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Cigarettes & Tobacco Market Report 2010
Key Note Publications Ltd, Oct 2010
The UK cigarettes and tobacco market grew by 4% to £16.28bn in 2009 and increased by 5.8% over the 5-year review period. This growth was largely due to an increase in spending on tobacco products within the UK, as the cross-border shopping sector declined in the face of a weak pound and a drop in the number of tourists. The continued growth of the hand-rolling tobacco (HRT) sector also helped to drive overall sales, with a large number of consumers switching to HRT in order to cut costs. Cigars and pipe tobacco remain in long-term decline, with values of £296m and £45m registered in 2009, respectively.
The four largest tobacco companies in the world, excluding sales in the People’s Republic of China (PRC), are Philip Morris International, British American Tobacco (BAT) Japan Tobacco International (JTI) and Imperial Tobacco. Two of the world’s largest tobacco companies, BAT and Imperial Tobacco, are UK-based. Imperial Tobacco and JTI dominate sales in the UK, accounting for around 84% of sales in the year to November 2009, according to ASH. Philip Morris International accounted for 7.3%, and BAT 6.4%. Interestingly, despite the ban on advertising, private-label brands took just 1% of the market.
In its Annual Report, 2009, BAT said that despite ‘the challenges ahead and economic uncertainty around the world’, it expects profitability in the tobacco industry to increase. It believes that most of the profit growth will come from emerging markets, where, as living standards rise, consumers are more likely to trade up to premium priced brands. BAT adds that the number of adults in the world over the age of 20 is forecast to grow over the next 10 years and, consequently, it believes that the tobacco industry’s global annual sales will be broadly unchanged in a decade’s time.
Volume consumption is likely to grow at a very small pace over the next 5 years, as the Government’s austerity measures begin to bite. Cutbacks in public spending will have an impact on unemployment and consumers sentiment over the next 5 years. The authors expect the pound to gain strength over the next 5 years as the economy recovers. Interest rates will rise, making sterling more attractive to foreign investors and pushing up the value of the currency. As a result, purchasing cigarettes and tobacco abroad may once again become attractive to UK consumers from 2013 onwards. The growth in the cigarette sector will be held back by the continuing trend towards value brands, while the focus on value will continue to drive sales of HRT. The cigars and pipe tobacco sectors will continue to deteriorate. The decline in the prevalence of tobacco will also continue to affect the market.
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