In China where the population gets through 1 Details of an investment in Turkey are also imminent.At the time of the deal with Reemtsma, Imperial said it was bowing out of industry consolidation, but Davis is now gearing up for a return to the acquisitions fray. In China, where the population gets through 1.7 trillion fags a year, Imperial is set to announce a licensing agreement with partner Yuxi Hongta Group. The biggest deal, though, was the £3.5bn purchase last year of Germany's Reemtsma, which has operations in the vital markets of central and eastern Europe, Africa and Asia.Tomorrow, when Imperial posts its final results, the effect of the Reemtsma deal is expected to be shown as a pre-tax profits surge from £642m to around £865m The company is also likely to detail further growth plans. In the past six years, Imperial has spent £4.4bn on acquisitions, including papers business Rizla and Tobaccor, the second-largest manufacturer in sub-Saharan Africa. Embassy has sponsored snooker for 28 years and its West brand sponsors Formula One team McLaren Mercedes.But Davis counters: "If a child is watching a car whizz round on television with West on it, does that incite them to get up off the sofa and buy a packet of cigarettes? I don't think so."One thing that is indisputable is the slump in the UK, Imperial's biggest market, to around 54 billion sticks a year from 130 billion when Davis entered the industry 31 years ago.Yet he has not given up on the home market and believes actual consumption is higher, around the mid-70s, as smokers buy cheaper fags from abroad."What we have seen in recent years is consumption being fairly flat," he adds. Along with rivals, the focus is shifting to emerging markets, where anti-smoking legislation is minimal and people puff away happily. "That's indicative that you are reaching a core group of people who are saying: 'I've heard the warnings, I'm an adult, I want to smoke and I'm going to smoke.' There's no advertising, there's some fairly restrictive practices around and yet people still smoke."But Davis is reducing Imperial's reliance on the UK. But the company does have the dubious distinction of being at the centre of the UK's first tobacco compensation case. Margaret McTear is suing it for £500,000 after her husband's death, and a decision is due early next year. Yet litigation, says Davis, "doesn't keep me awake at night".
Giving evidence last week, he refused to accept smoking killed, arguing that there was no firm proof linking cigarettes to lung cancer.He is similarly dismissive of the ban on sports sponsorship, now in force in the UK and due to affect other European Union countries by 2006. Everyone was working on the basis less was best."Those allegations surfaced in litigation in the US, where Imperial, which owns Embassy, Lambert & Butler and Golden Virginia, does not have any operations. Meanwhile, smokers struck down by illness continue to seek compensation in the courts.Davis remains unruffled. For a start, he is quick to defend much of the industry, particularly over accusations that tobacco companies deliberately misled smokers into believing "light" brands were better than normal ones: "That annoys me It's an absolute travesty. Yet, in western markets at least, his views aren't widely shared. Consumption has slumped over recent years, with smokers put off by the health risks and, in the UK, by duties that mean a pack of 20 now costs almost £5. Advertising, sponsorship and marketing have been curtailed and the health warnings on packets keep getting bigger and more stark. "It's one of the most over-used and misused words in the English language," he says. "If addictive means you can't give up, then that clearly isn't the case with smokers."Davis has spent all his career with Imperial - becoming chief executive in 1996 when it was demerged from the Hanson conglomerate - so he has had plenty of time to hone his beliefs about fags. A dedicated follower of nicotine, the Bolton-born chief executive of Imperial Tobacco is only too happy to sing the praises of his 20-a-day habit: "I believe in the right to smoke," he says. "It gives me an enormous amount of pleasure and I'm stunned that you get so many unbalanced arguments about it."And even for a committed smoker, one of the arguments with which Davis takes issue is the idea of nicotine addiction. |
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