Pay cuts for Japan Tobacco chiefs over tainted dumplings

TOKYO— Japan Tobacco said Friday its entire board of directors will take pay cuts after the company became embroiled in a scandal over poisoned dumplings imported from China.
JT president Hiroshi Kimura and four other JT executives will take a cut of 30 percent for three months, while others will see their salaries reduced by 10 percent over the food scare which erupted in January, a company statement said.
Japanese authorities have confirmed that 10 people suffered pesticide poisoning after eating tainted dumplings that a JT subsidiary imported from China.
Thousands more people complained of illness although the exact circumstances of how the cigarettes products were contaminated has not yet been established.
"We take this incident seriously and have decided at a board meeting today to penalise relevant members," JT said in a statement.
The poisoning scare has alarmed cigarettes consumers in Japan, which relies on imports for 60 percent of its food, with China the top provider after the United States.

Big Tobacco Faces Further Cigarette Market Declines In The U.S.

NEW YORK -The future of Big Tobacco in the U.S. is looking hazy.
Tobacco companies have been steadily selling fewer cigarettes in the U.S., but that rate of decline is likely to accelerate over the next few years. Those declines will mean the biggest cigarette companies could be in for a much tougher fight for their survival and growth in the U.S.
Altria Group Inc. (MO) - which at the end of this week will spin off its Philip Morris International business and transform itself into a domestic tobacco company - expects unit volumes of the overall U.S. cigarettes industry to decline by 2.5% to 3% a year for the next few years. That decline is steeper than the historical rate of about 2%. Altria estimates industry volumes, or the number of cigarettes sold, fell about 4% in 2007.
"We have highlighted accelerated volume declines as one of the bigger risks the industry faces," said Janice Hofferber, a vice president at Moody's Investors Service who follows tobacco and consumer products. Historically, tobacco companies have been able to raise prices fairly easily, but "there is a limit to the pricing flexibility these companies have."
The weaker volumes will mean that cigarette companies will need to focus more on cost cuts, and to dabble in new kinds of tobacco products. One thing, however, is unlikely to change: Altria is likely to continue to have the upperhand in U.S. tobacco market for some years due to the power of its Malboro brand.
In general, volumes have declined as cigarettes sellers have been pushed to boost prices to offset higher federal and state taxes and to make annual payments under a 1998 settlement agreement with states. Bans on smoking in public places and more health-conscious consumers have also contributed to the cigarette volume declines.
The U.S. tobacco companies have been trying to grow in the smaller, growing market for smokeless tobacco products. Altria - or the Big MO as the company is often called for its trading symbol - has a relatively small presence so far in smokeless tobacco. But its Marlboro brand still has 41% share of the retail market, larger than the combined share of the next 10 largest cigarette brands. Marlboro also continues to gain market share. Last year, Altria's U.S. tobacco segment saw revenue net of excise taxes rise 1.2% to $15 billion.
"I think Altria is better positioned to withstand price increases because of their brand position," said Hofferber.
Lorillard is in the next best position after Altria, she said, due to its dominance in menthol cigarettes. At the end of last year, Loews Corp. (LTR) announced plans to spin off Lorillard, its tobacco unit. Lorillard's Newport cigarettes are the top selling brand in the menthol market.
Rival Reynolds American Inc. (RAI) made an astute and quick move through its acquisition of smokeless tobacco maker Conwood in 2006 but Conwood by itself isn't sufficient to offset the challenges of weaker cigarette demand. The smokeless tobacco market is still far smaller than the market for cigarettes. A spokesman for Reynolds, which sells brands like Camel and Kool, said the company is making concerted efforts to get adult smokers to switch to its brands by introducing product and packaging innovation.
Cigarettes accounted for more than 90% of expenditures on all tobacco products in the U.S. in 2006, according data compiled by the Center for Disease Control and Prevention. Total spending on tobacco was $88.8 billion in 2005, of which $ 82 billion was spent on cigarettes, according to the agency.
Altria, Reynolds American, and the soon-to-be-independent Lorillard will not be able to rely on international growth to offset U.S. declines. Altria will be a U.S. tobacco company after the March 28 spinoff of Philip Morris International. Reynolds does business mainly in the U.S., while Lorillard sold the international rights to substantially all of its brands, including Newport, in 1977.
That said, some investors are still hoping to see steady returns from U.S. tobacco businesses.
"There is still a lot to like," about cigarette stocks, said Charles Norton, portfolio manager of the $183 million Vice Fund, which owns tobacco industry shares. "The story for the U.S. cigarette makers is not one of volume growth."
Norton likes these companies' strong pricing power, emphasis on cost reduction, their expansion into alternative tobacco products, their willingness to distribute cash to shareholders through dividends or buybacks, and an improved legal environment. In the last couple years, cigarette companies have had several important legal victories in tobacco lawsuits in the U.S.
"Tobacco in general offers earnings stability and dividend security that are vital in uncertain times like we are experiencing right now," Norton said. Norton's fund holds shares of Altria and Carolina Group (CG), currently the tracking stock for Lorillard. He has short positions in smokeless tobacco company UST Inc. (UST) and Reynolds American.
So far, no one is predicting the death of the U.S cigarette industry. Standard & Poor's tobacco debt analyst Ken Shea said, "You are going to have a universe of consumers" for cigarettes.

