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Five questions with Jean-Pierre du Coudray
1 The cigarette industry, by the very nature of its products, is often viewed as more resilient than many others. How has the impact of the current economic climate affected demand for Witco’s products and have you seen any changes in customer tastes and preferences?
Current economic challenges are very different to what we have experienced before and consumers are more careful, more sophisticated and are making more informed choices.
Our research has confirmed that despite the economic environment the overall market size for cigarettes in T&T has remained reasonably stable.
What we are experiencing, however, similar to many other countries, is as consumers disposable income comes under pressure, they go looking for a more affordable solution.
Price has become the important determining factor when making purchasing decisions, balanced with the need of value for money.
As with several companies in the market, the impact of the economic recession during 2017 has made business very challenging.
As a result, this has forced us to review all aspects of our business model in 2017 as it was clear the rules of the game has changed and probably has changed for the long term.
Having said that, we have still been able to deliver a commendable performance.
To date, we have made interim dividend payouts of $2.96 per share with the announcement of a final dividend anticipated this week.
The dividend yield of close to five per cent continues to demonstrate the sound performance of the company and we are still the second highest valued share on the stock exchange and the highest valued share of the manufacturing sector.
The real resilience of West Indian Tobacco is that it has been able to capitalise on its strengths.
The business model of the company puts the manufacturing and marketing of superior quality products at the heart of the business and the sustainable approach to sourcing, production, distribution and marketing helps create value for a wide group of stakeholders.
Our export business, which represents over 70 per cent of our volume, allows us the ability to earn foreign exchange and has also facilitated the key to continued success.
This fact cannot be understated given the recent and current shortages of foreign exchange in the market.
The fact that we are a net earner of US dollars allows us to manage the business in a sustainable manner.
Having said that, there is no doubt 2017 was a year of learning for us all, and we believe we have made the necessary adjustments and changes to our portfolio and business design to ensure continued growth 2018 and beyond.
2Witco is an extremely profitable business.
It is also a business that has historically been subject to a more onerous taxation scheme by the State. Do you believe that in some regard the company is a “soft target”?
We acknowledge that the company is a profitable one and we do not see ourselves as a target. Rather, we see ourselves as a legitimate business which is required to play our part and contribute to our country in all aspects as part of the business community. We support regulation that allow us to maintain a balance between consumer preferences and the interests of society, while recognising the right to compete commercially as a business.
We have seen in other countries, as excise taxes goes up, the introduction of illegal brands in the market increases. In October 2016, the government of T&T once again increased Excise tax by 15 per cent and almost immediately we noticed an increased presence of ultra low price brands in the market many of whom we suspect are in the market illegally.
In a situation of this nature:
• Government loses as they don’t collect the revenue they expect
• Industry loses as we lose market share to these Ultra Low Price brands
• Consumer loses as these products usually originate from sources where quality of product is not of high importance but only price matters.
• The real issue with taxation is that striking the right balance is crucial and this cannot happen without active engagement with all key stakeholders.
3The company has been very vocal about illegal trafficking of products in the local market.
Can you outline why this is an issue that merits public concern?
Illegal trafficking in products should be everyone’s concern and should not be viewed in a vacuum as there are economic, political, and social problems resulting from illicit activities as illegal drug trade, smuggling, and organised crime.
An illicit cigarette happens in any one of many ways. It is one that is produced and marketed under a brand that, although it could be registered, does not have the government permits to operate legally, is produced with low quality materials, its packaging does not have the warnings required, their sale is not authorised by the Ministry of Health nor the tax authority, in fact, it occurs in illegal factories, and is usually smuggled from one country to another.
We have seen in other countries where the illicit trade or black-market cigarettes have basically destroyed the legal business in that country and now the authorities and government are trying to work out where they went wrong and how to fix the problem. Easier said than done.
We are confident that the key stakeholders in T&T would work with the industry to ensure we don’t make the same mistakes here.
4A number of alternatives to cigarettes have grown in popularity as of late. Also, there has been movement in some territories to review laws on other currently banned substances. How do you see this affecting Witco or its business model going forward?
We recognise there is a popularity in some alternatives to cigarettes but we do not believe that this is poised to overtake the combustible cigarette any time soon. We also note that some are legal and some are banned substances. As far as other banned substances are concerned, we believe that through thorough research Governments will make the right decisions.
Our focus has been on the products which our consumers have taken interest in. If it is shown that these new products are what the market demands, the business will adapt.
We believe that these “Next Generation Products” may allow for an opportunity to deliver on our promises to our consumers in a new way that is potentially less harmful than traditional tobacco products.
5The cigarette business is usually a tough one to defend. Beyond its profits, how does Witco see itself adding societal value given the parameters within which it must operate?
The company and the tobacco industry in T&T operates within a regulated environment largely based on the Tobacco Control Act 2009 and being under the purview of the Tobacco Control Unit of the Ministry of Health.
The company, nevertheless, has always been clear that it supports regulation that is based on robust evidence and thorough research, respects legal rights and livelihoods and delivers on the intended policy aims.
Within this framework we flourish and seek to develop as a responsible, successful and sustainable business.
Our approach includes:
• Engaging openly on regulation.
• Responsible marketing of tobacco products and working with retailers to prevent youth smoking.
• Collaborating with others to tackle the illegal tobacco trade.
• Safeguarding human rights across our own operations and our supply chain.
• Protecting the health and safety of our workforce.
• Addressing the environmental impacts of our business operations.
About Jean-Pierre du Coudray
Jean-Pierre du Coudray was appointed managing director of West Indian Tobacco in October 2006. He has been in the tobacco industry since 2001.
He is a member of the board of the T&T Chamber of Industry and Commerce and sits on the board of several companies in the First Citizens Group.
He holds a bachelor of arts degree in economics from the University of Western Ontario, Canada.
Freedom through responsibility. Trust, support and respect your people and they will go to war for you.
Deputy Head of News-Business
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