British American Tobacco Malaysia (BAT) managing director Andrew Gary has a heart for minority shareholders, many of whom depend on BAT for reliable dividend and retirement income. Seeing their strong interest in the company made him happy. Gray is pursuing all means to defend BAT’s leadership position and fight against the sale of illegal cigarettes.
British American Tobacco Malaysia
StarBiz: How are your plans to strengthen the business coming along?
Gray: Our focus on building our drive brands - Dunhill, Kent and Pall Mall - has allowed us to secure our position within the key consumer segments of premium and value for money. Dunhill continues to lead with over 55% share of the premium segment, while Pall Mall is gaining momentum in the value-for-money segment.
Recently, the marketplace has been experiencing intensified competitive pricing and brand launch activity. BAT Malaysia has responded directly to competitor movements to ensure we remain the number one tobacco company in Malaysia.
We will always work hard to defend our leadership position and continue our commitment to creating long-term shareholder value.
StarBiz: Are you reaping the benefits of earlier moves to better position the business? Kindly elaborate.
Gray: BAT Malaysia’s long-term strategy is built upon growth, productivity, responsibility and a winning organisation. We work to increase our share of the cigarette market at the expense of competition and the illegal cigarette market.
We are also focused on better deploying our resources to increase efficiency and effectiveness and to generate more funds to reinvest in the business. We will continue to balance our commercial objectives with the expectations of a broad range of stakeholders, thus ensuring a sustainable business.
Last but by no means least, we always strive to ensure that we have the right people and the right environment to deliver our vision of remaining the number one tobacco company in Malaysia.
StarBiz: What are the trends in the industry or economy that are having a positive impact on your business?
Gray: The Plantation Industries and Commodities Ministry has announced a plan to restructure the Malaysian tobacco-growing sector to ensure that it can remain competitive following the implementation of Afta tariff reductions for imported Asean tobacco post-2008.
The restructuring plan is beneficial to the industry because consumers like the taste of Malaysian-grown tobacco, and tobacco farming makes a critical contribution to the local economy in states like Kelantan and Terengganu. For the restructuring plan to succeed, Malaysian tobacco farmers need a prolonged period of stability that can only be provided by ensuring stable demand for local leaf over a number of years.
Our worry is that large and sudden excise increases or other regulatory factors may reduce the demand for legal cigarettes and this would lead to a consequent decline in demand for locally-grown leaf during a critical time period of restructuring. This, in turn, would significantly reduce tobacco farmers’ income.
StarBiz: Do you foresee or expect any favourable occurrences or events that could have an impact on your business in the near future?
Gary: The ban on sales of small cigarette packs is deferred until June 2006. This provides short-term stability for the Malaysian tobacco farmers for the current year since it restricts the demand for low-price, duty-not-paid smuggled cigarettes made with foreign tobacco.
Looking forward, we think that low-income consumers should be able to continue to buy legal cigarettes. We need to discuss this issue so as to achieve a balanced solution that does not inadvertently lead to a substantial increase in demand for illegal cigarettes, and consequent decline in demand for locally-grown tobacco.
We support the authorities in enforcing the law banning under-aged people from purchasing cigarettes and shopkeepers from selling cigarettes to the under-aged. Increased enforcement of the law would help reduce the problem of youth smoking and we are willing to support the authorities in their effort to tackle this issue.
StarBiz: Moving forward, are you likely to be able to still expand your business or the scope of your business ties?
Gray: Our business is not about persuading non-smokers to become smokers. Future growth or expansion will only be generated by increasing our market share versus key competitors and by reducing the size of the market for illegal cigarettes in Malaysia.
BAT Malaysia is in regular dialogue with many stakeholders in the business - ranging from tobacco farmers and curers to the Government, trade unions, trade partners and associations, consumers, employees and shareholders – so you could say that the scope of our business ties is very wide. Balancing the different expectations of our stakeholders is not easy, but it is the key to maintaining a sustainable and responsible business.
StarBiz: On a personal level, what has been the happiest moment to you so far this year as CEO of your company?
Gray: Meeting minority shareholders at the AGM brought home to me how many ordinary Malaysian citizens depend on companies like BAT Malaysia for reliable dividend and retirement income.
It really made me happy to see how passionate the minority shareholders are about their business, and to see how much they care about how we are managing their company.