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Imperial Tobacco's sales are going up in smoke

The British tobacco group, the fourth largest in the world, sells 340 billion cigarettes a year but is struggling to increase sales volumes.

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Imperial Tobacco expects revenue to increase 4% this year – but only because the group has hiked the price of its cigarettes. Sales will be down 3% in the year to the end of September, the group said today, because of tough trading in Spain and stronger competition in Poland and Ukraine.

The 110-year-old Bristol-based company sells over 340 billion cigarettes a year in over 160 countries. But it has suffered from a rise in health-conscious consumers and at the hands of the illegal tobacco trade, which offers consumers a cheaper alternative. In particular, illegal tobacco selling in Ukraine has given Imperial a headache this year, while in Poland its hand rolling cigarette business was hit by farmers selling more tobacco directly to consumers.

Despite the troubles in Poland and Ukraine, growth was strong across the rest of Eastern Europe, in Africa and the Middle East and also in its Asia Pacific region. Imperial now hopes to fight Europe’s economic downturn (responsible for sliding sales in Spain) by offering cheaper, economy-brand cigarettes across the region. But the long-term downward trend of cigarette smoking will be a difficult problem to stub out.

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