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The leading US cigars manufacturer, Swisher International, is to acquire Drew Estate Tobacco with the deal expected to be concluded in the fourth quarter of 2014. Set up and run as a family business, with operations in New York, Miami and Nicaragua, Drew Estate has a focus on the premium cigar segment. Products marketed under its ‘The Rebirth of Cigars’ strapline include ACID, Herrera Esteli´, Kentucky Fired Cured, Liga Privada and Tabak Especial. The acquisition will help strengthen the premium end of Swisher’s portfolio.
According to Japan Tobacco International, shipments of Camel cigarettes increased 26.8% to 13.5 billion sticks in the third quarter but Mevius (formerly Mild Seven, JTI’s flagship brand) volumes fell due to Asian customers switching to lower priced products. This helped cause overall volume of the international business to fall some 3.6% in cigarette equivalents, mainly due to the shrinking Russian market despite fine-cut (RYO) volume growth of 5.7%
According to PMI, total cigarette market in the EU contracted by 3.4%, a slower rate of decline compared with the same period in 2013, attributed to deceleration in the growth of the e-vapor sector and lower ‘out-switching’ to the fine cut tobacco sector. The OTP market in the EU rose by 0.4%. PMI enjoyed a successful quarter in OTP, up 7.6% in equivalent units due to fine cut growth in Czech Republic, France, Hungary, Italy and Poland. The company reported costs increased by marketing expenditure on Marlboro, including, in the EU, the ‘don’t be a maybe’ campaign plus the roll-out of the new Marlboro Red 2.0 brand architecture.
The World Trade Organisation (WTO) panel considering complaints about Australia’s tobacco plain packaging law recently stated that there will be no ruling before 2016. Countries which have raised objections include Indonesia, Cuba, Honduras, Dominican Republic and Ukraine.
TAX AND PRICING
A proposal by the chairman of the Committee on Financial and Budgetary Affairs, Phung Quoc Hien, that a 70% tax rate (current rate 65%) be imposed on tobacco from January 1st 2016, and a 75% tax from January 1st 2018 has been accepted. In 2013 a national strategy on tobacco harm control and prevention was approved, aimed at reducing smoking among young people from the current rate of 26% to 18% by 2020.
Operations have commenced at PMI’s first pilot plant for reduced risk products near Bologna to be followed by a second and larger factory. Joint capacity will be some 30 billion units per annum. Products will include Iqos heat-not-burn sticks which will be test marketing in late autumn 2015.
According to RJRT Camel shipments volume rose 3% in the three months ended 30 Sept while overall volume fell 2.9% and industry volume fell 2.3%. Best performer was Santa Fe Natural Tobacco which gained 7.9% while moist snuff volume at American Snuff rose 2.9%. According to the company the vapour product VUSE is about to be available in some70,000 retail outlets while ZONNIC gum, its nicotine-replacement therapy product, would soon be available in some 8,000 selected outlets. (See also: RAI 3Q Results – Waiting for the Bride)
In the third quarter Swedish Match reported increased sales and operating profit compared with the same quarter in 2013 but with the strongest growth coming not from snus but from its ‘other tobacco products’ category which includes a combustible product – cigars, and the most unfashionable sector of the smokeless tobacco market – chewing tobacco.
Overall volumes fell from 317 bn stick equivalents (the volume measure of which is cigarette equivalents comprising cigars, smoking tobacco and snus) in 2013 to 294 bn stick equivalents in 2014 (a fall of 7.3%) though, according to the company, 9bn sticks of this was due to the stock optimisation programme’s effect on inventories. However, this still means an adjusted fall in volumes of 4.4%.
Volume sales were down 1% to 495 billion, with significant regional variations. Growth in Middle Eastern markets, Bangladesh, Venezuela, Pakistan, Ukraine, Turkey and Indonesia were offset by declines in Russia, Vietnam, Brazil, Poland and Canada. Absolute volume decline in Western Europe of 5 billion sticks (a 6.8% fall) was greater than BAT’s other regional groupings put together as Asia-Pacific saw moderate growth of 0.7%, with the Americas down 2% and EEMEA (Eastern Europe, Middle East and Africa, flat.
According to reports, PMI wishes to patent a USB- or Wi-Fi-connected smart e-cig able to link to a smartphone or computer and upload information about tobacco use. According to the company, the a pay-per-puff function can potentially help smokers quit smoking.
According to a Centers for Disease Control and Prevention (CDCP) study, the number of US adults who are trying electronic cigarettes is levelling off. The proportion of adults who have ever used electronic cigarettes rose from about 3-8% from 2010-12 but was virtually unchanged over the past year.
According to research led by Maciej Goniewicz, of the Department of Health Behavior at the Roswell Park Cancer Institute, there is ‘a growing body of evidence that e-cigarette use is increasing, not only among adult smokers, but also among adolescents. The researchers analyzed e-cigarette use among students aged 15 to 19 and found that the proportion of students who had tried e-cigarettes increased from 16.8% during 2010-2011 and to 61.1% during 2013-14 while, at the same time, e-cigarette use increased from 5.5% to 29.9%. Meanwhile, the number of adolescents who used traditional tobacco products also increased, from 23.9% to 38%, while use of both e-cigarettes and traditional cigarettes increased from 65.3% to 72.4%.
According to a YouGov survey, some 60 % of Britons would like to see e-cigarettes banned in public buildings including workplaces and shopping centres with 27 % opposing a ban. The poll also found that only 9% of e-cig users thought the devices helped them give up.
According to reports, Macau will add a total ban including bars, clubs, saunas and massage parlours. However it was also reported that the government has approved 18 of 28 applications for smoking lounges at gambling venues.
E CIGARETTE LEGISLATION
The World Health Organisation Framework Convention on Tobacco Control (FCTC) recently made a statement acknowledging ‘the need for regulations (of electronic nicotine delivery devices) along the lines of policies concerning other tobacco products, including banning or restricting promotion, advertising and sponsorship,’ In the same Moscow meeting a voluntary call was issued to the 179 FCTC signatory countries to increase cooperation to ‘reduce use of tobacco products by 30% by 2025’.
The Thai Cabinet has approved banning imports of electronic cigarettes and hookah pipes (shisha) to protect public health. Cambodia approved a similar ban earlier in 2014.
According to reports, India is to impose regulations demanding health warnings covering 80% of the front and back faces of tobacco packs and a ban on the manufacture and sale of e-cigarettes. (For more see: India Planning Outright Ban on E-Cigarette Products)
According to a Government announcement, new regulations will further restrict flavoured cigar products. The government had introduced regulations on some flavour additives in 2010, but the new regulations are intended to close a loophole by including products that use tipping paper or do not feature a wrapper fitted in spiral form.
A federal court jury in Florida has awarded US$ 41.1 million to former smoker Kenneth Kerrivan after finding Philip Morris USA and RJ Reynolds Tobacco ‘concealed the dangers and addictiveness of smoking’. The case is one in a series of ‘Engle suits’, named after a previous case.