Oregon's cigarette tax

Gov. Ted Kulongoski plans to announce a renewed push to increase Oregon's cigarettes tax to pay for expanded children's health care when he delivers his state-of-the-state address today in Portland.
Details are being worked out, but the Democratic governor is expected to announce he is resurrecting an idea that was left for dead after Oregon voters trounced Measure 50, which would have increased the state tax on a pack of cigarettes by 84.5 cents.
"The failure of Measure 50 last November was a setback, but I refuse to treat it as a defeat. Kids can't wait," Kulongoski said Thursday.
The cigarette-tax increase is one of the key elements of Kulongoski's annual address in which he also will outline plans to seek more revenue to upgrade Oregon's transportation system, possibly with gas- tax increases or higher state vehicle- registration fees.
Additionally, Kulongoski said he will push to increase the corporate minimum tax — set at $10 in 1931 and unchanged since — and dedicate the money to Oregon's rainy-day fund to shield schools, health-care providers and other services from getting hammered in the next economic downturn.
Kulongoski's chief of staff, Chip Terhune, acknowledged that the shaky economy could make those revenue increases a tough sell with lawmakers.
"This is ambitious," Terhune said. "He is reaching hard for this one. But frankly, the governor continues to believe that making sure that children have health insurance is critical and that transportation infrastructure is in dire need of reinvestment."
Kulongoski also will outline further plans to combat global warming, which could include offering new incentives to encourage use of all-electric cars. He also will push for reallocating existing state revenue to provide increases in funding for K-12 and for higher education, as well as for Head Start preschool programs.
Terhune said Kulongoski's proposals amount to a "road map" for the coming election year in which he will try to drum up support for those ideas before forwarding them to the 2009 Legislature for consideration.
The cigarette-tax increase will reprise a long political battle in 2007, which ended with voters soundly defeating the proposal after a record-shattering $12 million TV blitz financed by the tobacco industry.
Terhune said Kulongoski's new cigarettes tax proposal will be less than the 84.5-cent-per-pack proposal that was rejected by voters. And he said it will be written in more specific terms to make it clear that all of the money goes to children's health programs.

Cigarettes Maker Has Conducted 33 GM Tobacco Tests Since '05

Two days ago, Philip Morris backed NC-State scientists announced they'd genetically engineered tobacco plants to have reduced levels of some carcinogens. Further investigation by Wired.com revealed that the tobacco giant has applied for 34 field test permits for genetically modified tobacco since May of 2005, according to the USDA field trials database. 33 of the permits were issued.
Over the last three years, the USDA received 117 total applications to test GM tobacco strains, including 19 by North Carolina State University, which received $17.5 million from Philip Morris in December 2002 to map the tobacco genome.

Little can be determined about the types of studies that Philip Morris has run because they've labeled the details of their field permit applications, "Confidential Business Information," sealing them from public scrutiny.
Philip Morris is not alone among tobacco companies in genetically modifying tobacco. Vector Tobacco, which has developed a low-nicotine variety of the crop, has applied for 14 field permits since 2005, although five were rejected. RJ Reynolds has applied for six, and had one denied.
But the scale of the Philip Morris' genetic engineering program caught even staunch anti-GMO groups off-guard. Bill Freese, of Center for Food Safety, commented, "I'm shocked."
Many groups that fight genetically modified organisms focus on genetically modified food or "pharming," or the practice of synthesizing pharmaceuticals in cigarettes plants. Tobacco, however, is a natural drug crop and falls between the cracks of most watchdog groups. For example, Vector has been marketing cigarettes with genetically modified tobacco under the Quest 1-2-3 brand since 2003, according to an interview the company's CEO gave to Business Week. Almost no public outcry has resulted.

