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Cigarettes in Austria

Euromonitor International

July 2019

C I G A R E T T E S I N A U S T R I A P a s s p o r t i

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LIST OF CONTENTS AND TABLES

Headlines ……………………………………………………………………………………………………………………. 1
Prospects ……………………………………………………………………………………………………………………. 1

Smoking Less Fashionable Among Teenagers Due To Health Concerns ………………………….. 1
Ongoing Tax Rises Lead To Increasing Unit Prices and Changing Purchasing Patterns ……… 1
EU Track and Trace System To Reduce Illicit Trade ………………………………………………………. 1

Competitive Landscape …………………………………………………………………………………………………. 2

Re-launch of Chesterfield Supports the Leading Player’s Position ……………………………………. 2
M Tabak Changes Distribution Strategy Due To the Costs of Track and Trace ………………….. 2
Tschick Saved by A New Owner …………………………………………………………………………………. 2

Taxation and Pricing ……………………………………………………………………………………………………… 2

Taxation Rates………………………………………………………………………………………………………….. 2

Summary 1 Taxation and Duty Levies 2013-2018

………………………………………………….. 2

Average Cigarette Pack Price Breakdown …………………………………………………………………….. 3

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples ………………….. 3

Category Data ……………………………………………………………………………………………………………… 4

Table 1 Sales of Cigarettes: Volume 2013-2018 ………………………………………………. 4
Table 2 Sales of Cigarettes by Category: Value 2013-2018 ………………………………. 4
Table 3 Sales of Cigarettes: % Volume Growth 2013-2018 ……………………………….. 4
Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018 ………………… 4
Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018 ……………………………… 5
Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-

2018 ………………………………………………………………………………………………. 5
Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume

2013-2018 ………………………………………………………………………………………. 5
Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018 ……………………….. 5

Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018

……………………… 5
Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018 ………………….. 6
Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018 ………………………… 6
Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018 …………… 8
Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018………………………….. 8

Table 14 Forecast Sales of Cigarettes: Volume 2018-2023

…………………………………. 8
Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023 ………………….. 9
Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023 ………………….. 9
Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-

2023 ………………………………………………………………………………………………. 9
Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023 ………………… 9
Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: %

Volume 2018-2023 …………………………………………………………………………. 10
Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: %

Volume 2018-2023 …………………………………………………………………………. 10
Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023 ………… 10
Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023 ………. 10

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CIGARETTES IN AUSTRIA

HEADLINES
▪ Cigarettes records a flat retail value performance and a 4% retail volume decline to reach

EUR3.2 billion and 12.8 billion sticks in 2018

▪ The significant retail volume decline in sales of cigarettes in 2018 surprises the industry

▪ Philip Morris Austria continues to lead cigarettes with a 39% retail volume share in 2018

▪ Cigarettes is expected to record a negative retail volume CAGR of 3% over the forecast

period as fewer young people take up smoking due to health concerns

PROSPECTS

Smoking Less Fashionable Among Teenagers Due To Health Concerns

The cigarette industry was surprised by the steep decline in retail volume sales in 2018 as

health awareness continued to rise and the poor image of smoking intensified, particularly

among younger demographics. The volume decline even led to flat retail value sales in 2018,

despite further rises in specific taxation on cigarettes. Although the percentage of the adult

population who smoked declined over the review period, the actual number of adult smokers

also fell for the first time in the review period in 2018 after steady increases over most of the

period. Smoking in public and in the presence of minors is increasingly regarded as socially

unacceptable, and younger demographics no longer regard smoking as “cool”. The actual

number of smokers is expected to continue to fall, leading to further retail volume declines for

cigarettes throughout the

forecast period.

Ongoing Tax Rises Lead To Increasing Unit Prices and Changing
Purchasing Patterns

Further rises in specific taxation on cigarettes in 2018 had a number of influences on

cigarettes in 2018. Higher prices were key in reducing the actual number of smokers during the

year, but also had an influence on the type of cigarettes being purchased by those who

continued to smoke. The increases in the actual amounts of ad valorem excise and therefore

VAT payable on premium cigarettes were higher than those on mid-price and economy

cigarettes, despite the new tax structure taking steps to even out the taxes on different price

brands. This encouraged many smokers to switch from premium brands to mid-price and, in

particular, economy cigarettes, producing a significant increase in the retail volume share of

economy cigarettes in 2018, largely at the expense of premium. This pattern is set to accelerate

over the forecast period, which is likely to lead to a lacklustre current retail value performance

for cigarettes as a whole going forward.

EU Track and Trace System To Reduce Illicit Trade

Illicit cigarettes have traditionally held a significant share of sales in Austria, and even

increased their share over the review period as volume sales remained flat while those of legal

cigarettes declined. With prices rising continuously, cigarettes have remained much cheaper in

neighbouring countries and illegal imports have continued despite the government’s efforts to

stem the trade. The EU track and trace system is due to come into force in Austria in mid-2019.

The system aims to ensure that tobacco products sold in the EU can be traced by the

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introduction of unique identification codes, as well as the introduction of a number of

authentication systems to ensure authenticity and security. These measures are expected to

lead to declines in the illicit trade becoming more aligned with those of the legal trade over the

forecast period.

COMPETITIVE LANDSCAPE

Re-launch of Chesterfield Supports the Leading Player’s Position

The leading player, Philip Morris Austria, maintained its volume share in cigarettes in 2018.

The company re-launched its leading Chesterfield brand in March 2018, featuring fresh pack

designs for improved differentiation and new sub brand names, including Original instead of

Red, Remix2 instead of Twice, Unplugged Original instead of True Red and Unplugge

d Blue

instead of True Blue. The move aims to help Chesterfield defend its leading position, although it

is not expected to lead to notable growth going forward.

M Tabak Changes Distribution Strategy Due To the Costs of Track and
Trace

Domestic player, M Tabak, changed its distribution strategy in an effort to minimise the costs

of new laws concerning tobacco products, in particular of implementing the EU track and trace

system. From 15 November 2018 all M Tabak’s products in Upper Austria are to be distributed

by the Austrian distributor, Moosmayr.

Tschick Saved by A New Owner

The small domestic cigarette manufacturer, RL Tschickfabrik filed for bankruptcy in January

2019. The company manufactured the last domestic cigarette brand, Tschick, and it was feared

the brand would disappear from the market. However, Swiss start-up, Koch & Gsell, purchased

the brand and set up a subsidiary in Austria in order to continue marketing the brand. However,

it is likely to remain a niche brand, with little impact on the overall cigarette category.

TAXATION AND PRICING

Taxation Rates

The fixed tax rate on cigarettes was EUR50.00 per 1,000 sticks in January 2017, which was

increased to EUR53.00 per 1,000 sticks on1 April 2017 and EUR58.00 per 1,000 sticks after 1

April 2018. In addition, a 39% share of the retail price was deducted as a variable tax in 2015.

This was increased to 37.5% in April 2018, which is designed to tax differently priced cigarettes

more equally, aiming to limit the range of cigarette prices. On 1 April 2019, the minimum retail

margin for tobacco specialists will be increased significantly which will lead to an average price

increase of around EUR0.01 per stick.

VAT/sales tax for all tobacco products remained at 16.7% of the total rsp over the review

period. VAT is normally expressed as 20% of the net price.

High taxation over the review period had a significant impact on cigarettes, driving a

consumer shift towards cheaper economy brands.

Tax increases usually occur either after 31 December or 1 April.

Summary 1 Taxation and Duty Levies 2013-2018

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Taxation

Type

Units 2013 2014 2015 2016 2017 2018

Ad

valorem

excise

(%) 42.0 41.0 40.0 39.0 39.0 37.5

VAT/sale

s

taxes

(%) 16.7 16.7 16.7 16.7 16.7 16.7

Specific

taxes

(EUR per

1,000)

35.0 40.0 45.0 50.0 53.0 58.0

Source: Legal Information System of the Republic of Austria

Average Cigarette Pack Price Breakdown

Manufacturers raise the prices of their brands after the government imposes higher taxes on

tobacco products.

The high taxes levied on cigarettes in Austria meant that margins for manufacturers,

wholesalers and retailers were relatively low over the review period. As regulated by the tobacco

monopoly law, 53% of the retail price is due to the retailer.

However, over the review period, retailers suffered from a strong shift towards economy

brands. This has had a particularly severe impact on tobacco specialists, which rely on tobacco

products as their main source of income. As a result, many such outlets have increasingly

expanded their product ranges to include other items such as magazines, daily newspapers,

snacks, soft drinks, lottery tickets, stamps and tobacco accessories.

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples

P = ‘price’

in Euro

Premium Mid Priced Economy

Marlboro

Red

Memphis

Classic

Chesterfiel

d Blue

(Pack of

20)

(Pack of
20)
(Pack of
20)

P % P % P %

Wholesale 0.64 11.63 0.55 10.84 0.53 10.63

Retailer 0.72 13.11 0.62 12.24 0.60 12.00

TOTAL

Retained

1.36 24.74 1.18 23.08 1.13 22.63

Specific

Excise

1.16 21.09 1.16 22.75 1.16 23.20

Ad
valorem
Excise

2.06 37.50 1.91 37.50 1.88 37.50

VAT 0.92 16.67 0.85 16.67 0.83 16.67

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TOTAL

Tax

4.14 75.26 3.92 76.92 3.87 77.37

End Price 5.50 100.00 5.10 100.00 5.00 100.00

Source: Calculated from storecheck data and Taxation and Duty Levies Table.
Notes: Figures may not sum up to 100% due to rounding

CATEGORY DATA

Table 1 Sales of Cigarettes: Volume 2013-2018

million sticks
2013 2014 2015 2016 2017 2018

Cigarettes 14,071.4 13,853.3 13,669.0 13,454.4 13,232.4 12,760.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 2 Sales of Cigarettes by Category: Value 2013-2018

EUR million
2013 2014 2015 2016 2017 2018

Cigarettes Including 3,041.9 3,116.4 3,197.2 3,257.9 3,303.5 3,307.2
Fine Cut Stick Equivalent
Fine Cut Cigarettes 74.0 85.6 97.5 105.6 108.9 111.1
Cigarettes 2,967.9 3,030.8 3,099.7 3,152.3 3,194.6 3,196.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 3 Sales of Cigarettes: % Volume Growth 2013-2018

% volume growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes -3.6 -1.9 -9.3

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018

% current value growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes Including Fine Cut Stick 0.1 1.7 8.7
Equivalent
Fine Cut Cigarettes 2.0 8.5 50.2
Cigarettes 0.0 1.5 7.7

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

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Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

American Blend 73.9 73.6 73.4 73.2 73.0 72.8
Virginia 15.8 16.0 16.2 16.3 16.4 16.5
Other Blend 10.3 10.4 10.5 10.5 10.6 10.7
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Standard (non-capsule/ 95.4 94.8 95.8 96.0 96.3 96.3
non-menthol)
Flavour Capsule (all 3.0 3.7 3.0 3.1 3.2 3.3
flavours)
Menthol (non-capsule) 1.5 1.5 1.1 0.9 0.5 0.4
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Regular 96.9 96.8 97.0 97.1 97.2 97.2
Slim 1.7 1.6 1.6 1.6 1.5 1.5
Superslim 1.4 1.5 1.4 1.4 1.3 1.3
Microslim – – – – – –
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

20s 95.9 95.8 95.5 95.0 94.9 94.7
20 + 4.1 4.2 4.5 5.0 5.1 5.3
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018

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% retail volume
2013 2014 2015 2016 2017 2018

Economy price band 50.3 53.3 57.6 59.4 60.9 62.2
Mid price band 20.5 18.2 17.1 16.6 16.3 16.2
Premium price band 29.2 28.4 25.4 24.0 22.8 21.6
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018

% retail volume
Company 2014 2015 2016 2017 2018

Philip Morris Austria 38.0 38.7 39.1 39.2 39.1
GmbH
JTI Austria GmbH 14.2 15.3 16.0 16.6 17.1
Austria Tabak GmbH 18.7 17.3 16.3 15.6 15.2
Imperial Tobacco 15.0 14.7 14.6 14.6 14.7
Austria Marketing
Service GmbH
British American 11.0 10.9 10.8 10.9 11.0
Tobacco (Austria) GmbH
Philip Morris GmbH – – – – –
Others 3.0 3.1 3.3 3.1 2.9
Total 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018

% retail volume
Brand (GBO) Company (NBO) 2015 2016 2017 2018

Chesterfield Philip Morris Austria 15.2 16.2 17.0 17.3
(Philip Morris GmbH
International Inc)
Marlboro (Philip Philip Morris Austria 13.3 13.1 12.8 12.7
Morris GmbH
International Inc)
John Player Special Imperial Tobacco – 8.6 8.5 8.5
(Imperial Brands Plc) Austria Marketing
Service GmbH
Smart (Japan Austria Tabak GmbH 6.9 6.9 6.8 6.8
Tobacco Inc)
Benson & Hedges JTI Austria GmbH 5.7 5.9 6.1 6.2
(Japan Tobacco Inc)
Winston (Japan JTI Austria GmbH 5.2 5.5 5.6 5.8
Tobacco Inc)
Marlboro Gold Philip Morris Austria 6.6 6.2 5.9 5.6
(Philip Morris GmbH
International Inc)
Camel (Japan JTI Austria GmbH 4.4 4.7 4.9 5.2
Tobacco Inc)
Memphis (Japan Austria Tabak GmbH 5.9 5.5 5.2 5.1

