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What’s Happening in Tobacco? Q2 2018

June 2018

In the latest in an ongoing series of quarterly briefings looking at major (and some minor) developments in the world of tobacco, we assess the latest performance of the major multinationals, their recent NGP moves, further M&A activities from Scandinavian Tobacco Group, Swedish Match and Imperial Brands, the updated economic growth projections for the world’s key markets, and what to look for in the next quarter.

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San Francisco voters uphold the ban on flavoured tobacco products

On 5 June, voters in San Francisco passed a proposition to ban flavoured tobacco products, including menthol cigarettes and flavoured e-liquids. The ban was initially approved by city supervisors, but a referendum petition eventually gathered enough signatures, leaving the issue to voters. The final result showed 69% support for the ban. This arguably makes San Francisco the city with the toughest tobacco regulations in the US. Euromonitor International’s latest data shows that flavours and menthol make up more than 35% of the country’s volume sales of cigarettes.

Third tier tax on cigarettes maintained in Pakistan

In April, the Pakistani government rejected the Ministry of National Health Services' concerns and maintained the third tier tax slab on cigarettes.Furthermore, an extra nominal minor tax was also imposed on the industry.These developments and surrounding discussions are tightly linked to illicit trade, which has grown from 22% in 2012 to 37% in 2017, according to the latest Euromonitor International data.

Scottish “smoke-free”goal in danger

The Scottish government’s goal of creating a “tobacco-free generation” and bringing smoking prevalence below 5% by 2034, is now seemingly in danger. Recent official figures suggest that the number of people trying to quit the habit in 2017 was at a record low. This was mainly attributed to large cuts in smoking cessation campaigns. More countries are expected to set “smoke-free” targets in the immediate future.

Marlboro underperforms the US market

While Juul dominates vapour products Marlboro’s US volume performance in Q2 continued to be below the industry average, while Newport and Natural American Spirit showed good value growth. In vapour products, Juul remains dominant, holding nearly two thirds of sales in value terms.

Mergers and acquisitions updates

STG acquired Thompson and Co of Tampa, a leading US online cigar retailer, for USD62 million. Thompson has net sales of c.USD100 million and a significant online customer base. In the US, STG is currently ranked fifth in cigars with over a 2% share, and will hope to increase its presence in the world’s most profitable tobacco market.

Cannabis Strategic Ventures: New Halo filter

Reducing harmful chemicals and eliminating harsh taste. The total cannabis market size (legal and illegal) in Europe could be worth USD20-25bn. Recently, a number of EU-countries have either legalised or taken steps to legalise medical marijuana.

In Brief

Regulatory updates 1
Regulatory updates 2
Taxation updates
Prevalence updates
Market and product updates 1
Market and products updates 2
Mergers and acquisitions updates
New product developments

In Depth

BAT HY 2018 results: revenue and profit weighted to HY2 2018
PMI Q1 results: S&SA and RRP partly offset declines elsewhere
JTI Q1 results: growth in RoW, strong domestic decline
IMB HY results: declines across the board
Big Tobacco’s NGP updates

Latest Macroeconomic Data

The latest Euromonitor International macroeconomic forecasts

Q3 talking points

What to look for in Q3 2018
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