Tobacco in Thailand

Value boosted by higher taxes while smokers trade down to low-priced smoking tobacco

In 2018, all categories of tobacco in Thailand saw value growth as unit prices continued to increase. Unit price increases were however albeit less notable in fine cut tobacco, which naturally continued to see higher volume growth as consumers continued to trade down from higher-priced cigarettes related to the excise tax introduced in 2017.

State-owned monopoly incorporated as Tobacco Authority of Thailand

The October 2017 change in excise tax from Manufacturer Selling Price (MSP) to Retail Selling Price (RSP) hurt Thailand Tobacco Monopoly (TTM), Thailand’s sole domestic manufacturer of cigarettes. This tax change also benefited international players that could exploit the new tax structure through the competitive pricing of economy brands like L&M.

Pricing advantage helps Philip Morris gain on sole domestic cigarette manufacturer

Through most of 2018, Philip Morris was able to exploit its ability to lower the prices of some of its popular cigarettes brands to great advantage over its domestic rival TOAT. Philip Morris, which still imports some of its most popular global brands catering mainly to tourists, expatriates and affluent locals, widened its appeal by lowering prices of some brands to avoid paying higher taxes.

Independent small grocers benefit from widespread presence and single stick sales

In 2018, independent small grocers remained the key distribution channel for cigarettes and smoking tobacco, mainly due to the ubiquity of such outlets in both urban and rural areas of Thailand. Low-income people commonly purchase their cigarettes from independent small grocers, where cash-strapped consumers that are unable to afford an entire pack of 20 sticks can often purchase cigarettes by the stick.

Tax-related pricing issues and plain packaging will determine future direction

Recent changes to tobacco taxation will continue to influence sales trends in tobacco over the forecast period. While lower value growth is expected at current 2018 prices, retail volume sales of cigarettes are expected to decline at a slower pace than what was seen over the review period as manufacturers make adjustments to keep prices competitive.

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