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Tobacco Inc)
Pall Mall (British British American 4.9 5.0 5.0 5.0
American Tobacco Plc) Tobacco (Austria) GmbH
Mister Philip Philip Morris Austria 3.0 3.4 3.5 3.5
Morris (Philip GmbH
Morris
International Inc)
Gauloises Blondes Imperial Tobacco – 2.9 2.8 2.8
Rouge (Imperial Austria Marketing
Brands Plc) Service GmbH
Parisienne (British British American 2.7 2.7 2.6 2.7
American Tobacco Plc) Tobacco (Austria) GmbH
Lucky Strike British American 2.2 2.2 2.3 2.4
(British American Tobacco (Austria) GmbH
Tobacco Plc)
West (Imperial Imperial Tobacco – 1.6 1.7 1.7
Brands Plc) Austria Marketing
Service GmbH
Memphis Strato Blue Austria Tabak GmbH 1.8 1.5 1.4 1.2
(Japan Tobacco Inc)
Meine Sorte (Japan Austria Tabak GmbH 1.2 1.1 1.1 1.0
Tobacco Inc)
Gauloises Blondes Imperial Tobacco – 0.8 0.8 0.8
(Imperial Brands Plc) Austria Marketing
Service GmbH
Vogue (British British American 0.8 0.7 0.7 0.7
American Tobacco Plc) Tobacco (Austria) GmbH
Falk (Japan Tobacco Austria Tabak GmbH 0.5 0.5 0.5 0.5
Inc)
Davidoff Blue Imperial Tobacco – 0.4 0.4 0.3
(Imperial Brands Plc) Austria Marketing
Service GmbH
Hobby (Japan Austria Tabak GmbH 0.3 0.3 0.3 0.3
Tobacco Inc)
HB (British British American 0.3 0.2 0.2 0.2
American Tobacco Plc) Tobacco (Austria) GmbH
Dames (Japan Austria Tabak GmbH 0.3 0.2 0.2 0.2
Tobacco Inc)
Ernte 23 (Imperial Imperial Tobacco – 0.2 0.2 0.2
Brands Plc) Austria Marketing
Service GmbH
Casablanca (Japan Austria Tabak GmbH 0.1 0.1 0.1 0.1
Tobacco Inc)
John Player Special Imperial Tobacco 8.6 – – –
(Imperial Tobacco Austria Marketing
Group Plc) Service GmbH
Gauloises Blondes Imperial Tobacco 2.9 – – –
Rouge (Imperial Austria Marketing
Tobacco Group Plc) Service GmbH
West (Imperial Imperial Tobacco 1.5 – – –
Tobacco Group Plc) Austria Marketing
Service GmbH
Gauloises Blondes Imperial Tobacco 0.8 – – –
(Imperial Tobacco Austria Marketing
Group Plc) Service GmbH
Others Others 4.7 3.9 3.4 3.3
Total Total 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

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Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Store-Based Retailing 78.0 77.9 77.8 77.8 77.9 79.1
– Grocery Retailers 78.0 77.9 77.8 77.8 77.9 79.1
— Convenience Stores – – – – – –
— Discounters – – – – – –
— Forecourt Retailers 5.1 5.2 5.2 5.3 5.2 5.2
— Hypermarkets – – – – – –
— Supermarkets – – – – – –
— Food/drink/tobacco 63.4 63.4 63.3 63.3 63.5 64.8
specialists
— Food/drink – – – – – –
specialists
— Tobacco specialists 63.4 63.4 63.3 63.3 63.5 64.8
— Independent Small 0.4 0.4 0.3 0.3 0.3 0.2
Grocers
— Other Grocery 9.0 9.0 9.0 8.9 8.9 8.9
Retailers
— Newsagent- 9.0 9.0 9.0 8.9 8.9 8.9
tobacconists/kiosks
— Street vendors – – – – – –
– Mixed Retailers – – – – – –
— Department Stores – – – – – –
— Other Mixed Retailers – – – – – –
– Non-Grocery Specialists – – – – – –
— Drugstores/ – – – – – –
parapharmacies
— Other Non-Grocery – – – – – –
Specialists
Non-Store Retailing 10.5 10.6 10.7 10.8 11.0 10.8
– Vending 10.5 10.6 10.7 10.8 11.0 10.8
– Internet Retailing – – – – – –
Non-retail channels 11.4 11.4 11.5 11.4 11.1 10.0
– Bar-tobacconists 2.2 2.2 2.2 2.2 2.1 1.8
– Hotels/restaurants/bars 9.2 9.2 9.2 9.2 9.0 8.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018

million sticks
2013 2014 2015 2016 2017 2018

Legal sales 14,071.4 13,853.3 13,669.0 13,454.4 13,232.4 12,760.0
Illicit trade 2,496.5 2,491.5 2,484.0 2,591.6 2,561.7 2,514.3
% penetration of 15.1 15.2 15.4 16.2 16.2 16.5
illicit trade
Actual consumption 16,567.9 16,344.8 16,153.0 16,046.0 15,794.1 15,274.3

Source: Euromonitor International from official statistics, trade associations, trade interviews

Table 14 Forecast Sales of Cigarettes: Volume 2018-2023

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million sticks
2018 2019 2020 2021 2022 2023

Cigarettes 12,760.0 12,467.8 12,162.4 11,835.2 11,467.1 11,055.5

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023

EUR million
2018 2019 2020 2021 2022 2023

Cigarettes Including 3,307.2 3,271.2 3,222.0 3,160.1 3,082.6 2,988.9
Fine Cut Stick Equivalent
Fine Cut Cigarettes 111.1 110.7 109.6 108.0 106.3 104.5
Cigarettes 3,196.0 3,160.4 3,112.4 3,052.1 2,976.3 2,884.4

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023

% volume growth
2018/19 2018-23 CAGR 2018/23 Total

Cigarettes -2.3 -2.8 -13.4

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-2023

% constant value growth
2018/2019 2018-23 CAGR 2018/23 Total

Cigarettes Including Fine Cut Stick -1.1 -2.0 -9.6
Equivalent
Fine Cut Cigarettes -0.3 -1.2 -5.9
Cigarettes -1.1 -2.0 -9.8

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

American Blend 72.8 72.7 72.5 72.4 72.3 72.2
Virginia 16.5 16.6 16.6 16.7 16.7 16.7
Other Blend 10.7 10.8 10.9 10.9 11.0 11.1
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

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Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2018-
2023

% retail volume
2018 2019 2020 2021 2022 2023

Standard (non-capsule/ 96.3 96.3 97.4 100.0 100.0 100.0
non-menthol)
Flavour Capsule (all 3.3 3.4 2.3 – – –
flavours)
Menthol (non-capsule) 0.4 0.3 0.2 – – –
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume
2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

Regular 97.2 97.3 97.4 97.6 97.7 97.8
Slim 1.5 1.4 1.4 1.3 1.3 1.2
Superslim 1.3 1.2 1.2 1.1 1.0 1.0
Microslim – – – – – –
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

20s 94.7 94.6 94.6 94.5 94.4 94.4
20 + 5.3 5.4 5.4 5.5 5.5 5.6
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

Economy price band 62.2 63.3 64.1 65.0 66.9 67.8
Mid price band 16.2 16.1 16.0 15.7 15.5 15.2
Premium price band 21.6 20.6 19.9 19.3 17.6 17.0
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Cigarettes in the US

Euromonitor International

July 2019

C I G A R E T T E S I N T H E U S P a s s p o r t i

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LIST OF CONTENTS AND TABLES

Headlines ……………………………………………………………………………………………………………………. 1
Prospects ……………………………………………………………………………………………………………………. 1

Menthol Faces Major Scrutiny …………………………………………………………………………………….. 1
Economy Brands Gain Appeal …………………………………………………………………………………….. 1
Smoking Rates on A Steady Decline ……………………………………………………………………………. 1

Competitive Landscape …………………………………………………………………………………………………. 2

Natural American Spirit Stays Ahead of the Game …………………………………………………………. 2
Altria Group Looks To the Future With E-vapour Investments ………………………………………….. 2
Major Manufacturers Adopt New Strategies ………………………………………………………………….. 2

Taxation and Pricing ……………………………………………………………………………………………………… 2

Taxation Rates………………………………………………………………………………………………………….. 2

Summary 1 Taxation and Duty Levies 2013-2018 ………………………………………………….. 3

Average Cigarette Pack Price Breakdown …………………………………………………………………….. 4

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples ………………….. 4

Category Data ……………………………………………………………………………………………………………… 5

Table 1 Sales of Cigarettes: Volume 2013-2018 ………………………………………………. 5
Table 2 Sales of Cigarettes by Category: Value 2013-2018 ………………………………. 5
Table 3 Sales of Cigarettes: % Volume Growth 2013-2018 ……………………………….. 5
Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018 ………………… 5
Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018 ……………………………… 6
Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-

2018 ………………………………………………………………………………………………. 6
Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume

2013-2018 ………………………………………………………………………………………. 6
Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018 ……………………….. 6
Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018 ……………………… 7
Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018 ………………….. 7
Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018 ………………………… 7
Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018 …………… 8
Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018………………………….. 9
Table 14 Forecast Sales of Cigarettes: Volume 2018-2023 …………………………………. 9
Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023 ………………….. 9
Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023 ………………… 10
Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-

2023 …………………………………………………………………………………………….. 10
Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023 ………………. 10
Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: %

Volume 2018-2023 …………………………………………………………………………. 10
Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: %

Volume 2018-2023 …………………………………………………………………………. 11
Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023 ………… 11
Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023 ………. 11

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CIGARETTES IN THE US

HEADLINES
▪ In 2018, volume sales of cigarettes decline by 5% to 240.9 billion sticks, whilst negligible

growth is seen in current value terms, remaining at USD95.3 billion

▪ Cigarettes sees one of the largest volume declines in recent years, as smoking alternatives

gain popularity

▪ Philip Morris USA maintains its lead in cigarettes in 2018, with a 47% retail volume share, with

its Marlboro brand alone reaching a 40% share

▪ Over the forecast period, cigarettes is expected to record a negative volume CAGR of 3%,

due to continuing health concerns over smoking cigarettes and the rising popularity of vaping

PROSPECTS

Menthol Faces Major Scrutiny

There has been increasing concern about the continued distribution of menthol cigarettes.

Menthol cigarettes have been gaining volume share, whilst regular cigarettes have seen their

share decline. The main concern originates from the consumer demographic of menthols, which

consists of younger adults and minorities, especially black Americans. Considering the rising

popularity of menthol cigarettes, there are claims that a complete ban on flavours could push

smokers towards other nicotine products with no flavour restrictions, such as e cigarettes and

cigarillos. Brands with popular menthol SKUs, such as Newport, Camel and Maverick, would

also be likely to see a drastic drop in sales. The FDA has been a vocal proponent of the ban and

has tried to move towards a legislative ban for years. However, a strong pushback from

cigarette manufacturers, and the FDA commissioner Scott Gottlieb’s resignation in April 2019,

are likely to keep the decision up in the air for the near future.

Economy Brands Gain Appeal

Increasing taxes and rising cigarette upcharge rates imposed by manufacturers to combat

declining volume sales have slowly been altering the price band distribution within cigarettes.

Economy cigarettes saw a small share increase in 2018, and discounters saw strong retail

volume distribution growth. Smokers have been shown to consistently absorb price increases.

However, the rise in the share of economy brands may indicate the beginning of a shift in

purchasing behaviour. Over the forecast period, economy brands are expected to keep gaining

share, whilst premium brands are likely to gain modest share early in the forecast period, but

begin to lose share in later years, as consistent price increases begin to erode smokers’ brand

loyalty.

Smoking Rates on A Steady Decline

Cigarette smoking amongst adults in the US was at its lowest point in history in 2018.

Increasing regulation, rising public awareness and the growth of vaping prevalence have

consistently brought down smoking rates each year for decades. The FDA continues to consider

smoking cessation one of its top priorities, and its plans to ban menthol cigarettes and reduce

cigarette nicotine levels, if successfully passed, could drive smoking rates down even further,

guaranteeing a steady continued decline.

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COMPETITIVE LANDSCAPE

Natural American Spirit Stays Ahead of the Game

Natural American Spirit from Santa Fe Natural Tobacco Co was the only brand to experience

consistent volume growth in the review period. A large part of its success originates from

smokers switching from other brands, because of the perception that Natural American Spirit is

“less harmful” and “organic”, and is advertised as additive-free and natural. New smokers are

also attracted to the brand for the same reasons. In 2018, a federal court dismissed a case that

challenged the use of the word “natural” by the brand. Natural American Spirit will therefore

continue to use the word in its branding; thus, remaining attractive to consumers. As volume

sales are declining for the majority of brands, Natural American Spirit will have the opportunity to

keep gaining share.

Altria Group Looks To the Future With E-vapour Investments

Philip Morris USA (Altria Group) continued to lead cigarettes in retail volume terms in 2018. Its

top brand Marlboro continued to account for the largest volume share, and saw share growth in

2018. Despite its rising share, the overall volume decline of the cigarettes category meant

Marlboro saw an actual volume decline. In 2018, Philip Morris International announced plans to

cease cigarette production completely. Whilst this plan does not have a definite timetable, Altria

has stated that it instead wants to start putting its focus on its heated tobacco system IQOS,

which from 2019 was approved for sale by the FDA, and is available in selected areas. With

Marlboro being the biggest brand in cigarettes, the company’s plans will mean a major shake-up

for the category. Other cigarette giants, such as British American Tobacco and Imperial

Tobacco, are likely to begin to develop their own heated tobacco and vaping systems. This will

slowly but surely reduce sales of cigarettes in the US.

Major Manufacturers Adopt New Strategies

Whilst e-vapour products accounts for a much smaller share of sales of tobacco than

cigarettes, its share is growing rapidly, and each year poses more of a threat to sales of

cigarettes. As smoking prevalence falls, e-vapour products are absorbing much of the loss,

leading to the increased prevalence of vaping. However, a large share of sales within e-vapour

products is accounted for by big tobacco players such as Reynolds and Imperial, with Altria

Group owning 30% of JUUL. This indicates a shifting strategy for major cigarette manufacturers.

Whilst cigarettes are losing the battle with the FDA and public perception, the future is much

more promising for e-vapour products. This, combined with the promising potential of heated

tobacco systems, could offer consistent profit margins for big tobacco companies despite the

decline in sales of cigarettes.

TAXATION AND PRICING

Taxation Rates

▪ The federal cigarette tax rate was USD1.01 per pack of 20 as of 2018; unchanged since

2009. State and local tax rates vary widely. New York taxes cigarettes at over USD4.00 per

pack, whilst Puerto Rico and Guam tax at USD3.00 or more. 17 states, DC, Guam and Puerto

Rico, have cigarette tax rates of USD2.00 per pack or more, and 35 states, DC, Guam, the

Northern Marianas and Puerto Rico have tax rates of USD1.00 per pack or more.

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▪ In 2018, Washington DC, Kentucky, Oklahoma and Oregon increased the state tax on

cigarettes. Washington DC raised the tax per pack of 20 by USD2.50. In 2016, Connecticut,

Louisiana, Minnesota, Oregon, Pennsylvania and West Virginia all raised the excise tax on

cigarettes. California and Minnesota raised taxes during the first half of 2017. California’s

2016 tax increase was substantial, at a difference of USD2.00 per pack.

