BMI Industry ViewGlobally the cigarette manufacturing industry continuesto battle a four-pronged assault on its growth prospects.Rising consumer health consciousness has hit smokingrates in developed and emerging markets alike,putting the breaks on global industry growth rates. Anincreasingly mainstream and dogmatic anti-smokinglobby has also served to dent sales, helping to drivethrough prohibitive legislation and raise awarenessof the dangers of smoking.
Ongoing government taxhikes-an increasingly accepted form of revenue-raisinggiven the number of health-conscious consumersturning their backs on smoking-are similarly provingan enemy to the industry, as is the still-strong illegaltrade for tobacco products.
Facing up to the challenges of a so-called ‘dying industry’has led to rapid industry consolidation, withthe big three-Philip Morris International, BritishAmerican Tobacco and Japan Tobacco International-controlling around 45% of the global cigarettemarket. Presently, however, these giants, and theirsmaller local peers, are having to deal with a newchallenge in addition to the aforementioned dailyhurdles-a consumer-confidence crippling global recession.In 2009, BMI is forecasting a global economiccontraction of 2.5%.
Of course, with few substitutesavailable, cigarettes are a fairly income- and price-inelasticproduct in the short term. However, the depthand breadth of this recession means that the industrycannot escape unscathed, as our latest short-termcigarette sales forecasts show.Although the global economy is not expected to returnto its more typical growth trajectory until 2011and beyond, BMI is forecasting a return to globalgrowth in 2010, albeit of a modest 1.7%. This willlimit the effect of some of the demand and price basedchallenges facing the industry, as discussed in theShort-Term Outlook section of this report, towardsthe beginning and middle of our five-year forecastperiod.
However, BMI remains bearish about theprospects for the global tobacco industry for the reasonslisted above and discussed in more detail in thereport’s Long-Term Outlook section. Consequently,while we are forecasting volume sales growth insome states over the five-year forecast period, we arefor the most part expecting flat or declining volumesales growth.Value sales are a different matter and a major discrepancyhighlighted in this report is the vastly differing outlooksfor cigarette sales in volume and value terms. For themost part, growth in value sales can be attributed torising cigarette taxes; however, ongoing innovation-asmanufacturers strive to retain market share and boostsales in an increasingly hostile environment-will alsocontribute to forecast value sales increases.
In everysingle individual cigarette market analysed in this report,the value sales growth of cigarettes to 2013 is forecastto be positive.
While drivers of growth in the tobacco industry-be theyeconomic, legislative or consumer behaviour-led-arelargely global, there are some interesting differences tonote between regions and between regional markets, asexamined in more depth in the Regional Outlook sectionof this report. Largely, and perhaps unexpectedly, the keydifference is in the outlook for emerging markets anddeveloped states. While smokers in emerging markets aremore exposed to the global economic slowdown, withshort-term volume and value sales growth in most casescoming under immense pressure in 2009 and 2010, thelonger-term outlook for emerging markets is generallymore favourable than in developed states.
Typically,but not exclusively, consumer health consciousness,the effectiveness of anti-smoking legislation and thework of the anti-tobacco lobby, are less established inemerging markets.The short- and long-term outlooks examined in this reportand indeed the country specific cigarette sales forecastsprovided, highlight how challenging the future is for theglobal tobacco industry; the Company Analysis sectionof the report attempts to explain how global industrymajors are adapting to cope.
Related Reports:
Snapshots US Cigarettes 2009
Snapshots Russia Tobacco Products 2009
Top 100 Tobacco Manufacturers Report
Philip Morris International Inc. - SWOT Analysis
Tobacco - BRIC (Brazil, Russia, India, China) Industry Guide
Tobacco Product Manufacturing in Australia - Industry Risk Rating Report
Tobacco Product Wholesaling in Australia - Industry Risk Rating Report
Tobacconists and Other Specialised Grocery Retailing in Australia - Industry Risk Rating Report
Tobacco Farming in the US - Industry Risk Rating Report
Cigarette & Tobacco Product Manufacturing in the US - Industry Risk Rating Report
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