Because of taxes and bans How tobacco companies are realigning themselves

Status: June 8th, 2021 4:00 p.m.

The big tobacco companies still make billions in profits with cigarettes. But after decades of success, BAT, Altria & Co. are slowly turning around in the face of increasing bans and rising tobacco taxes. They are still running an extremely lucrative business. But the revenues and profits of the large tobacco companies are likely to come under further pressure in the coming years. New restrictions could reduce profits, higher taxes are supposed to increase government revenues in the Corona crisis and will further increase the prices for the “blue haze”. The first increase in tobacco taxes since 2015 is due in Germany. In the spring the governing parties CDU, CSU and SPD agreed on the framework conditions for tax increases . This should generate additional revenues of 11.3 billion by the end of 2025. A good half of this should be collected more through the classic tobacco tax, e-cigarettes should generate tax revenues of three billion euros and less harmful products in the industry should also contribute almost two billion euros. These include tobacco heaters that manufacturers had brought onto the market in recent years. The tax increases are to start gradually from 2022.

“Smoke-free Germany” called for

This is another turning point for tobacco companies after the sale of menthol cigarettes was banned in the EU in mid-2020. But the tax hike does not go far enough for health organizations. Significantly higher taxes are necessary to get people to stop smoking, according to a statement from the German Cancer Research Center (DKFZ). On the occasion of World No Tobacco Day on May 31, the non-smoking alliance and the German Society for Pneumology and Respiratory Medicine (DPG) called for a “smoke-free Germany” by 2040. There should still be a long way to go until then. Tobacco consumption fell by around 30 percent between 2011 and 2020. However, just under a quarter of adults in Germany still smokes.

Billions in income from cigarettes

The tobacco companies, for which Germany is an important but not a decisive market, have been changing direction for years, but Altria, Philip Morris International and British American Tobacco (BAT) continue to make good money with traditional cigarettes. BAT, for example, earned around £ 6.4 billion net last year, a large part of which was paid out to shareholders in the form of a dividend. And the current business forecast for the first half of the year, which was published today, does not read badly from the company’s point of view: The group expects growth of more than five percent for the current financial year. This also exceeds the previous forecasts. According to BAT, products of “new categories” such as e-cigarettes and tobacco vaporizers are more important. According to earlier information, the tobacco giant intends to win around 50 million customers for the vaporizer in the next ten years; the total customer base is currently 150 million. Big competitors Altria and Philip Morris are also well represented in the e-cigarette and tobacco vaporizer business. But without writing off the classic cigarette. Philip Morris Germany, for example, recently increased production at the Dresden plant. Due to temporarily closed borders in the pandemic, the demand for cigarettes from domestic production even increased. The company also saw higher demand for “fine-cut” tobacco. It is used for rolling cigarettes – smokers are increasingly looking for inexpensive alternatives to cigarettes from the pack.

Tobacco vaporizers and cannabis products

The coming years will show how quickly the tobacco companies can change course strategically. Some of the manufacturers want to offer new products without nicotine, but with caffeine. They also work on cannabis products. Further legalization of cannabis could open up new billion-dollar revenue streams for them. However, the pressure on the classic cigarette from the state is likely to accelerate and at the same time burden this process of change on the part of providers. This applies above all to the world’s most important sales market for tobacco multinationals, the USA: According to media reports, the new US government under Joe Biden wants to reduce the nicotine content of cigarettes to such an extent that they should no longer be addictive. In addition, menthol cigarettes could also face a ban in the USA.