▪ Local taxes on cigarettes in the US can be quite significant. Although Illinois taxes cigarettes

at a rate of only USD1.98 per pack of 20, state, county and city taxes add up to a total of over

USD7.00 per pack in Chicago, the US’s third most populous city.

▪ Because taxes are levied on an excise, per-pack of 20 basis, further ad valorem taxes are not

charged. States may charge sales taxes on tobacco products, but in such instances tobacco

products are not treated differently from other consumer goods. Where applicable, state sales

taxes are usually based on purchase prices, and remain below 10%. The federal government

does not charge sales tax in the US. Neither the federal government nor individual states

charge VAT.

▪ Although the international illicit trade volume of cigarettes in the US is relatively low, interstate

smuggling is common. Interstate smuggling, where, for instance South Carolina-taxed

cigarettes are sold in New York, is a growing concern for state and local governments.

Cigarettes manufactured by Native Americans on reservations are exempt from state tax

collection. Tax exemption status extends to purchases by Native Americans of cigarettes sold

on reservations. This practice is often exploited, resulting in illicit sales to non-Native

Americans, interstate smuggling and tax-free resale.

Summary 1 Taxation and Duty Levies 2013-2018

Taxation

Type

Units 2013 2014 2015 2016 2017 2018

Illinois

State

Excise

USD/per

pack of

20

1.0 2.0 2.0 2.0 2.0 2.0

Illinois
State

Sales

Tax

% retail

price

9.8 9.8 9.8 9.8 9.8 9.8

Cook

County

Cigarette

Tax
USD/per
pack of
20

2.0 2.0 3.0 3.0 3.0 3.0

City of

Chicago

Cigarette
Tax
USD/per
pack of
20

0.7 0.7 0.7 1.2 1.2 1.2

Federal

Excise
Tax

USD/pac

k of 20

1.0 1.0 1.0 1.0 1.0 1.0

Specific

taxes

USD/1,0

00 units

105.7 105.7 105.7 105.7 105.7 105.7

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Source: Euromonitor International from US Tax and Trade Bureau, Campaign for Tobacco-Free Kids, company
sources

Average Cigarette Pack Price Breakdown

▪ The example below shows the cigarette pack price breakdown for cigarettes sold in Chicago,

Illinois. The breakdown includes federal, state, county and municipal taxes, with total taxes

accounting for 70% of the total pack price for premium cigarettes. For mid-priced cigarettes,

total taxes comprise 74% of the average pack price, whilst for economy cigarette brands, total

taxes comprise 75% of the average pack price. It is important to note that Chicago has the

highest incidence of cigarette taxation in the US.

▪ Manufacturers’ pricing of cigarettes in the US changes frequently, with manufacturers raising

prices to offset volume declines and maintain or increase revenues. Price increases generally

occur bi-annually, and this is expected to continue in the future.

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples

P= price in

US dollars

Premium Mid-priced Economy

Marlboro L&M Pall Mall

(Pack of

20)

(Pack of
20)
(Pack of
20)

P % P % P %

Wholesale 1.85 15.45 1.20 10.77 1.12 10.19

Retailer 1.80 15.00 1.67 15.00 1.65 15.00

Total

retained

3.65 30.45 2.87 25.77 2.78 25.19

Federal
Excise

1.01 8.42 1.01 9.08 1.01 9.17

Illinois
State
Excise

1.98 16.51 1.98 17.81 1.98 17.97

Cook
County
Cigarette
Tax

3.00 25.02 3.00 26.98 3.00 27.22

City of
Chicago
Cigarette
Tax

1.18 9.84 1.18 10.61 1.18 10.71

Ad

valorem

excise

0.00 0.00 0.00 0.00 0.00 0.00

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Sales/VAT 1.17 9.75 1.08 9.75 1.07 9.75

TOTAL tax 8.34 69.55 8.25 74.23 8.24 74.81

End price 11.99 100.00 11.12 100.00 11.02 100.00

Source: Calculated from store check data and Taxation and Duty Levies Table. Based on a pack of cigarettes
bought in Chicago, Illinois

Notes: Figures may not sum up to 100% due to rounding

CATEGORY DATA

Table 1 Sales of Cigarettes: Volume 2013-2018

million sticks
2013 2014 2015 2016 2017 2018

Cigarettes 279,538.8 270,638.8 269,894.3 262,467.7 252,609.0 240,888.3

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 2 Sales of Cigarettes by Category: Value 2013-2018

USD million
2013 2014 2015 2016 2017 2018

Cigarettes Including 91,888.6 91,299.7 93,948.9 95,017.9 95,766.0 95,760.0
Fine Cut Stick Equivalent
Fine Cut Cigarettes 634.9 616.3 578.1 539.3 500.0 437.7
Cigarettes 91,253.7 90,683.4 93,370.8 94,478.6 95,266.0 95,322.2

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 3 Sales of Cigarettes: % Volume Growth 2013-2018

% volume growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes -4.6 -2.9 -13.8

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018

% current value growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes Including Fine Cut Stick 0.0 0.8 4.2
Equivalent
Fine Cut Cigarettes -12.4 -7.2 -31.1
Cigarettes 0.1 0.9 4.5

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Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

American Blend 99.5 99.5 99.5 99.5 99.5 99.5
Virginia 0.4 0.4 0.4 0.4 0.3 0.3
Other Blend 0.1 0.1 0.2 0.1 0.2 0.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Standard (non-capsule/ 69.9 69.5 69.1 60.1 65.9 65.1
non-menthol)
Flavour Capsule (all 3.8 4.8 4.9 4.9 5.4 5.8
flavours)
Menthol (non-capsule) 26.3 25.7 26.0 35.0 28.8 29.0
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Regular 98.1 98.3 98.3 98.4 98.6 98.7
Slim 1.7 1.6 1.5 1.4 1.3 1.2
Superslim 0.2 0.2 0.2 0.2 0.1 0.1
Microslim – – – – – –
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

20s 99.6 99.6 99.7 99.7 99.7 99.7
20 + 0.4 0.4 0.3 0.3 0.3 0.3
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

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Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Economy price band 21.5 21.7 23.6 24.1 23.9 24.0
Mid price band 7.1 6.5 6.2 5.7 5.2 5.2
Premium price band 71.4 71.8 70.2 70.1 70.9 70.8
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018

% retail volume
Company 2014 2015 2016 2017 2018

Philip Morris USA Inc 46.9 46.9 46.5 46.4 47.1
RJ Reynolds Tobacco Co 24.0 31.9 32.3 32.6 32.8
Commonwealth Brands Inc 3.1 9.7 9.5 9.6 9.6
Liggett Group Inc 3.3 3.2 3.2 3.8 4.1
Santa Fe Natural 1.5 1.8 2.1 2.3 2.5
Tobacco Co Inc
Japan Tobacco Inc 0.4 0.4 0.4 0.4 0.4
Lorillard Tobacco Co 14.8 – – – –
Others 6.1 6.0 5.9 4.8 3.5
Total 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018

% retail volume
Brand (GBO) Company (NBO) 2015 2016 2017 2018

Marlboro (Altria Philip Morris USA Inc 40.1 39.6 39.6 40.4
Group Inc)
Newport (Reynolds RJ Reynolds Tobacco Co 13.4 14.4 15.2 15.3
American Inc)
Camel (Reynolds RJ Reynolds Tobacco Co 8.1 8.1 8.1 8.2
American Inc)
Pall Mall (Reynolds RJ Reynolds Tobacco Co 8.2 7.9 7.7 7.7
American Inc)
L&M (Altria Group Philip Morris USA Inc 4.0 4.2 4.2 4.1
Inc)
Natural American Santa Fe Natural 1.8 2.1 2.3 2.5
Spirit (Reynolds Tobacco Co Inc
American Inc)
Winston (Imperial Commonwealth Brands Inc – 2.4 2.4 2.4
Brands Plc)
Maverick (Imperial Commonwealth Brands Inc – 1.8 1.8 1.9
Brands Plc)
Kool (Imperial Commonwealth Brands Inc – 1.8 1.8 1.8
Brands Plc)
Eagle 20 (Liggett Liggett Group Inc 0.7 1.0 1.5 1.8

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Vector Brands Inc)
Pyramid (Liggett Liggett Group Inc 1.8 1.6 1.6 1.7
Vector Brands Inc)
Virginia Slims Philip Morris USA Inc 1.1 1.1 1.1 1.1
(Altria Group Inc)
USA Gold (Imperial Commonwealth Brands Inc – 1.0 0.9 0.9
Brands Plc)
Parliament (Altria Philip Morris USA Inc 1.0 1.0 0.9 0.9
Group Inc)
Doral (Reynolds RJ Reynolds Tobacco Co 0.9 0.9 0.9 0.9
American Inc)
Salem (Imperial Commonwealth Brands Inc – 0.9 0.9 0.9
Brands Plc)
Misty (Reynolds RJ Reynolds Tobacco Co 0.7 0.6 0.5 0.5
American Inc)
Basic (Altria Group Philip Morris USA Inc 0.3 0.3 0.2 0.2
Inc)
Winston (Imperial Commonwealth Brands Inc 2.3 – – –
Tobacco Group Plc)
Maverick (Imperial Commonwealth Brands Inc 1.9 – – –
Tobacco Group Plc)
Kool (Imperial Commonwealth Brands Inc 1.7 – – –
Tobacco Group Plc)
USA Gold (Imperial Commonwealth Brands Inc 1.0 – – –
Tobacco Group Plc)
Salem (Imperial Commonwealth Brands Inc 0.9 – – –
Tobacco Group Plc)
Sonoma (Imperial Commonwealth Brands Inc – – – –
Tobacco Group Plc)
Grand Prix (Liggett Liggett Group Inc – – – –
Vector Brands Inc)
Liggett Select Liggett Group Inc – – – –
(Liggett Vector
Brands Inc)
Newport (Lorillard Lorillard Tobacco Co – – – –
Inc)
Kool (Reynolds RJ Reynolds Tobacco Co – – – –
American Inc)
Salem (Reynolds RJ Reynolds Tobacco Co – – – –
American Inc)
Winston (Reynolds RJ Reynolds Tobacco Co – – – –
American Inc)
Others Others 10.1 9.4 8.2 6.8
Total Total 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Store-Based Retailing 99.4 99.4 99.6 99.7 99.7 99.7
– Grocery Retailers 91.7 91.9 93.0 93.9 93.8 93.6
— Convenience Stores 16.2 16.4 17.1 17.8 18.0 18.1
— Discounters – – – – – –
— Forecourt Retailers 47.7 48.3 50.3 52.1 53.1 53.1
— Hypermarkets 1.0 1.1 1.3 1.6 1.6 1.7
— Supermarkets 3.9 3.9 3.9 3.9 4.0 4.0

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— Food/drink/tobacco 20.4 19.7 17.7 16.0 14.6 14.1
specialists
— Food/drink – – – – – –
specialists
— Tobacco specialists 20.4 19.7 17.7 16.0 14.6 14.1
— Independent Small 2.2 2.2 2.3 2.3 2.3 2.3
Grocers
— Other Grocery 0.3 0.3 0.3 0.2 0.2 0.2
Retailers
— Newsagent- 0.3 0.3 0.3 0.2 0.2 0.2
tobacconists/kiosks
— Street vendors – – – – – –
– Mixed Retailers 4.0 4.3 4.2 4.0 4.3 4.7
— Department Stores – – – – – –
— Other Mixed Retailers 4.0 4.3 4.2 4.0 4.3 4.7
– Non-Grocery Specialists 3.7 3.3 2.4 1.8 1.6 1.5
— Drugstores/ 3.7 3.3 2.4 1.8 1.6 1.5
parapharmacies
— Other Non-Grocery 0.0 0.0 0.0 – 0.0 –
Specialists
Non-Store Retailing 0.2 0.2 0.1 0.1 0.1 0.1
– Vending 0.1 0.1 0.1 0.1 0.0 0.0
– Internet Retailing 0.1 0.1 0.1 0.1 0.1 0.1
Non-retail channels 0.5 0.4 0.3 0.2 0.2 0.1
– Bar-tobacconists 0.1 0.1 0.1 0.1 0.1 0.1
– Hotels/restaurants/bars 0.4 0.3 0.2 0.1 0.1 0.0
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018

million sticks
2013 2014 2015 2016 2017 2018

Legal sales 279,538.8 270,638.8 269,894.3 262,467.7 252,609.0 240,888.3
Illicit trade 10,965.1 10,860.4 10,207.3 10,059.3 9,843.9 9,579.8
% penetration of 3.8 3.9 3.6 3.7 3.8 3.8
illicit trade
Actual consumption 290,503.9 281,499.2 280,101.6 272,527.0 262,452.9 250,468.1

Source: Euromonitor International from official statistics, trade associations, trade interviews

Table 14 Forecast Sales of Cigarettes: Volume 2018-2023

million sticks
2018 2019 2020 2021 2022 2023

Cigarettes 240,888.3 230,458.5 222,384.4 214,878.5 209,105.6 203,379.6

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023

USD million
2018 2019 2020 2021 2022 2023

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Cigarettes Including 95,760.0 95,477.3 95,894.1 95,993.1 96,490.7 96,856.8
Fine Cut Stick Equivalent
Fine Cut Cigarettes 437.7 434.4 411.4 393.9 380.3 368.8
Cigarettes 95,322.2 95,042.9 95,482.7 95,599.2 96,110.4 96,488.0

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023

% volume growth
2018/19 2018-23 CAGR 2018/23 Total

Cigarettes -4.3 -3.3 -15.6

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-2023

% constant value growth
2018/2019 2018-23 CAGR 2018/23 Total

Cigarettes Including Fine Cut Stick -0.3 0.2 1.1
Equivalent
Fine Cut Cigarettes -0.8 -3.4 -15.7
Cigarettes -0.3 0.2 1.2

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

American Blend 99.5 99.5 99.5 99.5 99.5 99.5
Virginia 0.3 0.3 0.3 0.3 0.3 0.3
Other Blend 0.2 0.2 0.2 0.2 0.2 0.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2018-
2023

% retail volume
2018 2019 2020 2021 2022 2023

Standard (non-capsule/ 65.1 64.8 64.6 64.5 64.5 64.4
non-menthol)
Flavour Capsule (all 5.8 6.1 6.2 6.2 6.3 6.3
flavours)
Menthol (non-capsule) 29.0 29.2 29.2 29.3 29.3 29.3
Total 100.0 100.0 100.0 100.0 100.0 100.0

