TOBACCO IN VIETNAM

Euromonitor International
June 2021
TOBACCO IN VIETNAM Passport 1

TOBACCO IN VIETNAM - INDUSTRY

OVERVIEW
EXECUTIVE SUMMARY

COVID-19 impact on tobacco

Vietnam was able to contain COVID-19 much better than many other markets, with the
government taking swift and decisive action to control its spread, including closing the country’s
borders to inbound arrivals. While these measures were effective in limiting case numbers and
deaths from COVID-19 they took a heavy toll on the economy, with unemployment rocketing to
its highest level in a decade in the months following the outbreak. With wages also being
reduced as businesses looked to navigate their way through the crisis this put a strain on
disposable income, especially for lower income households. As such, many consumers were
forced to prioritise their spending which led to a drop in demand for economy cigarettes as many
low-income smokers either reduced their consumption or quit altogether. Value growth was
sustained thanks to the fact that demand for mid-price and premium cigarettes was largely
unaffected, with mid- and high-income consumers generally less affected by the COVID-19
crisis. Sales of smoking tobacco were also negatively impacted by the impact of COVID-19 on
the economy, with sales of these products largely limited to low-income men in rural and
suburban areas.
Cigars are still a relatively new concept in Vietnam, with sales largely limited to special
occasions, high-level business meetings, as well as sales to foreign tourists. Due to Vietnam’s
COVID-19 self-isolation measures these consumption occasions were limited during the year
and as such sales saw significantly slower growth in 2020 compared to 2019. Distribution was
also a challenge with tobacco specialists and hotels/bars/restaurants seeing their opening
disrupted by the government’s efforts to contain the spread of COVID-19.

COVID-19 country impact

Vietnam was one of the first Asian countries to successfully contain the spread of COVID-19,
resulting in very few cases in the early stages of the pandemic. The country suspended all
flights from mainland China on 1 February 2020, followed by all international flights from 25
March. Social isolation guidelines were introduced from 1-22 April. During this period, grocery
retailers remained open, whilst many other stores were shut. In addition, social distancing of two
metres was strictly imposed in all grocery retailers. Restaurants were not allowed to offer dine-in
services. Social isolation guidelines in Hanoi and Ho Chi Minh City were subsequently lifted,
although restaurants still had to comply with strict guidelines from local authorities. Schools and
businesses reopened from 4 May, but non-essential services such as bars and karaoke parlours
remained closed. The authorities in Ho Chi Minh City also permitted sports centres and indoor
sports activities, including allowing gyms to reopen. In addition, the limit on public gatherings
was increased to 30 people, from a previous limit of 20.
However, restrictions had to be re-imposed in some high-risk areas later in the year. For
instance, at the end of July Da Nang saw a resurgence of COVID-19 cases, leading to a 15-day
quarantine of the city and the evacuation of 80,000 people. A few days later, the neighbouring
city of Hoi An was also quarantined. All activities, including the opening of bars and clubs,
resumed in Da Nang on 25 September after it was believed to have controlled the outbreak of

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COVID-19. Elsewhere, Hanoi City authorities temporarily closed some bars and karaoke outlets
for failing to comply with anti-COVID-19 measures such as wearing face masks.
More recently, on 9 February 2021, Ho Chi Minh City authorities announced the closure of all
non-essential businesses and entertainment activities such as bars, beauty salons, gyms,
karaoke parlours, night clubs, massage parlours, and cinemas until further notice in response to
the city recording more than 25 cases in a single day. In addition, religious gatherings were
limited to 20 people and non-essential travel was discouraged. Petrol stations, retail stores,
pharmacies and medical facilities remained open, but with strict preventive measures.
Restrictions on international travel remain in place until further notice, with anyone entering the
country having to quarantine. Wearing a mask is still compulsory in all public settings, including
for all passengers on public transport, with those not complying subject to fines. The
government’s strict COVID-19 measures limited cases to 3,000 and deaths to 35 as of April
2021, making it one of the countries to see the least impact from the virus. The government’s
COVID-19 vaccination programme also started to be rolled out in the first quarter of 2021,
although this is progressing slowly.

Company response
Vietnam National Tobacco Corp (Vinataba) continued to dominate cigarettes in retail volume
terms in 2020, thanks to the support of the Vietnamese government. Government legislation
requires international competing companies to collaborate with Vinataba for the production and
distribution of their products in the country. The company also has a nationwide distribution
network, which it is continuously expanding by targeting street vendors and tobacco specialists
in suburban and rural areas. It is also active in terms of new product development, with a focus
on the mid-priced and premium segments, rather than its traditional focus on the economy
segment. Nevertheless, the company lost share in 2020, with a key section of its consumer
base remaining Vietnam’s low-income population, who were hardest hit by the impact of
COVID-19. In contrast, multinationals British American Tobacco Plc and Japan Tobacco Inc
picked up share thanks to their focus on mid-price and premium cigarettes.
For most players, the response to COVID-19 was to focus on ensuring supplies were
maintained to meet demand. Nevertheless, Vietnam National Tobacco Corp (Vinataba) also
looked to support the government and the Vietnamese population through the crisis by donating
cash, medical protective equipment and mobile disinfection chambers to Bach Mai Hospital.

