Volume sales of cigarettes declined in Thailand for the third consecutive year in 2018, albeit at a lower rate than what was seen in the previous year, immediately after the new excise taxes took effect. The economy cigarettes segment, which already accounted for nearly three quarters of licit cigarette sales, saw the highest volume growth again as a result of the new tax legislation, which encouraged consumer down trading.
Demand for cigarettes is expected to continue declining, not only due to the tax hikes but also due to anti-smoking campaigns and wider understanding of the harms of cigarette smoking, which will continue to suppress demand. Mainly as a result of changing attitudes towards smoking, younger consumers are less likely to start smoking than their elders were when they were younger.
The forecast period is set to see a diversifying trend amongst cigarette manufacturers towards other tobacco products as a way to compensate for ongoing loss of demand for increasingly costly cigarettes in all price bands. With its new authority, the TOAT is expected to increase its exports and to produce more fine cut tobacco.
Tobacco Authority of Thailand (TOAT), the country’s sole domestic manufacturer of cigarettes, continued to hold the leading value share in 2018, but its volume share plunged by double digits over the year as a result of the tax levy increase of 40% on cigarette packs priced at THB60 or more and a 20% increase on cheaper packs. Because the domestic manufacturer was unable to lower its prices due to the high cost of Thai tobacco, manufacturing and overhead, it lost share to its main competitor Philip Morris.
Philip Morris (Thailand), the country’s dominant importer of cigarettes, was able to increase its volume sales by nearly 50% at TOAT’s expense in 2018, partially because it, like other foreign manufacturers, was able to lower its prices despite higher taxes. Prices of domestically produced cigarettes increased while that of some imported cigarettes decreased and, given a similar price range, consumers generally preferred the imported cigarettes.
Efforts to deter teenagers from starting to smoke continue in the form of various government-supported campaigns. Although in 2017 the Thai government raised the legal smoking age from 18 to 20, lax enforcement of age verification rules makes it unlikely this this legislation will have a significant impact on sales of cigarettes.
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This industry report originates from Passport, our Tobacco market research database.