C I G A R E T T E S I N T H E U S P a s s p o r t 1 1

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Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume
2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

Regular 98.7 98.7 98.7 98.7 98.7 98.8
Slim 1.2 1.2 1.1 1.1 1.1 1.1
Superslim 0.1 0.1 0.1 0.1 0.1 0.1
Microslim – – – – – –
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

20s 99.7 99.7 99.8 99.7 99.8 99.8
20 + 0.3 0.3 0.3 0.2 0.2 0.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

Economy price band 24.0 24.2 24.4 24.6 24.9 25.1
Mid price band 5.2 4.9 4.7 4.7 4.8 4.8
Premium price band 70.8 70.9 70.9 70.6 70.3 70.0
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Cigarettes in China

Euromonitor International

July 2019

C I G A R E T T E S I N C H I N A P a s s p o r t i

© E u r o m o n i t o r I n t e r n a t i o n a l

LIST OF CONTENTS AND TABLES

Headlines ……………………………………………………………………………………………………………………. 1
Prospects ……………………………………………………………………………………………………………………. 1

Cigarettes Posts Positive Growth in Both Volume and Value Sales ………………………………….. 1
Introduction of New Products Becomes Increasingly Important Amid Intense Competition …… 1
Creativity Is Seen in Domestic Flavoured Capsule Cigarettes ………………………………………….. 1

Competitive Landscape …………………………………………………………………………………………………. 2

Domestic Cigarette Manufacturers Continue To Dominate ………………………………………………. 2
Yuxi Hongta Tobacco Group Co Ltd Retains Its Leading Place in Retail Volume Terms ……… 2
China Tobacco Guangxi Industry Corp Sees the Biggest Increase in Volume Share …………… 2

Taxation and Pricing ……………………………………………………………………………………………………… 3

Taxation Rates………………………………………………………………………………………………………….. 3

Summary 1 Taxation and Duty Levies 2013-2018 ………………………………………………….. 3

Average Cigarette Pack Price Breakdown …………………………………………………………………….. 3

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples ………………….. 4

Category Data ……………………………………………………………………………………………………………… 4

Table 1 Sales of Cigarettes: Volume 2013-2018

………………………………………………. 4
Table 2 Sales of Cigarettes by Category: Value 2013-2018 ………………………………. 5
Table 3 Sales of Cigarettes: % Volume Growth 2013-2018 ……………………………….. 5
Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018 ………………… 5
Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018 ……………………………… 5
Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-

2018 ………………………………………………………………………………………………. 6
Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume

2013-2018 ………………………………………………………………………………………. 6
Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018 ……………………….. 6
Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018 ……………………… 6

Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018

………………….. 6
Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018 ………………………… 7
Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018 …………… 9
Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018………………………… 10
Table 14 Forecast Sales of Cigarettes: Volume 2018-2023 ……………………………….. 10
Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023 ………………… 10
Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023 ………………… 10
Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-

2023 …………………………………………………………………………………………….. 11
Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023 ………………. 11
Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: %

Volume 2018-2023 …………………………………………………………………………. 11
Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: %

Volume 2018-2023 …………………………………………………………………………. 11
Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023 ………… 12
Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023 ………. 12

C I G A R E T T E S I N C H I N A P a s s p o r t 1

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CIGARETTES IN CHINA

HEADLINES
▪ Cigarettes retail volume sales grow by 1% to reach 2.4 trillion sticks in 2018; retail current

value sales grow by 5% to reach CNY1.5 trillion

▪ Growth was mainly driven by new styles of products, including short, capsule, slim and su

per

slim products, benefiting from the diversification of consumer demand

▪ Domestic brands continue to dominate cigarettes with an overall retail volume share of more

than 99% in 2018

▪ Cigarettes is predicted to record a negative retail volume CAGR of 1% over the forecast

period to fall to 2.3 trillion sticks in 2023

PROSPECTS

Cigarettes Posts Positive Growth in Both Volume and Value Sal

es

Even facing challenges in the shape of the residual effect of rises in taxation, stricter

enforcement of smoking control in public areas and increasing health awareness of citizens,

cigarettes recorded an overall positive performance with modest retail volume growth and

slightly faster current value growth in 2018. With disposable income per capita surging in current

value terms, the increasing purchasing power has been cancelling out the negative effect of the

rising taxation. Moreover, even though regional restrictions have been implemented in several

major cities, the lack of national smoking ban regulations still means tobacco control progress in

China is a slow and inefficient process. Over the forecast period, the gradually declining

smoking prevalence will be offset by the growing population, resulting in relatively flat cigarettes

sales in China.

Introduction of New Products Becomes Increasingly Important Amid
Intense Competition

Facing increasingly intense competition and saturated demand for cigarettes, many

manufacturers have continuously made efforts to launch new products. The new products are

mainly concentrated in non-standard categories, including slim, super slim, short and flavoured

capsule products. This is mainly driven by the diversified and individualised demand. Instead of

only considering the quality, price and brand, consumers now also look at factors such as

packaging, culture and innovation when making a purchasing decision. According to trade and

research sources, new styles of products accounted for the majority of new product

development in 2017 and 2018 and posted double-digit growth in volume sales in 2018.

Creativity Is Seen in Domestic Flavoured Capsule Cigarettes

Although only accounting for a very small share of total retail volume, flavoured capsules

became increasingly popular over the review period, recording triple-digit growth in 2018. The

success of flavour capsules is contributed to by the variety of capsule flavours, which are

constantly piquing consumer interest. Apart from normal flavours, such as fruit and menthol,

domestic manufacturers have been very creative in adopting flavours that have never been

applied in cigarettes before. Some products included ingredients with strong Chinese

characteristics to provide a more elaborate or even an upgraded flavour. For example, China

C I G A R E T T E S I N C H I N A P a s s p o r t 2

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Tobacco Guizhou Industry Corp launched Guiyan Guojiuxiang, which has Maotai flavoured

capsules under its subbrand Guiyan. Maotai is a traditional and classic Chinese speciality liquor

from Guizhou province. Some products that included Chinese medicine or herbal ingredients

have gained traction among middle-aged smokers who were concerned about their health but

were struggling to give up smoking. For example, China Tobacco Sichuan Industry Corp

launched Kuanzhai Good Luck under its premium subbrand Kuanzhai. The new products used

fritillary and loquat leaf mixture, which is largely used in OTC syrup for the treatment of a cough

or throat discomfort. The product is popular among consumers who believe it can reduce the

damage to the throat caused by smoking. This is another new product joining the “healthy

concept” capsule flavour products that have been continuously rolled out since 2015, including

flavours such as ginseng, tangerine peel, Chinese yam, vitamin E, and royal jelly.

COMPETITIVE LANDSCAPE

Domestic Cigarette Manufacturers Continue To Dominate

Retail volume sales of cigarettes are completely dominated by domestic manufacturers, due

to the monopoly held by The State Tobacco Monopoly Administration (STMA), which is the sole

regulator of the tobacco industry. The STMA exercises unified, centralised leadership and

vertical management over the tobacco industry in China, covering responsibilities including

monitoring the implementation of tobacco-related regulations and standards and setting targets

with regard to production and retailing. To protect local brands, STMA completely controls the

import and export of cigarettes, with the development of international brands therefore having

been restrained in regulated channels.

Yuxi Hongta Tobacco Group Co Ltd Retains Its Leading Place in Retail
Volume Terms

Yuxi Hongta Tobacco Group Co Ltd continued to lead cigarettes in China in 2018. This is

mainly due to the company’s wide cigarettes portfolio, with its two flagship brands Hongtashan

and Yuxi, which cover the economy, standard and premium segments, enabling the company to

cater to a large consumer base across different income levels. Moreover, the success of Yuxi

Hongta Tobacco is also attributed to its geographic location in Yunnan Province, where the

sunshine, fertile soil and suitable temperatures all provide excellent advantages for tobacco

plantations.

China Tobacco Guangxi Industry Corp Sees the Biggest Increase in
Volume Share

China Tobacco Guangxi Industry Corp recorded the biggest increase in volume share thanks

to the good performance of its premium brand Zhenlong. China Tobacco Guangxi owns two

brands, Zhenlong and Jiatianxia. The Zhenlong brand has won the honorary title of “Guangxi’s

60 Most Influential Brands for the 60th Anniversary of the Founding of the People’s Republic of

China” and has been identified as the industry’s key support brand by STMA. The company has

also actively explored the advantages of existing brands and local culture to “perfect product

styles, enrich brand connotation and gain brand awareness”. For example, the company chose

to show a portrait of “Third Sister Liu”, a well-known local singer, and the brocade pattern of

Minority Zhuang on the box of Zhenlong Beauty Vanilla, which was launched in 2018.

C I G A R E T T E S I N C H I N A P a s s p o r t 3

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TAXATION AND PRICING

Taxation Rates

The last major change to cigarette taxation in China came in May 2015, when the Ministry of

Finance and State Administration of Taxation announced an adjustment to Cigarette

Consumption Tax. The tax on wholesale tobacco was raised from 5% to 11%, along with an

extra charge of CNY0.005 per stick, leading to increases in unit prices in wholesale and retail.

The regulation was implemented on 10 May 2015. The announcement of the new taxation policy

was expected to increase government revenue at the same time as reducing smoking

prevalence. The increase in tax was expected to be reflected in the retail prices of cigarettes,

which would impact the purchasing behaviour of those consumers who are more price sensitive,

such as younger adults of legal smoking age, and lower-income consumers.

Summary 1 Taxation and Duty Levies 2013-2018

Taxatio

n Type

Product

s

Units 2013 2014 2015 2016 2017 2018

Specific

tax

Cigarett

es

RMB

per

1,000

3.0 3.0 3.0 3.0 3.0 3.0

Specific
tax
Cigarett
es
RMB
per
1,000

0.0 0.0 5.0 5.0 5.0 5.0

VAT/sal

es tax

Cigarett
es

% rsp 14.5 14.5 14.5 14.5 14.5 14.5

Ad

valorem

excise

Cigarett
es

% msp 5.0 5.0 11.0 11.0 11.0 11.0

Ad
valorem

excise*

Cigarett
es

% rsp 36.0 36.0 36.0 36.0 36.0 36.0

Ad
valorem

excise**

Cigarett
es

% rsp 56.0 56.0 56.0 56.0 56.0 56.0

Ad
valorem
excise

Cigars % rsp 36.0 36.0 36.0 36.0 36.0 36.0

VAT/sal
es tax

Cigars % rsp 14.5 14.5 14.5 14.5 14.5 14.5

Source: Euromonitor International from national statistics
Note: *Prices below CNY70 per 200-stick carton; **Prices above CNY70 per 200-stick carton

Average Cigarette Pack Price Breakdown

In 2018, taxes accounted for a 68% share of the retail price of Shanghai Tobacco Corp’s

premium brand Chunghwa, while tax comprised a 54% share of the retail price of economy

C I G A R E T T E S I N C H I N A P a s s p o r t 4

© E u r o m o n i t o r I n t e r n a t i o n a l

brand Hongtashan by Yuxi Hongta Tobacco Group. This is because of different

ad valorem

excise for manufacturers. Ad valorem excise for manufacturers is 36% of the manufacturer’s

selling price if this price is lower than CNY70 for one carton (200 sticks) or 56% of the

manufacturer’s selling price if the price is higher than CNY70 for one carton. The higher tax

rates for higher-priced products will marginally increase the prices of premium brands such as

Chunghwa, sales of which are less likely to be negatively impacted due to the less price-

sensitive nature of the brand’s consumers.

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples

P = price in

CNY

Premium Mid Priced Economy

Chunghwa

Hard

Shuangxi

Century

Hongtasha

n Hard

(Pack of

20)

(Pack of
20)
(Pack of
20)

P % P % P %

Wholesale 14.65 32.56 7.82 34.01 2.54 33.86

Retailer 5.69 12.65 2.43 10.56 0.69 9.18

TOTAL

Retained

20.35 45.21 10.25 44.57 3.23 43.04

Specific
excise

0.06 0.13 0.06 0.26 0.06 0.80

Ad
valorem
excise

16.16 35.90 8.26 35.90 2.69 35.90

VAT 6.54 14.53 3.34 14.53 1.09 14.53

Wholesale

ad valorem

1.80 4.00 0.99 4.30 0.30 4.40

Wholesale

specific

excise

0.10 0.22 0.10 0.43 0.10 1.33

TOTAL

Tax

24.65 54.79 12.75 55.43 4.27 56.96

End Price 45.00 100.00 23.00 100.00 7.50 100.00

Source: Euromonitor International from store check data and Taxation and Duty Levies Table
Notes: Figures may not sum to 100% due to rounding

CATEGORY DATA

Table 1 Sales of Cigarettes: Volume 2013-2018

C I G A R E T T E S I N C H I N A P a s s p o r t 5

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bn sticks
2013 2014 2015 2016 2017 2018

Cigarettes 2,490.5 2,549.5 2,489.5 2,350.5 2,343.9 2,368.8

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 2 Sales of Cigarettes by Category: Value 2013-2018

CNY bn
2013 2014 2015 2016 2017 2018

Cigarettes Including 1,269.4 1,359.0 1,422.3 1,370.6 1,419.8 1,497.1
Fine Cut Stick Equivalent
Fine Cut Cigarettes – – – – – –
Cigarettes 1,269.4 1,359.0 1,422.3 1,370.6 1,419.8 1,497.1

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 3 Sales of Cigarettes: % Volume Growth 2013-2018

% volume growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes 1.1 -1.0 -4.9

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018

% current value growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes Including Fine Cut Stick 5.4 3.4 17.9
Equivalent
Fine Cut Cigarettes – – –
Cigarettes 5.4 3.4 17.9

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

American Blend 2.3 2.3 2.3 2.3 2.3 2.3
Virginia 97.6 97.6 97.6 97.5 97.5 97.5
Other Blend 0.1 0.1 0.2 0.2 0.2 0.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

C I G A R E T T E S I N C H I N A P a s s p o r t 6

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Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Standard (non-capsule/ 99.9 99.8 99.8 99.6 99.2 98.3
non-menthol)
Flavour Capsule (all 0.0 0.1 0.1 0.3 0.7 1.6
flavours)
Menthol (non-capsule) 0.1 0.1 0.1 0.1 0.1 0.1
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Regular 99.5 99.1 98.2 96.6 94.3 91.8
Slim 0.3 0.3 0.4 0.5 0.7 0.9
Superslim 0.3 0.6 1.4 2.9 5.0 7.3

