The Rembrandt Group is a South African based holding company whose wide ranging interests include tobacco, brewing, mining and insurance. The Group's structure is complex. Obtaining details of organization plus ownership of subsidiary and associated companies is not helped by the minimal disclosure requirements of South African company law, and the intermediary holding companies in Luxembourg. For the same reason, it is not possible to give a meaningful indication of profitability for the whole Group. The accounts of the parent company in South Africa declared a consolidated net after tax profit of 207 million Rand (F110mn) in the year ending March 1982, but the equity method of accounting is adopted, which does not reveal the true financial position of the Group, because the equity owned in associated companies is unknown in many instances.
Dr. Anton Rupert, the current chairman, is primarily responsible for the development of the Group since he founded it in 1948, and still exerts a strong control over its strategic direction. At the same time, and almost paradoxically, the Group's declared policy is one of 'partnership in industry' such that ownership of shares in any associate rarely rises above 50%. Nevertheless, irrespective of shareholding, Dr. Rupert has always significantly influenced the activities of associated companies, particularly with regard to finance, marketing and top management appointments. This influence is particularly apparent with the Rothmans International associate which has managed the bulk of the Rembrandt Group's worldwide cigarette interests since the early 1970's.
From the early 1970's onwards, the Rembrandt Group has progressively diversified away from tobacco into mining, liquor, banking and insurance and engineering, such that these areas now make a significant contribution to overall performance. From the mid 1970's onwards, Dr. Rupert, has lost some of his past enthusiasm for the worldwide tobacco business, possibly as a result of increased competitive pressures, poor performance by some of his associates, and the reduction in scope for further expansion at the rates experienced in the 1960's. Whatever the reasons, this loss of interest resulted in the Rembrandt Group selling half of its stake in Rothmans International to Philip Morris for $350 million in May 1981. This effectively- made the two companies equal partners in Rothmans International such that neither had control. The net impact of this deal has yet to emerge because the anti-trust legal proceedings have yet to be resolved within the E. E. C. However, Rothmans International continues to act as an independent company, and should not be considered as a part of the Philip Morris Group.
The cigarette sales of companies that come under the umbrella of the Rembrandt Group rank it as the fourth largest non-monopoly manufacturer in the free world with 1981 sales of 184.5 billions. Although growth was minimal in 1981, over the period from 1977-81 sales growth averaged 3.7 per cent per annum. This followed two years in 1975 and 1976 when volume declined.
In looking at the structure of their cigarette business it is clear that local subsidiaries have declined in relative importance whilst exports have grown. There are two-main exporting companies - Tobacco Exporters International (T. E. I) in the U. K., a wholly owned subsidiary of Rothmans International, and Turmac in Holland - which serve two different areas. TEI exports mainly to the Middle East and Africa whilst Turmac mainly produces brands for sale in EEC markets. Licensed production has grown rapidly as a result of a successful agreement with the Yugoslav monopoly.
With five European markets in their top ten the region's importance to Rembrandt is self evident, accounting for 46 per cent of 1981 Group sales. They also have the largest representation in the EEC of the major international cigarette companies (B. A. T., Philip Morris, R. J. Reynolds and Rembrandt). Interestingly, because of declining share and volume in West Germany, South Africa became the company's largest domestic market in 1981. Their presence in the Middle East/Africa region has grown, particularly in Middle Eastern markets.
ROTHMANS Total Sales: 38. 7 billions.
Canada (6. 5 bns),
South Africa (4bns),
Yemen, (4. 6 bns), ana U. K. (3. bns). Leading version: King Size, cork filter. Promoted as a full flavour, high quality international brand.
PETER STUYVESANT Total Sales: 22 billions. Leading markets: France (8.8 bns), South Africa (3 bns) and Holland (2 bns). Leading version: King size, cork filter. Promoted as an international brand with images of success, youth and vitality.
LORD Total Sales: 18.2 billion. Leading markets: West Germany (13.2 bns), Yugoslavia (4.2 bns). Leading version: LORD EXTRA, king size, cork filter. A mild brand with a more recent ultra light extension.
DUNHILL Total Sales: 16.3 billions. Leading markets: U. K. (3. 9 bns), Malaysia (1.7 bns) and Singapore (1.1 bns). Leading Version: King size, filter version. Promoted as an exclusive, high quality brand.
WINFIELD Total Sales: 10.5 billions Leading markets: Australia (9.1 bns) and New Zealand (1.3 bns). Leading version: King Size, cork filter. Promoted with a strong masculine image.
CRAVEN Total Sales: 12.3 billions. Leading markets: Canada (6.4 bns) and Jamaica (0.9 bns). Although sold internationally the brand does not have a strong or consistent image across markets.
Summary and conclusion
Rembrandt is not organized on a regional basis in the way that say, Philip Morris or R. J. Reynolds are. Indeed the companies in the Group appear to operate with a considerable degree of autonomy. A key element of the Group's marketing, though, is the promotion of their three leading international brands - ROTHMANS, PETER STUYVESANT and DUNHILL - which is so consistent and uniform that there must be tight central control. Their other international brands are CRAVEN, ROTHMANS PALL MALL, ST. MORITZ, CONSULATE and PICCADILLY.
To date there has been little evidence of Rothmans and Philip Morris acting together, but in the long-term the outcome of this partnership may have a crucial impact on the way in which the world cigarette industry develops.