Tobacco marketing to see radical shift come year end

No more local TV, radio ads
Stabroek News
May 5, 2002

Related Links: Articles on stuff
Letters Menu Archival Menu

Come this year end, the Demerara Tobacco Company will implement the new marketing strategies imposed after the September 11, agreement reached last year by three of the world's largest tobacco companies.

These include no television or radio advertising, no billboards exceeding 35 square metres, a provision that all outdoor materials must have a clearly visible health warning, promotions and distributions must be directed to adults only, no sponsorship of events or activities unless attended only by adults and measures supporting the prevention of youth smoking. The agreement was signed on September 11, by British American Tobacco plc of which Demerara Tobacco is a subsidiary, Phillip Morris and Japan Tobacco.

Despite the fact that these new standards will place severe limitations on the local tobacco company's advertising methods, Managing Director, Michael Harris, said the company was determined to meet the challenge.

"The new marketing standards outline a new era in the marketing and distribution of tobacco and tobacco-related products and also provide a new challenge to us, but one which we are determined to meet," Harris said in his report at the annual general meeting, held on Friday at the Hotel Tower on Main Street, Georgetown.

On that day too, Harris boasted of an almost 50 per cent increase in profits after tax for Demerara Tobacco Company last year. "The company's operating profit increased by $240 million or 39 per cent over the previous year, with earnings per share increased by 49 per cent. The main contributor to this performance was a growth in volumes of approximately nine million sticks or 1.9 per cent over 2000. This growth is directly attributable to the upgrading of our distribution network, which started late in 2000 and was successfully completed in 2001," Harris stated.

The company also reported a turnover, increased by 4.9 per cent over 2000, of which 15 per cent of gross turnover was allocated to the investors as dividends. According to Harris, a small price increase of the Bristol SC variant in July 2001, together with the 1.9 per cent increase in volumes, accounted for the yield of $126 million in gross turnover.

"The lower contract prices from our supplier, West Indian Tobacco Company Ltd, impacted favourably on our costs of finished products and contributed to the growth of our gross contribution.

"Total expenses fell by ten per cent compared to 2000, mainly due to the restructuring of our distribution and improvements made in our operational efficiencies," the managing director stated.

Consequently, given the financial strength of the company, and the policy of maintaining a high return to the investors, Harris said, the directors recommended a final dividend of $8.10 per share. This, when added to the interim and special dividends, brought the total dividends for last year to $17.85. This steady increase in earnings per share was as a result of the operational efficiencies of the company, including the reduction and costs of supplies, coupled with growth in volumes, Harris said.

With regard to marketing, he said the company continued to maintain its position as the market leader, by focusing on its customers and consumers of the products.

"The entire distribution system was modernised to more effectively meet consumer needs and to ensure adequate market information is readily available. The domestic volumes grew by 1.9 percent over the previous year. Benson & Hedges, our leader in the international segment, performed exceptionally well in the period under review. The entire family has shown a growth of 35 per cent over the previous year.

"The Lights variant of the Benson and Hedges family registered credible results, a growth of 65 per cent for the year. Bristol, our market leader, remains the preferred brand of our consumers. This is reinforced by the continued support for major national and other cultural events. The volumes for the year increased by 1.3 per cent over the previous year despite the price increase put through in July."

Based on these results, the managing director said, the company expected solid performance to continue and, during this year, it planned to continue to channel its resources to meet the needs of consumers, focus on main brands and work with distributors to meet the demands of consumers. The distributors are Edward B. Beharry and Company and Preferred Distributors Inv.

"As a result of the slow growth of the economy, we expect our volumes to remain relatively static for 2002, reflecting a mature market. We will continue to focus on our internal efficiencies and costs reductions...continue to meet and discuss with our key stakeholders our positions on the various issues, as well as, continue to make our contribution to the development of the national heritage," Harris pledged.