Microslim – – – – – –
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

< 20 0.0 0.0 0.0 0.0 0.0 0.0 20s 100.0 100.0 100.0 100.0 100.0 100.0 20 + 0.0 0.0 0.0 - 0.0 - Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Economy price band 31.6 29.2 26.6 25.6 23.5 21.4
Mid price band 53.5 53.8 54.8 56.0 57.2 59.1
Premium price band 14.9 17.0 18.7 18.5 19.3 19.5
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018

C I G A R E T T E S I N C H I N A P a s s p o r t 7

© E u r o m o n i t o r I n t e r n a t i o n a l

% retail volume
Company 2014 2015 2016 2017 2018

Yuxi Hongta Tobacco 10.9 10.8 10.6 10.1 10.0
Group Co Ltd
Hongyun Honghe Group 10.4 10.3 10.1 9.7 9.9
China Tobacco Hunan 9.7 9.9 9.8 9.6 9.3
Industry Corp
China Tobacco Zhejiang 5.1 5.8 6.4 6.8 6.7
Industry Corp
China Tobacco Guangdong 6.1 6.5 6.6 6.5 6.4
Industry Corp
China Tobacco Henan 7.1 6.8 6.6 6.6 6.3
Industry Corp
China Tobacco Hubei 6.0 5.5 5.5 5.9 5.9
Industry Corp
China Tobacco Jiangsu 4.4 4.9 5.3 5.7 5.7
Industry
Shanghai Tobacco Group 5.2 5.3 5.3 5.3 5.3
China Tobacco Shandong 5.4 5.3 5.1 5.0 4.8
Industry Corp
China Tobacco Guizhou 4.3 4.5 4.5 4.6 4.6
Industry Corp
China Tobacco Anhui 5.2 4.4 4.0 4.1 4.1
Industry Corp
China Tobacco Fujian 3.4 3.3 3.3 3.3 3.3
Industry Corp
China Tobacco Sichuan – 3.4 2.8 2.7 2.8
Industry Corp
China Tobacco Shaanxi 2.0 2.0 2.2 2.3 2.3
Industrial Co Ltd
China Tobacco Hebei 1.7 1.6 1.7 1.9 2.0
Industry Corp
China Tobacco Jiangxi 1.6 1.6 1.6 1.8 1.9
Industry Corp
China Tobacco Guangxi 1.3 1.4 1.5 1.5 1.8
Industry Corp
Gansu Tobacco 1.6 1.6 1.7 1.7 1.7
Industrial Co Ltd
Jilin Tobacco 1.4 1.3 1.4 1.5 1.7
Industrial Co Ltd
China Tobacco Chongqing – 1.0 1.3 1.5 1.5
Industry Corp
Philip Morris 0.1 0.1 0.1 0.1 0.1
International Inc
China Tobacco Chuanyu 4.4 – – – –
Industry Corp
Others 2.7 2.6 2.6 1.9 1.9
Total 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018

% retail volume
Brand (GBO) Company (NBO) 2015 2016 2017 2018

Yunyan (China Hongyun Honghe Group 7.4 7.4 7.3 7.6

C I G A R E T T E S I N C H I N A P a s s p o r t 8

© E u r o m o n i t o r I n t e r n a t i o n a l

National Tobacco
Corp (CNTC))
Shuangxi (China China Tobacco Guangdong 6.2 6.3 6.2 6.2
National Tobacco Industry Corp
Corp (CNTC))
Liqun (China China Tobacco Zhejiang 5.1 5.7 6.1 6.1
National Tobacco Industry Corp
Corp (CNTC))
Hongtashan (China Yuxi Hongta Tobacco 5.6 5.5 5.4 5.4
National Tobacco Group Co Ltd
Corp (CNTC))
BaiSha (China China Tobacco Hunan 5.3 5.2 5.1 4.9
National Tobacco Industry Corp
Corp (CNTC))
Nanjing (China China Tobacco Jiangsu 3.5 4.0 4.4 4.5
National Tobacco Industry
Corp (CNTC))
Yellow Crane Tower China Tobacco Hubei 3.6 3.6 4.0 4.1
(China National Industry Corp
Tobacco Corp (CNTC))
Golden Leaf (China China Tobacco Henan 3.5 3.5 3.9 4.0
National Tobacco Industry Corp
Corp (CNTC))
Furongwang (China China Tobacco Hunan 3.8 3.9 4.0 3.9
National Tobacco Industry Corp
Corp (CNTC))
Huangshan (China China Tobacco Anhui 4.0 3.6 3.8 3.9
National Tobacco Industry Corp
Corp (CNTC))
Taishan (China China Tobacco Shandong 2.6 2.7 3.0 3.1
National Tobacco Industry Corp
Corp (CNTC))
Septwolves (China China Tobacco Fujian 3.0 2.9 3.0 3.0
National Tobacco Industry Corp
Corp (CNTC))
Yuxi (China Yuxi Hongta Tobacco 2.7 2.5 2.6 2.7
National Tobacco Group Co Ltd
Corp (CNTC))
Huangguoshu (China China Tobacco Guizhou 2.4 2.5 2.6 2.4
National Tobacco Industry Corp
Corp (CNTC))
Chunghwa (China Shanghai Tobacco Group 2.3 2.4 2.4 2.4
National Tobacco
Corp (CNTC))
Honghe (China Hongyun Honghe Group 2.2 2.2 2.1 2.2
National Tobacco
Corp (CNTC))
Guiyan (China China Tobacco Guizhou 1.5 1.5 1.7 2.0
National Tobacco Industry Corp
Corp (CNTC))
Diamond (China China Tobacco Hebei 1.6 1.7 1.9 2.0
National Tobacco Industry Corp
Corp (CNTC))
Hongqiqu (China China Tobacco Henan 2.7 2.6 2.2 1.9
National Tobacco Industry Corp
Corp (CNTC))
Red Dragon (China China Tobacco Hubei 1.9 1.9 1.8 1.7
National Tobacco Industry Corp
Corp (CNTC))
Lanzhou (China Gansu Tobacco 1.6 1.7 1.7 1.7
National Tobacco Industrial Co Ltd

C I G A R E T T E S I N C H I N A P a s s p o r t 9

© E u r o m o n i t o r I n t e r n a t i o n a l

Corp (CNTC))
Changbaishan (China Jilin Tobacco 1.3 1.4 1.5 1.7
National Tobacco Industrial Co Ltd
Corp (CNTC))
Pride (China China Tobacco Sichuan 2.4 1.7 1.5 1.7
National Tobacco Industry Corp
Corp (CNTC))
Hongmei (China Yuxi Hongta Tobacco 2.0 2.0 1.8 1.6
National Tobacco Group Co Ltd
Corp (CNTC))
Zhenlong (China China Tobacco Guangxi 1.2 1.3 1.3 1.6
National Tobacco Industry Corp
Corp (CNTC))
Double Happiness Shanghai Tobacco Group 1.6 1.6 1.6 1.5
(China National
Tobacco Corp (CNTC))
Hatamen (China China Tobacco Shandong 1.7 1.7 1.5 1.4
National Tobacco Industry Corp
Corp (CNTC))
Jinsheng (China China Tobacco Jiangxi 0.8 0.8 1.0 1.2
National Tobacco Industry Corp
Corp (CNTC))
Suyan (China China Tobacco Jiangsu 1.2 1.1 1.1 1.1
National Tobacco Industry
Corp (CNTC))
Longfengchengxiang China Tobacco Chongqing 0.8 0.9 1.1 1.1
(China National Industry Corp
Tobacco Corp (CNTC))
Others Others 14.4 14.1 12.4 11.7
Total Total 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Store-Based Retailing 96.2 97.1 97.0 96.8 96.7 96.5
– Grocery Retailers 96.2 97.1 97.0 96.8 96.7 96.5
— Convenience Stores 3.1 3.1 3.5 3.9 4.3 4.5
— Discounters 0.1 0.1 0.1 0.1 0.1 0.1
— Forecourt Retailers – – – – – –
— Hypermarkets 7.6 7.6 7.6 7.6 7.5 7.3
— Supermarkets 4.4 4.5 4.5 4.5 4.6 4.8
— Food/drink/tobacco 38.6 39.0 36.2 33.2 30.4 28.1
specialists
— Food/drink – – – – – –
specialists
— Tobacco specialists 38.6 39.0 36.2 33.2 30.4 28.1
— Independent Small 29.4 30.0 33.3 36.8 40.0 41.3
Grocers
— Other Grocery 13.0 12.8 11.8 10.7 9.8 10.5
Retailers
— Newsagent- 0.8 0.8 0.8 0.7 0.7 0.7
tobacconists/kiosks
— Street vendors 12.2 12.0 11.0 10.0 9.1 9.8
– Mixed Retailers – – – – – –
— Department Stores – – – – – –

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— Other Mixed Retailers – – – – – –
– Non-Grocery Specialists – – – – 0.0 –
— Drugstores/ – – – – – –
parapharmacies
— Other Non-Grocery – – – – 0.0 –
Specialists
Non-Store Retailing – – – – – –
– Vending – – – – – –
– Internet Retailing – – – – – –
Non-retail channels 3.8 2.9 3.0 3.2 3.3 3.5
– Bar-tobacconists 0.7 0.2 0.2 0.2 0.2 0.3
– Hotels/restaurants/bars 3.1 2.7 2.8 3.0 3.1 3.3
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018

bn sticks
2013 2014 2015 2016 2017 2018

Legal sales 2,490.5 2,549.5 2,489.5 2,350.5 2,343.9 2,368.8
Illicit trade 149.4 134.8 124.8 116.0 108.0 97.4
% penetration of 5.7 5.0 4.8 4.7 4.4 3.9
illicit trade
Actual consumption 2,640.0 2,684.3 2,614.3 2,466.5 2,451.9 2,466.1

Source: Euromonitor International from official statistics, trade associations, trade interviews

Table 14 Forecast Sales of Cigarettes: Volume 2018-2023

bn sticks
2018 2019 2020 2021 2022 2023

Cigarettes 2,368.8 2,371.6 2,371.8 2,352.9 2,315.2 2,259.7

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023

CNY bn
2018 2019 2020 2021 2022 2023

Cigarettes Including 1,497.1 1,516.2 1,526.0 1,519.0 1,497.6 1,463.1
Fine Cut Stick Equivalent
Fine Cut Cigarettes – – – – – –
Cigarettes 1,497.1 1,516.2 1,526.0 1,519.0 1,497.6 1,463.1

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023

% volume growth
2018/19 2018-23 CAGR 2018/23 Total

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Cigarettes 0.1 -0.9 -4.6

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-2023

% constant value growth
2018/2019 2018-23 CAGR 2018/23 Total

Cigarettes Including Fine Cut Stick 1.3 -0.5 -2.3
Equivalent
Fine Cut Cigarettes – – –
Cigarettes 1.3 -0.5 -2.3

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

American Blend 2.3 2.3 2.3 2.3 2.3 2.4
Virginia 97.5 97.5 97.5 97.5 97.4 97.4
Other Blend 0.2 0.2 0.2 0.2 0.2 0.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2018-
2023

% retail volume
2018 2019 2020 2021 2022 2023

Standard (non-capsule/ 98.3 97.8 97.7 97.6 97.5 97.4
non-menthol)
Flavour Capsule (all 1.6 2.1 2.3 2.3 2.4 2.5
flavours)
Menthol (non-capsule) 0.1 0.1 0.1 0.1 0.1 0.1
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume
2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

Regular 91.8 89.4 87.4 85.7 84.0 82.2
Slim 0.9 1.3 1.8 2.4 3.1 4.0
Superslim 7.3 9.3 10.8 12.0 12.9 13.8

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Microslim – – – – – –
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

< 20 0.0 0.0 0.0 0.0 0.0 0.0 20s 100.0 100.0 100.0 100.0 100.0 100.0 20 + - - - 0.0 0.0 - Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

Economy price band 21.4 17.8 15.5 13.5 11.7 10.2
Mid price band 59.1 61.1 62.5 63.5 64.2 64.7
Premium price band 19.5 21.1 22.0 23.0 24.1 25.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Cigarettes in Japan

Euromonitor International

July 2019

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LIST OF CONTENTS AND TABLES

Headlines ……………………………………………………………………………………………………………………. 1
Prospects ……………………………………………………………………………………………………………………. 1

New Legislation Set To Dampen Demand …………………………………………………………………….. 1
Manufacturers Seek Ways To Keep Prices Down ………………………………………………………….. 1
Increasing Competition From Heated Tobacco ……………………………………………………………… 2

Competitive Landscape …………………………………………………………………………………………………. 2

Japanese Government Plays An Important Role With A Significant Stake in Jti …………………. 2
Philip Morris Preparing for Withdrawal From Cigarettes ………………………………………………….. 2
Innovation Targets Demand for Flavoured Products ………………………………………………………. 2

Taxation and Pricing ……………………………………………………………………………………………………… 2

Taxation Rates………………………………………………………………………………………………………….. 2

Summary 1 Taxation and Duty Levies 2013-2018 ………………………………………………….. 3

Average Cigarette Pack Price Breakdown …………………………………………………………………….. 4

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples ………………….. 4

Category Data ……………………………………………………………………………………………………………… 4

Table 1 Sales of Cigarettes: Volume 2013-2018 ………………………………………………. 4
Table 2 Sales of Cigarettes by Category: Value 2013-2018 ………………………………. 5
Table 3 Sales of Cigarettes: % Volume Growth 2013-2018 ……………………………….. 5
Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018 ………………… 5
Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018 ……………………………… 5
Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-

2018 ………………………………………………………………………………………………. 5
Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume

2013-2018 ………………………………………………………………………………………. 6
Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018 ……………………….. 6
Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018 ……………………… 6
Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018 ………………….. 6
Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018 ………………………… 7
Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018 …………… 8
Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018………………………….. 8
Table 14 Forecast Sales of Cigarettes: Volume 2018-2023 …………………………………. 9
Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023 ………………….. 9
Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023 ………………….. 9
Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-

2023 ………………………………………………………………………………………………. 9
Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023 ………………… 9
Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: %

Volume 2018-2023 …………………………………………………………………………. 10
Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: %

Volume 2018-2023 …………………………………………………………………………. 10
Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023 ………… 10
Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023 ………. 10

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CIGARETTES IN JAPAN

HEADLINES
▪ Cigarettes sees current value decline of 12% in 2018 to reach JPY2,945 billion, while volume

s

also fall by 12%, to 132.7 billion sticks

▪ Tax rise leads to significant price increase

▪ Japan Tobacco Inc dominates with a 62% volume share

▪ Cigarettes is expected to see a -6% volume CAGR over the forecast period, reaching 95.1

billion sticks, driven down by increasingly restrictive legislation, including the staged

imposition of the indoor smoking ban by April 2020

PROSPECTS

New Legislation Set To Dampen Demand

In July 2018, Japan approved its first national legislation banning smoking inside public

places, such as schools, hospitals, retail stores and restaurants. The ban will be introduced in

stages up to April 2020, as Japan aims to lower the risk of passive smoking ahead of the Tokyo

Olympics. The legislation is not as comprehensive as originally proposed and excludes many

restaurants and bars. However, in June 2018, Tokyo Metropolitan Assembly passed stricter

legislation, which was estimated to cover 84% of restaurants and bars in the capital, compared

with the national law’s coverage of 45%. Even in Tokyo, though, institutions such as universities,

hospitals and government offices will be subject to more relaxed rules, with smoking allowed in

designated areas outside buildings. Nonetheless, the environment is undoubtedly becoming

more challenging for smokers, and the new legislation is also likely to have a negative impact in

the social image of smoking. Consequently, legislation at both a national and local level is

expected to drive down demand for cigarettes during the forecast period.

