“Analysis of Cigarette Market”

By: -

KARANAM LBP KRUTHIKA

SYMBIOSIS LAW SCHOOL, HYDERABAD

Electronic copy available at: https://ssrn.com/abstract=4347623

1

TABLE OF CONTENTS

INTRODUCTION 2

NEED FOR STUDY 3

SCOPE AND LIMITATIONS OF THE 3

STUDY

REVIEW OF LITERATURE 3

OBJECTIVES OF THE STUDY 5

RESEARCH METHODOLOGY 5

ANALYSIS & FINDINGS 6

SUGGESTIONS 12

BIBLIOGRAPHY 13

Electronic copy available at: https://ssrn.com/abstract=4347623

2

INTRODUCTION

The cigarette is currently regarded as a very apparent breed of smoking in many areas of the globe.
The term "cigarette" derives from this French word called "cigarette," which implies "small cigar."
The majority of currently produced cigarettes contain refined and contain remanufactured tobacco
as well as additional chemicals. Cigarette consumption statistics differ tremendously but have
varied dramatically throughout history. Despite smoking prevalence in affluent regions being
steadied or falling over a period, it keeps increasing in emerging economies. Cigarettes remain
among the largest widely used tobacco commodities throughout our globe. They're little cigars
constructed of thin paper with crumpled or crushed tobacco within. The majority of cigarettes are
made from regenerated tobacco, including reprocessed tobacco stalks. Cigarettes have been
accessible since the 9th century mostly in the shape of stems and puffing pipes. Eventually
throughout the 1800s, in Mexico, Juan Nepomuceno Adorno invented cigarette-making devices.
Cigarettes were slowly transformed in a broad range of forms, configurations, colors, tastes, and
concentrations to meet the interests of customers. Cigarette consumption is significantly rising,
especially in emerging nations like Africa and Asia. It's attributable to the higher populace as well
as legislative rules governing cigarette manufacture.

Each cigarette market is categorized as:

"Light"

"Medium"

"Others"

This market has been categorized based on the various sorts of cigarettes offered to customers,
including the likes of light, medium, and others. Light cigarettes have the biggest market share
since these remain intact and are more hygienic to smoke. This same cigarette market is divided

Electronic copy available at: https://ssrn.com/abstract=4347623

3

between supermarkets, hypermarkets and tobacco shops, retail outlets, and internet businesses,
among others based on transmission routes.

NEED FOR STUDY

The lack of understanding and a rigid mindset of society and its cigarette consumers is the ultimate
reason for the increase in cigarette consumption and its sales year by year. This research is needed
to understand and analyze the cigarette market along with its success even during its historic period
of 2017-2021 and also the coming years 2022-2027, the after covid market.

SCOPE AND LIMITATIONS OF THE STUDY

This research provides essential perspectives into global cigarette market dynamics. The
worldwide cigarette market is divided into flavored and unflavored cigarettes. It is also divided
into four formats: slender, ultra-slim, giant-sized, and standard. Moreover, allocation networks
segregate this systematic analysis, with both conventional and internet sales taken into account to
maintain the analysis in control. Thus, it examines new and existing geographic locations,
including Asia-Pacific, Europe, North America, South America, Africa, and the Middle east.

REVIEW OF LITERATURE

 (Stoklosa M. , 2016):
The author analyzed and explained the illicit cigarette market and concluded that to
discourage governments from enacting pro-health laws, the cigarette market frequently
invokes the danger of increasing illegal cigarette commerce. The cigarette industry's main
justification for opposing tobacco tax rises is illegitimate trade, which is also used to
prevent the deployment of other significant countermeasures such as cigarette labeling,
exhibit prohibitions, and pocket-size limitations.
 (Andrews, 1991):
The author through a thematic technique, this paper presents statistical data from period
data just on links involving current smokers with publicity, cost, and revenue. The report
also looks at changes in these correlations across years, while adjusting for any covariate