Retailing shift
Vietnam’s lockdown was relatively short and therefore the distribution landscape was not
significantly disrupted by the outbreak of COVID-19. Street vendors remained the dominant
distribution channel being present on most street corners and thus offering the greatest
convenience. Street vendors even picked up share during 2020, with some consumers
preferring to avoid entering busy indoor shopping areas due to fears over catching COVID-19.
Hotels/restaurants/bars was the one channel to see significant disruption with this being partially
due to the lockdown, but also due to social distancing measures and the lack of tourism.
According to Circular 47/2014/TT-BCT, e-commerce for tobacco products is prohibited in
Vietnam. Nevertheless, this remains the main distribution channel for e-vapour products and
heated tobacco, although these products are not technically legal in Vietnam.

What next for tobacco?

Tobacco is expected to bounce back in 2021 as Vietnam moves towards a period of
normalisation and an economic recovery. As unemployment falls and consumer confidence
starts to return this should benefit sales of economy cigarettes, which remain the largest

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contributor to overall retail volume sales of tobacco in Vietnam. In the longer term value growth
should benefit from an ongoing premiumisation trend with mid-price and premium brands
perceived to offer the greatest potential moving forward. Buoyed by the growing investment and
interest of Vietnam National Tobacco Corp (Vinataba), cigars is also expected to continue
recording healthy growth over the forecast period, with the return of tourism likely to provide a
short-term boost to sales. As awareness of these products among locals grows so too should
demand, although sales are still likely to be limited to Vietnam’s wealthier consumers and
tourists.
Despite the relatively positive outlook for tobacco, its longer term future remains uncertain.
The main threat to growth is the projected ongoing decline in smoking prevalence and in the
overall smoking population. COVID-19 has only served to further highlight the dangers of
smoking, with smokers deemed to be at higher risk than non-smokers. The government had
already been pushing an anti-smoking agenda prior to COVID-19 and as such more smokers
are likely to quit over the forecast period. Illicit trade cigarettes also remain a threat due to their
lower prices, although the growth in illicit trade will largely depend on the government’s
willingness to invest in tightening the country’s borders and whether it decides to impose any
further tax increases. The future of e-vapour products and heated tobacco remains in the
balance with the Ministry of Health having proposed a ban on these products in 2019 and
having stated in 2020 that a ban would be introduced in 2021. Even if these products are not
banned they are unlikely to gain mass appeal unless Vinataba chooses to officially distribute
them, with e-vapour products generally being far more expensive than cigarettes.

OPERATING ENVIRONMENT

Legislation

Legislative overview
Vietnam has a traditionally strong legislative framework with regard to the marketing and
consumption of tobacco products. Tobacco is completely under the control of the government.
Prices, taxes and distribution have long been regulated. Advertising of tobacco is also banned,
and packaging must carry prominent health warnings.

Summary 1 Legislation Summary at a Glance

A B C D E F G H I

FCTC Minimu Tar cap Verbal Graphic Advertis Retail Public Restaur
ratificati m (max pack pack ing ban point-of- smokin ant/bar
on smokin mg) health health or sale g ban public
(year) g age warning warning restricti restricti smokin
(years) on ons g ban

Yes (2005) 18 Yes Yes Yes Yes No Yes

(16mg)

Source: Euromonitor International

Notes: (B) changed from 16 in 2007; (F) media allowed if not targeted at juveniles; (H) municipal buildings only

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Smoking prevalence
In 2020, adult smoking prevalence in Vietnam stood at 22%; equivalent to 15.7 million people.
Female smoking prevalence was just 1%, but male smoking prevalence was 45%. According to
the World Health Organisation, Vietnam is one of the 15 countries with the highest smoking
prevalence in the world. Smoking prevalence continued to fall slightly in 2020, with COVID-19
helping to increase awareness of the harmful impact of smoking.
Although there is a legislative framework for tobacco control in Vietnam, it does not have any
significant impact on smoking prevalence due to weak enforcement. Indeed, although a public
smoking ban has been in effect since 1 January 2010, people continue to smoke tobacco in
public places such as schools, kindergartens, health clinics and cinemas. Some flout the law as
they feel immune to the rarely levied fines, while others are completely unaware of the smoking
ban.
Traditionally, smoking was well accepted amongst men in Vietnamese society, with smoking
considered a social activity enjoyed between colleagues and business partners. Smoking is also
still believed to be a demonstration of maturity and masculinity by many teenage boys.
However, social acceptance of smoking began to decline over the review period due to
increasing health-consciousness and greater awareness of the harmful effects of tobacco
products on human health.
Thanks to increasing warnings in the media and government educational campaigns, the
number of female smokers continued to fall in 2020. In addition, whilst smoking amongst men is
generally accepted in Vietnamese society, this is not the case for women. Women who smoke
are looked upon very negatively and tend to be poorly educated low-income earners living in
more remote rural areas.