However, livestream has become a “trend” pursued by many people, but not all “creators” create value. Bullshit, vulgar content is posted by many vloggers defiantly to attract attention and receive donations (money and gifts) from viewers. On major live-streaming platforms in the country of billions of people, such as Bilibili, Douyin, and Kuaishou, it is not difficult for viewers to come across images of female vloggers dressed in revealing, offensive clothing and performing erotic acts. Many streamers are banned from showing off their bodies or showing sexual acts to receive donations. Showing off, deceiving viewers Many live broadcast studios often hack the number of followers to create credibility, attract viewers so that they are willing to donate money. The account holders also deliberately fabricated sensational stories, creating conflicts with others to attract viewers of their livestream. “Poor students borrow more than 100,000 yuan to reward female streamers in Nanjing”, “16-year-old teenager rewards female streamers with 1.58 million yuan for 3 months”, “Male cashier appropriated more than 48 million yuan to donate to the live broadcast room”, a series of negative news related to direct money rewards through livestream has caused many controversial streams in the Chinese online community. On May 17, Kuaishou posted a notice saying that live streamer Yin Shihang, an account holder with 8 million followers, had been banned from the platform for “sensational marketing”, “vulgar performances” and false advertising during the livestream on May 15. Initially, Yin introduced to live stream his marriage proposal with girlfriend Tao Lulu. Millions of people watched to witness the special moment of the popular streamer. In the end, he tricked the audience by turning the broadcast into a 5-hour sales show. Yin Shihang was banned from broadcasting when tricking viewers into the livestream. Various live broadcasting platforms are working to strengthen control over violations. Kuaishou has issued a special regulatory notice on “Scripting, Acting and Purchases”, which bans accounts or imposes fines on those who take advantage of family conflicts and other factors unrelated to the issue. sell merchandise to entice fans to buy. In June 2020, Douyin issued a new rule that allows minors to privately award rewards after verification and can be fully refunded. In April 2021, Douyin revealed that a total of 36,000 minors had been refunded in 11 months, with an average refund time of 19.7 hours. At the end of November 2020, the State Administration of Radio, Film and Television of China issued a notice on strengthening the management of livestream and live broadcast of e-commerce. In which, methods such as facial recognition are applied to implement real-name management for broadcasters and users. The new rule also limits the number of rewards users can receive by time, daily and monthly, if there are too many rewards, there will be a reminder message and the reward function will be paused if the limit is exceeded.

China again threatens to ‘handle’ Ericsson if Sweden bans Huawei. According to the Global Times, affiliated to the People’s Daily of the Communist Party of China, whether Ericsson has a chance to participate in the next round of China’s massive 5G network construction plan has nothing to do with whether whether or not Stockholm will change its stance on Huawei. Previously, in October 2020, the Postal and Telecommunications Administration of Sweden (PTS) announced a ban on the use of equipment from Huawei and ZTE in the development of 5G networks in the country. This ban did not surprise observers because Sweden has repeatedly bluntly called China a threat to national security. According to the Global Times, Huawei has appealed the decision in a Swedish court and a ruling is expected in the coming weeks. In the event that the appeal is unsuccessful, China will close the door to Ericsson from supplying goods to China. Representatives for Ericsson and the Swedish Ministry of Foreign Trade declined to comment. Meanwhile, shares of Ericsson fell nearly 4% on May 11. After Swedish regulators banned Huawei in October last year, Chinese officials and state media outlets judged the decision unfair, saying Huawei poses no security risk. and Sweden is trying to protect the domestic telecommunications company Ericsson. They threatened to retaliate against Swedish companies doing business in China, including Ericsson and its largest shareholder, Investor AB, the investment company of the highly influential Wallenberg family in Sweden, which has shares mostly at a few large European companies. Earlier, Chinese media outlets reported that the country’s Ministry of Commerce was said to be considering export control measures to prevent Ericsson from sending products and components made in China abroad. The prospect of retaliation prompted Ericsson CEO Börje Ekholm to launch a lobbying campaign on Huawei’s behalf. He criticized Swedish politicians and solicited lawyers to help Huawei fight the Swedish ban. He said Ericsson gets only 1% of its revenue from Sweden while China is Ericsson’s second-biggest market after the US, contributing 8% of the company’s revenue. Currently, Ericsson is providing equipment and terminal services to China’s state-owned carriers including China Mobile, China Unicom and China Telecom, serving more than 350 million 5G mobile subscribers in China in total. CEO Ekholm even stated: “If the ban on Huawei remains, Ericsson will leave Sweden.”

Johannes Caspar, the head of the Hamburg municipal privacy agency, issued a three-month emergency ban. Accordingly, Facebook is prohibited from further data collection. He also asked the European Union data panel to take action and make a ruling in the bloc. WhatsApp’s new provision of data collection is invalid because they are not transparent, inconsistent, and too broad. In a statement on May 11, Mr. Caspar confirmed that the ban aimed at protecting the rights and freedoms of millions of WhatsApp users in Germany must agree to Facebook’s conditions. The German ban hits the heart of Facebook’s business model and advertising strategy. Previously, the country’s antitrust office also criticized the company for its habit of collecting data about users doing online and associated with Facebook profiles. The huge amount of information allows for targeted advertising and brings great revenue to social networks. However, WhatsApp called Mr Caspar’s statements “false” and said the ban could not prevent the new term from being deployed. In the announcement, WhatsApp said that the German authorities’ actions were based on a fundamental misunderstanding of the new term. Facebook faces a wave of protests around the globe because of WhatsApp’s new terms, requiring users to agree by May 15. Mr. Caspar is concerned that Facebook could wrongly handle the data and it is important to prevent data misuse, affecting the September election. Du Lam (According to Bloomberg)