Imperial Brands PLC [L:IMB], the world's fourth-largest tobacco company, recently announced it is linking up on a joint venture with government-monopoly run China National Tobacco Corp. The new company, Global Horizon Ventures Ltd., is to be headquartered in Hong Kong.
The joint venture will work to enhance the influence of West and Davidoff -- two Imperial brands -- in China, and the brand influence of Yuxi and Yunyan owned by Yunnan Tobacco International Co. on the global market, Imperial Brands said on Jan. 11. Yunnan Tobacco is a subsidiary of China National Tobacco Corp, and claims a share of over 20 percent of China's market.
China is the world's largest tobacco market, with total consumption averaging approximately 250 million cigarettes a year, or one-third of the global total. Imperial Brands is seeking a foothold in the world's largest tobacco consumption market.
Plump tax revenues have long deterred the Chinese government from campaigns to discourage smoking, but rising longevity and consequently burgeoning tobacco-related ailments, coupled with pressure from health activists, will inevitably bring these about in the long term.
The joint venture thus represents a move by both firms to seek diversified markets to mitigate the risks of having all their eggs in one basket.