UK’s Imperial Brands in Joint Venture with Chinese Tobacco Monopoly

(Beijing) — British tobacco company Imperial Brands PLC said it will form a joint venture with Chinese tobacco monopoly China National Tobacco Corp. (CNTC) that aims to develop products for both the China and global markets.

China is the world’s largest market for tobacco, with more than 300 million smokers consuming 2.5 trillion cigarettes annually. Beijing has been reluctant in the past to aggressively discourage smoking due to its heavy reliance on tobacco tax revenue. But more recently it has come under growing pressure from health advocacy groups and a growing incidence of smoking-related diseases as people live longer.

Western cigarette makers have come under similar pressure for decades, forcing many to look for new growth opportunities outside their traditional markets.

Under their new alliance, Imperial Brands, owner of the West and Davidoff brands, will form the joint venture with Yunnan Tobacco International Co. Ltd., CNTC’s largest unit with over 20% of the China market. The venture, Global Horizon Ventures, will “look to develop a variety of growth opportunities in China and international markets,” the pair said in an announcement on Wednesday.

The venture will initially seek to boost sales of Imperial’s West and Davidoff brands in China, and to sell two Yunnan brands, Jadé and Horizon, outside China. The partners will consider additional product initiatives and potential merger and acquisition activities in the future, they said.

“We’re excited by the growth potential offered by this new business opportunity and look forward to seeing our co-operation with our Chinese partners flourish for many years to come,” Imperial CEO Alison Cooper said.

Imperial and CNTC have a relationship extending back to 2003, when the Chinese company’s Hongta Group agreed to start selling West brand cigarettes in southwestern China’s Yunnan province, the country’s main tobacco-growing base.

Contact reporter Yang Ge (geyang@caixin.com)