British American Tobacco

Topics: Tobacco, Tobacco industry, China Pages: 35 (9283 words) Published: March 9, 2013
Downloaded from on February 26, 2013 - Published by ii88


Breaking and re-entering: British American Tobacco in
China 1979–2000
K Lee, A B Gilmore, J Collin
............................................................................................................................... Tobacco Control 2004;13(Suppl II):ii88–ii95. doi: 10.1136/tc.2004.009258

See end of article for
authors’ affiliations
Correspondence to:
Dr Kelley Lee, Centre on
Global Change and
Health, London School of
Hygiene & Tropical
Medicine, Keppel Street,
London UK WC1E 7HT;


Objectives: To analyse the strategy used by British American Tobacco (BAT) to re-enter the Chinese market from 1979 to 2000 after historically dominating the market before the 1950s. Design: Analysis of tobacco industry document files to date available only on-site at the Guildford Depository operated by BAT. An additional search of recent documents related to BAT, placed in the Minnesota Depository, was also carried out.

Results: BAT has been committed to regaining its historically dominant position in China since the country reopened to foreign companies in 1979. Initially, BAT remained cautious relative to competitors in seeking joint ventures, finding market access hindered by bureaucratic complexity, restrictions on foreign investment and imports quotas, and later an advertising ban. Instead, the documents suggest BAT strongly relied on illegal imports to expand market presence of State Express 555 and other key brands. It was only when risks to contraband sales increased that the company made greater efforts to establish a legal presence in the country. Attempts to stress the long history of BAT in China and a proclaimed commitment to corporate social responsibility have been used to facilitate later negotiations. Conclusion: China has remained relatively closed to transnational tobacco companies (TTCs) during its transition to a market economy, maintaining a firm grip over foreign investment and imports. Nonetheless, BAT has circumvented such restrictions through illegal imports and exploitation of inconsistencies in the local enforcement of advertising bans. Governments need to understand and address the full range of market entry tactics by TTCs in order to ensure effective tobacco control.

hina has been the ultimate prize for tobacco companies
since the industry set its sights on international
markets over a century ago. James B Duke, first
chairman of British American Tobacco (BAT), famously
asked that a globe be brought to him and pointed to China
as the key market where he wanted to sell.1 With a
population today of 1.2 billion, with over 350 million
smokers, China is much the world’s largest cigarette market,2 accounting for one in three cigarettes smoked in the world
(1.7 trillion sticks in 2000).3 Critically for the expansion of transnational tobacco companies (TTCs), China remains a
growing market. From the early 1970s to early 1990s, per
capita consumption of cigarettes rose by 260%,4 with further rapid growth during 2001–2002 when sales volume rose by
5.5%, and commercial profits and taxes by 19.6%.5
During the first half of the 20th century, BAT dominated
the lucrative Chinese market, becoming the company’s key
overseas operation. Exporting its first cigarette to China in 1890, the market grew meteorically from 1.25 billion sticks in 1902 to 55 billion sticks in 1937.6 By as early as 1924 BAT had established an 82% market share.7 Throughout the 1920s,

BAT exports to China from its US base exceeded those for all other countries combined.8 Political and economic instability meant that the country never provided a straightforward
business climate, but the market’s closure in the early 1950s, after the establishment of the People’s Republic of China, lost BAT its largest source of foreign...
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