Electronic copy available at: https://ssrn.com/abstract=4347623

4

of design features in the papers examined. According to the findings, the median
advertisement and revenue elasticity of demand is high and substantial throughout
research, but the mean pricing permeability is notably unfavorable. Exogenous variables
vary by country and structural aspect and also have shrunk through time. The consequences
for policy making and areas for further research are highlighted.
 (HAI-YEN SUNG, 1994):
Through an iterative framework that comprises a market pricing calculation as well as a
dynamical requirement expression, the researcher assesses the influence of taxes on
cigarette use. This research is focused on the econometric techniques of Eleven western
democracies from 1967 to 1990. Cigarette use is a retail cost, with such elasticity of supply
of -0.40 within the immediate future and -0.48 within long hauls, per the findings.
An increase in taxes, similar to the ones implemented in California, in January 1989, may
reduce cigarette use by 11.2 percent in the near term and 13.4 percent there in long term.
Those findings corroborate the pragmatic habit concept as well as the premise as, being
a component of its oligopolistic conduct, cigarette businesses frequently elevate terminal
expenses over and above the extent of the taxation rise in interest rates.
 (Sumner, 1981):
Another basic approach by the author for measuring monopolistic pricing behavior is
provided. In what seems like a pricing formulation, the variable of the taxation component
specifies the cost proportion. Because no immediate cost assessment is necessary, a
significant difficulty for several other experimental analyses of monopolies is averted.
Research proof for merge time analysis reinforces the dismissal of microscopic capitalism,
but they also offer proof against the existence of a competent monopoly in the tobacco
sector. The paradigm is an alternate explanation of data from the latest report by Barzel. It
is possible to apply the technique to diverse economies.
 (TAURAS, 2006) :
The author analyzed that well inside the tobacco market during the last twenty years, 2
categories of cost rivalry had surfaced: the emergence as well as expansion
of bargains especially heavy discount cigarettes, or the growing utilization of valuation-
relevant advertisements. Throughout this research, researchers evaluate the influence of

Electronic copy available at: https://ssrn.com/abstract=4347623

5

cigarette pricing as well as offers on the share of the market across an elite, bargain, and
low-price labeled cigarettes using fortnightly real economy, spectrum analyzer statistics
spanning Fifty US regions through 1994-IV until 2002-11. As per research estimations,
variations in pricing, particularly those caused by offers, represent a large portion of the
apparent market changes in shares.

OBJECTIVES OF THE STUDY

The utmost important objective of this research work is to analyze and study the topic of “Analysis
of Cigarette Market” for a better and more precise understanding along with some knowledge. The
basic and prior objective of this research work is listed below:

1. To explain briefly to the readers of the research work regarding the in-depth meaning of
the agenda- “Analysis of Cigarette Market.”
2. To analyze the topic while understanding the present situation of the Cigarette Market and
the Market’s overview.
3. This paper also supports the objective to assess how the worldwide pandemic due to
Coronavirus affected the Cigarette Market.
4. The next objective is to analyze the factors and key market trends.
5. Another objective this paper serves is to recognize and examine the regions with the most
dominance in the Cigarette Market.
6. The following paper next serves the objective to recognize the Major Cigarette Market
manufacturers, Global sales of the Cigarette Markets by year, and the latest developments
that occurred in the Cigarette Market.

RESEARCH METHODOLOGY

So as to allow the most precise evaluation and projections feasible, the researcher adopts a rigorous
and recurrent methodological approach aimed at reducing deviation. For sectioning and analyzing
statistical features of the industry, the study incorporates elements of the underside and upper edge
methodologies. Furthermore, quantitative research, which examines the market from three separate
angles, is a common topic in all of our research studies. Them being- Initial Assessment,

Electronic copy available at: https://ssrn.com/abstract=4347623

6

Probabilistic Hypothesis, and Provisional Data Gathering. The Cigarettes market is based
on internal consumer research, central statistical agencies, multilateral agencies, business groups,
corporations, industry publications, and our researchers' expertise. The researcher assesses the
current state of the market, track patterns, and offer an unbiased prediction for the worldwide
Cigarette sector.

ANALYSIS & FINDINGS

MARKET’S GENERAL OUTLOOK:

Throughout its projected timeframe, the worldwide cigarette market stands predicted to increase
with a CAGR of 6.6 percent (2022 - 2027).

The cigarette industry is among the areas which have had significantly the largest impact because
of COVID-19 since smoking can induce lung as well as respiratory infections, that could result in
difficulties and increase the chances of such a global pandemic. The main factor influencing
market development and economic progress throughout COVID-19 was the realization of the
hazardous health impacts of smoking. There seems to be a clear indication suggesting that smoking
raises exposure to lung-related illnesses, impairs the body, as well as being a key source of chronic
medical issues that covid virus can exploit.

This research will present a critical path method for the cigarette market, which includes all critical
path operations including sourcing, production, retail, as well as dissemination. Additionally, the
research analyses the market using “Porter's 5 forces framework”, which measures the amount of
rivalry within the cigarette industry by assessing aspects also including customers and
business's ability to negotiate, risks from replacements, and recently established companies. A
comprehensive analysis of the tobacco industry's “competitive landscape” has also been presented.

However, large brands have discovered that marketing flavored cigarettes, also including cigars,
smokeless tobacco, fruit-flavored cigarettes, and similar items, is economical, giving them an
advantage across their counterparts. Nonetheless, growing urbanization, continual item evolution
in regards to container shape, organic components, as well as regulated nicotine

Electronic copy available at: https://ssrn.com/abstract=4347623

7

dosages get customer approval and conviction that smoking decreases anxiety, depression, and
stress, driving the industry internationally to increase. Moreover, numerous variables, also
including growing customer insight and consciousness of services and goods via new platforms as
well as other publications, combined only with the emergence of the internet, are trying to educate
customers regarding the perks of organic cigarette products, that is cruising consumption of
organic and chamomile/herbal cigarettes. Furthermore, firms supplying similar commodities are
boosting overall Research and innovation, branding, and revenue stream spending in order to
preserve their marketplace dominance.

