Illicit trade increases again
Excise tax amendments in Russia, Ukraine and Belarus, combined with the efforts of local authorities to contain smuggling, had only a short-term effect on increasing the legal trade in cigarettes. After a significant drop in illicit cigarettes sales observed in Latvia in 2011, the situation worsened again in 2012, when the illicit trade increased again in volume terms. The renewed growth in the illegal tobacco trade can, to a large extent, be attributed to the effects of a two-phase tax increase in 2011, followed by a further rise in 2012. Due to forthcoming tax amendments over the 2014-2016 period, illicit trade volumes are also predicted to witness a slight increase over the forecast period.
Trading volumes contract sharply in most categories in 2012
All categories except smoking tobacco experienced a significant decline in legal volume sales in 2012. Despite the overall improved purchasing power of consumers, persistent rises in excise taxes sharply reduced demand for legal cigarettes during the year. Increasing interest in RYO tobacco also contributed to a drop in cigarettes volumes. Cigars volume sales suffered not only from tax amendments but also from the contracting population. Rises in excise tax also reduced the difference between the price of the lowest-cost cigarillos and economy cigarettes, making cigarillos a less attractive alternative in 2012. Persistent increases in excise taxes over 2014-2017 will be the main factor determining developments in tobacco over the forecast period.
Authorities continue to propose tighter restrictions
During 2012 government authorities and health organisations proposed a set of regulations to reduce smoking prevalence in Latvia and protect non-smokers from the damaging effects of tobacco smoke. Proposals included an increase in the minimum legal smoking age to 21, unifying packaging design for all cigarette brands traded in Latvia and imposing a smoking ban on balconies and within 10 metres of the entrance to apartment blocks. The proposed restrictions, however, had still to be discussed in parliamentary commissions by the end of the review period and be approved by Parliament. Thus, it is not known when and which restrictions will come into place.
Female-oriented brands dictate trends in cigarettes
With a number of new female-oriented cigarette products, women received particular attention from manufacturers in 2012. Products targeted at image-conscious female customers typically featured distinctive and appealing packaging designs with a base colour of pink or red. New products introduced in this category in 2012 tended to be slim and superslim size cigarettes with low or ultra low tar levels. These formats are perceived not only as fashionable and feminine, but also as a good option to reduce tobacco consumption.
RYO continues healthy growth
Despite tax amendments, RYO tobacco performed very successfully both in terms of retail value and volume sales in 2012, becoming the fastest growing category within tobacco. This type of smoking tobacco is rapidly gaining popularity in Latvia, especially among young consumers who enjoy rolling cigarettes and see the whole smoking process as a part of a modern lifestyle and a good opportunity to socialise with peers. In the latter part of the review period a trend was also observed of people who previously smoked traditional cigarettes switching to RYO tobacco, mainly due to its higher tobacco quality and better value for money compared to cigarettes. In addition, many buyers were attracted by the broad range of RYO tobacco flavours that are widely available in the larger Latvian outlets. Manufacturers responded to the growing interest in RYO tobacco by introducing numerous new flavours in 2012.
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Discover the latest market trends and uncover sources of future market growth for the Tobacco industry in Latvia with research from Euromonitor's team of in-country analysts.
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The Tobacco in Latvia 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 Latvia?
- What are the major brands in Latvia?
- Which sector of the tobacco products market is the largest by value sales in Latvia?
- Which sector of the tobacco products market has been growing the fastest, by volume and value, in Latvia?
- Which sector is the most heavily taxed in Latvia?
- Which companies dominate in the total tobacco market in Latvia in terms of market share?
- What is the distribution channel split for the tobacco products market in Latvia?
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This industry report originates from Passport, our Tobacco market research database.