The Chinese economy is growing, raising 300 million Chinese out of poverty; many spending more on cigarettes. Today, the Chinese cigarette market is larger than worldwide box office movie returns.
United States of America (Press Release) April 11, 2008 --
There’s no such thing as the “Chinese.”
I don’t mean to be crass, but the mainstream financial media’s discussion of the “China Story” is woefully simplistic. China is not a giant homogenous country filled with 1.3 billion people of identical tastes and backgrounds.
China is comprised of 23 provinces, five autonomous regions, and four municipalities. It has 56 ethnic groups, 10 of which have populations of more than 5 million.
The differences in culture and attitude are immense, ranging from billionaires like Yang Huiyan who made her fortune through the explosive rise of her family’s real estate company, to the bang-bang jun – laborers in Chongqing who make their living transporting parcels using poles.
However, one thing is true across the board. China is no longer a communist state. It is a capitalist state, in communist clothing. And even that is getting threadbare.
The country’s economic rise began in 1979 when the government first introduced Special Economic Zones (SEZ) – pro-business areas where Chinese entrepreneurs could operate with greater freedom. The Chinese economy has since grown at an average annual rate of 9% a year, raising more than 300 million Chinese out of poverty.
And all of them are beginning to make, and spend, a little more money.
China’s per-capita income doubled once from 1978 to 1987 and again from 1987 to 1996.
There are now 320,000 millionaires on the mainland. Generally speaking, targeting Chinese consumers is no small feat. Their tastes differ greatly. Except for one particular industry.
Tobacco.
More than 350 million Chinese smoke. And they smoke with a vengeance. China’s market consumes roughly 1.8 trillion— with a “t”— cigarettes each year. Chinese cigarette sales in 2005 topped an incredible $31 billion, making the Chinese tobacco market larger than:
• Worldwide box office return for movies.
• Worldwide video game sales.
• Worldwide CD sales.
China’s government, already in the hotseat due to pollution concerns for the 2008 Beijing games, has begun pushing for smoking reform. However, while the percentage of smokers is falling slightly, the actual number of Chinese who smoke has increased due to population growth.
Cigarettes, due to their addictive nature, aren’t like typical consumer expenses. And smoking in China doesn’t have the social stigma that it does in the U.S.
Between 2002 and 2006 more than 30 million Chinese took up smoking. That’s more people than the entire population of the state of New York. Average daily consumption rose from one cigarette to 10 from 1952 to 1992. It has since leveled off. But at 10 cigarettes a day, the average Chinese smoker is burning through more than three packs a week.
Consumer brands from around the world have begun piling into Chinese markets. In the last ten years, any brand you can name from Nestle to Motorola to General Motors, has branched into the mainland. However, I would wager that none of these sectors will have the success of big tobacco. For many Chinese, cars and other items remain luxury items.
Cigarettes, on the other hand, are affordable to virtually any social class. And while many Western businesses have yet to find a marketing plan that works in China, tobacco doesn’t even need to advertise.
Take advantage of the tobacco play with direct exposure to Chinese markets. Sales have tripled since 2001. It generates enough cash that it could take itself private. And it yields 3%. I’ll be writing about it in my next issue of International Wealth Advisory. Find out more at GPS Capital Research, http://www.gpscapitalresearch.com/publication_promo.php?pcode=IMIWA0037&pscode=IMIWA0037979
I don’t mean to be crass, but the mainstream financial media’s discussion of the “China Story” is woefully simplistic. China is not a giant homogenous country filled with 1.3 billion people of identical tastes and backgrounds.
China is comprised of 23 provinces, five autonomous regions, and four municipalities. It has 56 ethnic groups, 10 of which have populations of more than 5 million.
The differences in culture and attitude are immense, ranging from billionaires like Yang Huiyan who made her fortune through the explosive rise of her family’s real estate company, to the bang-bang jun – laborers in Chongqing who make their living transporting parcels using poles.
However, one thing is true across the board. China is no longer a communist state. It is a capitalist state, in communist clothing. And even that is getting threadbare.
The country’s economic rise began in 1979 when the government first introduced Special Economic Zones (SEZ) – pro-business areas where Chinese entrepreneurs could operate with greater freedom. The Chinese economy has since grown at an average annual rate of 9% a year, raising more than 300 million Chinese out of poverty.
And all of them are beginning to make, and spend, a little more money.
China’s per-capita income doubled once from 1978 to 1987 and again from 1987 to 1996.
There are now 320,000 millionaires on the mainland. Generally speaking, targeting Chinese consumers is no small feat. Their tastes differ greatly. Except for one particular industry.
Tobacco.
More than 350 million Chinese smoke. And they smoke with a vengeance. China’s market consumes roughly 1.8 trillion— with a “t”— cigarettes each year. Chinese cigarette sales in 2005 topped an incredible $31 billion, making the Chinese tobacco market larger than:
• Worldwide box office return for movies.
• Worldwide video game sales.
• Worldwide CD sales.
China’s government, already in the hotseat due to pollution concerns for the 2008 Beijing games, has begun pushing for smoking reform. However, while the percentage of smokers is falling slightly, the actual number of Chinese who smoke has increased due to population growth.
Cigarettes, due to their addictive nature, aren’t like typical consumer expenses. And smoking in China doesn’t have the social stigma that it does in the U.S.
Between 2002 and 2006 more than 30 million Chinese took up smoking. That’s more people than the entire population of the state of New York. Average daily consumption rose from one cigarette to 10 from 1952 to 1992. It has since leveled off. But at 10 cigarettes a day, the average Chinese smoker is burning through more than three packs a week.
Consumer brands from around the world have begun piling into Chinese markets. In the last ten years, any brand you can name from Nestle to Motorola to General Motors, has branched into the mainland. However, I would wager that none of these sectors will have the success of big tobacco. For many Chinese, cars and other items remain luxury items.
Cigarettes, on the other hand, are affordable to virtually any social class. And while many Western businesses have yet to find a marketing plan that works in China, tobacco doesn’t even need to advertise.
Take advantage of the tobacco play with direct exposure to Chinese markets. Sales have tripled since 2001. It generates enough cash that it could take itself private. And it yields 3%. I’ll be writing about it in my next issue of International Wealth Advisory. Find out more at GPS Capital Research, http://www.gpscapitalresearch.com/publication_promo.php?pcode=IMIWA0037&pscode=IMIWA0037979
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