Top 3 Finding in Tobacco Industry, Management of Volume Decline a Key Challenge for Manufacturers

Published Date : Jan 12, 2016

Tobacco is majorly utilized in making cigarettes, cigar, and smoking, etc. In addition, it is also utilized in manufacturing bidis and snuff. Tobacco consumption has increased globally in the times of economic slowdown owing to foreclosures, the stress of layoffs, and stock market downfall owing to which a number of people choose smoking to relief stress. Although, the recovery of economic conditions lessened smoking as stress was eased amongst developed nations. Still, as per the World Health Organization, the development in smoking rates, especially in the developing nations, have surpassed the smoking declines within emerged nations. These factors may fuel the growth of the market for tobacco products.

In 2013, almost 5.7 trillion cigarettes had been consumed which came down to 1.4% in 2012 having slower growth within China and this is why it was difficult to compensate for ongoing declines within Rest of the World (RoW). 

  • Rise in Average Pack Prices: The average pack price came slightly up in 2013 and had 4.7% rise, which was greater than in 2012. This is owing to a marginal recovery of prices within Western Europe. On the other hand, Australia exhibited some reduction in prices in plain packaging and MEA has the lowest prices amongst all.
  • Cigarette Value Sales Growth Fuelled by China: The value sales growth of cigarettes had risen up slightly in 2013, starting from 2.7% in 2012. This was inspite of the fact that the value growth of duty paid had been outpaced owing to the growth of illicit trade volume. Asia Pacific and Eastern Europe, especially via China augmented growth, but all other regions experienced positive but slow growth.
  • Growth in Illicit Trade Volume: Illicit trade globally had grown from being 1.3% in 2012 to 4.7% in 2013 and reached to 570 bn sticks. This exhibits a penetration rate ranging to 9.5%. Illicit trade will continue declining in China and leaving China aside, the world illicit rose by 8.7% and constituted a 12.3% share, augmented by the ongoing substantial rise in Philippines, Europe, and Russia.

Hence, the major challenge for the tobacco industry is of managing volume declines and to maintain meaningful value growth with developing the coming generation tobacco or nicotine products.