Kentucky not alone with its budget problems

As Kentucky faces a projected revenue shortfall of nearly $1 billion over the next two fiscal years, the state is not alone in the nation when it comes to grappling with sagging revenues and increasing budgetary needs.
Kentucky is among states across the country that are facing tough budget decisions this year, according to a review by The Associated Press. Nearly two dozen states are facing shortfalls that combined total more than $34 billion, the AP review found.
"Nearly all the states are having problems, and the ones that aren't are getting ready to have problems because of the downturn in the national economy," said House Speaker Jody Richards, D-Bowling Green. "This is not unique to Kentucky in any way."
Kentucky is facing a projected budget shortfall of approximately $900 million over the next two fiscal years beginning July 1. That's about $580 million in fiscal 2009 and about $300 million in 2010.
Lawmakers in Kentucky are pondering various options, including raising the state's tax on cigarettes and significant cuts to higher education funding. Gov. Steve Beshear has proposed a two-year spending plan that calls for 12 percent cuts to public universities and multiple government programs and agencies.
Beshear has proposed an austere two-year $18.5 billion spending plan that includes significant cuts to state agencies and public universities. Kentucky's current two-year budget is about $18.1 billion.
But Beshear has said that cuts to higher education and other areas of state government were needed to offset unavoidable hikes in "have to" areas such as Medicaid and the state's prison system.
Beshear has already ordered 3 percent spending cuts to state government and public universities in an effort to resolve the current fiscal year's $434 million budget shortfall. Beshear attributed the current year fiscal problems to less income than was considered in the budget, additional spending that was authorized by the General Assembly since the budget was passed and additional spending needs in programs such as Medicaid and the state's prison system.
A group of Kentucky economists, known as the Consensus Forecasting Group, predicts shrinking revenue from various sources, including corporate and individual income taxes and sales taxes.
Now Kentucky lawmakers are considering ways to increase revenue.
Beshear is pushing a proposal to legalize casino gambling, which he says could bring at least $500 million in license fees by next year and $600 million in new revenue in future years.
The Kentucky House last week approved a budget proposal that called for an increase in the cigarettes tax of 25 cents per pack. Beshear wants lawmakers to pass a 70-cent cigarette tax increase and use the revenue to generate up to $800 million in new revenue through bonds.
Beshear, who has opposed raising such taxes, said he believed the proposed cuts to state government would be too severe.
Senate President David Williams, however, said there is "very little if any sentiment" for raising taxes. The state is in "tough economic times," and there will likely be "some cuts," Williams said.
"I never have believed, and do not believe, that we are in a fiscal crisis," Williams said.
Nevertheless, Kentucky's Medicaid program would likely fall short at least $360 million over the next two fiscal years under Beshear's proposed budget, Health and Family Services Secretary Janie Miller recently told a legislative panel.
Under the House-approved plan, Kentucky would also refinance General Fund debt, and other services would be taxed under the proposal. Public-school teachers, however, would see a pay increase of 4 percent over the next two years under the proposal.
Along with the cigarettes tax increase, the House revenue package counts on revenue from higher taxes on other tobacco products and a variety of business services to generate an additional $95 million. Revenue from the taxes coupled with cost-saving provisions would generate some $800 million over the next two years. One of the largest of those provisions calls for restructuring and refinancing General Fund debts to save about $300 million over two years.
Williams said he did not agree with the House's proposal, which is pending in the Senate.
"I think that that's not responsible," Williams said of the House plan.

