owners got $4.8 million in dividends, down from $8.5 million in 2015. Its brands are Marlboro, GT and Longbeach and all the product sold in New Zealand and the Pacific Islands is made by its Australian affiliate, according to the ASH website.
Imperial Tobacco New Zealand disclosed its results for the 12 months ended Sept. 30 last month, which included $385 million in duty. It has previously said tobacco products manufactured at its factory in Petone are also exported to Australia. Its brands include Horizon, JPS, Peter Stuyvesant, West and Drum.
Worldwide, BAT has focussed its efforts on developing alternative income streams on vaping products, so-called e-cigarettes, while rivals have chased a wider range of potential new products that allow them to earn income from tobacco in ways that are less harmful than smoking. Reuters reported in January that BAT quit plans to market a nicotine inhaler called Voke to focus on consumer items like e-cigarettes.
"Whilst tobacco is expected to remain at the core of our business for the near future, the BAT Group has over the last few years been dedicating significant resources to offering a range of less harmful alternatives, like e-cigarettes, and we support appropriate regulation of this emerging category," its local spokeswoman said. "We know this is a growing category in New Zealand. BAT intends to offer these products to New Zealand adult smokers in the future. We’re already doing this successfully in other countries across the globe (for example, our Vype brand) and we are market leaders in vapour in the UK."
The parent company, British American Tobacco Plc, posted a profit of 4.65 billion pounds last year, up from 4.29 billion pounds a year earlier, even as the volume of cigarettes sold fell 0.8 percent. In January, BAT agreed to lift its holding in Reynolds American to 100 percent from 42 percent in a US$49 billion deal that gave it direct access to the US market.
The New Zealand Customs Service has been ramping up excise duties on tobacco, with a 10 percent increase effective Jan. 1, the first of four such annual increments announced in the 2016 Budget. That's in addition to an annual indexation increase based on the consumers price index, which followed a series of 10 percent annual increases between 2013 and 2016, part of the government's strategy to make the country Smokefree by 2025.
The BAT spokeswoman said her company was still studying the plain packaging regulations that were released last week and “our current priority is to work through the details for compliance,” declining to comment further.
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