Health warnings
Decree No 117/2020/ND-CP was issued on 28 September 2020 and became effective from
15 November 2020.
1. A fine of between VND20 million and VND30 million shall be imposed for any one of the
following acts:
a) Printing health warnings incorrectly in accordance with the model, location, area and colour
as prescribed by law;
b) Failure to change every two years the health warnings on tobacco packages as prescribed
by law;
c) The quantity of cigarettes is not specified for a pack of cigarettes in the form of cigarettes or
the weight of other types of cigarettes;
d) Using words or phrases to make consumers think that tobacco is less harmful, or
misleading about the harm tobacco and tobacco smoke has on to human health.
2. A fine of between VND30 million and VND40 million shall be imposed for any one of the
following acts:
a) Failure to print health warnings on tobacco packages as prescribed by law for cigarettes
manufactured or imported for consumption in Vietnam;
b) Signing contracts to produce tobacco with foreign brands for domestic consumption without
permission of a competent authority.

Plain packaging
Vietnam does not require tobacco manufacturers to utilise plain packaging and it has no plans
to do so at the time of writing.

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Point-of-sale display bans

Point-of-sale displays are allowed for tobacco products in Vietnam. However, Circular
19/2005/TT-BVHTT outlines some restrictions regarding point-of-sale displays. All information
regarding the promotion of tobacco products must be printed on an area which is smaller than
0.5 sqm. The law prohibits retailers from displaying more than one pack (10s, 12s, and 20s) or
one carton (10 packs/carton) of the same brand, or more than one poster at the point of sale,
with those caught flouting the rules liable to a fine of between VND1-2 million. However, due to
weak enforcement of the law, some point-of-sale displays exceed the dimensions stipulated in
the regulations, whilst others contravene regulations by displaying more than one pack or one
carton per brand. Towards the end of the review period, some key retailers tried to make points
of sale more noticeable, with bigger and more colourful displays.
As point-of-sale displays of tobacco products remain permitted in Vietnam, and any breaches
of the restrictions relating to tobacco advertising through points-of-sale are routinely overlooked
by the authorities, this part of the government’s anti-tobacco legislation has little or no impact on
tobacco sales in the country.

Smoking in public places

Public places where smoking is completely prohibited include health facilities, childcare
facilities and entertainment areas designated for children, areas with a high risk of fire and
explosion, public transport and educational facilities except universities, colleges and academic
institutes. Other areas where smoking is banned in all indoor areas include workplaces,
universities and colleges and academic institutes. In some places, such as airports, bars,
karaoke lounges, restaurants, trains and ships, people can only smoke in separate designated
areas.
Decree No 117/2020/ND-CP was issued on 28 September 2020 and took effect from 15
November 2020. The new regulation has increased the fine for smoking in public places to
between VND200,000 to VND500,000, compared to the previous fine of between VND100,000
to VND300,000. However, the majority of Vietnamese people think the fine for smoking in public
places still remains too low, while the enforcement of the ban on public smoking is still weak due
to a lack of human resources.

Flavoured tobacco product ban

Vietnam has not introduced and has no plans to introduce a ban on flavourings in tobacco
products. Flavoured products such as menthol cigarettes account for only a small share of
volume sales. The main reason for this is that a high number of Vietnamese smokers believe
that menthol cigarettes cause impotence and affect health more adversely than standard
cigarettes. Moreover, menthol cigarettes are considered to be weaker.

Vapour products
There are currently no regulations relating to e-vapour products in Vietnam. Imported e-
vapour products are required to go through the same import processes as traditional cigarettes.
However, the majority of the products available in Vietnam are illegally imported.