Manufacturers Seek Ways To Keep Prices Down

Cigarettes is set to see an ongoing increase in taxation in the early part of the forecast period,

with JPY1 set to be added per stick in 2018, 2020 and 2021. In October 2018, the price per

pack rose significantly for many brands, with Japan Tobacco’s Mevius seeing the price increase

from JPY440 to JPY480 per 20 sticks, while Marlboro’s price rose from JPY470 for 20 sticks to

JPY520. The price increase had a negative impact on demand for cigarettes, particularly in the

premium segment.

Cigarette manufacturers looked to retain smokers by reducing the number of sticks in packs

from 20 to 19 sticks in order to keep the price down. Manufacturers also launched less

expensive new line-ups with lower tar and nicotine levels in response to the impact of rising

taxation on consumer demand. Launched in April 2018, Lark Smart Plus offers 19 sticks in a

pack retailing at JPY390. In addition, Winston Compact Menthol Purple was launched with 19

sticks in November 2018 to make it more affordable, at JPY410, while the existing Winston

Compact Blue 6 Box, 3 Box and One Box products were also reduced to 19 sticks per pack to

enable them to retail at the same price as the new product.

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Increasing Competition From Heated

Tobacco

The ongoing rise in demand for heated tobacco, supported by manufacturers increasingly

turning their attention and resources to the category, is set to have a significant negative impact

on the development of cigarettes during the forecast period. As well as being perceived as less

harmful to health because it is smoke-free, heated tobacco also appeals to consumers who are

attracted to modern design-driven gadgets. Nonetheless, cigarettes is expected to remain the

largest area of the Japanese tobacco market by value at the end of the forecast period.

COMPETITIVE LANDSCAPE

Japanese Government Plays An Important Role With A Significant Stake
in Jti

Japan Tobacco Inc, Philip Morris Japan KK, and British American Tobacco Japan Ltd

dominated the Japanese tobacco market in 2018. The Japanese Government continues to play

an important role in cigarettes. The government holds a 33% stake in the dominant player in the

market, Japan Tobacco (having reduced its stake from 50% in 2013), which is also the only

company allowed to produce cigarettes in Japan. In addition, the government continues to

closely control prices in the market.

Philip Morris Preparing for Withdrawal From Cigarettes

The second largest player in cigarettes, Philip Morris Japan saw its share of category volumes

decline significantly in the final two years of the review period as it looked to shift its focus to

heated tobacco, a growing category in which it is facing increasingly intense competition from

major rivals. Indeed, Philip Morris’s increasing emphasis on heated tobacco is laying the

foundations for its longer-term strategic aim of withdrawing from cigarettes completely.

Innovation Targets Demand for Flavoured Products

Towards the end of the review period, cigarette manufacturers targeted the strong demand for

menthol and fruit flavoured cigarettes amongst female smokers. Japan Tobacco launched

Mevius Premium Menthol Option Muscat Green 5 100s Slim and Mevius Premium Menthol

Option Muscat Green One 100s Slim in May 2019. By biting a capsule contained in the filter,

smokers can taste both menthol and fruit flavours. Similarly, British American Tobacco launched

the Kool Boost Double menthol cigarette, which contains a breakable capsule in the filter, in

March 2018.

TAXATION AND PRICING

Taxation Rates

▪ Cigarettes are taxed by the number of sticks, whilst cigars, cigarillos, fine cut tobacco and

pipe tobacco are taxed by weight. The conversion rate states that 1g of tobacco is equivalent

to one cigarette stick. The taxation rate for regular/king size and superking/long cigarettes is

the same.

▪ Until April 2019, Japan also had a separate tax imposed on ex-Class 3 cigarettes. Prior to

1985, imports of cigarettes were prohibited in Japan, while cigarettes were divided into three

classes depending on the quality of tobacco, with Class 3 being the lowest. From 1985, when

tobacco imports were allowed, the government consolidated Class 1 and Class 2 cigarettes

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but continued to classify Class 3 separately as budget cigarettes. The tax rate for ex-Class 3

cigarettes, such as Japan Tobacco’s Golden Bat, Echo and Wakaba brands, is, therefore,

lower than for other cigarettes. However, tax reform in April 2015 led to a change regarding

the separate Special Tobacco Tax on ex-Class 3 cigarettes. The 2015 tax reform aimed to

repeal this lower tax rate for ex-Class 3 cigarettes between April 2016 and April 2019 – with

the tax rate on ex-Class 3 cigarettes increasing in stages. Price increases on ex-Class 3

cigarettes were planned as follows: JPY6.8 per stick in April 2016, JPY7.8 in April 2017,

JPY9.3 in April 2018, and JPY12.40 in 2019.

▪ In December 2017, the government announced a reform of the tobacco tax scheme from

2018 to 2022, to increase taxes on cigarettes and heated tobacco. The reform, the first since

2010, includes plans to increase the level of tax on cigarettes in three stages and on heated

tobacco in five stages up to October 2022.

Summary 1 Taxation and Duty Levies 2013-2018

Units 2013 2014 2015 2016 2017 2018

Standard

cigarette

s

National

excise

tax

(JPY/1,0

00 sticks)

5,302 5,302 5,302 5,302 5,302 5,802

Regional

excise
tax
(JPY/1,0
00 sticks)

6,122 6,122 6,122 6,122 6,122 6,622

Special

Tobacco

Tax

(JPY/1,0
00 sticks)

820 820 820 820 820 820

Cigars/ci

garillos/fi

ne cut

tobacco

and pipe

tobacco

National
excise
tax

(JPY/kg) 5,302 5,302 5,302 5,302 5,302 5,802

Regional
excise
tax

(JPY/kg) 6,122 6,122 6,122 6,122 6,122 6,622

Special
Tobacco
Tax

(JPY/kg) 820 820 820 820 820 820

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VAT/sale

s taxes

(%) *

4.8% 7.4% 7.4% 7.4% 7.4% 7.4%

Source: Euromonitor International from national statistics
Note: * refers to TIRSP (Tax Inclusive Retail Selling Price): including all taxes

Average Cigarette Pack Price Breakdown

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples

P = ‘price’

in Japnese

yen

Premium Mid Priced Economy

Marlboro Mevius Wakaba

(Pack of

20)

(Pack of 20 (Pack of

20)

P % P % P %

Wholesale 191.63 36.85 156.51 32.61 51.16 14.21

Retailer 24.96 4.80 23.04 4.80 17.28 4.80

TOTAL

Retained

216.59 41.65 179.55 37.41 68.44 19.01

Specific

Excise

264.88 50.94 264.88 55.18 264.88 73.58

Ad

valorem

Excise

0.00 0.00 0.00 0.00 0.00 0.00

VAT 38.53 7.41 35.57 7.41 26.68 7.41

TOTAL
Tax

303.41 58.35 300.45 62.59 291.56 80.99

End Price 520.00 100.00 480.00 100.00 360.00 100.00

Source: Calculated from store-check data and Taxation and Duty Levies Table.
Notes: Figures may not sum up to 100% due to rounding

CATEGORY DATA

Table 1 Sales of Cigarettes: Volume 2013-2018

million sticks
2013 2014 2015 2016 2017 2018

Cigarettes 194,053.9 186,200.0 182,300.0 173,900.0 151,466.9 132,685.0

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Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 2 Sales of Cigarettes by Category: Value 2013-2018

JPY billion
2013 2014 2015 2016 2017 2018

Cigarettes Including 3,998.6 3,917.7 3,903.3 3,782.6 3,338.7 2,946.9
Fine Cut Stick Equivalent
Fine Cut Cigarettes 0.8 1.1 1.2 1.4 1.4 1.5
Cigarettes 3,997.8 3,916.6 3,902.0 3,781.2 3,337.3 2,945.4

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 3 Sales of Cigarettes: % Volume Growth 2013-2018

% volume growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes -12.4 -7.3 -31.6

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018

% current value growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes Including Fine Cut Stick -11.7 -5.9 -26.3
Equivalent
Fine Cut Cigarettes 5.0 13.5 88.3
Cigarettes -11.7 -5.9 -26.3

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018

% retail volume

2013 2014 2015 2016 2017 2018

American Blend 95.9 95.9 95.9 95.9 95.8 94.6
Virginia 1.3 1.3 1.3 1.2 1.3 2.5
Other Blend 2.8 2.8 2.8 2.9 2.9 2.9
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

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Standard (non-capsule/ 66.9 65.6 64.3 64.1 64.8 65.3
non-menthol)
Flavour Capsule (all 6.8 7.6 7.7 7.5 7.2 7.0
flavours)
Menthol (non-capsule) 26.3 26.8 28.0 28.4 28.0 27.7
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Regular 94.5 94.3 94.0 94.0 93.9 93.8
Slim 0.6 0.6 0.6 0.6 0.6 0.6
Superslim 4.8 5.0 5.2 5.3 5.3 5.4
Microslim 0.1 0.2 0.2 0.2 0.2 0.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

< 20 2.1 2.1 2.1 2.2 2.3 2.4 20s 96.9 96.9 96.9 96.8 96.8 96.7 20 + 1.0 1.0 1.0 1.0 0.9 0.9 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Economy price band 6.9 7.4 7.1 6.7 6.4 6.4
Mid price band 76.8 76.1 76.7 76.9 76.9 76.9
Premium price band 16.3 16.6 16.1 16.5 16.7 16.7
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018

% retail volume
Company 2014 2015 2016 2017 2018

Japan Tobacco Inc 60.1 56.8 61.3 61.3 61.8

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Philip Morris Japan KK 22.8 23.2 23.7 22.7 21.1
British American 10.1 10.5 10.1 10.2 10.5
Tobacco Japan Ltd
Santa Fe Natural 0.8 1.2 – – –
Tobacco Japan Inc
Others 6.2 8.2 4.9 5.8 6.6
Total 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018

% retail volume
Brand (GBO) Company (NBO) 2015 2016 2017 2018

Mevius Japan Tobacco Inc 32.1 33.5 31.4 31.4
Marlboro (Philip Philip Morris Japan KK 11.7 12.0 10.5 9.4
Morris
International Inc)
Lark (Philip Morris Philip Morris Japan KK 9.3 9.5 9.7 9.1
International Inc)
Winston Japan Tobacco Inc 4.6 4.9 8.1 8.0
Seven Stars Japan Tobacco Inc 7.5 7.8 7.6 7.9
Kent (British British American 4.8 4.5 4.4 4.6
American Tobacco Plc) Tobacco Japan Ltd
Kool (British British American 2.9 2.8 2.8 2.9
American Tobacco Plc) Tobacco Japan Ltd
Pianissimo Japan Tobacco Inc 3.0 3.1 2.9 2.9
Wakaba Japan Tobacco Inc 2.3 2.3 2.1 2.1
Peace Japan Tobacco Inc 2.0 2.1 2.0 2.0
Natural American Japan Tobacco Inc – 1.5 1.8 2.0
Spirit
Echo Japan Tobacco Inc 2.2 2.3 1.9 1.8
Parliament (Philip Philip Morris Japan KK 1.1 1.1 1.3 1.5
Morris
International Inc)
Hope Japan Tobacco Inc 1.4 1.4 1.3 1.4
Virginia Slims Philip Morris Japan KK 1.0 1.0 1.1 1.2
(Philip Morris
International Inc)
Lucky Strike British American 1.0 0.9 0.9 0.9
(British American Tobacco Japan Ltd
Tobacco Plc)
Hi-Lite Japan Tobacco Inc 0.4 0.4 0.4 0.4
Pall Mall (British British American 0.2 0.2 0.2 0.2
American Tobacco Plc) Tobacco Japan Ltd
Camel Japan Tobacco Inc 0.0 0.0 0.0 0.0
Caster Japan Tobacco Inc 0.0 0.0 0.0 0.0
Natural American Santa Fe Natural 1.2 – – –
Spirit (Reynolds Tobacco Japan Inc
American Inc)
Rothmans (British British American – – – –
American Tobacco Plc) Tobacco Japan Ltd
Cabin Mild Japan Tobacco Inc – – – –
Cabin One Tasty Japan Tobacco Inc – – – –
Cabin Prestige Japan Tobacco Inc – – – –
Cabin Roast Blend Japan Tobacco Inc – – – –
Cabin Super Mild Japan Tobacco Inc – – – –
Cabin Ultra Milds Japan Tobacco Inc – – – –

