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Panama’s economy is among the best performers on a global level, despite high income disparity and poverty among the rural indigenous population. Strong GDP growth has led the government to initiate programmes to address structural constraints, improving infrastructure, education and public institutions. Nevertheless, smoking prevalence is low and falling due to anti-smoking programmes, with tobacco in Panama likely to continue struggling for growth, despite a rising population.
This report analyses the market for tobacco in Panama. For the purposes of the study, the market has been defined as follows:
Cigars, Cigarillos and Smoking Tobacco
Smokeless Tobacco and Vapour Products
Explanations of terminology used in this report are as follows:
GBO refers to Global Brand Owner, which is the ultimate owner of a brand.
NBO refers to National Brand Owner, which is the company licensed to distribute a brand on behalf of a GBO. The NBO may be a subsidiary of a GBO or it may be a completely separate company.
Retail refers to sales of tobacco through retail outlets including supermarkets, hypermarkets, discounters, convenience stores, internet and other store and non-store channels, as well as sales of tobacco through bar-tobacconists and hotels/restaurants/bars.
Duty-paid retail sales are legitimate sales with tax applied to the final price.
Illicit trade refers to sales of duty-not-paid (or DNP) tobacco.
Market sizes are researched at category level, lower data levels are modelled.
Although cross-border and duty-free sales are considered legitimate, they are excluded from duty-paid sales.
Illicit trade (DNP) tobacco refers to contraband, counterfeit and unbranded tobacco, as well as illicit whites.
In Panama, public attitudes towards tobacco consumption in general and cigarette smoking in particular remain relatively negative. Years of official anti-smoking campaigns have left many Panamanians with the impression that smoking is antisocial and generally unacceptable in public. Furthermore, the tobacco industry does not play a major role in Panama’s economy and local commercial tobacco cultivation remains at minimal levels.
Smoking prevalence in Panama is among the lowest in Latin America and stood at 12% of men and just 3% of women at the end of the review period. Although smoking prevalence has declined slightly among men in recent years, it has remained static among women for some years. Any growth in the actual numbers of smokers among the Panamanian population can be attributed to overall population growth.
The bulk of anti-smoking campaigns in Panama are conducted by the country’s Ministry of Health. After the country became a party to the WHO Framework Convention on Tobacco Control on 27 February 2005, the government of Panama has been seen to be extremely serious about curbing smoking prevalence and reducing the damage caused to Panamanian society by tobacco use. Its measures to encourage the country’s smokers to quit include a national stop smoking helpline, the creation of nicotine addiction counselling groups and subsidised smoking cessation services and NRT products, while anti-smoking publicity campaigns and the organisation of an annual national smoke-free day are intended to discourage people from taking up smoking in the first place. So far, these official campaigns to discourage smoking have been effective as smoking prevalence has fallen steadily, particularly among men.
There has been little in the way of innovation seen in the Panamanian tobacco industry in recent years and this is mainly because restrictions on the advertising and promotion of tobacco products make it virtually impossible for tobacco companies to promote new products.
Consumer choice in cigarettes is based mainly on brand loyalty and the image that specific brands have. Moreover, there is a difference in the prices charged for different cigarette brands in the country, although the much lower prices charged for contraband cigarettes are the main driver of Panama’s illicit tobacco trade.
The forecast period is set to see further negative growth in sales of cigarettes in Panama, although declines are expected to be less severe than those seen over the review period. Cigars is expected to continue seeing moderately positive growth over the forecast period, while smoking tobacco is set to be the most dynamic tobacco category, although growth rates in this category are expected to be slower than evidenced over the review period.
There is a clear divide in Panamanian society between urban and rural dwellers. The majority of the country’s population live in urban areas and have relatively high incomes and strong spending power, while poverty is rife among the country’s rural-dwelling indigenous minority. This dichotomy is also reflected in sales of cigarettes, which are generally considered to be expensive. Thus, low-income rural dwellers tend to rely on the illicit tobacco trade, while disposable income plays a significant role in levels of cigarette smoking among the urban population.
The general perception of the population of Panama is that the prices of cigarettes are constantly rising, and further increases are expected in the cost of smoking during the forecast period.
Panama is a country with a young population and 43% of the population of Panama were aged under 25 in 2016. The population of Panama is rising at a rate of 1.6% per annum and this means that the potential consumer base for tobacco is likely to increase over the forecast period and beyond. However, due to the high cost of cigarettes for much of the country’s population and the government’s ongoing anti-smoking campaigns, it is unlikely that increases will be seen in tobacco usage in Panama.
Tobacco products are widely available in Panama and modern grocery retailers accounted for the majority of cigarette sales in 2016, with supermarkets and forecourt retailers the strongest channels. However, independent small grocers is still the leading retail channel for cigarettes and this is mainly due to the ubiquity of the small neighbourhood grocery stores called chinitos throughout the country. Tobacco specialists, meanwhile, accounted for all smoking tobacco sold in Panama in 2016, as well as the vast majority of cigars and cigarillos.
The retail display of tobacco products is banned in Panama and customers must ask the cashier for a specific product before it can be sold to them. This limits the impulse buying of cigarettes.
According to official estimates, the illicit trade accounted for 32% of total volume sales of cigarettes in Panama in 2016. However, trade sources have suggested that the real figure could be as high as 50%.
The main reason for the high proportion of illicit cigarettes sales in Panama is the high price of cigarettes in the country, with the prices charged for a pack of illicit cigarettes around 55% of the legal retail selling price of the same brand. In addition, Panama’s status as a major international trading hub also contributes the illicit cigarette trade, facilitating the movement of illegal cigarettes in and out of the country. Most illegal cigarettes in Panama are imported from Paraguay or China and there is also some local repackaging of clandestinely imported cigarettes.
