Tobacco key trends and strategies explained

 
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Global Tobacco Industry

 

The world tobacco industry generated sales of almost $721 billion in 2010, according to MarketLine. Cigarettes represent the leading market segment with revenue exceeding $681 billion, which accounts for almost 95% of the overall market. The yearly rate of market growth is expected to accelerate to be 4.5% until 2015, bringing the market to almost $890 billion.

 

The tobacco market involves the retail of tobacco, cigarettes, cigars, cigarillos and chewing tobacco. There are currently around 1.3 billion smokers in the world; this figure is expected to climb at a rate of almost 4% per year. Tobacco is grown in over 120 countries worldwide, using close to 4 million hectares of total agricultural land available globally. Around 12 million cigarettes are smoked every minute around the world. 

 

Around 35% of men in developed nations smoke, compared with 50% of men in developing nations. About 22% of women smoke in developed nations, compared with less than 10% in developing nations.

 

Key Market Products

 

  • Cigarettes represent the largest share of the tobacco market in sales volume and value. Though consumption levels have fallen, the absolute number of smokers has been climbing along with the global population and disposable incomes, reports Global Industry Analysts. China is the largest regional market for cigarettes.

 

  • Cigars do not generate the same sales or sell in the same high volume as cigarettes. In a more recent trend, the social cachet attached to cigars has been boosting sales. As consumers become more health conscious, they are opting for cigars for their lower level of harm to health. Cigarillos, which are cigars that way less than three grams, represent the market segments recording the most rapid growth. In the past, cigars have been much less marketed than cigarettes, associated with a different demographic (that of the older male), and have not been paid much promotional attention by companies. Advertising of cigars is on the rise, along with aromatic filter varieties, which appeal more to younger and female demographics, and there are increasing numbers of tobacco-only stores in operation. 

 

 

Regional Market Share

 

  • The EU tobacco market was worth almost $208 billion in 2010, reports MarketLine. Cigarettes represented the leading market segment with sales exceeding $188 billion, or almost 91% of the overall market. Market growth is expected to accelerate to reach a yearly rate of over 3% through 2015, bringing the market to over $242 billion.

 

  • The US tobacco industry had sales of almost $96 billion in 2010, according to MarketLine. As in the EU, cigarettes lead with 92% of the overall market, generating almost $88 billion in sales. Market growth is expected to slow to just over 2% a year through 2015, bringing the market to over $106 billion.

 

  • MarketLine valued the Asia-Pacific tobacco market at over $366 billion in 2010. Cigarettes led the market with sales of almost $356 billion, or 92% of the overall market. Market growth is expected to accelerate to a yearly rate of over 5.5% through 2015 to bring the market to almost $483 billion.

 

 

Industry Leaders

 

The three leading companies in the global tobacco market are Philip Morris International, China National Tobacco Corporation and Japan Tobacco. Philip Morris International is the world’s largest tobacco company, which sells its products in 180 countries, and held a 16% stake in the international market outside of the US in 2010. Excluding China, the company holds almost 28% of the global market.

 

 

Market Outlook

 

As tobacco consumption in developed countries declines due to health awareness, tobacco companies are concentrating more on developing countries, including Latin America, Asia, and the Middle East. The industry is focusing its efforts on advertising strategies such as offering low-risk products and re-launching existing products to attract female consumers. More recent product offerings include cigarettes flavored with mint, citrus, and vanilla, and low-risk products with reduced toxins and carcinogens or free of nicotine.

 

The global tobacco industry continues to struggle with negative publicity due to health concerns, high taxes, and state regulations. Once seen as a social pass time, smoking is now perceived as anti-social and damaging to health, causing premature deaths and lung cancer. Companies are now required to include health warnings on their product labels and are no longer allowed to undertake marketing campaigns.

 

 

Leading Industry Associations

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