MARKET DATA
Table 1 Sales of Tobacco: Value 2018-2020

VND billion

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2018 2019 2020

Tobacco 79,903.1 86,290.1 92,555.1

Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 2 NBO Company Shares of Cigarettes: % Volume 2016-2020

% retail volume
Company 2016 2017 2018 2019 2020

Vietnam National 59.9 59.4 61.0 58.4 56.9

Tobacco Corp (Vinataba)
British American 26.4 26.1 24.9 27.7 29.3
Tobacco Plc
Dong Nai Tobacco Co 7.2 7.2 7.3 7.5 7.3
Philip Morris 3.3 3.2 3.0 3.0 3.0
International Inc
Japan Tobacco Inc 1.5 1.5 1.5 1.8 1.9
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

Table 3 Forecast Sales of Tobacco: Value 2023-2025

VND billion
2023 2024 2025

Tobacco 103,762.1 107,187.3 110,517.9

Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

GLOBAL MACROECONOMIC ENVIRONMENT

▪ The COVID-19 pandemic has forced governments to quarantine entire countries, disrupted
global supply chains, slashed business and consumer confidence and affected financial
markets. The effects on the global economy are already being felt, and will be substantial, but
the exact magnitude will depend on the length of COVID-19 restrictions.
▪ COVID-19 will severely impact both the supply and demand sides of the economy. At the
same time, monetary policy tools are almost exhausted due to the slow recovery from the
Global Financial Crisis. Interest rates have not recovered, so central banks have to resort to
Quantitative Easing programmes (QEs), but QEs have limited effect on labour markets,
consumer spending and other aspects of the real economy.
▪ Thus, countries have to turn to fiscal stimulus. However, the response to fiscal stimulus will be
limited too as long as people are quarantined in their homes. In the meantime, governments
are helping businesses and citizens by providing emergency loans to cover expenses and
lower the spillover effects through economies, but uncertainty surrounding the pandemic limits
economic activity.

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GLOBAL INDUSTRY ENVIRONMENT

▪ Over the last decade, the global tobacco industry has been in a state of putative, unrealised
transformation as the previous dominance of a single nicotine delivery mechanism, the
cigarette, has begun to wane and a range of alternatives have become increasingly viable to
the adult consumer. International tobacco companies have invested more resources in
developing cigarette alternatives, just as they have found it increasingly difficult in some
developed markets to expand revenue in the face of declining cigarette volumes,
commoditised by regulation, taxation and health awareness.
▪ In the short term, the fallout from COVID-19 has suspended some of these trends. With
notable exceptions, global consumers maintained access to cigarettes throughout 2020, and
a combination of stockpiling, increased private time and anxiety has resulted in persistence in
demand for the category. Conversely, many global smokers may have found alternatives
relatively more difficult to access and paused plans to migrate in a wider context of
uncertainty.
▪ Over the mid to longer term however, the crisis will accelerate the underlying existential
challenges facing the industry as consumer reassess the nature and extent of their tobacco
and nicotine use in the context of evolving (physical and mental) health priorities and
constrained disposable income. Governments will increase taxation on tobacco to pay for the
crisis and may leverage it to further extend controls on tobacco.
▪ Affordability is set to become an even more acute issue, as this taxation-driven stretch on
pricing coalesces with the financial fallout of the COVID-19 pandemic, creating down and out
trading in key global markets.

DISCLAIMER
Forecast and scenario closing date: 24 May 2021
Report closing date: 28 May 2021
Analysis and data in this report give full consideration to the impact of COVID-19 on
consumer behaviour and market performance in 2020 and beyond. However, the situation
continues to develop rapidly, and the influence and severity of the pandemic are constantly
evolving. For the very latest insight on COVID-19 and its impact on industries and consumers, at
both global and national level, readers can access strategic analysis and updates on
www.euromonitor.com and via the Passport system, where new content is being added on a
systematic basis.

TOBACCO IN VIETNAM - COMPANY PROFILES

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British American Tobacco Plc in Cigarettes (Vietnam)

Chart 1 Profile British American Tobacco Plc in Cigarettes (Vietnam)

Source: Euromonitor International

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Dong Nai Tobacco Co in Cigarettes (Vietnam)

Chart 2 Profile Dong Nai Tobacco Co in Cigarettes (Vietnam)

Source: Euromonitor International

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Japan Tobacco Inc in Cigarettes (Vietnam)

Chart 3 Profile Japan Tobacco Inc in Cigarettes (Vietnam)

Source: Euromonitor International

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Philip Morris International Inc in Cigarettes (Vietnam)

Chart 4 Profile Philip Morris International Inc in Cigarettes (Vietnam)

Source: Euromonitor International

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Vietnam National Tobacco Corp (Vinataba) in Cigarettes (Vietnam)

Chart 5 Profile Vietnam National Tobacco Corp (Vinataba) in Cigarettes (Vietnam)

Source: Euromonitor International

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CIGARETTES IN VIETNAM - CATEGORY ANALYSIS

KEY DATA FINDINGS

▪ COVID-19 creates economic pressures which forces some lower income consumers to cut
back on cigarettes in 2020
▪ Sales decline by 1% in retail volume terms to reach 80.8 billion sticks in 2020, but increase by
8% in current value terms to reach VND90,953.6 billion
▪ Vietnam National Tobacco Corp (Vinataba) retains its dominance with a retail volume share of
57% in 2020
▪ Over the forecast period, cigarettes is projected to post a 1% retail volume CAGR with growth
supported by an ongoing rise in the male smoking population

