Legal cigarette sales continue to decline
Cigarette sales in South Africa continued to decline in 2013 due to a combination of factors. Rising excise and duty taxes increased the unit prices of legitimate cigarettes, resulting in a greater number of consumers purchasing cheaper illicit cigarettes. This has also meant that whilst retail volume sales have increased, value sales have shown a slight increase in comparison to the previous year. The average unit price of cigarettes increased by 6% in current terms. As a result, consumers increasingly sought out less expensive alternatives.
Innovation and the launch of cheaper variants of leading brands used to stimulate consumer interest
While the future looks bleak for tobacco in South Africa, leading players continued to focus on innovation in order to reach their target audience. As consumers became increasingly cash-strapped due to rising inflation, key players introduced cheaper variants of their leading brands. Philip Morris’ Marlboro was extended to include Marlboro Beyond while JTI’s Winston brand added Winston Slide. The company also introduced cheaper variants of its Camel brand, with Camel White, Black and Activate being made with a cheaper Virginia blend. These cheaper blends all sell at approximately R10 less than the price of the regular variant of the brand.
Grocery retailers remains the leading distribution channel for tobacco products
The bulk of tobacco products in South Africa continued to be sold through grocery retailers such as supermarkets and tobacco specialists. Supermarkets accounted for the highest share of volume sales due to their easy access and convenience. This applied predominantly to cigarettes, with tobacco specialists being the leading channel for cigars and smoking tobacco. In addition, the high volume share of supermarkets can be attributed to these outlets offering relatively lower-priced products when compared with other retail channels. Despite the popularity of supermarkets, the distribution of tobacco is diversifying. Tobacco products are increasingly being sold through other retail channels such as kiosks, newsagents, street vendors and spaza shops.
Potential legislative changes to exacerbate volume decline over the forecast period
Tobacco in South Africa is expected to continue to decline in volume terms over the forecast period. Potential changes restricting the advertising and marketing of tobacco products, such as changes to the amount of display space allowed in-store, the inclusion of graphic images on packaging and even further restrictions on smoking in public places, will all serve to place increased pressure on cigarette manufacturers. Combined with the growth of illicit cigarette sales, the market looks set to struggle over the forecast period.
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Discover the latest market trends and uncover sources of future market growth for the Tobacco industry in South Africa with research from Euromonitor's team of in-country analysts.
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If you're in the Tobacco industry in South Africa, our research will save you time and money while empowering you to make informed, profitable decisions.
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The Tobacco in South Africa 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 South Africa?
- What are the major brands in South Africa?
- Which sector of the tobacco products market is the largest by value sales in South Africa?
- Which sector of the tobacco products market has been growing the fastest, by volume and value, in South Africa?
- Which sector is the most heavily taxed in South Africa?
- Which companies dominate in the total tobacco market in South Africa in terms of market share?
- What is the distribution channel split for the tobacco products market in South Africa?
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- Gain competitive intelligence about market leaders
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This industry report originates from Passport, our Tobacco market research database.