• SELECT SITE CURRENCY
Select a currency for use throughout the site
Cigarettes and Tobacco Market Report 2001
Key Note Publications Ltd, January 2001
The UK duty-paid cigarette and tobacco market grew by 3.9% between 1996 and 2000, to reach a value of £12.37bn. While the volume of the market has remained fairly constant, its value has been affected by rising tobacco-specific taxes. In addition, the legitimate trade is being undermined by the growing volume of smuggled products entering the market.
The main sectors of the market are cigarettes, cigars, hand-rolling tobacco and pipe tobacco. Cigarette sales have seen a trading down on the part of many consumers, from premium to low-priced brands, in the face of substantial price rises in the market. This has also encouraged some consumers to opt for hand-rolling tobacco as a lower-priced alternative - a choice particularly popular among younger smokers, both male and female. Cigars have seen a fall-off in sales, but an even sharper decline is evident in pipe tobacco.
Cigarettes and tobacco continue to be a battleground for the pro- and anti-smoking lobbies. The negative health implications of smoking mean that the Government and the EU are among those actively seeking a reduction in the prevalence of smoking, and they are legislating against it. Those in favour of smoking, led by the tobacco groups, are taking a pro-choice position. However, even they regard issues such as a complete advertising ban as simply a matter of time.
The UK market is heavily regulated and mature, with volumes steady or declining, rather than on the rise. As a result, the major tobacco companies are pursuing a policy of overseas expansion. Desirable markets include those in the former Soviet Union, and growth is taking the form of acquisition.
The most important issue facing the UK market is the growing level of smuggled products. These are often UK brands that have been exported and subsequently find a way back into the UK market to retail at a discount of up to £2 for a pack of 20. UK cigarettes and hand-rolling tobacco are the most expensive and highly taxed in Europe. The Government is taking steps to combat smuggling through its Customs and Excise operations, but many within the trade see a reduction in tobacco taxes as the only way to deal with the problem.
Volumes in the cigarette and tobacco market are expected to show a slight decline in the medium term, but it is likely that sales of legitimate products will show a sharper fall unless the threat from smuggled products can be addressed. The market's value will grow slowly between 2001 and 2005, boosted by price increases imposed by the tobacco groups, as well as by any rises in tax.