2020 IMPACT

COVID-19 puts A heavy strain on the local economy forcing some consumers to cutback or quit
smoking
Following the outbreak of COVID-19 in Vietnam the government moved swiftly to try and
contain it and stop it from spreading. While these measures were commended by some global
health authorities, they nonetheless took their toll on the Vietnamese economy with
unemployment seen to reach its highest point in a decade, with hundreds of thousands of
people losing their jobs. Meanwhile, many of those consumers who kept their jobs saw a drop in
their wages, with women, unskilled, migrant, and informal workers being among the most
vulnerable to the crisis. Many low-income consumers were already facing budgetary constraints
even before COVID-19 but following the outbreak of the virus this pushed many smokers within
this group to either cutback on cigarettes or quit altogether, with these consumers having to
focus on first-need priorities such as food and medicines.
Economy cigarettes were the hardest hit, with these being the primary choice of lower-income
consumers. As such, Vietnam National Tobacco Corp (Vinataba) suffered the most significant
decline of the leading players in cigarettes in 2020 due to the fact many of its key consumers
are from a low-income background. Aside from the economic impact on sales, cigarettes also
suffered from restrictions on distribution brought about by the government’s social isolation
measures. These measures saw some channels such as hotels/restaurants/bars have their
opening restricted, with this being reflected in a sharp drop in cigarettes sales through these
channels in 2020. Added to this, the closure of the country’s borders effectively suspended
inbound tourism, with this not only putting a dent in Vietnam’s economy but it also took away
tourist sales of cigarettes.

Cigarettes continues to see premiumisation in spite of COVID-19

While economy cigarettes struggled due to the economic impact of COVID-19, mid-price and
premium band cigarettes continued to growth, with the latter in particular building on the strong
showing seen during the review period. This was largely due to the fact that mid- and high-
income consumers were not as severely impacted by COVID-19 and so they continued to
choose their favourite cigarette brands. Thanks to rising incomes and a higher standard of living
there was a shift towards premium brands of cigarettes in major cities such as Ho Chi Minh and
Hanoi towards the end of the review period.

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While some consumers were looking to quit, due to the additional health concerns created by
COVID-19, others took the opportunity to trade up, with premium brands seeing healthy volume
growth in 2020. With many leading international brands performing well in Vietnam at the end of
the review period, Japan Tobacco Inc expanded its portfolio in the country with the launch of its
Camel brand in 2019. The brand continued to see dynamic growth in 2020 thanks to its high
quality and appealing packaging, despite it still carrying the required graphic health warnings. As
a result of the stronger performances of premium brands from British American Tobacco Plc and
Japan Tobacco Inc they were able to take further share from leading player Vietnam National
Tobacco Corp (Vinataba).

Vinataba retains its dominance despite losing further share to its multinational rivals
The Vietnamese government largely controls the country’s tobacco industry through its
ownership and management of Vietnam National Tobacco Corp (Vinataba). Vinataba continued
to dominate cigarettes in retail volume terms in 2020. With a wide variety of brands available at
different price points, the company offers cigarettes for all consumer groups. Moreover, it
benefits from a strong distribution network, as well as a stable supply of tobacco thanks to
owning tobacco fields in the country. Furthermore, multinational companies such as British
American Tobacco are required to work with Vinataba as part of a joint venture to produce and
distribute cigarettes in Vietnam.
Despite retaining its dominance in 2020, Vinataba nonetheless saw a decline in its retail
volume share. This was partly due to the aforementioned impact from COVID-19 on lower
income consumers – which are a core part of the company’s consumer base – but also due to
the strong competition from imported premium brands, including the newly introduced Camel.
Japan Tobacco Inc has worked closely with its sales team with it offering attractive sales
commissions to push sales of Camel cigarettes through street vendors in urban areas. Despite a
disappointing year in terms of sales, Vietnam National Tobacco Corp (Vinataba) looked to build
some goodwill for the company with it donating cash, medical protective equipment and mobile
disinfection chambers to Bach Mai Hospital to aid in the prevention and fight of COVID-19 in
Vietnam.

