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KN16009

KEY NOTE CIGARETTES AND TOBACCO : JANUARY 1999

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Executive Summary

Table of Contents

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EXECUTIVE SUMMARY

The UK tobacco market was estimated at £12.89bn in 1998 -- an increase of 23.1 percent at current prices since 1993. However, at constant 1995 prices, the value of the market has actually fallen by 12.2 percent. Volume sales are down and parts of the market remain in long-term decline.
The four main sectors of the market are cigarettes, cigars, hand-rolling tobacco (HRT) and pipe tobacco. Cigarettes dominate sales, accounting for 94.1 percent of the market in 1998. Both cigars and pipe tobacco face shrinking markets, although there is some evidence to suggest that some cigarette smokers are `trading up' to cigars. HRT sales have also been declining.
The two main problems facing the market are the high level of taxation levied on tobacco products, and smuggling. Tobacco products are more expensive in the UK than in other European countries, primarily because of taxation, so products from overseas are an attractive option for smokers. Legal cross-border shopping has had some impact on the retail trade, and this is likely to increase with the abolition of duty-free shopping and its limits. However, the level of illegal smuggling is of greater concern. HM Customs & Excise estimates that in 1998 alone £1bn of revenue was lost as a result of this activity, which involves the illegal importation and resale of cigarettes and, in particular, HRT.
The cigarette market continues to be dominated by the manufacturer brands supplied by the four major tobacco groups: Gallaher, Imperial Tobacco, Rothmans and RJ Reynolds. New product development has focused on lower tar products and smaller pack sizes as smokers are reducing average consumption levels.
The tobacco industry remains under attack on health grounds. In December 1998, the Government published a White Paper detailing measures designed to reduce smoking levels in the UK. The plans include the offer of free nicotine patches and an anti-smoking advertising campaign aimed particularly at youngsters. Offices and workplaces will be required to prioritise the needs of non-smokers, while pubs and restaurants will have to sign a `clean air' charter and display signs indicating the smokiness of their environment.

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TABLE OF CONTENTS

Executive Summary

Market Definition

MARKET SECTORS

MARKET POSITION

MARKET TRENDS

Table 1: Types and Uses of Tobacco

Table 2: The Cigarette and Tobacco Market by Sector (£m and percent), 1998

Table 3: Index of Total Consumer Expenditure and Expenditure on Cigarettes and Tobacco at Constant 1995 prices (1995=100), 1993-1998

Table 4: Prevalence of Smoking among UK Adults ( percent), 1986-1996

Table 5: Quantities of Tobacco Products Released for Consumption (million and 000 kg), 1992/1993-1997/1998

Table 6: Revenue Losses from Cross-Border Shopping and Smuggling of Tobacco (£m), 1996-1998

Table 7: Market Shares of Cigarettes and Other Tobacco Products ( percent), 1993-1998

Market Size

THE TOTAL MARKET

MARKET SECTORS

FOREIGN TRADE

Table 8: The Cigarette and Tobacco Market at Current and Constant 1995 Prices (£m at rsp), 1993-1998

Table 9: The UK Cigarette Market by Value and Volume (£m and million pieces), 1993-1998

Table 10: The UK Cigar Market by Value and Volume (£m and million pieces), 1993-1998

Table 11: The UK Hand-Rolling Tobacco Market by Value and Volume (£m and 000 kg), 1993-1998

Table 12: The UK Pipe Tobacco Market by Value and Volume (£m and 000 kg), 1993-1998

Table 13: Exports of Tobacco Products (£m), 1996 and 1997

Table 14: Imports of Tobacco Products (£m), 1996 and 1997

Industry Background

RECENT HISTORY

INDUSTRY CONCENTRATION

DISTRIBUTION

TRADE ASSOCIATIONS

Table 15: Retail Distribution of Tobacco Products by Retail Outlet TypeÅ ( percent), 1997

Brands

MARKET DEVELOPMENTS

BRAND TYPES

BRAND NAMES

BRAND ADVERTISING

Table 16: Gallaher - Major Brands

Table 17: Imperial Tobacco - Major Brands

Table 18: Rothmans - Major Brands

Table 19: RJ Reynolds - Major Brands

Table 20: Retailer and Wholesaler Own-Brand Cigarettes

Table 21: Main Media Expenditure by Brand (£000), Year to September 1997 and 1998

Competitor Analysis

THE MARKETPLACE

MARKET LEADERS

ADVERTISING AND PROMOTION

Table 22: Selected Major Tobacco Suppliers by Turnover (£m), Year Ending 1997/1998

Table 23: Main Media Expenditure on Cigarettes and Tobacco Products (£000), Year to September 1997 and 1998

Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Buying Behaviour

GENERAL TRENDS

CIGARETTE SMOKING

CIGAR SMOKING

HAND-ROLLING TOBACCO

PIPE SMOKING

Table 24: Usage of Cigarettes and Tobacco ( percent of adults), 1995, 1997 and 1998

Table 25: Cigarette Use by Socio-Economic Group ( percent of adults), 1998

Table 26: Cigar Use by Socio-Economic Group ( percent of adults), 1998

Table 27: Use of Hand-Rolling Tobacco by Socio-Economic Group ( percent of adults), 1998

Table 28: Use of Pipe Tobacco by Socio-Economic Group ( percent of men), 1998

Outside Suppliers to the Industry

Table 29: Selected Tobacco Products Importers and Distributors, 1998

Current Issues

BRAND STRETCHING

US TOBACCO SETTLEMENT

COMPANY DEVELOPMENTS

SMUGGLING

ATTACK ON LOW-TAR CIGARETTES

GOVERNMENT ACTION

Forecasts

FORECASTS 1999 TO 2003

FUTURE TRENDS

Table 30: The Cigarette and Tobacco Market at Constant 1995 Prices (£m), 1999-2003

Table 31: Forecast Age Profile of the UK Population (000), 1996 and 2006

Market Growth

Figure 1: The UK Cigarette and Tobacco Market (£m at constant 1995 prices), 1994-2003

Company Profiles

INTRODUCTION

DEFINITIONS

FURTHER INFORMATION

Company Financials

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HBI UK INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

Text © 1999 Key Note

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