This presentation outlines key findings from Euromonitor's newly updated 2015 Tobacco Industry research including global prospects, cigarette alternatives, pricing data, packaging and legislation.

1. TOBACCO 2015: NEW INSIGHTS
JUNE 2015

2. KEY FINDINGS
SYSTEM REFRESHER
MIP

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The Tobacco Categories’ Performance at a Glance
KEY FINDINGS
Cigarettes
• 5.7 trillion sticks sold: 90% of most markets
• Legislation and Tax impacting volume sales
• Price becoming main purchasing decision
Roll-your-own
• Growth in EE (vols grew 4%) but slowdown in
WE - weakening of price advantage
Cigars & Cigarillos
• Dominated by US and WE (US + DE = >60%)
• Shrinking vols in mature markets
• Growth from developing markets (CN, IN, GCC)
-0.0%
-0.4%
2013-14:
Pipe tobacco
• Growth in EE (vols grew 4%) but slowdown in
WE - weakening of price advantage
Smokeless Tobacco
• Dominated by US, SE and IN (bans in latter
cause of shrinking volumes)
• Northern European and US snus grows
• No reduced harm credentials allowed
Latest trends:
-14.5%
-3.8%
-0.1%

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Cigarettes’ Troubled Future as Alternatives Advance
KEY FINDINGS
1 in 2
smokers
by 2019 will be in China

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Vapour Devices – Latest Trends
KEY FINDINGS
VAPING POPULATION
13mnregular sole or dual users of vapour
devices in 2014
VAPOUR DEVICES
>6bnUS$6.5bn of vapour device sales
globally in 2014

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Vapour Devices - How does it Compare to Other Categories?
KEY FINDINGS
US$ 6.2 billion US$ 2.4 billion
E-cigarettes NRTLarge cigars
US$ 5.1 billion
• World’s 20th largest cigarette market equivalent

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Cigarettes’ Unit Price on Ever-Upward Trajectory
PRICE AND INNOVATION
-2
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
%growth2013
US$
Price per pack of 20 in US$
Average Cigarette Pack Prices – Regional Comparisons 2014

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Pack innovation Product innovation
• Innovative closures
• Tactile finishes, including raised
surfaces such as embossing and
bevelled edges
• Pack size variations (eg XL pack sizes)
• Flavour capsules (double menthol)
• Recessed filters
• Superslims/ demislims/ microslims
(superslims with capsule)
• Additive-free tobacco
• Less Smoke Smell
• Length (100s)
• Cigarette format variations (eg Pocket
Packs, more compact sizes)
The Role of Innovation in Re-Engaging Consumers
PRICE AND INNOVATION

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Top Five Global Cigarettes Players
PRICE AND INNOVATION
World cigarettes company
share 2014 (% volume)
44.2%
14.6%
11%
8.2%
3.8%
Company’s leading brand
2014 (world ranking)
(2)
(1)
(12)
(5)
(58)
Note: Arrow indicates direction of growth/decline in share between 2013-2014

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Heralding a ‘New Generation’ in Legislation
LEGISLATION
Core
• Advertising and
sponsorship bans
• Descriptor bans
• Tax-driven excise
increases
Standard
• Public smoking bans
• POS display bans
• Graphic health warnings
Next generation
• Plain packaging
• Flavour bans
• Variant limits
• Turbo taxation
• Birth year ban



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The Future of Legislation
LEGISLATION
EU TPD
2014
65% graphic health warnings
Ban on menthol cigarettes (2020)
No ban on slim cigarettes
Ban on packs of 10 sticks
New “positive” ingredients list
Ban on misleading labelling (eg “organic”)
E-cigarettes regulated as tobacco
Plain
packaging by
stealth?
EuropeanUnion ROW Plain packaging (Australia)
Flavour bans (US, Brasil)
Variant limits (Uruguay)
Turbo taxation
Birth year smoking ban
(Tasmania)
Australia

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Other FMCG Industries Next?
LEGISLATION
• Taxation (alcohol, ‘soda tax’, ‘butter tax’)
• Saturated fat content limits
• Portion size
• Acrylamide……………………….etc

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The Irresistible Allure of Illicit Trade
TAXATION, PRICING AND ILLICIT TRADE
• £1 million
Largest seizure in EU – 120mn
sticks of cigarettes
£40 million
• The global illicit trade market is referred
to as the ‘third tobacco market’, ie the
third biggest ‘player’ in the world,
making more money than BAT and
chomping at the heels of PMI.
• An international brand bought fully tax
paid in Ukraine, and sold on the street in
the UK at half its UK retail price can still
generate the following profit:
WORLD ILLICIT TRADE
1in10Cigarettes are illicit (incl China) in 2013

14. THANK YOU FOR YOUR ATTENTION
Zora Milenkovic
Head of Industry Research
Shane MacGuill
Senior Analyst – Tobacco