RECOVERY AND OPPORTUNITIES

Cigarettes set to return to growth alongside economic recovery

Cigarettes is projected to return to growth in retail volume terms from 2021 as COVID-19
restrictions are eased and the economy starts on its path to recovery. Low-income consumers
should once again be able to afford to purchase cigarettes, which would be significant, while it
would also provide a boost to Vietnam National Tobacco Corp (Vinataba), for which these
consumers represent a key source of sales. Economy and mid-price cigarettes will likely be the
key beneficiaries of any upturn in the local economy, while premium band cigarettes will
continue on a steady growth path. The return of tourism will also be significant with it not only
being a key contributor to GDP, but tourists are also an important source of revenue for
cigarettes manufacturers.
Over the forecast period, the premiumisation trend is also projected to continue in big cities
like Ho Chi Minh and Hanoi, supported by a post-COVID-19 economic recovery. A higher quality
standard of living has allowed consumers to trade up to more sophisticated premium cigarettes,
with premium brands mostly from British American Tobacco such as 555’ and Japan Tobacco
Inc’s Camel expected to continue enjoying strong growth over the forecast period.

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Illicit trade cigarettes likely to remain A problem due to A lack of resources to tackle the problem
in Vietnam
Despite the largely positive outlook for cigarettes, illicit cigarettes are still forecast to continue
putting strong pressure on cigarettes players, including both domestic and international brands.
Illicit cigarettes will likely continue to see growth due to a lack of financial and human resources
available to the Vietnamese government to tackle the problem. The closure of the country’s
borders did slow the growth of illicit trade in 2020, but as the borders reopen so too will illicit
trade likely return. Illicit trade in cigarettes occurs daily at borders such as those in the Tay Ninh
and Dong Thap provinces. Consumers can purchase illicit cigarettes at street vendors in both
urban and suburban areas and these can be bought at much cheaper prices, with the packaging
often coming without graphic health warnings.

Rising health awareness expected to limit growth in cigarettes

Cigarettes also faces the dual challenge of declining smoking prevalence and the potential
rise of alternative products which are perceived to be less harmful, such as heated tobacco.
With the leading tobacco companies looking to diversify their offering into these new product
areas it is unlikely that cigarettes will see significant growth over the forecast period, although a
large and loyal consumer base should ensure sales do continue to grow. In terms of the longer-
term impact of COVID-19, this is likely to result in more consumers looking to quit, with articles
and advice appearing that has highlighted the added risk to smokers.
Consumers are slowly becoming more concerned about the health effects of cigarettes
smoking thanks to the Vietnamese government’s efforts to increase public health awareness.
According to the Ministry of Health, smoking prevalence among both males and females in
Vietnam showed a declining trend during the review period. The government’s Tobacco Harm
Prevention Fund (Qu? phòng ch?ng tác h?i thu?c lá) has been used to support various activities
and public campaigns to increase public awareness about the negative health effects of
smoking cigarettes, as well as being used to tighten legislation and regulation. As such, more
and more people want to quit smoking to protect themselves and their family, with this being
reflected in a projected downward trend in smoking prevalence over the forecast period.

TAXATION AND PRICING

Taxation rates

Summary 2 Taxation and Duty Levies 2015-2020

Unit 2015 2016 2017 2018 2019 2020

Ad % msp 65.0 70.0 70.0 70.0 75.0 75.0

valorem
excise

VAT/sale % rsp 9.1 9.1 9.1 9.1 9.1 9.1

s taxes

Specific VND per 0.0 0.0 0.0 0.0 0.0 0.0

taxes 1,000

Import % 135.0 135.0 135.0 135.0 135.0 135.0

duties

Source: Law on Special Consumption Tax (No 27/2008/QH12), Law on Value-added Tax (No 13/2008/QH12),
Law 70/2014/QH13

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Average cigarette pack price breakdown

Manufacturers normally raise their prices in line with inflation and tax increases, rather than at
regular intervals.

Summary 3 Average Cigarette Pack Price Breakdown: Brand Examples

P = ‘price’
in
Vietnames
e dong

Premium Mid-priced Economy

555 White Bastos

Horse

(Pack of (Pack of (Pack of

20) 20) 20)

P % P % P %

Wholesale 13,868.57 46.23 10,170.29 46.23 5547.43 6.23

Retailer 3,000.00 10.00 2,200.00 10.00 1,200.00 10.00

TOTAL 9,067.50 30.23 6,649.50 30.23 3,627.00 30.23

Retained

Specific 0.00 0.00 0.00 0.00 0.00 0.00

Excise

Ad 10,401.43 34.67 7,627.71 34.67 4,160.57 34.67

valorem
Excise

VAT 2,730.00 9.10 2,002.00 9.10 1,092.00 9.10

TOTAL 13,131.43 43.77 9,629.71 43.77 5,252.57 43.77

Tax

End Price 30,000.00 100.00 22,000.00 100.00 12,000.00 100.00

Source: Calculated from storecheck data and Taxation and Duty Levies Table.
Notes: Figures may not sum up to 100% due to rounding

CIGARS, CIGARILLOS AND SMOKING TOBACCO IN VIETNAM -

CATEGORY ANALYSIS

KEY DATA FINDINGS

▪ COVID-19 creates economic uncertainty which impacts sales of cigars and cigarillos in 2020

