Falling tobacco volume growth due to rising health concerns
Volume growth within tobacco, which chiefly consists of cigarettes and cigars in China, continued to slow down in 2012, mainly due to rising health awareness among consumers and the government’s continuous efforts to control the number of smokers. However, due to the large consumer base, particularly for cigarettes (due to their wide availability and affordable price), there is still steady demand for tobacco.
Product trading-up fuels value growth
In spite of the slow-down in volume growth, tobacco value sales continue to increase at double-digit pace, with sales being boosted by consumers trading-up to higher priced products as a result of rising health consciousness and new smoking trends. Some consumers have shifted from high tar to low tar cigarettes even though the latter are about three times as expensive as the former. In addition, some consumers, particularly the burgeoning middle class and the super-rich, are gradually adopting the habit of smoking cigars, which are increasingly seen as status symbols.
Stellar performance of low tar cigarettes due to industry regulation
Low tar cigarettes recorded very strong volume and value growth in 2012. The State Tobacco Monopoly Association (STMA) and the relevant authorities prohibited the selling of cigarettes with tar yields of above 12mg in January 2011 and new regulations further reduced allowed tar levels to 11mg in January 2013 while the limit is set to be further reduced to 10mg in January 2015. The low tar scheme resulted in robust growth within mid and low tar cigarettes in 2012.
Domestic players further consolidate leadership
Under the tight control of the STMA, tobacco experienced standardised and concentrated development over the review period, with domestic players dominating the local market. Leading tobacco companies in China have been making continuous efforts to enhance product quality as well as research and development in order to meet consumers’ changing needs and to strengthen branding. On the other hand, international players have a marginal presence in tobacco and are struggling to maintain their sales shares amid strong competition from domestic players.
Volume sales expected to remain stable but strong projected value growth
Volume growth rates within tobacco will stagnate over the coming years as the penetration of the smoking population is already high in China. In addition, as a result of growing health awareness, the number of smokers is expected to decline over the forecast period. Nevertheless, value sales are expected to increase dynamically over the forecast period as more smokers are likely to trade up to low tar cigarettes as a result of the STMA’s low tar scheme while consumer acceptance of cigars is expected to increase further – a development which, overall, will boost value growth over the forecast period.
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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.