KEY MARKET TRENDS:

“Adoption of Western Culture fueled the Market”:

Growing acceptance of Westernized life amongst people is boosting the prevalence of

women smokers, its robust logistics chain of cigarette producers, or the appeal of
flavored cigarettes. Flavored cigarette items have received great relevance and have been
considered very widespread, especially in recent years around the world owing to frenetic lives
combined with severe constraints, heavy workload of combining career and personal life with
inconsistent duty days in workplaces. In contrast to flavored cigarettes, these goods include
menthol smokeless tobacco, small cigars, e-cigarettes and cigarillos, big cigars, dissolvable, and
hookah. Nevertheless, by generating massive showcases as well as an obtainability of trademarks
internationally, cigarette consumption via retail stores is playing an excessively crucial part
throughout the introduction of the latest cigarette brands or trademark improvements. These
seem to be available in a multitude of tastes, including confectionary, distilled spirits, and
seasoning.

Electronic copy available at: https://ssrn.com/abstract=4347623

8

(Intelligence, 2022)

“China holds a Compelling Share in the Market”:

With approximately 0.3 billion cigarette consumers, China seems to be the worldwide leading
supplier and user of nicotine. Around 50% of Chinese males smoke cigarettes, accounting for
more than forty percent of the overall global cigarette consumption. The "China National
Tobacco Corporation (CNTC)", a national corporation (SOE) that accounts for about ninety
percent of any and all cigarettes retailed in China, dominates its Chinese tobacco industry. The
"CNTC" possesses a vast variety of manufacturers, including "Hong Shuangxi", "Yun Yan", &
"Zhongnanhai", as well as local brands and extensions. Just a strategic alliance with CNTC may
allow international corporations to produce and retail cigarettes. For instance, Marlboro, another
of the world's leading cigarette brands, began production in China in 2008, following an
agreement only with CNTC to advertise Chinese brands abroad. Furthermore, the increasing
numbers of organized retailers make tobacco goods readily available to customers. It's one of the
key causes fueling the rise of the tobacco industry across the country.

Electronic copy available at: https://ssrn.com/abstract=4347623

9

(Intelligence, 2022)

COMPETITIVE REGIONS:

Companies such as “British American Tobacco PLC”, “ITC Limited”, “Philip Morris Products
SA”, “Altria Group Inc.”, and “Japan Tobacco International SA” monopolize this marketplace.
The major businesses in the research industry have a strong network. Prominent firms are
focusing on utilizing developing and evolving market prospects to increase their range of goods
and their profile in services to meet the demands of a wide range of goods sectors, particularly e-
cigarettes. As little more than a result of this issue, prominent firms are pursuing acquisitions and
mergers as among their primary tactics for achieving amalgamation and optimizing their offers.
Companies have an advantage in expanding their items variety overview area due to their
sophisticated logistics chain and manufacturing capabilities.

Electronic copy available at: https://ssrn.com/abstract=4347623

10

MAJOR COMPANIES:

The market capitalization, often known as market cap, seems to be the aggregate amount of a
publicly-listed business's authorized assets and therefore is widely often used to determine the
firm’s value.

1. “British American Tobacco PLC”: “British American Tobacco” has a market

capitalization of “$99.39 million” in June 2022. Per the statistics, this places “British
American Tobacco” as the 125th highest significant corporation worldwide by market
capitalization.
2. “Philip Morris International”: “Philip Morris” does indeed have a capitalization of
“$161.02 billion” in June 2022. As per the statistics, that places “Philip Morris” as the
globe's 64th largest significant corporation by market capitalization.
3. “Imperial Brands”: “Imperial Brands” really does have a market capitalization of “$21.47
billion” during the period in June 2022. Owing to the statistics, it places “Imperial
Brands” as that of the 773rd highest valued corporation in the world per market
capitalization.
4. “Japan Tobacco”: “Japan Tobacco” does indeed have a market capitalization of “$31.62
billion” during the period of June 2022. Based on current statistics, which places “Japan
Tobacco” is the 522nd largest valued corporation in the world per market capitalization.
5. “Altria Group”: “Altria Group” seems to have a market capitalization of “$78.57 billion”
during the period of June 2022. Based on the statistics, which place “Altria Group” as the
160th highest lucrative business on the globe by market capitalization.
6. “ITC Ltd.”: “ITC” does indeed have a market capitalization of “$41.87 billion” during
the period of June 2022. Compared to current statistics, it thus places “ITC” as that of the
385th highest lucrative business in the business world per market capitalization.
7. “Swedish Match”: “Swedish Match” really does have a market capitalization of “$15.15
billion” in June 2022. Pursuant to the statistics, it thus places “Swedish Match” as that of
the 1045th largest powerful business in the business world by market capitalization.
(Companiesmarketcap, 2022)

Electronic copy available at: https://ssrn.com/abstract=4347623

11

GLOBAL CIGARETTE SALES BY YEAR:

 In 2022, turnover throughout the Cigarette category is expected to be US$0.81 trillion.

