Savanna to take on BAT giant

By Nicola Mawson, IOL Business Editor Time of article published Sep 7, 2016

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Harare - Zimbabwe’s Savanna Tobacco aims to take on well-established players across the African continent as it grows its market.

The company, which in July bought the Remington Gold brand from local manufacturer Cut Rag Processors, plans to add at least four countries to its portfolio a year. It is currently in Zimbabwe, but is also found in South Africa, Mozambique, Zambia, Lesotho, Swaziland, Malawi and the Democratic Republic of Congo.

With the acquisition, Savanna Tobacco now owns four brands - Pacific, Branson, Pegasus and Remington Gold.

Savanna global CEO Nick Hales says Savanna’s share of the market is growing in Zambia and Zimbabwe.

Hales is a born-and-bred tobacco man who has spent his entire career in the industry, most recently with British American Tobacco.

His brief, he says, is to expand the company’s operations in Africa, and the company is about to launch in a new country in the next few months, a location he cannot disclose because it is competitive information.

Chairman Adam Molai has big ambitions for the company - including dominating as much of the market as possible.

After that, Hales’ plan is to take the brand global. “Africa first and then the world.”

Savanna is aiming to launch in about four countries a year, Hales says. Its pricing in the store, at around $1.10 a box, is cheaper than that of its rivals, which gives it an edge in a country where the per capita gross domestic product is $1 000.

Targets

The brand is taking on some big players.

Globally, the Chinese National Tobacco Market Company rules the roost, and this state-owned company is followed by Phillip Morris, British American Tobacco and then JTI, which is better known for its Camel brand.

Savanna aims to grow its share in this tightly contested market. In Africa, the market is dominated by BAT.

Hales says the company wants to be a serious competitor. “We just want to grow share.”

Savanna, he says, can act quicker because it’s smaller, which makes decision-making quicker, and allows it to be nimble in the market. He says this also allows it to listen to consumers for each country it enters.

Savanna has a total capacity of 5 billion sticks s year, and between its Mozambique, Zambia and Zimbabwe operations, employs just more than 200 people.

Hales says the company has capacity available and can re-allocate as needed. The company also has an appetite for risk, he adds.

In Zimbabwe, Savanna uses a multi-pronged distribution approach. It sells through retailers, wholesalers and smaller traders. Some of its stock is legally sold in informal markets, and some is sold through what South Africans would recognise as a spaza shop.

The company also helps traders to set up, providing them with financing as long as it can mitigate the risk.

Hales says the devastating drought did not have such a negative effect on the tobacco crop as feared. He explains that the total output was 30 percent higher than anticipated, and the only issue was the blending had to be controlled because the nicotine level was higher because it wasn’t as diluted as it would have been in a usual season.

The amount of nicotine in cigarettes is limited by the government. In SA, it’s capped at 1.2 MGS.

* Nicola Mawson was hosted in Zimbabwe courtesy of private industry in SA.

IOL

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