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Cigarettes and Tobacco Market Report 2002
Key Note Publications Ltd, Jan 2002
The UK cigarette and tobacco market grew by 22.7% between 1997 and 2001, to reach an estimated value of £15.52bn. The total volume of products in the market continued to decline, while price increases, including taxation on tobacco products, contributed to a rising market value. However, this was dampened due to factors such as consumers switching to cheaper brands. Smuggled products and goods legitimately purchased from overseas also reduces the market value. Consequently, smuggling has increased in recent years as a result of the relatively high tax levied on UK tobacco products compared to other European countries.
There are four main sectors within the market,- cigarettes, hand-rolling tobacco, cigars and pipe tobacco. Cigarettes have a high level of popularity among smokers and account for the greatest market share, due to their convenience, strong brand portfolio and product range within the UK market. Hand-rolling tobacco sales have increased in recent years as smokers are looking for a cheaper option to manufactured cigarettes. Cigars and pipe tobacco sales have fallen, particularly among the younger age groups. The UK cigarette and tobacco market is dominated by three main companies: Gallaher Group PLC, Imperial Tobacco Group PLC and British American Tobacco PLC. The three companies accounted for 94% of tobacco sales for 2001 in the UK market. All three companies operate internationally and have been pursuing an active policy of overseas expansion.
The cigarette and tobacco market continues to come under pressure from anti-smoking groups. The Government has announced specific targets to reduce the number of smokers within groups, particularly young people and pregnant women. The EU is also following a policy to reduce tar levels in cigarettes and ban advertising, as well as attempting to force companies to change on-pack descriptions and branding. This legislation is being challenged by the major tobacco groups and the outcome will have a significant impact on product development in the market.
Key Note anticipates that the value of the tobacco market will continue to show a year-on-year increase to 2006, despite the Government setting specific targets to cut down on the prevalence of smoking, as well as ongoing duty increases and the need to meet rising manufacturing costs.
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