Cigarettes and Tobacco News

Mar 23, 2007 -- Foreign supermarkets in China are still selling cigarettes despite a ban imposed on them by a regulation issued on March 7.

But though the new regulation annuls the one issued by the State Tobacco Monopoly Administration in 1998, it has some grey areas that are being exploited by enterprises such as Wal-Mart, Carrefour and Ito Yokado.

The National Development and Reform Commission (NDRC) regulation, applicable to Chinese-foreign joint ventures, partnerships and solely foreign-owned enterprises, bans cigarette sales through franchises and other divisions of supermarkets.

It bans foreign companies from retailing or wholesaling cigarettes, too, but doesn't specify what firms whose licenses are still valid should do.

The Catalogue for the Guidance of Foreign Investment Industries (CGFII) issued by the Ministry of Commerce banned foreign companies' from entering the tobacco sales sector as early as 2004.

Cigarettes can still be bought from some foreign retailers in Beijing and Shanghai. The Shanghai Morning Post has reported that some foreign retailers circumvent the ban by leasing out counters to licensed local tobacco retailers.

In Beijing, cigarettes can still be bought at supermarket chains like Carrefour and Ito Yokado.

"The problem is that the license granted to Carrefour by the Shanghai Tobacco Monopoly Administration (STMA) is valid till 2008," a source with the French retail chain said yesterday. The same applies to other foreign companies.

The STMA has, however, said that such licenses will not be renewed after 2008.

"So to balance our respect for the regulation and customers' demands, we plan to lease out our tobacco selling sector to qualified licensees," the source said.

But there was no response to questions on whether leasing out counters was the right approach for the supermarket chains.

Moreover, some retailers claim they haven't received any notice on the ban.

A Lotus official said the Thailand-based supermarket chain under the Chia Tai Group hadn't received any instruction either from supervisors or the authorities. Hence, "cigarettes are being sold and promoted as usual".

Wal-Mart's spokesman for the East China region said the US supermarket giant had stopped selling cigarettes in 2005, and "leased out the counters to licensed operators."

Industry insiders feel the ban won't deal a heavy blow to large-scale foreign retailers because profits from other goods could offset the loss incurred from the ban on cigarette sales.

But smaller foreign convenient stores, which sell a limited number of products, could be badly hit because cigarettes have long been a major source of income for them.