Tobacco in Thailand

COVID-19 impact on tobacco

High unemployment rates noted in the initial stages of the lockdown in the country in response to COVID-19 is set to lead to reduced demand for a number of tobacco products in 2020, particularly the largest category of cigarettes, as many Thais have been forced to remain at home with all non-essential businesses closed. This scenario has led to many consumers prioritising their budgets on groceries and other essential items due to financial concerns during an uncertain period of time.

COVID-19 country impact

All schools were shut on 18 March and are not expected to reopen until 1 July, with remote learning being recommended, where possible. All non-essential establishments were closed from 21 March, with only takeaway and delivery allowed from foodservice outlets.

Ongoing price sensitivity amongst largest low-income male target audience in the wake of the tax levy leads to increasing demand for economy cigarettes, illicit trade and fine cut tobacco

Following price rises for cigarettes in 2017 as a result of a tax levy on all price segments (20% on THB60 pack and 40% on packs priced over THB60), a stronger switch towards economy cigarettes was noted in 2018, a trend which continued into 2019 with this price segment recording another year of strong volume growth. By way of contrast, demand for mid-priced and premium cigarettes experienced another year of decline as the main consumer group of cigarettes in Thailand is comprised of lower-income males, who are less likely to give up their addiction, and instead choose cheaper options.

Global producers of cigarettes continue to benefit from price reductions on brands in wake of tax levy, squeezing major local producer TAOT in 2019

Global producers of tobacco products fared better than local producers in 2019, with leading cigarettes players Philip Morris (Thailand) Ltd and Japan Tobacco International gaining retail volume share from Tobacco Authority of Thailand following the increase in the tax levy on cigarettes in 2017; while packs retailing higher than THB60 were hit with a 40% tax increase, packs of cigarettes priced at THB60 or less were taxed at the lower rate of 20%, although the latter is a short-term solution with plans to hit all price segments with the 40% tax in the early part of the forecast period.

Smoking prevalence rate set to remain steady in Thailand over the forecast period, with ongoing demand for more affordable options including fine cut tobacco from price-sensitive consumers

Tobacco in Thailand is predicted to experience an overall decline over the forecast period, driven by the largest category of cigarettes, although the latter’s rate of decline will weaken from 2021 onwards, supported by the economy segment. Illicit trade will continue to see healthy demand, especially in 2021 as lockdown measures, including border controls, are eased, making it less difficult for these products to be smuggled in from neighbouring countries.

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