Slowdown in volume growth in cigarettes while value performance remains strong
Tobacco in China, dominated by cigarettes, witnessed a further decelerating trend in volume in 2013. This can be attributed to cigarettes’ high level of maturity and rising health awareness among Chinese smokers. On the whole, the general public are becoming more aware of the negative effects of smoking, and reduce their consumption volume. However, thanks to ongoing structural optimisation and increasing personal incomes, retail value sales of tobacco continued to enjoy a healthy growth despite the sluggish volume performance.
Switch from high tar to mid tar cigarettes driven by policy guidance
The State Tobacco Monopoly Administration (STMA) has announced that, the maximum allowed tar yield in cigarettes will be reduced to 10mg since January 2015. Thus, manufacturers will transfer the tar yields of existing 11mg (high tar) cigarettes to 10mg (mid tar), resulting in a severe declining for the high tar cigarettes and robust growth for mid tar cigarettes. Sales of high tar cigarettes will be negligible by 2017 as it requires a long time period to fully clear the inventory of 11mg cigarettes in the market.
Declining unit price in mid tar cigarettes
Average unit price in mid tar cigarettes is predicted to decline in 2014 and 2015, affected by a large number of previously (11mg) high tar cigarettes moving into the mid tar cigarettes. Unit prices of high tar products are currently lower than that of mid tar products, and it will be difficult to raise prices significantly due to existing consumer perception, thus results decline of unit price in mid tar cigarette.
Consistent development of strong brands with streamlined product lines
Since mid-2013, the STMA has emphasised the importance of “building strong brands, optimising product lines and rising prices”. Most efforts are invested at optimization of existing product lines, meaning that three flagship variants of leading brands should contribute around 70% sales in both volume and value term. This strategy will also cause a prudent attitude towards new product launches. As it required, when a brand with fewer than 20 SKUs launches a new product, it must eliminate one SKU at the same time, while when a brand with fewer than 30 SKUs launches a new product, it must eliminate two SKUs.
Projected strong value growth and steady volume sales
Given an already huge smokers’ base in China, along with intensified smoking control efforts over the forecast period, volume growth is predicted to remain moderate. In addition, decelerating growth in the smoking population, caused by rising health awareness, will also contribute to such a modest volume performance over 2013-2018. However, value growth over the forecast period is predicted to be much more robust thanks to the ongoing trading up trend, jointly driven by both the government and consumers.
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The Tobacco in China market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic volumes and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Production, imports by origin, exports by destination
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Tobacco in China?
- What are the major brands in China?
- Which sector of the tobacco products market is the largest by value sales in China?
- Which sector of the tobacco products market has been growing the fastest, by volume and value, in China?
- Which sector is the most heavily taxed in China?
- Which companies dominate in the total tobacco market in China in terms of market share?
- What is the distribution channel split for the tobacco products market in China?
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This industry report originates from Passport, our Tobacco market research database.