9 September 2016
Despite enormous tobacco control efforts in the ASEAN region, the tobacco business continues to be lucrative. According to 2016 Euromonitor report, cigarette volume is projected to increase in nearly all the countries till 2020 (see Table).
Cigarette consumption will increase in Indonesia, Malaysia, Philippines and Thailand, while it will remain stable in Singapore. Vietnam is expected to see a slight decline over the next five years.
Tobacco companies’ profits confirm that their business is expanding. BAT’s cigarette volume during the first six months of 2016, was at 332 billion sticks, an increase of 3.4 percent compared to same period last year. BAT’s revenue during the six months was £6,900 million, up by 7.8 percent. BAT’s growth in Asia, in Vietnam, Indonesia and Bangladesh, contributed to its increased sales, while sales in Malaysia declined.
BAT Singapore has been the centre of BAT Group’s operations in the Asia Pacific Region, as the primary cigarette producer in the region. It is also responsible for exporting its products to over 20 countries in Asia Pacific, including Thailand, Indonesia, and the Philippines. This year BAT in Koreaannounced it will “nurture its Korean business into a key hub for the global tobacco market.”
BAT Singapore is expected to concentrate on its cheap and mid-priced brands because smokers are down-trading in Singapore. In view of the 2017 point-of-sale display ban, the company is also set to be more aggressive in launching new products in 2016 to ensure a high level of consumer awareness before the ban is implemented.
In 2015, BAT Singapore introduced Viceroy Extra in a pack of 22 cigarette sticks at the same price as the regular Viceroy (20 sticks). Although this is a form of promotion, Euromonitor referred to it as “additional value for the same money”. In view of the 2017 point-of-sale display ban, BAT is anticipated to be more aggressive in launching new products in 2016 to attract consumers before the ban is implemented.
In Vietnam, BAT is currently the No.2 tobacco business but it aims to be the leading tobacco manufacturer, in production volume and value.
In 2016, BAT announced its decision to cease cigarette manufacturing operations in Malaysia to improve profit margins as manufacturing costs in other countries such as Indonesia are 50-60% lower in comparison with those in Malaysia. Hence BAT will maintain its dominant cigarette market share in Malaysia by importing cheaper cigarettes from the region.
The tobacco industry usually whinges about how tobacco control kills its business. In reality there is no dent in its business. It is clear tobacco control needs to be stepped up in the region. Plain packaging of cigarettes and pack display bans at POS are a must.
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