Darling clobbers booze, cigarettes

Alistair Darling has slapped more tax on cigarettes and alcohol as he scaled back on his economic forecast.
In what he called his "budget for stability", the Chancellor also moved to reaffirm the Government's green credentials by introducing moves to help the environment.
Among the measures announced are the prospect of a charge on plastic bags and free road tax for one year of low-emission cars. However, he postponed a planned increase in fuel duty until next October.
Booze and cigarettes will rise dramatically at midnight on Sunday - the eve of St Patrick's Day - to help raise money to tackle child poverty, he said.
Duty rates will increase by 6% above inflation with beer up by 4p a pint, cider 3p a litre, wine 14p a bottle and spirits 55p a bottle. Duty on tobacco rises from 6pm today, adding 11p to the price of a packet of 20 cigarettes and 4p to five cigars.
It was a difficult first budget for the Chancellor with the UK economy facing the biggest slowdown since Labour came to power and a large hole in Treasury coffers. High levels of government debt and the global credit crunch left him with few options.
Standing at the despatch box, unveiling Labour's 12th budget, he spared motorists a further hike at the pumps with the planned 2p rise in fuel duty - which kicks in automatically every year - delayed "to support the economy now and help business and families".
He added: "For environmental reasons we will increase fuel duty by 0.5p per litre in real terms from 2010."
The move sparked widespread criticism from environmental campaigners, who claimed it damaged the government's green credentials, but soaring crude oil prices have left fuel inflation at the highest since records began in January 1997.
In a nod to tackling green issues he announced legislation to come into force in 2009 to impose a charge on single-use carrier bags if progress is not made on a voluntary basis.
The Chancellor confirmed that the Government was poised to impose charges on the use of plastic carrier bags unless supermarkets make "sufficient" progress on a voluntary basis.
He said legislation would come into force in 2009 and could lead to around 12 billion fewer plastic bags in circulation.
He announced plans for a zero rate of car tax in the first year for new, low emission cars but a higher first year rate on the most polluting cars.
Despite keeping a tight rein on the purse strings there were a few bonuses. Parents will get an extra £50 a year above inflation on the child element of the tax credit from next April and a further £125m to be spent over the next three years to help families.
Child benefit for the first child will rise to £20 a week from 2009 - a year earlier than planned.
And five million customers on energy pre-payment meters will be given a fairer deal, with legislation if necessary.
Mr Darling said all economies were trying to maintain stability during the global slowdown but insisted Britain was better placed to do so. He told MPs growth in the British economy was estimated at 1.75% to 2.25% in 2008 - higher than Japan or the US - and will rise to 2.25%-2.75% in 2009 and 2.5%-3% by 2010.
Corporation tax will fall from 30% to 28% by April this year, he confirmed.
To prevent a return to the high inflation of the early 1990s he said he is writing to the governor of the Bank of England to keep a 2% target on inflation.
Today's budget was a major test for Mr Darling, who has come under increasing criticism for his handling of the Northern Rock crisis, attempts to tax wealthy "non dom" foreigners living in Britain, and his overhaul of the capital gains tax system.
He told MPs that the Government's action to support Northern Rock and protect depositors and savers meant that confidence and stability in the banking system had been maintained despite the "worst period of financial disruption for a generation".
The Tories said that for the "first time in years" the story of the budget is the state of the economy and the incompetence of a government that failed to prepare. A spokesman said: "We know that after 15 years of global economic growth, Britain has the worst budget deficit of any major economy."

Assembly Approves Fire-Safe Cigarettes

All cigarettes sold in Wisconsin would have to be the type that automatically extinguish when they're not being smoked under a bill that has passed the Assembly.

Wisconsin would join 22 other states in requiring that only fire-safe cigarettes be sold should the bill also clear the Senate and be signed by the governor.

Tobacco companies do not oppose the measure, which has the support of firefighters and emergency responders.
sponsor

R.J. Reynolds Tobacco Company plans to voluntarily switch all its cigarettes to the fire-safe kind by the end of next year.

ITC Shares Drop After India Increases Cigarette Tax

NEW DELHI: When it comes to smoke, Finance Minister P Chidambaram does not want to differentiate between filter and plain cigarettes, on which he has proposed to levy an excise duty of up to Rs 1.32 per stick.

The new duty structure brings non-filter cigarettes on par with filtered ones.

"Non-filter cigarettes are more toxic than filter cigarettes, yet they enjoy a favourable tax regime, which is iniquitous. I propose to tax both filter and non-filter cigarettes on par by applying higher rates," Chidambaram said in his Budget speech.

For the smaller non-filter cigarettes not exceeding 60 mm length, the excise duty has been increased nearly five times to Rs 819 per 1,000 cigarettes from prevailing Rs 168.

But for the longer cigarettes, the excise duty has been increased by over two and half times to Rs 1,323 from Rs 546 for every 1,000 sticks.

He, however, kept the excise on filtered cigarettes unchanged.

At present, cigarettes attract duty at varying rates depending upon whether they are filter or non-filter and their length. Excise duty rates on non-filter cigarettes have been enhanced to bring them at par with filter cigarettes of corresponding length.