C
IGARETTE companies are spending millions of dollars in advertising and promotional
campaigns in Cambodia. Yet the market is small - five to seven billion sticks sold
per year - and annual growth, at roughly three percent, is not spectacular. Why are
these companies investing huge sums?
Getting new smokers is not the issue. According to studies by Phnom Penh-based consultants
IMIC, 70 percent of all males smoke, while cultural taboos suggest that the cigarette
industry will not be able to make inroads among females: only one female in ten smokes,
and nearly all of them are above 40 years old.
Instead, companies are spending millions building brand loyalty in a country where
consumers seem to switch brands on a whim. This means targeting the 18 to 35-year-old
smoker and also depending on the aspiring middle class to move from their medium-priced
cigarettes to higher-priced brands.
The battlefield for the cigarette wars is the premium-priced segment which constitutes
only 15 percent of the industry. Four pricing segments comprise the cigarette industry,
ranging from the low-priced brands selling for 400 riel, up to 2500 riel ($1) per
pack for premium brands. The top segment is comprised of British American Tobacco's
(BAT) 555, Philip Morris's Marlboro, Japan Tobacco's Mild 7, and Dunhill.
Exactly how much companies are devoting to advertising and promotional campaigns
is unknown. No company was willing to provide expenditure figures, but one industry
executive estimated promotional expenses at above $5 million. Indeed, the evidence
lies everywhere, from Mild 7's ubiquitous parasols, Marlboro's billboards, and 555's
painted logo. In what may be a sign of the competitive future, bands and entertainers
from Marlboro and Mild 7 battle it out 100 meters from each other every Sunday in
Hun Sen Park.
Television and print advertising will nearly double this year, from last year's figure
of $1.5 million, according to Paul Guymon, General Manager of IMIC Research. Cigarettes
constitute 20 percent of total TV and newspaper advertising. Unlike other countries
in Southeast Asia, Cambodia allows cigarette advertising. In addition, brands are
not required to print health warnings.
BAT is investing in several promotional campaigns for 555 - Second Prime Minister
Hun Sen's brand, and the country's top selling - but it is devoting most of its resources
strengthening its distribution network and ensure consistency in quality. "We
need to maintain our market share, not buy it, as the other brands are trying to
do," said Mohammad A. Aleem, Managing Director of BAT Cambodia.
"Smoking 555s means you have arrived," he said. BAT is counting on this
image of success and high quality to help maintain its position in the premium segment.
In June of this year, BAT signed a $25 million joint venture agreement with Cambodia
Tobacco Co (CTC). Under the agreement, BAT will upgrade and expand CTC's cigarette
factory and provide technical training for local farmers to increase their tobacco
yields.
BAT is Cambodia's largest company that uses local tobacco, according to Aleem. Marlboro
and Mild 7 are imported brands, while the other brands import cut tobacco and roll
their cigarettes here. BAT also distributes local brands Ara and Victory and may
introduce a medium-priced brand in the future, depending on opportunities, said Aleem.
Although Mild 7 has less than one percent of the premium market, it is by far the
biggest spender for ads and promotional campaigns, according to IMIC. Eric Wong,
Regional Manager of Japan Tobacco International explains: "Cambodia is part
of our Indochina strategy. We know we won't make any money for the next couple of
years. But we will be Number One in the premium segment by 2000."
Mild 7 has a clean, smooth - a soft - image, according to Wong. "Therefore,
we are promoting soft sports, such as snooker and Motorcross to portray our image,"
he said.
Cambodian smokers prefer strength and taste, according to IMIC studies, which may
bode poorly for Mild 7. Wong hopes consumer preferences will change. "We are
the best selling mild cigarette in the world and we are counting on Indochina to
follow that route... give it time," he said.
Marlboro is trying to impart an image of excitement to appeal to the 18-35-year-old
smoker. Its promotional campaigns stress excitement through motorcycle racing; its
soccer league has an image of teamwork and sports; and it offers consumers promotion
such as concerts which involve and entertain Cambodians.
In the future, more promotional campaigns are likely to bombard Cambodians. When
one international brand sees its competitor initiate a campaign, it will most likely
follow suit and raise the stakes.
Wong explains the power of promotional campaigns: "If smokers perceive [a particular
brand] tastes good, they will say it does, even if it tastes lousy."
