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KN16000

KEY NOTE CIGARETTES AND TOBACCO : APRIL 2000

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Executive Summary

Table of Contents

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EXECUTIVE SUMMARY

The UK cigarette and tobacco market grew by 4.9 percent between 1995 and 1999, reaching an estimated value of £11.98bn. While the total volume of products in the market continued to decline, price increases included the rising taxation on tobacco products, which contributed to the rising market value. However, this was dampened by factors such as a switch to cheaper brands by some consumers. Illegal sales of smuggled tobacco are excluded from the market value figure. This type of trade has increased in recent years as a consequence of the relatively high level of tax levied on UK tobacco products when compared to that in other European countries.
There are four main sectors within the market -- cigarettes, cigars, hand rolling tobacco and pipe tobacco. Cigarettes account for the greatest market share, having a high level of popularity among smokers (due to their convenience), and a strong brand portfolio and product range in the UK market. The cigar market has seen a slight decline in sales. Hand rolling tobacco sales have declined in recent years, with legal sales also suffering from the high level of smuggling in this sector. Pipe tobacco sales have fallen in line with the decreased popularity of this form of smoking, particularly among the younger age groups, which means that the buying base is not being renewed.
The UK cigarette and tobacco market is dominated by three main companies -- Gallaher Group PLC, Imperial Tobacco Group PLC and British American Tobacco PLC. In 1999, a major shake-up took place when Gallaher acquired the UK interests of RJ Reynolds, following the buyout of the holding company by Japan Tobacco Incorporated. British American Tobacco also took a more direct role in the UK market, following its acquisition of Rothmans.
Own-brand cigarettes sold by supermarkets and cash and carry groups gained a minority foothold in the market.
The cigarette and tobacco market continues to come under pressure from anti-smoking groups. The Government has started a 3-year campaign with specific targets to reduce the number of smokers, and it is focusing particularly on groups such as young people and pregnant women. The growing level of smuggled tobacco is also a major problem, as manufacturers have no control over product quality and sales conditions, while the legitimate supply route is also being undermined.
Market values are likely to decline in real terms, although the major manufacturers will seek to gain sales in overseas, particularly emerging, markets. Key Note forecasts that by 2004, the cigarette and tobacco market will be worth £12.53bn -- an increase of 4.7 percent over the estimated 1999 value.

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TABLE OF CONTENTS

Executive Summary

Market Definition

MARKET SECTORS

MARKET POSITION

MARKET TRENDS

Table 1: The Types and Uses of Tobacco

Table 2: Tobacco Market Shares ( percent), 1995-1999

Table 3: The Cigarette and Tobacco Market by Sector by Value (£m and percent), 1999

Table 4: Indices of Consumer Expenditure and Spending on Cigarettes and Tobacco at Constant 1995 Prices (1995=100), 1995-1999

Table 5: Methods Used to Stop Smoking ( percent of population), 1999

Table 6: The Potential Revenue Loss from Tobacco Smuggling (£m), 1996-1999

Market Size

THE TOTAL MARKET

BY MARKET SECTOR

FOREIGN TRADE

Table 7: The Cigarette and Tobacco Market at Current and Constant 1995 Prices (£m at rsp and index 1995=100), 1995-1999

Table 8: The UK Cigarette Market by Value and Volume (£m, million pieces and index 1995=100), 1995-1999

Table 9: The UK Cigar Market by Value and Volume (£m, million pieces and index 1995=100), 1995-1999

Table 10: The UK Hand Rolling Tobacco Market by Value and Volume (£m, 000kg and index 1995=100), 1995-1999

Table 11: The UK Pipe Tobacco Market by Value and Volume (£m, 000kg and index 1995=100), 1995-1999

Table 12: Exports of Tobacco Products Produced in the UK (£m), 1997 and 1998

Table 13: Imports of Tobacco Products (£m), 1997 and 1998

Industry Background

RECENT HISTORY

INDUSTRY CONCENTRATION

DISTRIBUTION

EMPLOYMENT

TRADE ASSOCIATIONS

Table 14: Number of VAT-Based Enterprises Engaged in the Manufacture of Tobacco Products by Turnover (£000), 1999

Table 15: Number of Local Units Engaged in the Manufacture of Tobacco Products by Number of Employees, 1999

Competitor Analysis

THE MARKETPLACE

MARKET LEADERS AND THEIR BRANDS

ADVERTISING AND PROMOTION

Table 16: Selected Cigarette and Tobacco Manufacturers by Turnover (£m), 1998 and 1999

Table 17: The Major Cigarette and Tobacco Brands of British American Tobacco PLC

Table 18: The Major Cigarette and Tobacco Brands of Imperial Tobacco Group PLC

Table 19: The Major Cigarette and Tobacco Brands of Gallaher Group PLC

Table 20: The Major Tobacco Brands of Swedish Match UK Ltd

Table 21: Main Media Advertising Expenditure on Cigarettes and Tobacco Products (£000), Years Ending September 1998 and 1999

Table 22: Main Media Advertising Expenditure on Cigarettes and Tobacco Products by Brand (£000), Years Ending December 1998 and 1999

Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Buying Behaviour

GENERAL TRENDS

PENETRATION OF CIGARETTE SMOKING

PENETRATION OF CIGAR SMOKING

PENETRATION OF HAND ROLLING TOBACCO

PENETRATION OF PIPE SMOKING

Table 23: Penetration of Cigarette and Tobacco Use ( percent of population), 1995, 1997 and 1999

Table 24: Penetration of Cigarette Use by Age and by Social Grade ( percent), 1999

Table 25: Penetration of Cigar Use by Age and by Social Grade ( percent), 1999

Table 26: Penetration of Hand Rolling Tobacco by Age and by Social Grade ( percent), 1999

Table 27: Penetration of Pipe Smoking by Age and by Social Grade ( percent), 1999

Outside Suppliers to the Industry

THE SUPPLY OF TOBACCO LEAF AND PACKAGING

SECONDARY SUPPLIERS

IMPORTERS AND DISTRIBUTORS

Current Issues

ADVERTISING BAN

SMUGGLING

DUTY PAID STAMPING

PHILIP MORRIS

BRAND BATTLE

BUDGET 2000

Forecasts

DEMOGRAPHICS

MARKET SEGMENTATION

PRODUCT DEVELOPMENT

COMPETITOR FORECASTS

FORECASTS 2000 TO 2004

Table 28: The Forecast Cigarette and Tobacco Market at Current Prices (£m at rsp), 2000-2004

Company Profiles

INTRODUCTION

DEFINITIONS

FURTHER INFORMATION

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

BONNIER INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

Text © 2000 Key Note

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Last updated by Jacob van Eldik 19th May 2000