‘Cig­a­rette Sales to Fall 3% a Year Till 2021’

The Economic Times - - Companies & Economy - Wri­tankar.Mukher­jee @times­group.com

Kolkata: Cig­a­rette sales in In­dia will con­tinue to be un­der pres­sure with gov­ern­ment’s tough anti-smok­ing ini­tia­tives and a thriv­ing grey mar­ket, says a re­port by Euromon­i­tor In­ter­na­tional.

The re­search agency es­ti­mates sales vol­ume de­clined by 4% last year and is poised to fall 3% ev­ery year un­til 2021, bring­ing the mar­ket down to about 72.6 bil­lion sticks per an­num by then from 84.9 bil­lion sticks in 2016.

Euromon­i­tor projects that sales will con­tinue to be un­der the purview of the gov­ern­ment through 2021.

The de­cline last year was mainly due to fur­ther en­force­ment of reg­u­la­tions across states where it was pre­vi­ously not strictly man­aged, in­crease in tax­a­tion, and im­ple­men­ta­tion of strin­gent graphic health warn­ings cov­er­ing 85% of the packet against 40% of front of the pack ear­lier. “In or­der to curb smok­ing and limit the harm­ful ef­fects of this habit, the gov­ern­ment is set to con­tinue in­tro­duc­ing stricter reg­u­la­tions dur­ing the fore­cast pe­riod such as mak­ing more use of graphic health warn­ings, rais­ing lev­els of tax­a­tion and ban­ning pub­lic smok­ing and sales of sin­gle cig­a­rettes,” the re­port said. “These moves by the gov­ern­ment are set to con­tinue to dis­cour­age new con­sumers from tak­ing up the smok­ing habit.”

Tax ac­counts for over 75% of the price for cig­a­rettes in the econ­omy seg­ment, while it is 50% in case of pre­mium cig­a­rette brands and 43% for mid-priced cig­a­rettes. Euromon­i­tor said con­sol­i­da­tion into two main price cat­e­gories is ex­pected as con­sumers from the mid-priced seg­ment move to ei­ther econ­omy or pre­mium cig­a­rettes. Econ­omy and mid-priced cig­a­rettes ac­counted for the largest pro­por­tion of sales in In­dia in 2016 with a com­bined vol­ume share of 59%.

“It is es­ti­mated that one-third of In­dia’s mid­dle-in­come con­sumers would be pre­pared to switch to pre­mium brands or stay in the mid-priced seg­ment, while the re­main­der would be more likely to trade down to econ­omy brands,” the re­port said.

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