China Research and Intelligence

www.shcri.com

Generally speaking, Chinese cigarette industry develops steadily and the degree of
brand concentration promotes gradually. Under the combined action of policy guide,
market competition and administrative drive, Chinese cigarette industry will
experience several procedures of closing small cigarette companies, recombining
medium cigarette companies, inside-province merges and recombination and
cross-province unite and recombination. Chinese cigarette companies decreased from
123 in 2003 to 31 in 2008.

Research Report on China’s Cigarette

Industry, 2009
TEL: +86-439-6925-111
MAIL: report@shcri.com

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Research Report on China’s Cigarette Industry, 2009

Description

The number of Chinese smokers is over 0.35 billion, more than the total population of
America. The sharp growth of China’s Cigarette Industry makes up the most important
part of national economy.

In 2008, the total domestic cigarette sales volumes were 2180.5 billion, increasing by 2.6%
of 2124.35 in 2007. The market scale of Chinese cigarettes passes 100 billion US Dollars
in 2008.

In 2008, brands in process of Chinese cigarette industry were one hundred and fifty-five,
decreasing by 20 in 2007. Cigarette types in process were eight hundred and seventy-one,
decreasing by five in 2007. The average yield of single brand in process was 14.25 billion,
increasing by 2.1 billion of the same period in 2007 and increased 17.3%.

In 2008, national top 20 brands cigarette sales reached to 939.2, increasing by 14.85% of
817.75 billion of the same period of last year. The proportion in total sales volumes was
43.1%. The accumulative sales revenues of top 20 brand cigarette were 411.09 billion
Yuan (58.7 billon US Dollars), accounting for more than 50% of the total sales revenues.

Generally speaking, Chinese cigarette industry develops steadily and the degree of brand
concentration promotes gradually. Under the combined action of policy guide, market
competition and administrative drive, Chinese cigarette industry will experience several
procedures of closing small cigarette companies, recombining medium cigarette
companies, inside-province merges and recombination and cross-province unite and
recombination. Chinese cigarette companies decreased from 123 in 2003 to 31 in 2008.

The annual tax revenue of Chinese tobacco industry is about 30 billion US Dollars. But,
the production of Chinese cigarette is strictly controlled, and the same to its development
space.

In Dec. 2005, Morris International and China Tobacco Corporation signed two cooperation
agreements: first, producing Marlboro cigarettes in China; second, establishing joint
ventures abroad. China had been produced Marlboro cigarettes since 2006. In the
beginning of 2008, joint venture was set up with each holding 50% of equity. After the
establishment of the joint venture, it would provide comprehensive Chinese style cigarette
series for the international customers, and the sales network of Morris International will
open up the foreign market for Chinese cigarettes. Meanwhile, Morris International has
the biggest competitiveness enjoying a huge advantage in the strictly-controlled Chinese
market.

With the globalization of Chinese economy, other international cigarette tycoons will take

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part in the Chinese market competition.

More information can be obtained as follows:
- Production of China’s Cigarette Industry
- Demands of China’s Cigarettes
- Import and Export of China’s Cigarettes
- Main Enterprises and Their Operations of China’s Cigarette Industry
- Customers' Characteristics Analysis of China’s Cigarettes
- Impact of International Financial Crisis on China’s Cigarette Industry

Table of Contents
1 Development Environment Analysis of China’s Cigarette Industry
1.1 Government Policy
1.1. Expanding Domestic Demands
1.1.2 Food Safety
1.1.3 Tax
1.1.4 Local Policy
1.2 Macroeconomic Environment
1.2.1 Economic Growth in China, 2008
1.2.2 Rural Income Growth in China
1.2.3 Chinese Economic Prediction, 2009-2010
1.3 Policy Environment of Cigarette Industry
1.3.1 Production Policy
1.3.2 Standard Policy
1.3.3 Circulation Policy
1.3.4 Authentication Policy
1.3.5 Brand Protection
1.3.6 Origin Policy
1.4 Social Environment of Chinese Cigarette Consumption
1.4.1 Concept of Healthy Consumption
1.4.2 Concept of Brand Consumption
1.4.3 Concept of Fashion Consumption
1.4.4 Concept of Gift Consumption
1.4.5 Concept of Festival Consumption

