China: Big Tobacco and Big Internet Join Hands

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By TobaccoChina Online

On June 22, 2018, China National Tobacco Corporation ((CNTC) signed a memorandum of strategic cooperation with China’s internet giants Alibaba Group and Ant Financial. Ling Chengxing, the director of the State Tobacco Monopoly Administration (STMA) and general manager of CNTC, and Ma Yun, the chairman of Alibaba Group, attended the signing ceremony,

This move has had a large impact on the industry. In addition to the cooperation with Alibaba, Ling Chengxing also met with Ma Huateng, chairman of the Board of Tencent in Beijing last November. The two sides respectively put forward opinions and suggestions on how to explore the practice of Internet+ in the tobacco industry.                

In fact, just a few years ago Baidu, Ali, and Tencent, the three internet giants in China, had already become involved in the tobacco industry at the corporate level. For example, Guangxi Tianhai and Tencent worked together, China Tobacco Zhejiang Industrial Co. Ltd (CT Zhejiang) introduced Alipay (a third-party mobile and online payment platform) and Ding Ding (a new mobile and desktop program also known as DingTalk, China’s “Orwellian” version of Slack), and some enterprises worked with Tencent, Ali, and JD.com (one of the two largest B2C online retailers in China) on QR code marketing. Following the launch of “internet+”, all industries have begun to pay more attention to the importance of data analysis. By analyzing acquired consumption data, they can outline consumer profiles and provide data support for their r&d and marketing. The tobacco industry is no exception.

China Tobacco Guangxi utilizes big data with QR codes

In the tobacco industry, China Tobacco Guangxi (CT Guangxi) was an early adopter of internet+. In 2015, the company relied on the platform of Tianhai Research Institute to form a platform integrating anti-counterfeiting, tracking, marketing, and promotion. As the platform grew, several styles of products of Zhenlong (the leading brand of CT Guangxi) became a hit in the Guangxi market. “Scanning the QR code” has become a habit of Chinese consumers.

As an industrial company that has studied the early application of QR code technology in the industry, CT Guangxi achieved excellent results. In 2015, it took the lead to develop a QR code application system, which not only serves tobacco companies but also moves beyond the industry to provide technical support for the economic development of Guangxi province. According to statistics, in 2015 alone, CT Guangxi’s QR code scanning was used 30 million times, and the platform exchanged a total of 440,000 gifts with the average daily redemption gift reaching 1200 times. The Zhenlong WeChat official account “captured” 700,000 users in a short period of time. The mature QR code system not only satisfies the marketing needs of the company but also embarks on the path to foreign technology output for both customers in the tobacco industry and those outside the industry. CT Guangxi has explored a viable path of diversifying the taste of tobacco, diversifying the main business of tobacco, and the Internet+ transformation of the tobacco industry.

CT Zhejiang pilots “internet+tobacco”

Located in Hangzhou where Alibaba is headquartered, CT Zhejiang naturally has many advantages in its application of Internet+. The company has gained experience through cooperation with Alibaba in terms of innovative monopoly administration, brand marketing, and loan settlement, and thus established three major cooperation directions between the tobacco industry and Ali (including Ant Financial), respectively the anti-counterfeiting and smuggling, marketing management, and third-party payment. Especially in the area of anti-counterfeiting and smuggling, CT Zhejiang and Alibaba have achieved good gains in practice. At the beginning of 2018, the first case of the illegal heat-non-burn cigarettes occurring in Ningbo, Zhejiang province was solved, in which Alibaba’s team provided strong data support.

Last year, the Yinzhou Tobacco Monopoly Administration of Ningbo, Zhejiang province received a report that some consumers bought a carton of fake cigarettes on an e-commerce platform. After checking, the police confirmed that the reported product was cartridges of heat-not-burn cigarettes. In 2017, STMA had made it clear that heat-not-burn cigarettes shall fall under the tobacco monopoly law supervision. On August 28, law enforcement officers began an in-depth investigation into the case. Up till now, 13 suspects have been arrested in this case. They have seized more than 3,500 cartridges involved in the case and detained one delivery vehicle for the crime, which involved RMB100 million. The case has raised widespread concern in the society.

In the investigation process of this case, which was listed by Alibaba Group as one of the top 10 cases of 2017 anti-counterfeiting, the application of big data was remarkable, In the Internet era, big data applications are everywhere. In order to improve the efficiency of case investigations, CT Zhejiang and public security sub-bureaus set up a data analysis center to fully collect data on all aspects and use big data to drive cases. In the meantime, Alibaba’s team also provided strong data support for case detection. Faced with thousands of transaction records, big data has become increasingly important. Big data has also driven the arrest process. Through the tracking and analysis of suspects’ consumption data, the behavior track and activity area can be worked out, and sometimes the suspect’s activity range can be reduced to less than 50 meters.

Undoubtedly, the cooperation between the tobacco industry and BAT in the future may be further strengthened.

On the one hand, internet giants represented by Baidu, Ali, and Tencent working with the tobacco industry is so that they can continuously expand their business.  On the other hand, the reason why the tobacco industry has actively embraced internet companies is to keep up with current development trends and achieve a win-win situation. The two sides are expected to expand cooperation in big data, AI (artificial intelligence), IoT (internet of things), retail services, financial services, and smart logistics.