According to Heated Tobacco News, a closer look at the timeline of Chinese cigarette industry companies going global shows that Hubei China Tobacco Industry Co., Ltd. was not an early leader. Li Bingyi, director of the international department office, spo
Heated Tobacco News Network reports: Looking closely at the timeline of domestic cigarette manufacturing companies "going global," Hubei China Tobacco Industrial Co., Ltd. (hereinafter referred to as "Hubei Tobacco") is not considered a leader. Li Bingyi, director of the International Department, candidly stated: "In terms of expanding into international markets, we have a poor foundation, a low starting point, a lack of talent, and many difficulties." However, when measuring the company against the China-Philippines strategic cooperation project, the rapid and successful development of Hubei Tobacco's "RGD" (i.e., "Red Gold Dragon") has far exceeded expectations.
In December 2005, China National Tobacco Import and Export (Group) Corporation (restructured in 2008 to become China Tobacco International Co., Ltd.) represented Chinese tobacco and established a joint venture, CTPM International Co., Ltd., with Philip Morris in Switzerland, utilizing Philip Morris's channels to operate Chinese cigarette brands in the international market.
The pace of China's cigarette "trailblazers"
Hubei Tobacco truly began to "go global" with this China-Philippines strategic cooperation. According to the agreement, three brands, including Hubei Tobacco's "RGD," will be launched in the Eastern European market. Among them, "RGD" is positioned as an "exploratory brand."
For Hubei Tobacco, "going global" is a process of changing mindset. In the new situation of fully promoting "cigarette quality improvement," if it continues to aim at finding gaps with advanced domestic companies, it can only play the role of a "follower" in the future. Only by competing at a higher level and actively learning from international tobacco giants can it have the opportunity to shorten the gap and gain initiative.
"International cigarettes are neither high-end nor low-end." Ning Changhuai, deputy general manager of CTPM International Co., Ltd., explained. In building an international brand for Chinese tobacco, Hubei Tobacco did not insist on pursuing the mid-to-high-end market but chose to meet the needs of the working class as its product target, based on the reality of rising cigarette prices due to increasing taxes in international markets.
After determining the target positioning, "RGD" embarked on an innovative journey that suited its characteristics. In the European market, cigarettes do not serve as gifts; consumers choose a brand solely based on their preference for its flavor. This means that as long as the style characteristics of "RGD" products meet the smoking needs of Eastern European consumers, there is a chance to win the market. "For Chinese cigarettes to enter developed country markets, breakthroughs must be sought through segmentation of consumer groups," Ning Changhuai further explained.
At that time, many people in China believed that the domestic cigarette market was primarily based on flue-cured tobacco, and it was difficult to produce internationally recognized blended cigarettes with existing raw materials. However, Hubei Tobacco's technical team eventually broke this "doubt" through repeated exploration.
Hubei Tobacco's "RGD" project team visits the Eastern European market
Chen Yikun, who has years of international product development experience in the technical center, stated that developing blended cigarettes often requires breaking a fixed mindset. Each type of tobacco leaf and flavoring has different characteristics and varieties, and different combinations and formulas can produce different flavors. This is akin to cooking; the same ingredients can yield the taste of Hunan cuisine or Shandong cuisine depending on the cooking method and added seasonings. Recognizing this level provides a path for new product development.
Entering the international market also requires adhering to international market rules. The EU standards impose many strict regulations on tobacco products, such as limiting the tar content of sold cigarettes to no more than 10 mg per cigarette; regarding health, it requires the elimination of harmful components in flavorings and other additives; in terms of packaging, it mandates the use of biodegradable and recyclable paper and environmentally friendly inks; and for environmental protection, it requires the use of pesticide-free, non-GMO tobacco leaf materials, etc. All raw materials must undergo strict sampling inspection by Philip Morris's technical center before being transported to the production site.
In response, Hubei Tobacco's technical team is learning EU standards while refining product formulas to ensure all indicators align with EU standards.
Starting in February 2008, "RGD" was successively launched in the Czech Republic, Slovakia, and Poland, becoming the first Chinese cigarette brand to enter the international market under the China-Philippines cooperation. By April 2011, "RGD" had accumulated sales of nearly 300,000 pieces in the Eastern European market, accounting for about 80% of the total sales of the three Chinese brands, making it the most successful among the three brands in the China-Philippines cooperation. The market share of RGD reached 2.6% and 3.1% in the Czech Republic and Slovakia, respectively, gaining many loyal consumers in the Eastern European market.
