Tobacco Industry: Definitions

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These terms are used on TobaccoTactics. Different terms may be used by other people and organisations working in tobacco control or other areas. We aim to simplify and use non-technical language where possible. We indicate where to find more information on TobaccoTactics and relevant external resources.

The tobacco industry

Central to the tobacco industry are companies which are involved in the manufacture and distribution of tobacco products.1  Manufacture and distribution are maintained and promoted by the companies through marketing, research and development, finance and business services, and lobbying.

The same companies may also be involved in tobacco leaf growing and processing, or different companies may be contracted to do this.  Other industries support the tobacco supply chain, such as the makers of cigarette paper and packaging, and manufacturers of machinery for tobacco factories.

Tobacco company

A tobacco company sells cigarettes and may sell other tobacco products, such as cigars or rolling tobacco. Some tobacco companies also sell nicotine products, including e-cigarettes and nicotine pouches.

Heated tobacco (sometimes called ‘heat-not-burn’) is a tobacco product and therefore a company selling heated tobacco is described as a tobacco company, even if they do not sell other tobacco products.

Transnational tobacco company (TTC)

A tobacco company, or corporation, operating in more than one country. 2 Transnational companies may specialise their operations in particular countries. For example, the head office may be in one country, research and development functions in another, and financial services in a third.2 . Transnational subsidiaries  have some decision-making powers and can adapt their activities to local needs.3 The term ‘multinational’ is also used to describe companies  operating  across borders, but company management operations are centralised in the country where they are headquartered,2 and their subsidiaries have less autonomy.3

TobaccoTactics uses the term transnational tobacco company (TTC) and features the ‘big 4’:

The TTCs are limited liability companies or corporations (Public Limited Company, or PLC in the UK).4567 It is possible for the public to buy shares but the company is controlled  by a Board of Directors (who may also be shareholders).  Limited liability means that shareholders’ personal wealth is not at risk to pay company debts.  The TTCs are ‘listed companies’ which means their shares are listed, bought and sold on a particular stock market.8

Company Structure

Parent company

This is a company that controls other companies but does not sell products or services itself.  Sometimes these are called a ‘holding’ or ‘umbrella’ company.910 For example, Imperial Brands is the parent company of Imperial Tobacco among others.

Subsidiary

A subsidiary is a company which is controlled by another company (its parent).101112

A company may be a wholly owned subsidiary with the parent company owning 100% of the shares sometimes through an ‘intermediate parent’ if the immediate parent is also a wholly owned subsidiary.  TTC company structures can involve many intermediate parents.13

A company can buy shares in another company. If it owns the majority (>50%) of shares, and therefore more voting rights than other shareholders, it can appoint or remove the Board of Directors. A majority share of over 50% is sometimes called a ‘controlling share’.  Buying more shares can be a way to take over a company (see for example PMI’s acquisition of Swedish Match)

The US National Securities Agency (SEC) requires that companies report only on ‘significant subsidiaries’, for example where the subsidiary is responsible for more than 10% of the parent company’s assets or income.14   PMI is headquartered in the US and so follows these guidelines in its Annual Reporting.

Tobacco companies have multiple subsidiaries in other countries. For example, in the early 2020s BAT had tobacco growing subsidiaries in 23 countries and as of 2023 has tobacco product (i.e. cigarette) factories in 44 countries (see the Supply Chain Database).

Some TTC subsidiaries have been set up to develop or invest in products other than cigarettes. These are sometimes named ‘Ventures’ although they are not external companies.15

For example:

Joint venture

A company set up by more than one company. Depending on the percentage shares each holds, the relationship is either between equal partners, or a senior and junior partner (in some cases partners).16 For example:

Associate

When a minority share (under 50%) is held in another company, that company is described as an ‘associate’, rather than a subsidiary.17 BAT and Imperial Brands, headquartered in the UK,  list associates in their Annual Reports. For example, BAT describes Kamaran in Yemen, and ITC in India, as its associates, stating that it owns 31% and 29% respectively.18 Imperial Brands lists Lao Tobacco among its associates incorporated overseas stating it owns 44%.19  In the US, the legal definition is direct or indirect ownership of 10% of a company.20

Affiliate

This is a broad term which can include:  parent companies; sibling/sister companies controlled by the same parent; subsidiaries; and associates.2122  In their annual reports both BAT and PMI refer to companies which they, and their competitors, own as “affiliates”.1823

Commercial relationships

Partnership

Partnership has multiple meanings. A business partnership is an arrangement between two or more individuals or companies, who jointly oversee business activities.2425 Tobacco companies do not usually have partnerships with other tobacco companies, although they may have partnership type agreements to collaborate in specific areas.

