ManufacturerGallaher Group
Contents
Gallaher Group
Background
The company's roots date back to 1857 when Tom Gallaher started a business making Irish roll tobacco in Londonderry, in what is now Northern Ireland.
In 1900, Queen Victoria awarded Gallaher a Royal Warrant, and in 1928 it became a publicly traded company for the first time. The first major acquisition took place in 1936 with the purchase of J. A. Pattreiouex (the makers of the Senior Service brand), followed by the acquisition of cigarmakers J. R. Freeman in 1947. The United Kingdom branch of Benson and Hedges was then acquired in 1955. In 1963, Gallaher launched Silk Cut, which would go on to be among the company's most popular brands.
The biggest change in the company's history thus far happened in 1968 when the American Tobacco Company acquired Gallaher. The American Tobacco Company changed its name in 1969 to American Brands, Inc.
After Gallaher became a wholly-owned subsidiary of American Brands, it had several other diversified interests, such as an optical company (Dollond & Aitchison), a kitchenware company (Prestige), and a whisky manufacturer (Whyte & Mackay). However, these were gradually disposed of over time, and Gallaher, under the ownership of American Brands, refocused as a 100% tobacco company in January, 1996.
Gallaher demerged from American Brands in May, 1997 and, for the first time, Gallaher Group Plc's shares were listed on both the London Stock Exchange and its A.D.R.'s on the New York Stock Exchange. American Brands also took the step of changing its name, and is now known as Fortune Brands, Inc.
Since 1997, the Group has been transformed from a predominantly British and Irish company into a leading international tobacco group, assisted by the acquisitions of the Russian company Liggett-Ducat in 2000, and by Austria Tabak in 2001. It is truly an international tobacco manufacturing and wholesale company now, employing over 12,000 people, with manufacturing plants in Austria, Canary Islands, Dominican Republic, Kazakhstan, Poland, Romania, Russia, South Africa, Sweden, Ukraine and the UK.
A tradition ended in 1999 when H. M. Queen Elizabeth II withdrew her Royal Warrant from tobacco manufacturers; this affected Gallaher, as well as its Benson and Hedges brands. While the Queen's great-grandfather (King Edward VII), grandfather (King George V), and father (King George VI) were all smokers (a habit which arguably contributed to their deaths), Her Majesty does not smoke, and her son and heir, the Prince of Wales, is an ardent anti-smoker.
In 2002, American tobacco firm R. J. Reynolds formed Reynolds-Gallaher International, to give the manufacturer access to cigarette sales in most countries in the European Union. This venture was scheduled to run through 2012, but was ended prematurely in 2007, as a result of the acquisition of Gallaher Group by Japan Tobacco International, who became the sole owner of the Gallaher Group on 18 April 2007. The purchase was the largest-ever foreign acquisition in Japanese history.
The closure of the J. R. Freeman cigar factory in Cardiff, Wales was announced in September, 2007, with all work scheduled to move to the Ballymena factory by September, 2009.
Group strategy
Gallaher’s objective is to maximise the cash flow from its core markets (Austria, Republic of Ireland, Sweden, and the U.K.) to fund its international growth strategy through export opportunities, ‘on-the-ground’ investments (start-ups and acquisitions) and joint ventures and alliances across Europe, the C.I.S., Africa and Asia.
Divisional strategies
In the U.K., Gallaher seeks to increase its shares of the growing value cigarette sector, and to defend its leading positions in the premium cigarette and cigar sectors – achieving an appropriate balance between sales volumes and the margins achieved on those volumes.
In Europe, Gallaher aims to defend its market leading positions in Austria and the Republic of Ireland – balancing volumes and margins – and to grow share elsewhere, notably in central and eastern Europe.
In the Commonwealth of Independent States, Gallaher's objective is to grow regional market share while increasing the proportion of its brands sold in the intermediate- and higher-priced sectors across the region. Gallaher has experienced strong gains in Russia, where the group has a 17% market share (in 2005).
In its Rest-of-World division, Gallaher seeks to grow its positions in Poland, the Baltics, Africa and the Asia-Pacific region, while defending its leading position in the Swedish cigarette market – balancing volumes and margins.
Gallaher's operations
Gallaher's brands are available in some 80 countries throughout Europe, the C.I.S., Africa, and Asia. In 2005, the Group sold 174 billion cigarettes, and in the first six months of 2006, Gallaher sold 85.5 billion cigarettes.