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▪ Sales decline by 3% in current value terms to reach VND1,601.5 billion in 2020, while in retail
volume terms cigars and cigarillos sees retail volume growth of 9% to reach one million units,
and smoking tobacco declines by 5% to reach 3,700 tonnes
▪ Cigars is the most dynamic category in 2020 with retail volume growth of 9%
▪ Vietnam National Tobacco Corp (Vinataba) retains a monopoly in the sales of cigars in
Vietnam in 2020
▪ Over the forecast period, cigars and cigarillos is projected to post a 9% retail volume CAGR,
while smoking tobacco is set to increase at a 1% retail volume CAGR, with growth being
supported by an economic recovery

2020 IMPACT

Cigars sees growth slow as COVID-19 disrupts life in Vietnam

The Vietnamese government was perceived to have done a good job of containing COVID-
19, but the measures taken to control its spread nonetheless had negative consequences for
many products, including cigars and smoking tobacco. Cigars and cigarillos remains a relatively
niche area in Vietnam, with only cigars having a significant presence. Due to the high price of
cigars and limited awareness of these products demand is largely reserved for high-income
earners, for example businessmen and executives, which account for only a small share of the
total population, as well as tourists.
With inbound tourism suspended for much of 2020 due to COVID-19 this negatively impacted
sales. Distribution was also disrupted with non-essential retail and foodservice outlets asked to
close during the lockdown. With sales limited to hotels/restaurants/bars and a small number of
tobacco specialists in larger cities such as Ho Chi Minh and Hanoi this put the brakes on retail
volume growth, which prior to COVID-19 had been accelerating at an extraordinary rate.
Furthermore, cigars are typically seen as an indulgent product which is to be enjoyed at special
occasions or during important business meetings, but with social isolation measures being put in
place this limited the number of consumption occasions in 2020.

Lack of strong competition and weak distribution A feature of cigars, cigarillos and smoking
tobacco
In term of cigars and cigarillos, only Vietnam National Tobacco Corp (Vinataba) has a license
from the Vietnamese government to sell cigars and cigarillos brand, with no change in this
situation in 2020. The company offers a wide range of cigars and cigarillos under its Hanos,
Vinaboss, and Lotus brands in Vietnam. In addition, it is the only player that is allowed by the
Vietnamese government to import cigars and cigarillos to sell in the domestic market. However,
due to a lack of enforcement and loose regulation, Vietnamese consumers are still able to buy
illicit cigars and cigarillos at street vendors. In terms of smoking tobacco, the competitive
landscape remains highly fragmented with a wide variety of unbranded products available. In
terms of distribution, tobacco specialists account for most sales of cigars, cigarillos and smoking
tobacco, although hotels/restaurants/bars still accounts for a small share despite seeing heavy
losses in 2020 due to the government’s lockdown measures.
The majority of cigars in Vietnam are large cigars. The presence of other sizes of cigars
(standard cigars and small cigars) remained negligible in 2020. As cigars are still quite new and
exclusive products, most affluent consumers prefer large cigars as they are perceived to be a
clear status symbol while also often being considered to be better value for money than other
sizes.

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Economic pressures force low-income consumers to reassess their habit

Sales of smoking tobacco are limited to a niche consumer group in rural and suburban areas,
especially people in northern parts of Vietnam. This niche consumer group mainly includes
those in the older generation on low incomes, who are used to the strong flavour of smoking
tobacco and who feel cigarettes are too mild for them. Smoking tobacco is a niche despite being
cheaper than cigarettes, as most consumers prefer cigarettes due to the convenience they offer
in terms of ease of consumption, and because cigarette sticks and packs are less bulky than
smoking tobacco. However, interest in smoking tobacco was starting to increase amongst
younger adults of legal smoking age prior to COVID-19, with consumers appreciating its
affordability and the fact it can be used in different ways. Nevertheless, smoking tobacco sales
suffered in 2020 with there being challenges maintaining access during the lockdown with strict
controls over movement and store openings. Furthermore, the economic challenges presented
by COVID-19 also hit poorer communities harder, with these being key consumers of smoking
tobacco in Vietnam. With incomes restricted some consumers were forced to cut down their use
of smoking tobacco or quit altogether.

RECOVERY AND OPPORTUNITIES

Cigars set to continue developing thanks to investment from Vinataba

As Vietnam starts to ease restrictions this should benefit sales of cigars with the ability to
share these products with friends and work associates being a key part of the enjoyment.
Additionally, due to the high price of these products, growth is also likely to be linked to
Vietnam’s economic performance. Once incomes start to recover this should help drive sales of
cigars.
Although being unlikely to establish mass market appeal, cigars is nonetheless expected to
benefit from the growing interest being shown in these products by Vietnam National Tobacco
Corp (Vinataba). The government-controlled company is expected to look to work with
international cigars and cigarillos manufacturers to develop the category and to bring more
variety to consumers in Vietnam. Another significant factor will be the reopening of Vietnam to
inbound tourism, with foreign visitors being another important source of sales for cigars and
cigarillos.

