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UK tobacco giant to build plant in Miaoli County

UK-based Imperial Tobacco Group PLC, the world's fourth-largest tobacco company, plans to invest NT$2.8 billion (US$85 million) to build a factory in Miaoli County, making the company the first foreign tobacco firm to have a plant in Taiwan.

Imperial Tobacco is scheduled to begin construction of the factory next month on a 1.9 hectare plot procured from Kuan Yuan Paper Inc (廣源造紙), Miaoli County Commissioner Liu Cheng-hung (劉政鴻) was quoted as saying in the Chinese-language Liberty Times (the Taipei Times' sister newspaper).

The investment is expected to create 300 jobs, the report said.

Following five months of negotiations, the tobacco firm decided to locate its production and logistics center in the Asia-Pacific region in Taiwan, Liu said.

The firm expects to start mass production of its premium cigarette brands of Boss and Davidoff, among others, next year.

The investment is expected to bring in considerable tax revenues for the central and county governments.

Liu said he hoped that, once the factory has been built, the firm would be able to further transfer technology to plant and purchase tobacco leaves in the neighboring townships of Nanchuang (南庄), Sanwan (三灣) and Shihtan (獅潭) to boost local farmers' incomes.

The British firm has made some aggressive acquisitions to expand its scale. In 2002, it purchased Germany-based Reemtsma Cigarettenfabriken GmbH, which added brands such as Davidoff, Peter Stuyvesant and West to its portfolio.

Last month, Imperial Tobacco entered the US market by taking over Commonwealth Brands, the fourth-largest tobacco company in the US.

Despite the prospect of increased competition, state-run Taiwan Tobacco and Liquor Corp (TTL, 台灣菸酒公司), the only company currently operating tobacco factories in Taiwan, remained confident in its market presence, as "smokers are very loyal to their favorite cigarettes," TTL chairman Martin Tsai (蔡木霖) said yesterday.

The Fair Trade Commission's latest statistics show that TTL's cigarette sales accounted for 41.6 percent of the market in 2005, second only to Japan's JT Tobacco International (JTI), which had a 42.6 percent share.

JTI distributes Mild Seven, one of the nation's best-selling imported brands.

The local tobacco market has become a mature battlefield since the local market was opened to foreign firms in 1986.

"It would be difficult for Imperial Tobacco to greatly push up its market share in the short term by constructing a factory here," Tsai said.

TTL currently owns three tobacco factories in Taipei's Shenkeng (深坑), Taichung's Fengyuan (豐原) and Pingtung's Neipu (內埔).

It churns out 1.8 million cartons of cigarettes per year, or 900 million packs, with most of the products consumed locally.

The nation's tobacco market is estimated at 4 million cartons a year, the Fair Trade Commission's figures showed.
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