Some of the best data in Australia on the tobacco industry is expensive to purchase and mainly intended for use by the industry itself. It is obviously of interest for those concerned with reducing cigarette smoking. Cigarettes are, by far, the biggest component of tobacco use in Australia – their retail sales in 2010 were worth $5 billion compared to cigar sales of $29 million.
The legal carcinogen supply industry is on the back foot and not only because of the anticipated effects of plain packaging legislation. According to Euromonitor International (January 2012) cigarette volume growth in 2010 was -8% following already implemented tax hikes and bans on displaying cigarettes in retail outlets. Given restrictions on advertising and promotion, packaging of cigarettes is the only means by which brands can be promoted and even this will end with the plain packaging legislation. It will be very difficult for individual sellers (in the main, British American Tobacco* (BAT) (market share 46% in 2010) and Phillip Morris (PM) (36%), Imperial Tobacco Australia (16.2%) who jointly control 98% of the Australian market) for players to prevent a decline in demand. New brands will find it tough to gain a market share – Imperial Tobacco Australia have introduced JPS as a ‘cheap’ brand following the excise hikes in 2010. This type of move will be more difficult in the future. With past advertising restrictions price discounts occurred by scaling up pack sizes and reducing per stick prices.
The ‘commoditization’ of cigarettes has therefore already commenced with an increased share of retail cigarette sales going to supermarkets – up to 54% in 2010 from 51% in 2005 – and a decreased share to specialist tobacco shops – down to 17.4% in 2010 from 20% in 2005.
Australia has done well in restricting tobacco consumption. Comparing 2010 with 2005 total sticks of tobacco sold have fallen from 22,532m to 20,151m a decline of more than 10 per cent. Much of this decline has occurred among high tar cigarettes. Production of cigarettes has grown strongly with an increase in exports from 1226 million sticks in 2005 to 4186 million sticks in 2010 more than offsetting the reduction in local consumption. Imports have also increased (much more will apparently come from a New Zealand plant owned by Imperial replacing local production from a plant in Sydney) but by much less than the increase in exports. I’d be interested in knowing where these exports go.
The industry, will be worried by the Euromonitor forecast of a further a decline in local consumption of 19% from 2010 to 2015 that would reduce sticks consumed in Australia to 16,322 million.
Branding remained important in 2010 with 75% of cigarettes sold being one of five brands (Winfield (BAT, 24%), Longbeach (PM, 17%), Peter Jackson (PM, 12.5%), Horizon (ITA, 12%), Benson & Hedges (BAT, 10%)). It will be interesting to see what happens to both total consumption and to these market shares with plain packaging.
* The BAT website is fascinating. I liked this claim. “Generally speaking, British American Tobacco thinks that smokers will consume fewer cigarettes each and smaller percentages of populations will smoke. However, the number of adults in the world over the age of 20 is forecast to grow by around 11 per cent over the next ten years. As a result, it expects global annual sales will be broadly unchanged in a decade’s time”. What a ghastly forecast!