2 Analysis of China’s Cigarette Industrial Chain

2.1 Analysis of China’s Cigarette Industrial Chain
2.2 Brand Integrator
2.3 OEM/ODM/OBM
2.4 Agents
2.5 Retailers
2.6 Related Products of Cigarette

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3 Operations and Developing Trends of China’s Cigarette Industry

3.1 Present Operations of China’s Cigarette Industry
3.1.1 Scale Analysis on China’s Cigarette Industry, 2008
3.1.2 Profitability of China’s Cigarette Industry, 2008
3.1.3 Development of China’s Cigarette Industry, 2008
3.2 Present operating of China’s Cigarette Industry
3.2.1 Developing Characteristics of China’s Cigarette Industry, 2008
3.2.2 Production Scale Analysis of China’s Cigarette
3.2.3 Present State of Chinese Top Quality Cigarette Market
3.2.4 Present State of Chinese Medium Quality Cigarette Market
3.2.5 Present State of Chinese Low Quality Cigarette Market
3.3 Competitive Pattern of Chinese Cigarette Market
3.3.1 Entry/Exit Barrie
3.3.2 Competition Characteristics
3.3.3 Brand Pattern
3.3.4 Degree of Concentration
3.3.5 Desperate Competition Pattern
3.4 Market Problem Analysis of China’s Cigarette Industry
3.4.1 Product Problems
3.4.2 Brand Problems
3.4.3 Price Problems
3.4.4 Operating Problems
3.4.5 Channel Problems

4 Marketing Model Research on China’s Cigarette Industry

4.1 Analysis of Modern Cigarette Agriculture Model
4.2 Integrated Model
4.3 OEM/ODM/OBM Model
4.4 Order Model
4.5 Logistics Distribution Model
4.6 Terminal Drive Model
4.7 Important Marketing Element Research on China’s Cigarette Industry
4.7.1 Brand Marketing
4.7.2 Electronic Commerce
4.7.3 Media Strategies
4.7.4 Cultural Marketing
4.7.5 Pack Strategies

5 Major Cigarette Enterprise Analysis of China’s Cigarette Industry

5.1 Honghe Tobacco Group Co., LTD Zhaotong Cigarette Factory
5.1.1 Company Profiles

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5.1.2 Cigarette Brand Analysis

5.1.3 Operations
5.1.4 Developing Strategies
5.2 China Tobacco Hunan Industrial Corporation
5.2.1 Company Profiles
5.2.2 Cigarette Brand Analysis
5.2.3 Operations
5.2.4 Developing Strategies
5.3 Shanghai Tobacco (Group) Corp.
5.4 Hongyun Tobacco (Group) Co., LTD
5.5 Yuxi Hongta Tobacco (Group) Company Ltd
5.6 China Tobacco Guangdong Industrial Corporation
5.7 Wuhan Tobacco (Group) Co., LTD
5.8 China Tobacco Henan Industrial Corporation
5.9 China Tobacco Shandong Industrial Corporation
5.10 China Tobacco Anhui Industrial Corporation
5.11 China Tobacco Zhejiang Industrial Co., LTD Hangzhou Cigarette Factory
5.12 China Tobacco Guizhou Industrial Corporation
5.13 Honghe Tobacco Group Honghe Cigarette Factory
5.14 China Tobacco Jiangsu Industrial Corporation Xuzhou Cigarette Factory
5.15 China Tobacco Jiangsu Industrial Corporation Nanjing Cigarette Factory

6 Development Analysis on China’s Cigarette Industry

6.1 Production Prediction
6.2 Consumption Prediction
6.3 Impact of International Financial Crisis on China’s Cigarette Industry

Selected Charts
Chart Chinese Cigarette Yields, 2004-2008
Chart Domestic Sales Volumes of Chinese Cigarettes, 2004-2008
Chart Market Scales of China’s Cigarette Industry, 2004-2008
Chart Sales of Chinese Cigarettes, 2008
Chart Top 20 Yield Brands of Chinese Cigarettes, 2008
Chart Domestic Sales Predictions of Chinese Cigarettes, 2009-2012
Chart Enterprise Numbers of Chinese Cigarettes, 2003-2008