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Current issue  Features Imperial Surfs A Wave Down Under By Martin Riordan Big Tobacco's U.S. litigation wars have washed through new "high watermarks" for suppliers and shareholders worldwide. And the tobacco companies surfing with high revenues and little direct impact from the U.S. settlement have each grown into the new "Big Tobacco Pretenders"     For Asia-Pacific, Imperial Tobacco (U.K.) and Reemtsma (Germany) have out-performed many big rivals with bullish export growth in premium sales through the region. While British American Tobacco merged with Rothmans, Japan Tobacco acquire R.J. Reynolds brands (outside the U.S.), and Philip Morris absorbed considerable impact from the US settlements, it has been the smaller groups which emerged strongly into strategic "Pretender" Big Tobacco positions.     In Australia, former British American Tobacco legal counsel Nicholas Cannar, who joined BATCo U.K. in 1981 from Bass Brewing, and since 1994 rejoined BAT to work at the Australian W.D. & H.O. Wills Holdings group, was the first to surf into the "new" and emerging companies. Cannar was appointed managing director of Imperial Tobacco Australia (ITA), the new entity regulators recently approved as the additional market player beyond BAT and Philip Morris, for competition to remain in the Down Under cigarette market.     Under the merger agreement, Imperial (ITA) secured an additional strategic No. 3 market share position in New Zealand. This included the purchase of W.D. & H.O. Wills' Wellington-based manufacturing headquarters, further guaranteeing ITA's long-term "Pretender" status, and major Asia-Pacific capacity. Imperial Tobacco strength is based on its 38% of the profitably U.K. market, with No. 1 brands for cigarettes, RYO, and pipe tobacco.     Today Cannar finds the irony of surfing the new tobacco wave "Aussie-style" a genuine delight. He told Tobacco Asia: "I am naturally proud and delighted to have been asked by Imperial to lead the new Australasian investment. It was a unique opportunity, and as Imperial had known me from my years in the U.K. industry, we have mutual respect for how together we can launch the ITA company, explore widening brand potential, and deliver new shareholder benefit."     It took Cannar just three months to achieve each of these three "issues. For Cannar, Sydney-based and with plans to establish ITA at Parramatta, in western Sydney soon, the "issues" have been a far cry from almost 20 years of tobacco litigation "issues."     Under Cannar, ITA leaped aboard an aggressive "brand world" drive for supporting the biggest of its six brands, Horizon, acquired in the Australian merger. Driving his ex-Wills marketing team in a Down Under retail and consumer promotion for Horizon, it has begun with essential "Aussie" humor. With a cheeky slogan "How Long Is Yours", the point-of-sale campaign seeks high retail impact to retain Horizon's market share at No. 4 in Australia, with new 20s & 30s packs just released.     Australia's new "per stick" excise regime takes effect in November this year, causing larger packs of 40s and 50s to be expensive.     Horizon, pioneered for Wills Australia by BAT's respected former Australian Chairman Gordon Watson, was launched as a commodity 50s pack brand during economic recession in the early 1990s. Horizon became an overnight success for the Wills companies, and now leads ITA's new brand stable with a market share of 13.3% in Australia and 12.0% in New Zealand.     Cannar's endorsement of the new point-of-purchase campaign included a direct marketing drive to Australian and New Zealand retailers. This included ITA's new sales and distribution director, Michael Read, issuing joint letters with Cannar explaining to retailers the new ITA brands. Retailer support will be critical for ITA, as Cannar is quick to acknowledge. This is especially the case with new excise changes due radically change cigarette and RYO pricing, with effect from November this year.     "Imperial's expertise in selling top quality Virginia cigarettes will be critical as we launch the company, widen brand potential and begin the process of bringing more regional performance into Imperial's Down Under investment," said Cannar.     "Imperial enjoys manufacturing capacity in the U.K., Ireland, and now New Zealand. In Australia, we negotiated a five-year contract manufacturing agreement with British American Tobacco, while in New Zealand, we will reciprocate with contract manufacture for BAT's New Zealand brands.     Cannar said ITA had viewed the excise changes as an "opportunity" for widening Imperial's market share. He revealed the company may also explore brand expansion for its other trade marks Escort, Brandon, and even some of Imperial's U.K. stable of brands. Tobacco Asia was first to see Nick Cannar in his new marketing pitch. We were issued with new king size packs of Horizon 20s, and Escort 35s. Escort remains No. 1 of the conservative South Australian market.     Said Cannar: "This is an incredible opportunity. We have an excellent portfolio of cigarette brands, especially with Horizon, and a strong 25%t (and growing) RYO portfolio and cigarette papers brand Tally Ho. Imperial is a lean and mean organization, without a great deal of company bureaucracy, and committed to a strong sales force.     "Our competitive advantage will see the capacity to be flexible, with quick responses, and pushing responsibility down to trade marketing, our essential success," he said.     A final "surfing" note from Cannar: He confirmed Drum tobacco would be marketed as an Imperial brand in New Zealand, but Stuart Alexander's long-running Australian distribution contract would be "respected," leaving Drum to continue surfing into Aussie markets via the Alexander-based distributor.

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© Copyright 1999 By Lockwood Trade Journal Co., Inc.

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