Tobacco monopoly looks to raise market share

The state-owned Thailand Tobacco Monopoly (TTM) remains the single largest buyer of tobacco produced locally.

The agency bought 21,970 tonnes of leaf in 2010, 36% of an estimated 60,500 tonnes of leaf grown that year.

TTM also imported 3,470 tonnes of leaf to make 28.9 billion cigarettes for domestic sale and export.

Domestic brands control a 75% share of the market, with the balance imported brands.

But sales in recent years have been decreasing due to an amendment to the excise tariff in 2009 that raised cigarette prices.

In addition, some consumers have switched to low-priced imports or roll-your-own tobacco.

Anti-smoking campaigns launched by government agencies and the private sector have also affected sales volume.

These developments have prompted the state enterprise to outline its strategic plans to improve performance and stay competitive.

Based on TTM's five-year plan, it vows to increase its market share by 0.25 percentage points each year to 77.5% by 2015, with sales revenue of 60 billion baht for a net profit of 5 billion over the period.

A total of 63 projects have been planned to improve operational efficiency and marketing, allow research and development to produce better-quality products, and support more tobacco farmers qualifying for Good Agricultural Practice (GAP) criteria.

TTM received cabinet approval in 2007 to build a second tobacco production plant for 16.2 billion baht.

To be located in an industrial estate for more effective control of its environment, TTM decided on Rojana Industrial Park in Ayutthaya.

However, last year's massive flooding made the government nervous, and Chiang Mai has emerged as a new choice.

Besides TTM, there are several other suppliers that purchase tobacco for export. Many of them supply tobacco to Philip Morris International Co (PMI), which purchased one billion baht worth of tobacco from Thailand in 2010 or 30% of total Thai tobacco exports.

Like other makers, PMI buys all types of locally grown tobacco _ Virginia, Oriental and Burley are mixed for its American blend, the most popular of blended cigarettes.

Philip Morris (Thailand) works closely with growers to promote GAP standards.

The Thai subsidiary commands a 20% share of the domestic market.