Excise hike 'welcome' for new BAT Malaysia head

by **Cals** Tue 22 Oct 2013, 09:10

Posted on 22 October 2013 - 05:39am

Kang Siew Li
[You must be registered and logged in to see this link.]

[You must be registered and logged in to see this image.]

[color]

PETALING JAYA (Oct 22, 2013): No one was more surprised than British American Tobacco (Malaysia) Bhd (BAT Malaysia) managing director Stefano Clini (pix) by the sudden tobacco excise duty hike last month.

The announcement came less than four months after the 46-year-old Italian took the helm at BAT Malaysia, while still adjusting to his new role and the new culture here.

Amid calls for a moderate and gradual approach in tobacco taxation, the government went ahead on Sept 27, 2013 with a tobacco excise hike of 14%, in part due to the need to offset Malaysia's soaring public debt.

In an immediate response, Clini described the sudden hike as "shocking and disappointing", saying the move will exacerbate the already high levels of illegal cigarettes in Malaysia and dampen efforts that have been taken to address this costly illegal activity.

Tan Kee Hoong, an analyst at Alliance Research Sdn Bhd, estimated that legitimate industry volume will drop by 10% in 2014 following the recent tobacco excise hike, which will result in illicit trade spiking to 40% of the market volume.

"For BAT Malaysia, we expect the impact to be similar to (the last round of excise duty increase in) 2009 as well, which saw its sales volume contract more (-15.2% year-on-year) due to down trading by consumers," said Tan.

On its part, BAT Malaysia has since increased the prices of its cigarette brands by RM1.50 per 20-stick pack effective Sept 30, 2013, which analysts say is more than sufficient to offset the decline in sales volume.

BAT Malaysia said its pricing decision took into account the loss of legal volumes due to illegal cigarettes, consequential loss of industry's and retailers' margins and ongoing inflationary pressure.

On the topic of illegal cigarettes Clini has much to say. He said the illegal trade of cigarettes continues to be the biggest challenge for the tobacco industry in Malaysia.

"I am actually very concerned that 34.5% of the total cigarette market are illegal cigarettes, which means that more than one in three sticks sold are illegal. That is huge!" Clini told SunBiz in an email interview.

He said a visit to retail outlets will show that illegal cigarettes are still easily available and extremely affordable at RM3 to RM4.80 per pack.

"I do believe that enhanced enforcement and implementing deterrent penalties such as mandatory imprisonment for dealing in illegal cigarettes will continue to help reduce the incidence of the illegal cigarette trade in the country.

"On this note, it is heartening to hear that the Ministry of Health will be making possession of illegal cigarettes an offence under their laws. This addition to the law, coupled with strict and swift enforcement in the marketplace, will most certainly make a positive impact against illegal cigarette trade in the country," he said.

Clini, who joined BAT Group in early 2013, stepped into his current role on July 1, 2013.

"I was based in BAT's London headquarters before coming over to BAT Malaysia. Prior to this I was with HJ Heinz Italia SpA in Italy as its president of global infant and nutrition," he said.

"Although I was based in Europe I have taken on many global assignments and spent a lot of time in Asia.

"Having said that, I do not see the need to change my management style as it is not a factor. What is more important to me is to understand the needs of the employees better and to build a stronger bond with each and every one of them in achieving our common goals," he added.

The manufacturer of cigarette brands Dunhill, Kent, Pall Mall and Peter Stuyvesant BAT Malaysia is the country's largest tobacco company, with 61.8% of the legal cigarette market share as of August 2013.

"With a legacy spanning 100 years of achievements in Malaysia, we will continue to defend and grow our market leadership by focusing on our strategic global drive brands, continuous improvements in our trade marketing and distribution capabilities, improving productivity, and investing in people development," said Clini.

"In general, the company is doing great right now and holding strong. And with that being said, I would not change a thing in the company at this point in time.

"My vision is simple – to build upon the strong legacy of my predecessors to lead this company to even greater heights. And to achieve this, I will be working closely with my fellow colleagues here in BAT Malaysia," he added.
[/color]