Although there is no minimum legal smoking age in Panama, it is illegal to sell tobacco products to anyone aged under 18.
Studies have shown that many Panamanian teenagers start smoking between the age of 13 and 15, although youth smoking prevalence has fallen dramatically after the country ratified the WHO’s Framework Convention on Tobacco Control in 2005. In 2013, 6% of underage boys and 3% of underage girls were daily smokers, while 8% of teenagers aged 13-15 years old reported using at least one tobacco product during the previous 30 days when surveyed in 2010.
There are no limits placed on the tar levels of cigarettes sold in Panama and there are no plans to introduce such limits in the near future. However, it is forbidden to use terms such as “low tar”, “light”, “ultra-light”, or “mild” which would suggest that some products are less harmful than others. However, according to industry sources, most cigarette smokers in Panama prefer cigarettes with lower levels of tar.
In Panama, the advertising and promotion of all tobacco products is banned. Law 13 of 2008 stipulates that “Tobacco products may not be promoted through gifts, souvenirs, related activities or other activities that encourage people to consume tobacco products”. This statute is interpreted as including the promotion of sports and cultural events and sports teams, for instance, by tobacco companies.
Since 2005, all packs of cigarettes sold in Panama are required to have graphic and text health warnings. These warnings must cover 50% of both the front and back of all cigarette packs and the warnings are updated regularly. In addition, Panamanian law requires tar, nicotine and carbon monoxide emission data to be printed on the side of all cigarette packs.
Panama’s public smoking ban came into force in 2008 and includes all indoor workplaces and public spaces. This includes all public transport facilities and vehicles, hospitals and healthcare facilities, educational facilities, cultural facilities, indoor stadiums and arenas, retail stores, restaurants, bars and nightclubs, casinos, hotels, and even prisons. Despite initial resistance to the smoking ban, by the end of the review period it was widely accepted and generally followed.
Taxation and duty levies
Sales tax in Panama is relatively low at 7%, although all tobacco products attract a higher sales tax of 15%. In addition, since 2009, excise tax on all tobacco products has been set at 100% of the declared pre-tax price, a substantial increase from the previous rate of 32.5%.
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Chart 1 Tobacco in Panama in 2016 Chart 2 Panama Socioeconomic Trends
Taxation and duty levies
Table 1 Sales of Tobacco by Category: Volume 2011-2016 Table 2 Sales of Tobacco by Category: Value 2011-2016 Table 3 Sales of Tobacco by Category: % Volume Growth 2011-2016 Table 4 Sales of Tobacco by Category: % Value Growth 2011-2016 Table 5 Forecast Sales of Tobacco by Category: Volume 2016-2021 Table 6 Forecast Sales of Tobacco by Category: Volume 2016-2021 Table 7 Forecast Sales of Tobacco by Category: Value 2016-2021 Table 8 Forecast Sales of Tobacco by Category: % Volume Growth 2016-2021 Table 9 Forecast Sales of Tobacco by Category: % Value Growth 2016-2021
Chart 3 Cigarettes: Modern Retailer
Table 10 Sales of Cigarettes: Volume 2011-2016 Table 11 Sales of Cigarettes by Category: Value 2011-2016 Table 12 Sales of Cigarettes: % Volume Growth 2011-2016 Table 13 Sales of Cigarettes by Category: % Value Growth 2011-2016 Table 14 Forecast Sales of Cigarettes: Volume 2016-2021 Table 15 Forecast Sales of Cigarettes by Category: Value 2016-2021 Table 16 Forecast Sales of Cigarettes: % Volume Growth 2016-2021 Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2016-2021 Table 18 NBO Company Shares of Cigarettes: % Volume 2012-2016: Table 19 LBN Brand Shares of Cigarettes: % Volume 2013-2016 Table 20 Sales of Cigarettes by Distribution Format: % Volume 2011-2016 Summary 1 Cigarettes Pricing
CIGARS, CIGARILLOS AND SMOKING TOBACCO
Chart 4 Cigars: Traditional Retailer Chart 5 Cigars: Traditional Retailer Chart 6 Smoking Tobacco: Modern Retailer
Table 21 Sales of Cigars, Cigarillos and Smoking Tobacco by Category: Volume 2011-2016 Table 22 Sales of Cigars, Cigarillos and Smoking Tobacco by Category: Value 2011-2016 Table 23 Sales of Cigars, Cigarillos and Smoking Tobacco by Category: % Volume Growth 2011-2016 Table 24 Sales of Cigars, Cigarillos and Smoking Tobacco by Category: % Value Growth 2011-2016 Table 25 Forecast Sales of Cigars, Cigarillos and Smoking Tobacco by Category: Volume 2016-2021 Table 26 Forecast Sales of Cigars, Cigarillos and Smoking Tobacco by Category: Value 2016-2021 Table 27 Forecast Sales of Cigars, Cigarillos and Smoking Tobacco by Category: % Volume Growth 2016-2021 Table 28 Forecast Sales of Cigars, Cigarillos and Smoking Tobacco by Category: % Value Growth 2016-2021 Table 29 NBO Company Shares of Cigars and Cigarillos: % Volume 2012-2016 Table 30 LBN Brand Shares of Cigars and Cigarillos: % Volume 2013-2016 Table 31 NBO Company Shares of Smoking Tobacco: % Volume 2012-2016: Table 32 LBN Brand Shares of Smoking Tobacco: % Volume 2013-2016 Table 33 Distribution of Cigars and Cigarillos by Format: % Volume 2011-2016 Table 34 Distribution of Smoking Tobacco by Format: % Volume 2011-2016 Summary 2 Cigars, Cigarillos and Smoking Tobacco Pricing
SMOKELESS TOBACCO AND VAPOUR PRODUCTS
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