A quick look at the tobacco product market: what do the numbers say?

According to statistical data on excise duty from the National Tax and Customs Administration (NAV), until November 2014 tobacco product volume sales were lower than in the same period of 2013. However, the decline of the cigarette market is in part offset by the increase in sales if calculated in weight: from roll-your-own (RYO) tobacco more cigarettes can be made. Calculated in cigarettes, what we see is that 0.7-1 billion fewer cigarettes were sold than in the base period. Experts estimate the size of the black market to be between 11 and 12 percent. Market dynamics suggest that the loss will stay at this level or perhaps reduce a little. Philip Morris Hungary was the winner of 2014: Trafik.hu statistics indicate that they are now 10 percent ahead of British American Tobacco. JTI and Imperial have about the same market share, while the sole Hungarian market player Continental and the smallest international firm, Róna performed below expectations. Philip Morris kept growing throughout the year, the company’s market share increased by about 3 percent and exceeded 40 percent by December. Besides the drop in volume sales, the restructuring of product categories also continued. More and more consumers switch to cheaper RYO products. Sales of RYO tobacco and cigarillo kept rising and because of this sales of rolling papers and cigarette tubes sales also improved: estimation is that they reached HUF 1 billion per month. It is bad news that RYO tobacco also became an item sold in the black market. Imperial is the market leader in RYO tobacco sales, BAT is second but third-placed Philip Morris is fighting hard to become the leader in the product category too – just like they were No.1 in the cigarette category with a 47-percent market share in 2014. As for the challenges in 2015, the change in excise duty definitely increases the risk of further market contraction – and that of further growth in the black market. The mandatory Sunday closure of most food stores may result in a small improvement in the selling of non-tobacco products by National Tobacco Shops. From September a new central distribution system will supply tobacco shops with products. Market players are keen to know more about this but when the present issue of Trade magazin went to press there were no details available about the new system yet… At the moment it seems that the new distribution system will bring the smallest changes for retailers performing averagely. However, in their case there is significant risk in the forecasted consumption drop and sales decline resulting from the changes in taxation