Retail volume sales of cigarettes continued to decrease in 2017, albeit at a slower rate than the review period CAGR. The slowdown was due to the continuing improvement of the wider Dutch economy and a temporary easing of annual excise tax hikes by the government.
The downward trend in smoking prevalence was the single most important structural factor negatively affecting demand over the review period. Given low population growth, this has resulted in a decline in the total number of smokers in the Netherlands over the past decade.
Retail volume sales of cigarettes are increasingly concentrated in supermarkets and related modern grocery formats. Traditional formats, such as forecourt retailers and tobacco specialists, by contrast, have been falling out of favour with Dutch consumers.
The increasingly restrictive retail environment for tobacco products, especially the ban on advertising, has seen leading international brands Marlboro, Camel, L&M, Pall Mall and Lucky Strike claim a growing share of retail volume sales during the review period. Since it has become difficult to target customers as yet not firmly attached to a brand or persuade loyal existing customers to switch, brand loyalty and competitive pricing have become increasingly decisive factors.
Philip Morris Holland remained the leading player in 2017 due to the popularity of its Marlboro brand, which has become the single most valuable grocery brand in the Netherlands. Retail volume sales of Marlboro were supported by the demand for the Marlboro Gold and Marlboro Fuse Beyond.
Heupink & Bloemen Tabak, which specialises in cigarillos and fine cut tobacco, remained one of the few domestic manufacturers still present in cigarettes in 2017. Besides genuine company brands like Black Devil, the domestic enterprise holds the licence for several brands, which it manufactures for exclusive distribution in the country’s leading grocery chains.
Retail current value sales of cigars, cigarillos and smoking tobacco saw a decline in 2017, after a slight rebound in 2016. The main cause was struggling sales of smoking tobacco, where the demand for fine cut tobacco, a popular substitute for cigarettes with cash-strapped consumers, particularly young adults, softened as the economy and consumer confidence improved.
Fine cut tobacco retained a very strong position in tobacco, with per capita consumption in the Netherlands still amongst the highest globally. While roll-your-own (RYO) tobacco dominates, make-your-own (MYO) tobacco has become more popular, accounting for around one quarter of retail volume sales in 2016.
Cigars is expected to continue to see a decline in retail volume and value (at constant 2017 prices) sales over the forecast period. Cigars and cigarillos are equally affected by restrictive legislation and increasingly negative public opinion.
Given a strong historic preference for cigarillos over cigars in the Netherlands, the demand for cigarillos remains relatively high and the local manufacturers lead the category. In 2017, the top two manufacturers were Royal Agio Cigars and Ritmeester Cigars.
Testifying to the rising demand for premium cigars is the growing availability of Cuban cigars by Habanos in tobacco specialists in the Netherlands. Moreover, Jas Sum Kral cigars were successfully launched in the market towards the end of the review period.
Imperial Tobacco Netherlands remained the undisputed leader in fine cut tobacco in 2017, mainly due to its ownership of several historic Dutch brands. Drum, Van Nelle and Brandaris have a long-standing presence in the Netherlands and they enjoy strong brand recognition among local consumers.
Only vapour products recorded significant retail value sales and growth in 2017. This trend is expected to continue over the forecast period, due to the launch of the first heated tobacco device in the first half of 2017, and the potential launch of non cig-a-like closed systems.
While the use of vapour products continues to grow and is likely to become more frequent still over the forecast period, the rate of adoption has slowed down considerably. Compared with some Western European countries, vapour products remained marginal in the Netherlands.
With 18-24-year-olds set to become a less important consumer group for vapour products, the attention of manufacturers is likely to shift towards older, more affluent young adults. Since these consumers enjoy higher disposable incomes, they are willing to spend more on high-quality devices and accessories.
Overall, vapour products remained highly fragmented, although there were signs of incipient consolidation as the category gradually matured. There is still a large variety of small independent specialist outlets (brick-and-mortar and pure online retailers) that sell exclusively vapour products.
Shenzhen Joye Technology remained the frontrunner in 2017, primarily owing to its strong position in open vaping systems, where it continued to lead sales of devices and e-liquids. Overall, it is one of the few players that can boast a strong presence in both open and closed vaping systems.
Philip Morris Holland was responsible for the biggest change in vapour products in the Netherlands in 2017, with the March launch of Iqos. Widely marketed as containing 90% less nicotine than ordinary cigarettes, this is the first heated tobacco device available in the Netherlands.
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