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Frontier Menthol Japan Tobacco Inc – – – –
Philip Morris Philip Morris Japan KK – – – –
(Philip Morris
International Inc)
Others Others 11.1 8.5 9.5 10.3
Total Total 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Store-Based Retailing 87.6 89.1 89.2 89.2 88.9 88.9
– Grocery Retailers 87.3 88.8 89.0 88.2 88.6 88.7
— Convenience Stores 68.0 68.4 69.0 68.6 68.8 68.9
— Discounters – – – – – –
— Forecourt Retailers – – – – – –
— Hypermarkets – – – – – –
— Supermarkets 11.0 12.4 12.6 12.6 12.7 12.7
— Food/drink/tobacco 6.0 5.8 5.2 4.8 4.6 4.6
specialists
— Food/drink 2.0 1.8 1.6 1.5 1.5 1.5
specialists
— Tobacco specialists 4.0 4.0 3.6 3.3 3.1 3.1
— Independent Small 1.2 1.1 1.1 1.1 1.4 1.4
Grocers
— Other Grocery 1.1 1.1 1.1 1.1 1.1 1.1
Retailers
— Newsagent- 1.1 1.1 1.1 1.1 1.1 1.1
tobacconists/kiosks
— Street vendors – – – – – 0.0
– Mixed Retailers 0.2 0.2 0.1 0.1 0.1 0.1
— Department Stores 0.2 0.2 0.1 0.1 0.1 0.1
— Other Mixed Retailers – – – – – –
– Non-Grocery Specialists 0.1 0.1 0.1 0.9 0.1 0.0
— Drugstores/ – – – – – –
parapharmacies
— Other Non-Grocery 0.1 0.1 0.1 0.9 0.1 0.0
Specialists
Non-Store Retailing 11.9 10.4 10.2 10.2 10.6 10.6
– Vending 11.7 10.2 10.1 10.1 10.4 10.4
– Internet Retailing 0.2 0.2 0.2 0.2 0.2 0.2
Non-retail channels 0.6 0.5 0.5 0.5 0.5 0.5
– Bar-tobacconists – – – – – –
– Hotels/restaurants/bars 0.6 0.5 0.5 0.5 0.5 0.5
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018

million sticks
2013 2014 2015 2016 2017 2018

Legal sales 194,053.9 186,200.0 182,300.0 173,900.0 151,466.9 132,685.0

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Illicit trade 82.1 78.1 75.3 71.6 62.3 54.3
% penetration of 0.0 0.0 0.0 0.0 0.0 0.0
illicit trade
Actual consumption 194,136.0 186,278.1 182,375.3 173,971.6 151,529.2 132,739.3

Source: Euromonitor International from official statistics, trade associations, trade interviews

Table 14 Forecast Sales of Cigarettes: Volume 2018-2023

million sticks
2018 2019 2020 2021 2022 2023

Cigarettes 132,685.0 123,131.7 114,881.9 107,529.4 100,970.1 95,113.9

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023

JPY billion
2018 2019 2020 2021 2022 2023

Cigarettes Including 2,946.9 2,941.6 2,766.8 2,688.3 2,617.7 2,554.7
Fine Cut Stick Equivalent
Fine Cut Cigarettes 1.5 1.6 1.6 1.7 1.7 1.8
Cigarettes 2,945.4 2,940.1 2,765.2 2,686.6 2,616.0 2,552.9

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023

% volume growth
2018/19 2018-23 CAGR 2018/23 Total

Cigarettes -7.2 -6.4 -28.3

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-2023

% constant value growth
2018/2019 2018-23 CAGR 2018/23 Total

Cigarettes Including Fine Cut Stick -0.2 -2.8 -13.3
Equivalent
Fine Cut Cigarettes 4.5 3.4 18.3
Cigarettes -0.2 -2.8 -13.3

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023

% retail volume

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2018 2019 2020 2021 2022 2023

American Blend 94.6 94.5 94.4 94.3 94.2 94.1
Virginia 2.5 2.4 2.4 2.4 2.4 2.7
Other Blend 2.9 3.0 3.2 3.3 3.4 3.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2018-
2023

% retail volume
2018 2019 2020 2021 2022 2023

Standard (non-capsule/ 65.3 65.3 65.3 65.2 65.2 65.2
non-menthol)
Flavour Capsule (all 7.0 7.0 7.0 7.0 7.0 7.1
flavours)
Menthol (non-capsule) 27.7 27.7 27.7 27.7 27.7 27.7
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume
2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

Regular 93.8 93.8 93.7 93.7 93.6 93.6
Slim 0.6 0.7 0.7 0.7 0.7 0.7
Superslim 5.4 5.4 5.4 5.4 5.5 5.5
Microslim 0.2 0.2 0.2 0.2 0.2 0.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

< 20 2.4 2.5 2.7 2.8 2.9 3.0 20s 96.7 96.7 96.5 96.4 96.4 96.3 20 + 0.9 0.7 0.8 0.8 0.8 0.7 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023

% retail volume

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2018 2019 2020 2021 2022 2023

Economy price band 6.4 6.4 6.4 6.3 6.3 6.3
Mid price band 76.9 76.9 76.9 76.9 76.9 76.9
Premium price band 16.7 16.7 16.7 16.7 16.7 16.7
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Cigarettes in France

Euromonitor International

July 2019

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LIST OF CONTENTS AND TABLES

Headlines ……………………………………………………………………………………………………………………. 1
Prospects ……………………………………………………………………………………………………………………. 1

Strong Volume Decline for Cigarettes Following Second Tax Hike …………………………………… 1
Illegal Trade Experiences Stronger Demand …………………………………………………………………. 1
Demand for Microslims and Larger Packs …………………………………………………………………….. 2

Competitive Landscape …………………………………………………………………………………………………. 2

Philip Morris Marron Records Positive Volume Growth Amongst Declining Sales for Leading

Brands …………………………………………………………………………………………………………………….. 2
Economy Brands Lose Out To Mid Price and Premium Cigarettes …………………………………… 2
Seita Groupe Imperial Tobacco Records Strongest Decline As News Suffers From Economy

Image ………………………………………………………………………………………………………………………. 2

Taxation and Pricing ……………………………………………………………………………………………………… 3

Taxation Rates………………………………………………………………………………………………………….. 3

Summary 1 Taxation and Duty Levies 2013-2018 ………………………………………………….. 3

Average Cigarette Pack Price Breakdown …………………………………………………………………….. 3

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples

………………….. 3

Category Data ……………………………………………………………………………………………………………… 4

Table 1 Sales of Cigarettes: Volume 2013-2018 ………………………………………………. 4
Table 2 Sales of Cigarettes by Category: Value 2013-2018 ………………………………. 4
Table 3 Sales of Cigarettes: % Volume Growth 2013-2018 ……………………………….. 5
Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018 ………………… 5
Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018 ……………………………… 5
Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-

2018 ………………………………………………………………………………………………. 5
Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume

2013-2018 ………………………………………………………………………………………. 6
Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018 ……………………….. 6
Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018 ……………………… 6
Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018 ………………….. 6
Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018 ………………………… 7
Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018 …………… 9
Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018………………………….. 9
Table 14 Forecast Sales of Cigarettes: Volume 2018-2023 ……………………………….. 10
Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023 ………………… 10
Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023 ………………… 10
Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-

2023 …………………………………………………………………………………………….. 10
Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023 ………………. 10
Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: %

Volume 2018-2023 …………………………………………………………………………. 11
Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: %

Volume 2018-2023 …………………………………………………………………………. 11
Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023 ………… 11
Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023 ………. 11

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C I G A R E T T E S I N F R A N C E P a s s p o r t 1

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CIGARETTES IN FRANCE

HEADLINES
▪ Cigarettes records 4% current value growth to reach EUR15.6 billion and declines by 9% in

retail volume terms, falling to 40.3 billion sticks in

2018

▪ High tax hikes lead to strong volume decline but higher growth of illicit trade for cigarettes in

2018

▪ Philip Morris France SAS strengthens lead of cigarettes in 2018 with a 45% retail volume

share

▪ Over the forecast period, cigarettes is predicted to record a -7% retail volume CAGR with

ongoing tax hikes into 2020 to continue negatively impacting demand for legal cigarettes

PROSPECTS

Strong Volume Decline for Cigarettes Following Second Tax Hike

Although the introduction of standardised plain packaging on cigarettes failed to have the

impact that the government was hoping for with regards to reducing smoking prevalence in the

country in 2017, a further increase in tax on tobacco products in March 2018 dramatically

increased the price of a 20-pack of cigarettes by EUR1, which made the cost of purchasing

cigarettes prohibitive to many lower-income consumers. This price increase supported higher

current value growth during the year but had a hugely negative impact on retail volume sales

which recorded a strong decline.

Some consumers turned to pipe tobacco which is cheaper compared to cigarettes and has

become fashionable in France with the trend for shisha smoking. There was also notable further

migration towards e-vapour products, which are also much cheaper than cigarettes and are

attracting consumers with constant innovation.

Falling demand was also compounded by the declining prevalence of smoking amongst the

French, as the health and wellness trend continued to gain momentum in the country.

Illegal Trade Experiences Stronger Demand

Unfortunately, the rise in prices also led to some consumers turning to illicit trade for cheaper

cigarettes, leading to stronger demand for the latter compared to 2017, when the first of the two

tax hikes emerged. The latter resulted in France having the most expensively priced packs of

cigarettes in continental Europe. High volumes of illegal trade stem from Spain and Andorra.

As smuggling and counterfeits result in a huge loss of income for the state, the fight against

illicit trade constitutes a major objective for the French government, with the implementation by

2019 of a tracking and tracing system for the legal supply chain. It will also support the

diversification of tobacconists towards complementary activities besides sales of cigarettes such

as selling e-vapour products, which continued to perform strongly in 2018. However, despite

efforts to reduce illegal trade through the tracking and tracing system at the beginning of the

forecast period, sales of illegal cigarettes are predicted to record consistent growth in line with

further declining retail volume sales for legal products.

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Demand for Microslims and Larger Packs

While superslim cigarettes such as Vogue from British American Tobacco France continued

to gain retail volume share from regular and slim, 2018 witnessed demand amongst French

consumers for longer cigarettes with the niche of microslim the only length to record positive

retail volume growth.

With average prices of cigarettes continuing to rise, the gap between price bands narrowed,

with the share of economy losing ground to mid price products, in addition to recording the

highest retail volume decline. Unsurprisingly, with consumers looking to make savings, there

was growing demand for larger pack sizes, with

20+ packs gaining retail volume share from 20s with only marginal decline in sales compared

to the double-digit decline for the regular pack size. Winston Mega Classic 40 and packs of 100s

benefited from this trend including King’s Black 100’s.

COMPETITIVE LANDSCAPE

Philip Morris Marron Records Positive Volume Growth Amongst
Declining Sales for Leading Brands

Cigarettes continued to be dominated by multinationals in France in 2018, with Philip Morris

France SAS gaining further retail volume share, as its brands Marlboro Red, Philip Morris

Marron and Marlboro Gold led the overall category. However, Philip Morris Marron was the only

brand amongst the three to record positive retail volume sales. Strong international brand equity

supported demand for multinational brands as their names have the strongest recognition rate

which meant that they were not as impacted by the standardised plain packaging as smaller

brands as consumers simply requested their favoured brands by name.

Other brands to record positive retail volume sales in 2018 included JT International’s Camel

filters and Winston Red and British American Tobacco’s Lucky Strike. However, Benson &

Hedges Gold, distributed locally by Gallaher France for Japan Tobacco Inc, was the strongest

performer with a second consecutive year of double-digit volume growth, carrying a more

premium image.

Economy Brands Lose Out To Mid Price and Premium Cigarettes

The increasingly weak price differential between premium and economy 20-pack cigarettes

meant that smokers could see no reason to continue purchasing economy packs which led to

the strong decline for this price band, while mid price and premium cigarettes benefited brands

such as Marlboro and Benson & Hedges Gold. Economy brands such as News from Seita

Groupe Imperial Tobacco SA therefore recorded strong declines in retail volume sales in 2018.

Seita Groupe Imperial Tobacco Records Strongest Decline As News
Suffers From Economy Image

Ongoing portfolio rationalisation was particularly noticeable by Seita Groupe Imperial Tobacco

SA, which recorded the strongest retail volume decline in 2018 amongst cigarette

manufacturers. Smaller brands with low recognition suffered more from the standardised plain

packaging and the disappearance of their visual identity compared to multinational brands such

as those offered by Philip Morris. However, while Seita Groupe Imperial Tobacco originally

reduced the size of its portfolio which benefited its News economy cigarettes in 2017, the brand

recorded one of the highest retail volume sales declines in 2018, prompted by the narrowing

gap between price bands due to further price hikes.

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TAXATION AND PRICING

Taxation Rates

▪ Taxation on cigarettes in France is made up of VAT, ad valorem excise tax and a specific tax.

▪ Tax hikes on cigarettes generally take effect from 1 January, which is the start of the financial

year in France. However, the minimum perceived price for cigarettes is another instrument

used by the government to amend prices during the year.

▪ Under a plan set up by Agnès Buzyn, the new Health Minister, the biggest price hikes were in

November 2017 and March 2018, which resulted in dramatic price increases. The aim is to

reach EUR10 for the price of a 20-stick pack by 2020.

▪ With the government’s agreement, manufacturers have the option to set their own prices for

tobacco products on condition that they are above the minimum perceived price or above the

amount of total tax. In this case, tax hikes have no effect on retail price if manufacturers

decide to reduce their margins instead of increasing retail prices. Generally, however, tax

hikes have a direct impact on retail prices, in turn reducing the affordability of cigarettes for

low-income smokers.

▪ In order to justify further tax hikes, the government has introduced stricter border controls,

including penalties and prison sentences, while an EU-wide tracking and tracing system for

the legal supply chain was introduced in 2019.

Summary 1 Taxation and Duty Levies 2013-2018

2013 2014 2015 2016 2017 2018

Ad

valorem

excise (%)

49.7 49.7 49.7 49.7 49.7 50.8

VAT/sales

taxes (%)

16.4 16.7 16.7 16.7 16.7 16.7

Specific

taxes

(EUR per

1,000

sticks)

45.8 48.8 48.8 48.8 48.8 59.9

Source: Euromonitor International

Average Cigarette Pack Price Breakdown

▪ With a minimum of 80% of the final retail price accounted for by tax, France has one of the

highest taxation rates on cigarettes in Europe, leading to the prevalence of illicit trade,

especially at the country’s borders.

▪ Manufacturers are free to set prices in line with the minimum price; prices are then published

in the Journal Officiel (JO) and need to be followed by retailers. The government has the

ability to amend the minimum price during the year.