They may also have partnerships which indirectly support their business interests, for example with international bodies, or civil society NGOs (part of the ‘third sector’ in the UK) organisations.

Licensing agreement

TTC subsidiaries make money by receiving royalties from licensing trademarks to overseas subsidiaries. For example, one of BAT’s UK based subsidiaries, Rothmans of Pall Mall, owns Rothmans of Pall Mall and Royals trademarks and receives royalties from licensing these to BAT subsidiaries globally.

Some companies sell the products made by other companies under a licence agreement (or ‘under licence’). For example:

Sponsorship

This is a financial arrangement between a company and another company, project or activity.2627 The sponsoring company usually has their logo or brand name displayed on public-facing material. One example of this kind of corporate marketing used by tobacco companies is motorsport sponsorship.  Sponsorship can also be related to companies Corporate Social Responsibility (CSR) activities.

Sectors

Public, private and third sectors

The public sector is that controlled by the state.

Private sector (companies) are privately owned and not directly controlled by the state, although the state may hold shares or interests.

The third sector includes ‘not-for-profit’ organisations like charities and voluntary organisations.2 Many non-governmental organisations (NGOs) come into this category. The third sector is also referred to as civil society.28

State-owned company

A company or enterprise owned by the Government of the country.29 In some cases the company may not be wholly owned, but the government holds a majority share or controlling interest.3031

For example, the Japanese government owns a one third share of Japan Tobacco Inc., the parent company of JTI, but this is not primarily a state owned company.32

If a company is the only one in that market, it is referred to as a monopoly.33 Examples of tobacco companies which are state-owned monopolies include:

Monopolies do not prevent TTCs operating in a country. For example, in Vietnam the TTCs produce their brands locally through joint ventures with VINATABA.37

Tobacco Control

The World Health Organization Framework Convention on Tobacco Control (WHO FCTC) defines tobacco control as:

“a range of supply, demand and harm reduction strategies that aim to improve the health of a population by eliminating or reducing their consumption of tobacco products and exposure to tobacco smoke1

Parties to the WHO FCTC are required to apply tobacco control measures in relation to all types of tobacco company including state-owned.

For WHO FCTC definitions see Article 1 of the WHO FCTC.1

Product Regulation

For up-to-date information on tobacco regulation around the world, see the Tobacco Control Laws website, published by the Campaign for Tobacco Free Kids (CTFK).

Since the early 2000s transnational tobacco companies (TTCs) have developed interests in newer nicotine and tobacco products, including e-cigarettes, heated tobacco products and nicotine pouches. Companies have referred to these types of product as ‘next generation products’ although product terminology changes over time. The Policy Scan Project, by the Institute for Global Tobacco Control (at Johns Hopkins University) tracks and reports regulatory approaches to these newer products.

Relevant Links

Detailed explanations of Types of Corporations,  Investopedia website

What is Tobacco? STOP blog, available at exposetobacco.org

Tobacco Tactics Resources

Companies & Products (topic list)

Tobacco Industry Product Terminology

Tobacco Supply Chain

Tobacco Industry Tactics

TCRG Research

Defining and conceptualising the commercial determinants of health, A. Gilmore, A. Fabbri, F. Baum et al, The Lancet, 2023, doi:10.1016/S0140-6736(23)00013-2

