Factors affecting the future development of cigarettes

Tobacco Online, citing International Tobacco, reported:

　　Plain cigarette packaging

　　Today, more and more countries are considering plain cigarette packaging as a means of tobacco control. In December 2012, Australia became the first country to implement plain cigarette packaging. In June 2014, the President of Ireland signed a bill on standardized tobacco packaging. In mid-March 2015, the UK House of Commons passed related legislation requiring tobacco companies to sell cigarettes in plain packaging. After approval by the House of Lords, the law was set to officially take effect in May 2016.

　　Plain cigarette packaging will have a major impact on cigarette sales for global tobacco companies. The tobacco industry’s response has been that this policy effectively hands counterfeiters the “jackpot” and, to a large extent, plain packaging will also lead to losses in government excise tax revenue.

　　Electronic cigarettes

　　The impact of new electronic cigarette technology on traditional cigarettes is already obvious. The electronic cigarette market grew from US$910 million in 2010 to US$2.5 billion in 2013, with especially notable growth in the US market. Although still just a “small dish” compared with the US$600 billion tobacco market, its development should not be underestimated. Several major multinational tobacco companies have also moved aggressively into the space: British American Tobacco successfully launched the Vype electronic cigarette brand in the UK, selling both online and offline; after launching its electronic cigarette brand Puritane in 2014, Imperial Tobacco planned to introduce another new electronic cigarette brand. It can be said that the four major multinational tobacco companies have had little choice but to enter the electronic cigarette sector to capture market share. But this also means they must compete against their own traditional cigarette brands, and the electronic cigarette market is bound to impact the traditional cigarette market.

　　Government regulation

　　Since the WHO Framework Convention on Tobacco Control officially came into force in 2005, tobacco-control efforts by the parties have continued to advance under the promotion of the World Health Organization, and governments around the world have steadily intensified tobacco-control measures. In 2013, Russia passed legislation requiring printed health warning images on tobacco products and a comprehensive ban on smoking in public places; the Philippines imposed a “sin tax” on cigarettes; and the EU advanced revisions to the Tobacco Products Directive. Under increasingly severe tobacco-control pressure and a persistently sluggish global economic environment, the tobacco industry cannot remain unaffected. In addition, the global tobacco development environment has undergone profound and significant changes. In many developed countries, tobacco consumption behavior is gradually changing, and the cigarette market will inevitably show a sustained downward trend.

　　Illegal tobacco products

　　Because tobacco policies and tax rates vary widely across countries and regions, criminals who see profit in the illegal cigarette trade will certainly take risks, and some consumers are also willing to buy lower-priced illicit cigarettes. Therefore, in the period ahead, the global volume of illicit cigarette trade will remain substantial, especially after plain packaging is adopted, when counterfeit products are bound to surge. Although countries around the world have taken many measures to crack down on illegal cigarette sales, illicit cigarette trade is still likely to remain significant in the future.