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples

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P = ‘price’

in Euro

Premium Mid-priced Economy

Marlboro

Red

Philip

Morris Bleu

News&co

Rouge

Pack of 20 Pack of 20 Pack of 20

P % P % P %

Wholesale 0.82 9.29 0.77 8.98 0.70 8.47

Retailer 0.84 9.60 0.83 9.60 0.80 9.60

TOTAL

Retained

1.66 18.89 1.60 18.58 1.50 18.07

Specific

Excise

1.20 13.64 1.20 13.95 1.20 14.46

Ad
valorem
Excise

4.47 50.80 4.37 50.80 4.22 50.80

VAT 1.47 16.67 1.43 16.67 1.38 16.67

TOTAL

Tax

7.14 81.11 7.00 81.42 6.80 81.93

End Price 8.80 100.00 8.60 100.00 8.30 100.00

Source: Calculated from storecheck data and Taxation and Duty Levies Table.
Notes: Figures may not sum up to 100% due to rounding

CATEGORY DATA

Table 1 Sales of Cigarettes: Volume 2013-2018

million sticks
2013 2014 2015 2016 2017 2018

Cigarettes 47,527.0 45,014.0 45,457.0 44,925.8 44,260.9 40,277.4

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 2 Sales of Cigarettes by Category: Value 2013-2018

EUR million
2013 2014 2015 2016 2017 2018

Cigarettes Including 17,175.7 17,265.1 17,570.3 17,535.4 17,579.9 18,326.0

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Fine Cut Stick Equivalent
Fine Cut Cigarettes 1,952.7 2,101.1 2,231.5 2,365.4 2,516.8 2,705.6
Cigarettes 15,223.0 15,164.0 15,338.7 15,170.0 15,063.1 15,620.4

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 3 Sales of Cigarettes: % Volume Growth 2013-2018

% volume growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes -9.0 -3.3 -15.3

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018

% current value growth
2017/18 2013-18 CAGR 2013/18 Total

Cigarettes Including Fine Cut Stick 4.2 1.3 6.7
Equivalent
Fine Cut Cigarettes 7.5 6.7 38.6
Cigarettes 3.7 0.5 2.6

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

American Blend 92.8 92.8 92.8 93.0 92.9 92.7
Virginia 5.2 5.2 5.3 5.2 5.2 5.3
Other Blend 2.0 2.0 1.9 1.9 1.9 2.0
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Standard (non-capsule/ 93.1 92.0 91.2 93.0 96.7 96.9
non-menthol)
Flavour Capsule (all 3.1 4.2 5.2 3.6 – –
flavours)
Menthol (non-capsule) 3.8 3.7 3.6 3.4 3.3 3.1
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

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Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Regular 97.5 97.0 96.6 96.2 96.1 96.0
Slim 0.5 0.5 0.5 0.4 0.4 0.3
Superslim 2.0 2.5 2.8 3.1 3.3 3.4
Microslim – – 0.2 0.2 0.2 0.3
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

< 20 - - - - - - 20s 88.2 88.3 88.5 88.6 88.4 87.3 20 + 11.8 11.6 11.4 11.4 11.6 12.7 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Economy price band 25.9 26.3 26.2 24.5 24.5 22.5
Mid price band 30.6 31.6 31.0 32.9 32.9 34.7
Premium price band 43.5 42.1 42.7 42.6 42.6 42.8
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018

% retail volume
Company 2014 2015 2016 2017 2018

Philip Morris France SAS 39.9 41.0 41.7 42.4 44.5
Seita Groupe Imperial 21.7 21.4 21.6 22.1 19.7
Tobacco SA
British American 16.2 16.2 16.3 16.2 16.1
Tobacco France
JT International France 15.8 15.1 14.7 14.6 15.5
SAS
Gallaher France 2.2 2.1 2.1 2.1 2.1
Pöschl Tabak Gmbh & Co KG 0.3 0.3 – – –
SEITA (Société – – – – –
Nationale
d’Exploitation

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Industrielle des Tabacs
et Allumettes)
Altadis SA – – – – –
Imperial Tobacco France – – – – –
SA
Others 3.9 3.8 3.6 2.7 2.2
Total 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018

% retail volume
Brand (GBO) Company (NBO) 2015 2016 2017 2018

Marlboro Red Philip Morris France SAS 15.6 16.0 16.5 17.5
(Philip Morris
International Inc)
Philip Morris Philip Morris France SAS 7.0 7.0 7.2 8.1
Marron (Philip
Morris
International Inc)
Marlboro Gold Philip Morris France SAS 7.9 8.0 7.9 7.8
(Philip Morris
International Inc)
News (Imperial Seita Groupe Imperial – 4.8 5.7 4.7
Brands Plc) Tobacco SA
Camel Filters JT International France 3.8 3.7 3.6 4.1
(Japan Tobacco Inc) SAS
Winston Red (Japan JT International France 3.0 3.0 2.8 3.3
Tobacco Inc) SAS
Lucky Strike British American 2.8 2.8 2.9 3.2
(British American Tobacco France
Tobacco Plc)
Lucky Strike Red British American 2.6 2.7 3.2 3.0
(British American Tobacco France
Tobacco Plc)
News Rouge Seita Groupe Imperial – 2.0 2.5 2.4
(Imperial Brands Plc) Tobacco SA
Marlboro (Philip Philip Morris France SAS 2.0 2.2 2.3 2.4
Morris
International Inc)
Camel (Japan JT International France 2.4 2.3 2.4 2.1
Tobacco Inc) SAS
Vogue (British British American 1.4 1.6 1.9 2.1
American Tobacco Plc) Tobacco France
Gauloises Blondes Seita Groupe Imperial – 2.4 2.2 2.0
Bleu (Imperial Tobacco SA
Brands Plc)
Gauloises Blondes Seita Groupe Imperial – 1.9 1.8 1.6
Rouge (Imperial Tobacco SA
Brands Plc)
Gauloises Brunes Seita Groupe Imperial – 2.0 1.7 1.5
(Imperial Brands Plc) Tobacco SA
Philip Morris Blue Philip Morris France SAS 1.4 1.4 1.4 1.3
(Philip Morris
International Inc)
JPS Black Original Seita Groupe Imperial – 0.8 0.9 1.3
(Imperial Brands Plc) Tobacco SA

C I G A R E T T E S I N F R A N C E P a s s p o r t 8

© E u r o m o n i t o r I n t e r n a t i o n a l

L&M Red (Philip Philip Morris France SAS 1.3 1.4 1.3 1.2
Morris
International Inc)
L&M (Philip Morris Philip Morris France SAS 1.2 1.2 1.1 1.2
International Inc)
Philip Morris Philip Morris France SAS 0.9 1.0 1.0 1.2
(Philip Morris
International Inc)
Winfield Rouge x 30 British American 1.4 1.4 1.3 1.1
(British American Tobacco France
Tobacco Plc)
Benson & Hedges Gallaher France 0.7 0.6 0.7 1.1
Gold (Japan Tobacco
Inc)
Winston Blue x25 JT International France 1.1 1.0 1.0 1.0
(Japan Tobacco Inc) SAS
Chesterfield Red 20 Philip Morris France SAS 0.8 0.7 0.8 0.9
(Philip Morris
International Inc)
Fortuna Rouge Seita Groupe Imperial – 1.4 1.1 0.9
(Imperial Brands Plc) Tobacco SA
Lucky Strike British American 1.2 1.1 0.9 0.9
Convertibles Tobacco France
(British American
Tobacco Plc)
Peter Stuyvesant British American 0.9 0.9 0.8 0.8
Red (British Tobacco France
American Tobacco Plc)
John Player Special Seita Groupe Imperial – 1.2 1.1 0.8
(Imperial Brands Plc) Tobacco SA
Gitanes Brunes Seita Groupe Imperial – 1.1 0.9 0.8
(Imperial Brands Plc) Tobacco SA
Benson & Hedges Gallaher France 0.7 0.7 0.7 0.6
(Japan Tobacco Inc)
News (Imperial Seita Groupe Imperial 4.2 – – –
Tobacco Group Plc) Tobacco SA
Gauloises Blondes Seita Groupe Imperial 2.5 – – –
Bleu (Imperial Tobacco SA
Tobacco Group Plc)
Gauloises Brunes Seita Groupe Imperial 2.1 – – –
(Imperial Tobacco Tobacco SA
Group Plc)
Gauloises Blondes Seita Groupe Imperial 1.9 – – –
Rouge (Imperial Tobacco SA
Tobacco Group Plc)
News Rouge Seita Groupe Imperial 1.8 – – –
(Imperial Tobacco Tobacco SA
Group Plc)
Fortuna Rouge Seita Groupe Imperial 1.5 – – –
(Imperial Tobacco Tobacco SA
Group Plc)
Gitanes Brunes Seita Groupe Imperial 1.2 – – –
(Imperial Tobacco Tobacco SA
Group Plc)
John Player Special Seita Groupe Imperial 1.2 – – –
(Imperial Tobacco Tobacco SA
Group Plc)
JPS Black Original Seita Groupe Imperial 0.9 – – –
(Imperial Tobacco Tobacco SA
Group Plc)
John Player Special Seita Groupe Imperial 0.7 – – –

C I G A R E T T E S I N F R A N C E P a s s p o r t 9

© E u r o m o n i t o r I n t e r n a t i o n a l

Red (Imperial Tobacco SA
Tobacco Group Plc)
Others Others 22.0 21.9 20.3 19.2
Total Total 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018

% retail volume
2013 2014 2015 2016 2017 2018

Store-Based Retailing 37.1 37.2 37.3 37.3 37.2 37.2
– Grocery Retailers 37.1 37.2 37.3 37.3 37.2 37.2
— Convenience Stores – – – – – –
— Discounters – – – – – –
— Forecourt Retailers 0.6 0.5 0.5 0.5 0.5 0.5
— Hypermarkets – – – – – –
— Supermarkets – – – – – –
— Food/drink/tobacco 3.0 3.0 3.0 3.0 3.1 3.2
specialists
— Food/drink – – – – – –
specialists
— Tobacco specialists 3.0 3.0 3.0 3.0 3.1 3.2
— Independent Small – – – – – –
Grocers
— Other Grocery 33.6 33.7 33.7 33.7 33.6 33.6
Retailers
— Newsagent- 33.6 33.7 33.7 33.7 33.6 33.5
tobacconists/kiosks
— Street vendors – – – – – –
– Mixed Retailers – – – – – –
— Department Stores – – – – – –
— Other Mixed Retailers – – – – – –
– Non-Grocery Specialists – – – – – –
— Drugstores/ – – – – – –
parapharmacies
— Other Non-Grocery – – – – – –
Specialists
Non-Store Retailing – – – – – –
– Vending – – – – – –
– Internet Retailing – – – – – –
Non-retail channels 62.9 62.8 62.7 62.7 62.8 62.8
– Bar-tobacconists 62.1 62.1 62.0 62.0 62.1 62.1
– Hotels/restaurants/bars 0.8 0.8 0.7 0.7 0.7 0.7
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018

million sticks
2013 2014 2015 2016 2017 2018

Legal sales 47,527.0 45,014.0 45,457.0 44,925.8 44,260.9 40,277.4
Illicit trade 8,838.5 9,209.7 9,000.0 8,965.9 9,154.1 9,419.6
% penetration of 15.7 17.0 16.5 16.6 17.1 19.0

C I G A R E T T E S I N F R A N C E P a s s p o r t 1 0

© E u r o m o n i t o r I n t e r n a t i o n a l

illicit trade
Actual consumption 56,365.5 54,223.7 54,457.0 53,891.7 53,415.0 49,697.0

Source: Euromonitor International from official statistics, trade associations, trade interviews

Table 14 Forecast Sales of Cigarettes: Volume 2018-2023

million sticks
2018 2019 2020 2021 2022 2023

Cigarettes 40,277.4 36,853.8 34,016.1 31,873.1 29,801.3 28,043.1

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023

EUR million
2018 2019 2020 2021 2022 2023

Cigarettes Including 18,326.0 18,672.6 18,892.6 19,066.7 19,168.8 19,342.1
Fine Cut Stick Equivalent
Fine Cut Cigarettes 2,705.6 2,840.9 2,951.7 3,046.2 3,116.3 3,225.3
Cigarettes 15,620.4 15,831.7 15,940.8 16,020.5 16,052.6 16,116.8

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023

% volume growth
2018/19 2018-23 CAGR 2018/23 Total

Cigarettes -8.5 -7.0 -30.4

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-2023

% constant value growth
2018/2019 2018-23 CAGR 2018/23 Total

Cigarettes Including Fine Cut Stick 1.9 1.1 5.5
Equivalent
Fine Cut Cigarettes 5.0 3.6 19.2
Cigarettes 1.4 0.6 3.2

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

C I G A R E T T E S I N F R A N C E P a s s p o r t 1 1

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American Blend 92.7 92.5 92.4 92.4 92.4 92.2
Virginia 5.3 5.5 5.5 5.5 5.5 5.6
Other Blend 2.0 2.0 2.1 2.1 2.2 2.2
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2018-
2023

% retail volume
2018 2019 2020 2021 2022 2023

Standard (non-capsule/ 96.9 97.2 98.2 100.0 100.0 100.0
non-menthol)
Flavour Capsule (all – – – – – –
flavours)
Menthol (non-capsule) 3.1 2.8 1.8 – – –
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume
2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

Regular 96.0 95.9 95.7 95.6 95.4 95.3
Slim 0.3 0.3 0.3 0.3 0.3 0.3
Superslim 3.4 3.5 3.6 3.8 3.9 4.0
Microslim 0.3 0.3 0.3 0.3 0.3 0.3
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

< 20 - - - - - - 20s 87.3 87.0 86.9 86.9 86.8 86.7 20 + 12.7 13.0 13.1 13.2 13.2 13.3 Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023

% retail volume
2018 2019 2020 2021 2022 2023

C I G A R E T T E S I N F R A N C E P a s s p o r t 1 2

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Economy price band 22.5 19.6 6.9 – – –
Mid price band 34.7 34.9 33.5 13.5 – –
Premium price band 42.8 45.5 59.6 86.5 100.0 100.0
Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

PICK A PRODUCT OR PRODUCT CATEGORY ON EUROMONITOR AND WRITE A 600

WORD REPORT ON CONSUMER TRENDS FOR THAT PRODUCT OR PRODUCT CATEGORY

USING DATA FROM FIVE COUNTRIES. (The countries should be from different regions

and have different levels of economic development)

THE REPORT SHOULD INDICATE:

o What the overriding trends are for the product;

o In what type of country is the product doing well or poorly and why;

o Where are sales for the product projected to grow and decline;

o What do Euromonitor’s written assessments and reports tell you about the

product?

This assignment is due at 11:59pm on Monday, 2/3/2020.

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