Cigarettes in Bosnia and Herzegovina

PROSPECTS

Illicit trade will only increase until excise tax rises ease

The illicit trading of cigarettes keeps increasing rapidly, showing no signs of retreat. In 2018, the illicit trade accounted for roughly a third of total cigarette sales in the country – and is predicted to represent roughly half of the total in 2023.

British American Tobacco Plc slashes domestic production

In 2018, there was a huge decline in cigarette production in both Federation of Bosnia-Herzegovina and Republic of Srpska. These regions have separate statistical offices, which both reported significant decreases.

Lower excise tax proportions favour premium cigarettes as tax hikes continue

During the course of the review period, there was a clear trend of premium cigarettes more than doubling its share of total cigarettes, while economy and mid-priced products lost ground. At first glance, it makes little sense that consumers are buying more premium cigarettes amid constant price increases.

COMPETITIVE LANDSCAPE

British American Tobacco brings in its own brands

British American Tobacco focused on consolidating regional tobacco processing during the review period, starting by taking over the tobacco business of the largest regional manufacturer Adris Grupa dd and following through with the acquisition of Fabrika Duhana Sarajevo and a range of Bulgartabac’s brands including all those manufactured by Fabrika Duvana Banja Luka. As a result of this activity, several highly popular regional brands were withdrawn, or rather replaced by British American Tobacco’s international brands.

Japan Tobacco Inc voices its support for postponing of excise tax increases

Japan Tobacco Inc has strongly supported the moratorium on excise tax increases for tobacco products in Bosnia-Herzegovina. A government decision was made late in the review period to stop any further rises in tobacco excise tax for a period of 2-4 years, with the aim being to prevent further negative effects to the state’s tobacco tax revenue caused by a strong rise in illicit sales.

Key players compete through distribution

While British American Tobacco focused on growth through acquisition of regional manufacturing capacities and brands, Philip Morris doo retained its overall leadership of cigarettes in Bosnia-Herzegovina in 2018. The company fine-tuned its product range throughout the review period to align it with key developing trends such as the shift towards premium products, legislative restrictions and changes in the distribution landscape.

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