Annual report 2010 - Imperial Tobacco Group

Operating Review continuedStrategy Performance Governance FinancialsOur PerformanceWith a price increase in June across our value cigarettebrands and strong growth in our fine cut tobacco volumeswe grew our net revenue to £853 million (2009: £826million), with adjusted operating profit up 7 per cent to£432 million (2009: £403 million).A number of initiatives including new variants and softpacks have driven JPS market share up to 9.3 per cent(2009: 8.5 per cent).West, positioned in the mid-priced segment in Germany hascontinued to be impacted by consumers’ downtrading, withour overall market share declining to 26.9 per cent (2009:27.3 per cent). In line with our global brand strategy, new packdesigns and variants for West have recently been introduced.From 1 April this year Gauloises Blondes was incorporatedinto our distribution network and we have subsequentlyextended distribution, with the “100 ans de Liberté”centenary special editions launched in the market.Our total tobacco approach has enabled us to furtherconsolidate the JPS brand franchise in the fine cut tobaccosegment, with our overall market share up to 18.2 per cent(2009: 17.6 per cent). Route 66 make your own tobaccoalso performed well.OutlookWe expect consumers to continue to economise and ourstrength in value brands and products means we are wellplaced to benefit from this dynamic. We will continue toleverage our portfolio to capitalise on growth opportunities,with a particular focus on building sales of our key brandsJPS, West and Gauloises Blondes.SpainCigarette2010 2009Volumes 25.3bn 30.3bnMarket size 1 73.9bn 83.6bnMarket share 1, 2 29.0% 30.6%1 Imperial Tobacco estimates.2 Market shares reflect the domestic blonde cigarette segment.Fine Cut Tobacco2010 2009Volumes 1,400t 2,350tMarket size 1 4,950t 5,150tMarket share 1 32.3% 42.6%1 Imperial Tobacco estimates.Market Environment and Consumer TrendsThe recession is continuing to have a significant impact inSpain and market conditions remain challenging.Against this backdrop consumers have reduced theirspending in almost every consumer category with the valuecigarette segment now accounting for 26 per cent of theoverall cigarette market (2009: 23 per cent). There has alsobeen considerable switching into fine cut tobacco and inaddition, tourism levels in Spain have declined, impactingtravel retail purchases.We estimate overall cigarette market volumes were downby 12 per cent to 73.9 billion cigarettes (2009: 83.6 billion),with fine cut tobacco volumes down by 4 per cent to 4,950tonnes (2009: 5,150 tonnes).Performance Highlights: SpainWe are market leaders across alltobacco segments in Spain andhave increased our share in thegrowing value segment with softpack launches and repositioningof variants of Ducados Rubio.34