3.  GALLAHER GROUP PLC

  3.1  The business of Gallaher began in 1857 in Londonderry. Today, sales by Gallaher represent around 40 per cent of the UK cigarette market. Gallaher also has a strengthening international presence and is a major exporter to continental Europe, the Commonwealth of Independent States and other key markets, including Asia Pacific.[2]

  3.2  Gallaher employs approximately 2,400 people in the UK. Cigarette production is located at Gallaher's main site in Lisnafillan, County Antrim, where hand-rolling and pipe tobaccos are also manufactured and Gallaher's Research and Development department is based. Gallaher's cigar brands are produced in Cardiff. Gallaher's head office is located at Weybridge; a number of central administrative functions are based at Perivale; and its distribution centre for the UK is situated at Crewe.

  3.3  Within the UK, Gallaher manufactures and distributes a range of cigarette brands, including Benson & Hedges and Silk Cut. Gallaher also manufactures and distributes cigars, hand-rolling tobaccos and pipe tobaccos, including Hamlet, Old Holborn and Condor. Mirroring the overall market position in the UK, cigarettes accounted for approximately 93 per cent of Gallaher's total sales in 1998.

  3.4  For a period of years and until comparatively recently, Gallaher was owned by an American company, American Brands, Inc—now called Fortune Brands, Inc. Its corporate predecessor took an initial shareholding in Gallaher in 1962, obtained a majority shareholding in 1968 and acquired a 100 per cent shareholding in 1975. Subsequently, in 1997, American Brands, Inc divested its interest in Gallaher to a newly-formed holding company, Gallaher Group Plc, which was listed on the London and New York Stock Exchanges in May 1997. American Brands, Inc also owned The American Tobacco Company, until 1994, when it sold that company.

  3.5  During the period of US ownership, Gallaher operated as an independent entity in the UK, without interference in day-to-day management by its parent company.

  3.6  Gallaher has grown from a relatively small company in the 1950s to a leading UK manufacturer in the 1990s. In the 1950s, Gallaher's market share moved from just above 10 per cent to approximately 15 per cent. During the 1960s it grew to just over 25 per cent and remained at that level until the mid-1970s. Gallaher's market share since then has moved to today's level of approximately 40 per cent.