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References

  1. abcWorld Health Organization, WHO Framework Convention on Tobacco Control, 2003
  2. abcdA. Gilmore, A. Fabbri, F. Baum et al, Defining and conceptualising the commercial determinants of health, The Lancet, 2023, doi:10.1016/S0140-6736(23)00013-2
  3. abS. Kedia, The Difference Between International, Multinational, Transnational & Global Companies, Marketing Mind, 8 January 2020, accessed July 2023
  4. UK Government, Shareholders and guarantors, website, undated, accessed April 2023
  5. UK Government, Companies Act 2006: Types of company, available from legislation.gov.uk
  6. Government of Japan, Companies Act 2005: Part 1 General Provisions, available from Japaneselawtransaltion.go.jp
  7. US Small Businesses Administration, Choose a business structure, website, undated accessed April 2023
  8. Listed: Definition, Investopedia, 25 May 2022, accessed April 2023
  9. Parent Company: Definitions, Types and Examples, Investopedia, 25 May 2022, accessed April 2023
  10. abCorporate Finance Institute, Parent Company, December 2022, accessed April 2023
  11. Subsidiary Company: Definition, Example, and How It Works, Investopedia, 29 September 2020, accessed April 2023
  12. UK Government, Companies Act 2006: Meaning of subsidiary, available from legislation.gov.uk
  13. A. Rowell, J. Branston, Big Tobacco, Big Avoidance: What role do British American Tobacco’s secretive UK subsidiaries play in facilitating tax avoidance?, brief, Tobacco Control Research Group, February 2022
  14. Cornell Law School, Significant subsidiary, undated, accessed April 2023, available from law.cornell.edu
  15. R.P. Garrett, Internal Corporate Ventures, 2015. In Wiley Encyclopedia of Management, eds C.L. Cooper, M.H. Morris and D.F. Kuratko. doi:10.1002/9781118785317.weom030059
  16. Joint Venture (JV): What Is It and Why Do Companies Form One, Investopedia, 28 March 2023, accessed April 2023
  17. What is an Associate Company?,  Investopedia, 31 March 2021, accessed July 2023
  18. abBritish American Tobacco, Delivering Transformation: Combined Annual and ESG Report 2022, available from BAT.com
  19. Imperial Brands, A Challenger Mindset: Annual Report 2022, available from IMB.com
  20. Definitions: Associate, Legal Information Institute, Cornell Legal School, website, undated, accessed July 2023
  21. Affiliated companies: Definition, Criteria and Example, Investopedia, 14 November 2020, accessed July 2023
  22. Affiliated company, Financial Conduct Authority (UK), website, undated, accessed July 2023
  23. Philip Morris International, Annual Report 2022, available from PMI.com
  24. Partnership: Definition, How It Works, Taxation, and Types,  Investopedia, 28 March 2023, accessed April 2023
  25. Corporate Finance Institute, Partnership, December 2022, accessed April 2023
  26. Corporate sponsorship, Investopedia, undated, accessed April 2023
  27. National Cancer Institute, The Role of the Media in Promoting and Reducing Tobacco Use, Tobacco Control Monograph No. 19, June 2008, Bethesda, MD: U.S. Department of Health and Human Services, National Institutes of Health, National Cancer Institute, NIH Pub. No. 07-6242
  28. United Nations, Civil Society, website, undated, accessed April 2023
  29. S.L. Hogg, S.E. Hill, J. Collin, State-ownership of tobacco industry: a ‘fundamental conflict of interest’ or a ‘tremendous opportunity’ for tobacco control? Tobacco Control, 2016;25:367-372, doi: http://dx.doi.org/10.1136/tobaccocontrol-2014-052114
  30. I. Linert, Where Does the Public Sector End and the Private Sector Begin?, IMF working paper, 1 June 2009
  31. The Size and Sectoral Distribution of State-Owned Enterprises, Organisation for Economic Co-operation and Development (OECD), September 2017, OECD publishing, Paris, doi:10.1787/9789264280663-en
  32. Japan Tobacco Inc, Financial Policy: stability and flexibility, website, undated, accessed April 2023
  33. Monopoly, Investopedia, 2 August 2022, accessed April 2023
  34. South East Asia Tobacco Control Alliance, Thai Tobacco Monopoly Corporatized – What Is Different?, Tobacco Watch website, 28 July 2018, accessed April 2023
  35. R. MacKenzie, H. Ross, K. Lee, ‘Preparing ourselves to become an international organization’: Thailand Tobacco Monopoly’s regional and global strategiesGlobal Public Health, 2017, 12:3, 351-366, doi: 1080/17441692.2016.1273369
  36. H. Alaouie, J.R. Branston, M. Bloomfield, The Lebanese Regie state-owned tobacco monopoly: lessons to inform monopoly-focused endgame strategiesBMC Public Health, 22, 1632 (2022),doi: 10.1186/s12889-022-13531-z
  37. South East Asia Tobacco Control Alliance, Thai Tobacco Monopoly: Should it be Privatised, Tobacco Watch website, 3 March 2017, accessed April 2023