This industry is predicted to rise by 2.42 percent every year (CAGR 2022-2027).
 Considering worldwide contrast, China generates the largest income (US$273,000.00m in
2022).
 In 2022, median capita profits of US$141.30 are earned in proportion to overall
population statistics.

Electronic copy available at: https://ssrn.com/abstract=4347623

12

 Consumption throughout the Cigarettes category is predicted to reach 5,177,972.4 million

units by 2027. By 2023, the overall Cigarette category is predicted to expand by 0.5
percent in sales.
 Around 2022, worldwide collate capita individuals throughout the Cigarettes category is
predicted to be 915.6 units.

LATEST PROGRESS:

Throughout 2021, “ITC Ltd.”, India's leading tobacco corporation, will have completed the
latter's cigarette business. Supported by such an advantageous taxation system, a renewed fixate
on incremental advancements, industrial design, as well as its vast allocation surpass, the
constantly rising enterprise is thriving with such an elevated global expansion.

“Eastern Company” unveiled a novel commodity mostly in Egyptian trade during 2020: a “10-
cigarette case of Cleopatra Package”. “EGP10” seems to be the cost of such a package. The
purpose of launching this item has been to improve its sales revenue and maintain a major share
in the market at an affordable price.

In 2019, “Philip Morris” developed a novel cigarette quality brand "Philip Morris Bold" for
Indonesia. The “Philip Morris Bold” cigarette seems to be a “kretek cigarette”, which is elevated,
“high-nicotine clove cigarette” prevalent throughout Indonesia. The above unique scented
cigarette was introduced to suit consumer needs and to broaden the company's product selection
process.

SUGGESTIONS

1. The Cigarette industry and the companies should diversify their products and reduce the
nicotine content while becoming socially responsible. Just to increase their sales the
companies cannot manufacture highly addictive cigarettes. These highly addictive
cigarettes harm the consumers in a very apparent and excessive way.
2. These industries should be ethical and not target teenagers and children in their
advertisements and banners to market their products.

Electronic copy available at: https://ssrn.com/abstract=4347623

13

3. Many Cigarette companies do not advertise their products in a proper and beneficial way.
They should target the age range of consumers and attract their interest in the product
without mentioning any false health benefits. They should target channels that are not
watched by minors.
4. They should start advertising about their products being available even on the internet retail
apps such as the likes of “Swiggy Instamart”, “Blinkit”, “Amazon” and etc.
5. The companies should maintain their loyal consumers’ demands and needs. They should
first take into consideration what the public and smokers want in their cigarettes.
6. Statutes, as well as different lengths of Voluntary Codes and Self-Regulation efforts, have
already been proposed at various times. All were somewhat effective, but neither have
completely stemmed from the spread of this practice. The practice of the companies
following the law, relying upon and obeying is the best suggestion.
7. A legally obeying and socially responsible company that is truthful to its consumers’ works
and dominates the market the most.

BIBLIOGRAPHY

1. Andrews, R. L., & Franke, G. R. (1991). The Determinants of Cigarette Consumption: A

Meta-Analysis. Journal of Public Policy & Marketing, 10(1), 81–100.
2. Daniel A. Sumner (1981). Measurement of Monopoly Behavior: An Application to the
Cigarette Industry. Journal of Political Economy, 89(5), 1010-1019.
3. (Companiesmarketcap, 2022).
https://companiesmarketcap.com/
4. Hai-Yen Sung, The-Wei Hu, Theodore E. Keeler (1994). Cigarette Taxation and Demand:
An Empirical Model, Contemporary and Economic Policy, 12(3), 91-100.
5. (Intelligence, 2022).
https://www.mordorintelligence.com/industry-reports/cigarette-market
6. Stoklosa, M. (2016). Is the illicit cigarette market really growing? The tobacco industry’s
misleading math trick. Tobacco Control, 25(3), 360–361.

Electronic copy available at: https://ssrn.com/abstract=4347623

14

7. TAURAS, J. A., PECK, R. M., & CHALOUPKA, F. J. (2006). The Role of Retail Prices
and Promotions in Determining Cigarette Brand Market Shares. Review of Industrial
Organization, 28(3), 253–284.

Electronic copy available at: https://ssrn.com/abstract=4347623