Gallaher Group Plc's head office is located in Weybridge in the UK and the Group has four divisions, which together employ over 12,000 people. These comprise: U.K., Europe, Commonwealth of Independent States (CIS) and Rest-of-World.
The U.K. division is based at the Group's headquarters in Weybridge. Gallaher is one of two leading tobacco companies operating in the U.K. market. The Group leads the premium cigarette and cigar markets and has strong positions in the value cigarette and handrolling tobacco markets.
The cigarette brands sold by Gallaher in the U.K. are produced at the Group's factory in Lisnafillan, Northern Ireland. This factory also produces Virginia-blended cigarettes for export to markets in the Europe and Rest-of-World divisions, as well as all of Gallaher's cigar brands that were formerly produced at the now-closed J. R. Freeman cigar factory in Cardiff, Wales.
Gallaher's Europe division is based in Vienna, Austria. The Group leads the Austrian and Republic of Ireland cigarette markets and has positions in many other European markets in the E.U. and central and eastern Europe. Gallaher also has leading tobacco distribution positions in Austria and Germany.
Demand for Gallaher's American blended cigarettes in Europe is largely met by manufacturing facilities in Austria.
Gallaher's C.I.S. division is founded on strong cigarette market positions in Russia, Kazakhstan and Ukraine. The Group's Russian brands are produced at its Moscow factory. This is Gallaher's largest facility with an annual production capacity of around 65 billion sticks. Gallaher also has factories at Almaty, Kazakhstan and Cherkassy, Ukraine.
The Rest-of-World division comprises operations in Scandinavia and the Baltics, Poland, the Asia-Pacific region, and Africa. Gallaher leads the Swedish cigarette market and has growing positions in other markets. The division has regional head offices in certain markets, including Sweden and Singapore. Brands are produced for the division by Gallaher's factories in Lisnafillan, Austria, and Poland.
Gallaher brand biographies
Cigarettes
Benson & Hedges
Owned in the U.K. by Gallaher since 1955, Benson & Hedges has a proud British heritage. It is the leading U.K. premium brand, number one in the Republic of Ireland, and, more recently, is gaining popularity in a number of European markets.
Silk Cut
Gallaher created Silk Cut in 1963. Today, it is the leading U.K. lower-tar brand, has significant market shares in the Republic of Ireland and Greece, and is being launched across Europe.
Mayfair
Mayfair was launched in 1992, and is currently available across a selection of the Group’s markets worldwide. In the U.K., its key market, Mayfair has become Britain’s second best-selling king-size cigarette brand.
Memphis
Memphis was launched in Austria in 1897, and is the Group’s key brand in this market. The brand’s footprint has been extended into central and eastern Europe, and more recently was launched in China and Singapore.
Ronson
The Ronson trademark was developed in the late 1980s, and joined the Gallaher portfolio when the Company acquired Austria Tabak in 2001. It has been a major driver of Gallaher’s growth in various markets in central and eastern Europe, and across the C.I.S..
Sovereign
Sovereign was launched in the UK in 1965, and then internationally in a number of countries around the world. It was launched in Kazakhstan in 1993, where it became the number one cigarette brand in 2000. It has since been introduced across the C.I.S. region. It was also re-launched in the U.K. in 1996 in the discount sector (alongside Mayfair).
LD
LD is Gallaher’s most popular cigarette brand. It was launched in Russia in 1999, and is currently the number one brand in the value segment. Having gained a strong position in C.I.S. markets, LD has been rolled out across the Group’s operations – from western Europe to China.
Sobranie
Sobranie was established in 1897, and is synonymous with super-premium luxury. Over the years, Gallaher has evolved a number of different brand variants within the Sobranie house, delivering on Gallaher’s renowned quality standards.
Handrolling tobacco
Old Holborn
Old Holborn Blue is the U.K.’s principal ‘dark tobacco’. Old Holborn Yellow, the leading tobacco brand in Greece, has also been growing shares in a number of European markets.
Amber Leaf
Amber Leaf was launched in 1991. For the past few years it has been the U.K.’s fastest-growing handrolling tobacco brand, driven by the success of the innovative 'piece pack'.
Cigars
Hamlet
Hamlet cigars were first launched in the U.K. in 1964. The brand has since grown to become the number one cigar in the U.K. and the Republic of Ireland. More recently, it has been launched in a number of western European markets.
Pipe
Condor
Condor, since its launch early last century, has been one of the best-selling pipe tobaccos in the U.K.. The success of the brand has led to launches in the Republic of Ireland, Spain and Sweden.
Former Brands
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