On September 14, 2010, the director of the National Bureau, Jiang Chengkang, highly praised the performance of "RGD" in overseas markets, stating for the first time: "'RGD' is an important brand in the cooperation between China Tobacco and Philip Morris, and we must strive to provide 'RGD' with better development space."
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The mindset of a "seeker of knowledge"
At the tobacco industry's international market expansion work conference held in May this year, "RGD" was listed as a key brand for expanding into international markets. From an "exploratory brand" to a "key brand," the initial success of "RGD" is inseparable from the strong support of Hubei Tobacco's technical, production, and financial departments. Hubei Tobacco's general manager, Peng Mingquan, has explicitly stated the need to "mobilize the entire enterprise to expand into international markets." The company has established an international work liaison group, selecting high-quality professionals from various departments to coordinate and implement specific matters related to international expansion, ensuring special cases are handled specially and prioritized for resolution. At the end of 2007, in the face of severe domestic air transport capacity shortages, to ensure "RGD" was launched as planned, Hubei Tobacco decisively transported an international transport team from Ukraine to airlift the first batch of raw materials to the Romanian production plant.
Establishing such a substantial "backing" has an important reason: Hubei Tobacco views the "RGD" project as a good opportunity to "learn from others' strengths" and train its team. "A small step today is a giant leap in history." Overseas, Chinese cigarette brands may not occupy a large market share, and the efforts required are a hundred times more than domestically, but "going global" is more conducive to broadening the company's global vision and enhancing market awareness, competitive awareness, innovative awareness, and crisis awareness.
During visits to the Eastern European market, project team members discovered that Philip Morris has gradually upgraded old packaging in various markets since 2008 while launching new packaging, implementing a strategy of operating multiple specifications and flavors under the same brand, which has proven to be very effective for brand expansion. This has provided insights for Hubei Tobacco in formulating the global development strategy for the "RGD" brand. In 2010, the company successively launched four new specifications in the Czech market: mint flavor, ultra-light flavor, 24-piece full flavor, and light flavor, making "RGD" a representative of the most innovative cigarette brand in the Czech Republic, achieving a recognition rate of 73% among local cigarette consumers.
Although there are different cultures, thinking styles, and working styles, the project team members consistently maintain a humble learning attitude when communicating with Philip Morris personnel, fully respecting their opinions. Project team member Li Hong stated: "Philip Morris is, after all, a large international company with extensive experience in market analysis and channel expansion. However, when encountering principled issues, we must also firmly uphold our position, such as insisting on using 'RGD's' consistent branding during product packaging upgrades."
"A more professional spirit and a more dedicated attitude are more likely to earn the respect of others." Li Hong observed that, based on recent years of cooperation, both the marketing and technical teams have gained full respect from the relevant teams at Philip Morris, establishing deep personal friendships. Over the past three years, project team members have improved in product development, marketing, and familiarity with foreign laws and regulations, with much of this knowledge being learned and accumulated through practical work. Hubei Tobacco's international team is growing.
Director Jiang has instructed that "going global" focuses on "accumulating experience, training the team, laying a solid foundation, and achieving breakthroughs." While Hubei Tobacco is "accumulating experience," it places greater emphasis on applying that experience. Chen Yikun stated: "Learning for application makes the experience valuable."
"RGD's" success in the European market partly benefits from its adherence to EU standards as the basic principle for product development. This has also inspired domestic product development: "If some of the most advanced concepts and techniques from EU standards are introduced into products, they are likely to succeed in China as they are at the forefront of Chinese cigarette product concepts and innovation." Thus, a product based on EU standards, "Red Gold Dragon (Hard Xiaolou)," has entered the domestic market, with its concepts and characteristics of "green, environmentally friendly, natural, and low harm" being eye-catching.
From the beginning, Hubei Tobacco positioned itself as the "vanguard" and "experimental field" for Chinese tobacco's "going global." The recent "ocean voyage" of "RGD" is also a positive exploration and accumulation. Whether the company can establish a foothold in the broader international market depends on further in-depth and sustained efforts in the future. Currently, Hubei Tobacco has determined its brand development strategy, focusing on "Red Gold Dragon (RGD)" as the key brand for international market expansion and "Huanghelou" as the high-end brand for the international duty-free market, as well as a market expansion strategy focusing on Central and South America, Southeast Asia, the Middle East, and Eastern Europe, hoping for further breakthroughs in cultivating key brands and expanding key markets.
