‘Tobacco shop – with a view?’

Rolling tobacco and lower-category cigarillo continue to gain ground in the market. This trend results in significant profit margin loss in tobacco product retail. If we examine price ratios per item, we can see that cigarette rolled at home or cigarillos cost less than half, sometimes only one third of the price of cigarette bought ready-made. The situation is made even worse by the fact that volume sales in general are declining as well. Sales statistics from Trafik.hu partners show us that after the weak January performance February was even worse, due to the lower number of selling days; March brought a moderate improvement. Despite the weak overall market performance competition between the two key actors remains fierce: at the moment in cigarette sales Philip Morris seems to be a clear winner with BAT as runner-up. Philip Morris also bettered its position in the rolling tobacco category. Thanks to the new products they introduced at the end of last year, by March 2014 they dominated nearly one quarter of the market. In the cigarillo category Continental Dohányipari Zrt. (CTG) preserved its dominance. The size of the market seems to have stayed at the level of the 4th quarter in 2013 or a bit below that.

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As for market players, Phillip Morris is the number one company, followed by BAT; JTI and Imperial perform rather similarly in the medium-sized segment, while among smaller firms Continental Tobacco Group, the only Hungarian-owned company keeps progressing. In the 2nd quarter of 2014 only very small growth can be expected. As for the whole of the year, the size of the tobacco product market is estimated to be around HUF 500 billion. Just before the present issue of the magazine went to press, Philip Morris introduced new products: soft pack cigarettes return to the market at a HUF 910 price. This step may entail changes in cigarette prices, depending on how competitors react to the new products. On 1 June 2014 tobacco shops located at petrol stations, in hypermarkets with a floor space above 2,500m² and in shopping malls will have to close down. So far these units represented 17 percent of tobacco product turnover and a value of HUF 6.5-7-5 billion, which is expected to spread across the remaining tobacco shops. Currently 2,500 of the latter are fighting for survival. A new, comprehensive evaluation of the new Hungarian tobacco selling system is necessary, in order to find a solution that is acceptable for each member of the value chain, from manufacturer to retailer to consumer. This has to be done as long as alternatives exist and there is a view of the future.