Declining volumes, but rising prices keep value sales rising
Overall value sales of tobacco increased above inflation, supported by rising prices and rising taxes, although volume sales remained static. Sales continued to be hit by the smoking ban and higher prices, as well as the ongoing economic uncertainty. The taxation situation continued to frustrate a number of manufacturers, as the government continued to apply its cigarette duty escalator, which was relaxed on alcohol. Volume sales remained trapped in the long term decline of recent years, as consumers had greater concerns about the health implications of smoking, and as the marketing and retailing of cigarettes became ever harder thanks to more stringent regulation. This included the introduction in 2013 of a ban on cigarette displays in large stores and supermarkets.
Economic uncertainty continues to boost cheaper brands
Consumers continued to trade down, switching to cheaper brands in the hope of saving money whilst economic uncertainty continued in the UK. The economic crisis led to a slight rise in unemployment and a very serious decline in living standards, with patterns of employment changing significantly, as well as cuts to welfare, all of which had serious effects on all levels of the economy, but particularly on demographics which are more likely to include smokers. Unsurprisingly, therefore, there was a move towards cheaper brands, especially with taxation taking the price of cigarettes ever higher. Consumers particularly moved from standard cigarettes, not only to economy brands, but also to RYO tobacco, whilst in cigars there continued to be a serious decline and a marked shift to cheaper cigarillos.
Supermarkets extends its lead thanks to pricing, range and convenience
Supermarkets was the leading distribution channel in cigarettes, cigars and smoking tobacco , and continued to gain share in each product area. This channel benefits from offering competitive prices, with consumers becoming increasingly willing to shop around for the best price as a result of higher taxation and on-going economic concerns due to the frequently high mark-ups in these channels. Supermarkets also offers convenience, enabling busy consumers to buy tobacco along with their groceries, whilst many outlets also offer a wide range of brands and products.
Imperial Tobacco Group continues to lead, with a mixed performance
Imperial Tobacco continued to be the strong leader in cigarettes at the end of the review period, and also led smoking tobacco, whilst ranking third in cigars. The company rebounded from a poor performance in cigarettes in the review period by gaining share in this category in 2012, thanks to price discounting and new product development, and its rivals’ stronger focus on price. Gallaher, meanwhile, ranked second in smoking tobacco and cigarettes in 2012 and led cigars; it gained share in each category. Gallaher succeeded thanks to its focus on price, with budget brand Sterling gaining share in cigarettes in 2012.
Continuing volume declines forecast, offset by higher taxes and prices
The long term trend of declining tobacco usage in the UK is likely to continue, whilst this in turn is likely to be offset by higher taxes and higher prices. The government seems intent on continuing the implementation of its duty escalator for tobacco, which essentially locks in price rises above inflation on an annual basis into the tobacco market. This in turn provides a windfall both for the government and for the tobacco market, as it disguises the declining volume figures. It is forecast that smokers will therefore continue to economise, which will continue to aid economy brands and RYO tobacco. There will also be a continuing fight over legislation, although plain packaging restrictions had been ruled out before 2015 at the time of writing.
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The Tobacco in United Kingdom 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 United Kingdom?
- What are the major brands in United Kingdom?
- Which sector of the tobacco products market is the largest by value sales in United Kingdom?
- Which sector of the tobacco products market has been growing the fastest, by volume and value, in United Kingdom?
- Which sector is the most heavily taxed in United Kingdom?
- Which companies dominate in the total tobacco market in United Kingdom in terms of market share?
- What is the distribution channel split for the tobacco products market in United Kingdom?
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This industry report originates from Passport, our Tobacco market research database.