Improved Philippines economy benefits tobacco market
Towards 2012, the Philippine economy has experienced tremendous improvement. With better employment opportunities, many families enjoyed stronger purchasing power, translating into positive growth for tobacco in the Philippines. This included both cigarettes and cigars, with the former being patronised mainly by all income groups and the latter being more popular among the higher income segments.
Year of stable taxes provides reprieve for tobacco companies
As 2012 did not come with any increase in excise taxes, 2011 being the last year when taxes increased as stipulated in the Sin Tax Law, tobacco companies enjoyed a year of reprieve. Volume sales bounced back to positive growth rates as consumers have adjusted to the higher prices of 2011 and gone back to old smoking habits. Of course, in the midst of this healthy growth, talks have continued of further amendments to the taxes of cigarettes, with 2012 finally ending with the signing of RA 10351, calling for yet more tax increases beginning January 2013.
Small retailers continue to account for most cigarette sales
Throughout the review period, the main distribution channel for cigarettes, which comprise the bulk of tobacco sales in the Philippines, continued to be other grocery retailers. This is led by sari-sari stores, small neighbourhood ‘mom-and-pop’ stores which sell cigarettes by the stick. Towards 2012, manufacturers have increasingly recognised the importance of these retail outlets, with many of their promotional activities geared towards stronger partnership with these retailers in order to encourage sales.
Per-unit purchase of cigarettes defeats purpose of some legislation
With Philippine consumers continuing to prefer to buy cigarettes by the stick, by 2012, it was clear that some legislation set in place during the review period did not have the demand-reducing effect originally expected: One major example is the implementation of health warning labels on the packaging of cigarettes. Since the majority of sales of cigarettes in the Philippines are bought by the stick through sari-sari stores, mass consumers did not really come into much contact with the health warnings, posing another problem to legislators working towards requiring graphic health warnings to be printed on cigarette packaging over the forecast years.
Forecast period looking bleak with newly implemented tax system
With RA 10351 signed into law at the end of 2012, January 2013 welcomes the new tax rates, significantly higher than the previous law required. This translates into a rather gloomy forecast period for tobacco, both for cigarettes and cigars. Whereas cigars were spared the biannual increase in taxes over the review period, for the forecast period, they also face up to an annual tax increase alongside cigarettes. Industry sources express their dismay at the decline in demand expected from the almost-double price increase, whilst expressing hope that consumers would choose to shift down to cheaper brands instead of giving up on smoking altogether.
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Discover the latest market trends and uncover sources of future market growth for the Tobacco industry in Philippines with research from Euromonitor's team of in-country analysts.
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The Tobacco in Philippines 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 Philippines?
- What are the major brands in Philippines?
- Which sector of the tobacco products market is the largest by value sales in Philippines?
- Which sector of the tobacco products market has been growing the fastest, by volume and value, in Philippines?
- Which sector is the most heavily taxed in Philippines?
- Which companies dominate in the total tobacco market in Philippines in terms of market share?
- What is the distribution channel split for the tobacco products market in Philippines?
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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.