Jan 2007 Financial News

WITCO still smoking

Jan 18, 2007

With a global market that has seen sales almost flattened in the past few years, changing smoking regulations in public places and growing anti-smoking sentiment, marketing cigarettes has been challenging.

In T&T, the Government has introduced a smoking ban in state buildings, and is in the process of drafting legislation to give effect to the 2004 Framework Convention for Tobacco Control and has imposed a 15 per cent excise tax.

The end result has been that cigarette manufacturing has become more expensive causing prices to rise.

The Government needs to generate revenue to pay for the country,” he shrugged, but noted that it has affected consumption.

“Since the inflation problem has started in July last year, we have seen a fall off in consumer spending and as a result more of a flattening of sales. From the second half of 2006 we have seen a slower rate of increase over the past few years. The first half of 2006 there was much larger increase,” he noted.

But overall, sales in the local market have increased.

You are seeing some domestic increases. I think that is being driven by the economy, there is more money out there for consumers to spend and people are doing that. I don’t think this is going to be a permanent position. I think when the economy slows down we are going to see a slight decline on overall volume but more of the lower-priced ones,” he said.

In the midst of higher cigarette prices, a new brand, Pall Mall, was launched and a rebranded Benson and Hedges hit shops in the new year.

Du Coudray told the Business Guardian that being a publicly run company Witco’s goal was to satisfy its shareholders and making a profit would require more innovation.

It goes back to just being able to manage the business as efficiently as possible—where we may lose volume as a result of the prices going up, there are other ways we could look at recuperating that,” he said.

Witco, a subsidiary of British American Tobacco, has shut down manufacturing operations throughout the Caribbean and has centred production in T&T.

The capacity requirements of its machinery has increased by 100 per cent in the last five years.

On-going investment in its machinery to improve efficiency has also resulted in an increase in staff. While the company has 161 permanent employees, it also employs an additional 101-plus temporary workers.

Because of the increase in capacity, we have literally doubled our volumes in five years from where we used to be,” he remarked.

What I am looking for now, because we have the processes and systems established, is an era of much more innovation, not only in the technical side because if you walk through the factory now its going to look a lot different than it looked ten years ago, but also innovation in terms of the way we do things and what we do,” he said.

Du Coudray, who has been with the company for seven years, worked as Witco’s trade, marketing and distribution manager, and handled BAT’s Caribbean market before becoming Witco’s managing director.

Du Coudray has already decided on where he’s going to make the difference: working in what he describes as a well-oiled machine means that the processes and the systems are in place.

His focus is on the people and generating high performance teams to bring about positive results.

This is what he believes has helped him move up the ranks within the organisation.

I think I’ve been given a great opportunity to write the next chapter of the history of Witco. I don’t know how that chapter is going to end but I do know that along the way you are going to hear words like team, people, collaboration and something that I am adamant about, that you are going to see a lot about is fun,” he said.

We spend eight to ten hours a day behind the walls of Witco doing our jobs and we’re very committed. We are very passionate about what we do, so if you’re going to spend half of your life inside of here, why not enjoy what you are doing while being as productive as you can be? Yes, we are here to do a serious job but we want to make it a passionate place where people enjoy coming to work, enjoy what they are doing and it allows them to excel,” he said.

Strategy

Du Coudray said the company had introduced a new strategy to focus on global drive brands in T&T—Dunhill, Kent, Lucky Strike and Pall Mall.

But it has also changed its approach to marketing.

We’ve been in the business for 102 years. To be in the business for another 102 years we have no choice but to ensure that what we do is done in a responsible manner,” he said.

The company has already stopped all advertising and withdrawn from sponsorship of cultural, sport and carnival events and activities.

That was a responsible approach. Gone is the du Maurier Brass Festival, and du Maurier Chutney Soca. A lot of these events allow people under the age of 18. If we are in the business of marketing tobacco to informed adults we can’t be seen to be taking decisions where a large percentage of people are under 18. It doesn’t go with what we stand for,” he said.

He said the company had spent money financing several prevention progammes, one of the popular ones being—Can’t vote, Don’t Smoke.

He observed that while profit was still a motive, there were other ways, beside sales, to increase profits.

In the investments we made in the factory there is a lot of efficiency in terms of economies of scale. In terms of getting our cost down, if we can get consumers to purchase some of the higher priced brands then that mix could affect our profits,” he said.

The company has recorded steady sales growth with sales moving from 3.26 per cent in 2004-2005 to 4.23 per cent in 2005- 2006.

He also noted that the company has had to be innovative in how it marketed its products.

Actually, it really has revolutionised the way we do marketing. Now we still have a budget but we have to find ways to revolutionise it to interact with the consumers. It has allowed us to be more creative in the events and the type of activities that we do to get that interaction going. So the type of marketing we do created a lot more challenges—take it out of the traditional into the innovative.” he said.


Source:

ASHA JAVEED
The Trinidad Business Guardian
Thursday 18th January, 2007


http://www.guardian.co.tt/bussguardian4.html