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Strategy Briefing

The Shift to the Functional: Has the Pleasure Gone Out of Tobacco?

29 pages, May 2014

US$1,325

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About This Report

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If you purchase a report that is updated in the next 60 days, we will send you the new edition and data extract FREE!

More and more tobacco use is in “inferior volumes” (economy cigarettes, RYO and illicit trade) particularly in developed markets. Driven by restrictive regulation and regular price increases, this denotes an irreversible shift to consumption concerned primarily with function rather than pleasure. This trend clearly has substantial implications for the future of the global cigarette market, as well as emerging categories, and marks the beginning of the end of brand (and therefore pricing) power.

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Overview

Why buy this report?

Gain competitive intelligence about market leaders. Track key industry trends, opportunities and threats. Inform your marketing, brand, strategy and market development, sales and supply functions.

Tobacco: from pillar to pariah

For many decades, the tobacco industry benefited from the central place of tobacco consumption in society, and at the heart of smokers’ lives as an affordable luxury. However, as a result of constantly increasing unit prices and ever stricter regulation, tobacco is seen more and more by its consumers simply as a grudgingly afforded necessity.

Functional instead of lifestyle positioning

This process of “functionalisation” is leading to decreased consumption in many global markets, and, in most, significantly lower value sales. This process is characterised by disengagement with tobacco and has consequences for its future as a “lifestyle” product and for those of tobacco alternatives.

Caused by taxation and regulation

Decades of tobacco control, in the form of both tax increases and marketing and consumption bans, have created a negative feedback loop in which smoking is a less pleasant activity for which people must pay ever more, a cycle amplified by growing health awareness.

Impact on the power of brands

Price rises force consumers to seek out cheaper brands or alternatives to cigarette consumption, damaging previously powerful brands and thus impacting manufacturers’ capacity to continue generating profit, despite years of “pricing power”.

Options for the industry

The industry has two sets of possible approaches to the problem of functionalisation. Negative: Challenge the introduction of “disproportionate” regulation through advocacy and legal action and manage declines through cost-cutting and portfolio adjustment. Positive: Innovate better products and develop the positive case for nicotine use.

What this report includes

Top-level strategic analysis of how major consumer trends will influence global markets
Consumer insight
Impact across all relevant consumer markets
Unique graphics and case studies
Key market snapshots
Accompanying presentation to synthesise main findings

Why buy this report

Identify factors driving change now and in the future
Understand motivation
Forward-looking outlook
Briefings and presentation should provoke lively discussion at senior level
Take a step back from micro trends
Get up to date estimates and comment

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I ntroduction

Scope

Key Findings on Functionalisation

Key findings

The de-stimulating effect of high prices and strict regulation

The Subprime Crisis in Global Cigarettes

Non-performing volumes on the rise in developed markets

Developing and emerging markets no cure-all

The functional roots of subprime: Case study - UK

Duty paid cigarettes to lose 20% of share in a decade in Italy

Onward March of Regulation

The emergent, bleeding edge of regulation

The role of innovation in re-engaging consumers

Plain packaging represents the ultimate path to commoditisation

Flavour bans remove weapons in the war against functionalisation

An end to growth regions, endgame in others?

An Alternative Future

The abundant potential of alternatives…

… But regulatory and consumer response is uncertain

The central importance of branding to the future of e-cigarettes

Regulation will have huge impact on e-cig brand-building capacity

Consumer acceptance case studies: Snus and generic pharma

What Can The Industry Do?

Challenging the spread of regulation: Delayed defeat?

Managing declines through old fashioned cost-cutting

Expand existing products from other categories

Develop better non-combustible products

Going on the offensive regarding perception of nicotine

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Megatrends

Strategy Briefing

The Shift to the Functional: Has the Pleasure Gone Out of Tobacco?

New Report Guarantee

About This Report

New Report Guarantee

Overview

Why buy this report?

Tobacco: from pillar to pariah

Functional instead of lifestyle positioning

Caused by taxation and regulation

Impact on the power of brands

Options for the industry

What this report includes

Why buy this report

Want to find out more about this report?

Table of Contents

I ntroduction

Scope

Key Findings on Functionalisation

Key findings

The de-stimulating effect of high prices and strict regulation

The Subprime Crisis in Global Cigarettes

Non-performing volumes on the rise in developed markets

Developing and emerging markets no cure-all

The functional roots of subprime: Case study - UK

Duty paid cigarettes to lose 20% of share in a decade in Italy

Onward March of Regulation

The emergent, bleeding edge of regulation

The role of innovation in re-engaging consumers

Plain packaging represents the ultimate path to commoditisation

Flavour bans remove weapons in the war against functionalisation

An end to growth regions, endgame in others?

An Alternative Future

The abundant potential of alternatives…

… But regulatory and consumer response is uncertain

The central importance of branding to the future of e-cigarettes

Regulation will have huge impact on e-cig brand-building capacity

Consumer acceptance case studies: Snus and generic pharma

What Can The Industry Do?

Challenging the spread of regulation: Delayed defeat?

Managing declines through old fashioned cost-cutting

Expand existing products from other categories

Develop better non-combustible products

Going on the offensive regarding perception of nicotine

Why buy this report?

Want to find out more about this report?

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