Imperial Tobacco has secured the rights to distribute Marlboro cigarettes in the UK.
Imperial has signed a sales-and-distribution deal with Marlboro’s parent company, Philip Morris, in a move that severely dents British American Tobacco’s (BAT) standing in the UK market.
The Marlboro brand will be handed over to Imperial this September. The move follows a legal dispute between BAT and Philip Morris over the existing deal.
The dispute culminated in an appeal court ruling in July that allowed Philip Morris to end the agreement with BAT.
BAT has held the UK sales and distribution rights for Marlboro since it took over Rothmans in 1999. Rothmans had distributed the cigarettes since 1989.
The move means BAT’s share of the UK market will be reduced from 14 per cent to about six per cent, and UK profits will fall by two-thirds, according to industry sources. Imperial Tobacco will hold about 47 per cent share of the UK market under the terms of the five-year deal.
A spokeswoman for BAT says the company will “continue to explore options”, but declines to say what these options are.
Observers are incredulous that BAT has failed to prepare for the loss of the lucrative agreement, with one former employee branding the situation “pathetic”.
Merrill Lynch tobacco analyst Jonathan Fell says BAT will either have to come up with a rival brand to Marlboro or make an acquisition, but both options are expensive.