While direct regulatory restrictions on tobacco trade had subsided by the beginning 2021, cigarettes in South Africa continued to feel the lagging effects of COVID-19 restrictions on a macro level. One impact of the pandemic which continued to influence demand was lower income levels and subsequent lower levels of disposable incomes available to many local consumers.
Following significant increases in illicit trade sales in 2020, the illegal market in cigarettes witnessed significant declines in 2021. This also indicated that the initial increase in illicit trade was an indirect result of the government’s attempt to prevent overwhelming the South African healthcare system and save lives, using the Disaster Management Act of 2002 as a policy tool to ban the legal trade of cigarettes.
Leading cigarettes players, including British American Tobacco (South Africa) Ltd, JT International South Africa (Pty) Ltd and Philip Morris South Africa (Pty) Ltd regained lost sales in 2021 following significant declines the previous year, with the latter two gaining share from smaller manufacturers including Carnilinx and Gold Leaf Tobacco. While overall retail volume sales of dominant player British American Tobacco remained below pre-pandemic levels in 2021, certain brands gained further share including Princeton Pall Mall, while Dunhill Courtleigh and Benson & Hedges recovered some lost ground.
British American Tobacco released a statement in 2021 and requested a minimum cigarette price to be implemented. The player reasoned that a minimum price would reduce tax evasion and a growing illicit market, which if considered by the government, would have a substantial impact on overall cigarette sales and not only on pricing.
Illicit trade is expected to remain dynamic and able to respond to market shocks, provided harsher measures are not imposed by the government to combat the illegal sales of cigarettes. Much of this stems from the market not being subject to any of the laws and regulations that the legal market is subject to.
Retail volume sales of cigarettes in South Africa were declining over the review period. However, the rate of decline is expected to increase over the forecast period, based on two key factors.
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RETAIL SALES OF DUTY PAID CIGARETTES The definition of cigarettes for the purposes of this study is duty-paid, machine manufactured white-stick products. This does not exclude brands of cigarettes that do not use white paper but it is designed to exclude the volume of non-machine manufactured products such as bidis/beedis (India) and papirosy (Russia), and other smoking products made with tobacco but that either do not resemble cigarettes as recognised in the US or Europe, or those that are not machine manufactured. The exclusion of these products is intended to give a more accurate picture of the "true" market for cigarettes and cigars which has been distorted in official statistics and published reports because of the inclusion of hybrid products. NB Please note that due to its central importance and integration into the industry mainstream, Indonesia’s market data does include hand-rolled kreteks DUTY-FREE sales are excluded from retail sales, as are herbal cigarettes. ILLICIT TRADE CIGARETTES Not included in retail sales, but split out separately in volume terms only. Defined as non-duty paid cigarettes (includes smuggled & counterfeit/fake products combined). Legitimate cross-border sales are considered duty-paid. Sales arising from a foreign national purchasing cheaper cigarettes in bulk in a neighbouring country for personal use and exported back are attributed to the country where the purchase is made (e.g. bulk cigarette sales by British nationals in France are attributed to France).See All of Our Definitions
This report originates from Passport, our Cigarettes research and analysis database.
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