Little interest in cigarillos

Cigarillos is expected to retain a negligible presence over the forecast period due to a lack of
consumer interest and demand for these products. Affluent consumers still prefer cigars rather
than cigarillos, while most other consumers prefer cigarettes. However, Vietnam National
Tobacco Corp (Vinataba) is expected to develop its own brand of cigarillos to provide more
choice to consumers in Vietnam.

Small but loyal consumer base expected to sustain growth in smoking tobacco
As the economy starts to recover from the impact of COVID-19 this should help sales of
smoking tobacco return to stability. Smoking tobacco remains somewhat of a niche area and
there is little sign this will change significantly over the forecast period. It does however have a
loyal consumer base in the north of the country and as such sales are expected to remain
steady. There were signs towards the end of the review period of some younger consumers
showing an interest in smoking tobacco and this could help to expand the consumer base,
especially if the price of cigarettes continues to rise, as is expected. If cigarettes become too
expensive then some lower-income consumers may turn to smoking tobacco as a more
affordable alternative.

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SMOKELESS TOBACCO, E-VAPOUR PRODUCTS AND HEATED

TOBACCO IN VIETNAM - CATEGORY ANALYSIS

KEY DATA FINDINGS

▪ COVID-19 has a limited impact on the category in 2020

▪ Legal sales of smokeless tobacco, e-vapour products and heated tobacco remain negligible in
Vietnam
▪ Sales of all categories remain negligible in 2020
▪ Vietnam National Tobacco Corp (Vinataba) is the sole authorised distributor of all tobacco
products in Vietnam, but it does not yet distribute these products
▪ The future of heated tobacco is dependent on government legislation and whether Vietnam
National Tobacco Corp (Vinataba) chooses to distribute these products

2020 IMPACT

Regulation on e-vapour products and heated tobacco yet to be signed into law
E-vapour products and heated tobacco still lacked necessary and clear legalisation and
instruction from the Vietnamese government in 2020, despite setting out proposals for a ban on
these products. As e-cigarettes are still quite new products in the country, the Vietnamese
government has still not signed off on legislation governing these products. At the time of writing
this report, illegally imported e-cigarettes are still treated as illicit normal products and thus face
a lower fine than illicit trade cigarettes, for example. In addition, legal enforcement also face a
problem in punishing smoking e-cigarettes in public places since e-cigarettes are not yet
classified like cigarettes due to the lack of clear regulation.

The sale of e-vapour products and heated tobacco remains A grey area with Vinataba not yet
distributing these products
Vietnam National Tobacco Corp (Vinataba) is the government-appointed sole distributor for all
tobacco products in the country. However, the company currently does not import and distribute
e-vapour products and heated tobacco products. As a result, although these products are
available in Vietnam, they are not distributed through Vinataba and as such are not technically
legal. The supply of these products generally comes through tobacco specialists and local e-
commerce operators which import these products directly from outside of Vietnam from
countries such as China, the US, Malaysia and Japan. Some retailers focus on mass products
from China and Malaysia with affordable prices, seeking to cater to price-conscious consumers
who are reluctant to spend more on e-vapour products than cigarettes. On the other hand, other
companies and retailers focus on premium e-vapour products imported from the US and Japan
in order to satisfy demand from more affluent consumers. Popular brands include Joyetech,
Eleaf and KangerTech. In terms of heated tobacco, iQos is the main brand in tobacco heating
devices, whilst HEETS is the main brand in heated tobacco sticks.

Smokeless tobacco continues to attract little interest

Sales of smokeless tobacco remained negligible in Vietnam in 2020, with local consumers
generally being unaware of such products. Chewing tobacco with betel is the only product with a

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presence but it is available only in tobacco specialists in large cities such as Ho Chi Minh and
Hanoi. There was no noticeable activity seen in smokeless tobacco in 2020, with Vietnamese
consumers generally remain loyal to cigarettes and seeing no need for any alternatives. The
high price of smokeless tobacco is also another factor which is preventing further development
within the category.

RECOVERY AND OPPORTUNITIES

Vietnam’s Ministry of Health expected to introduce A ban on e-cigarettes and shisha in 2021
In 2019 Vietnam’s Ministry of Health proposed a ban on e-cigarettes and shisha, while at a
meeting in March 2020 an official from the Health Ministry’s legal department confirmed that
Vietnam will introduce a ban on the sale, production and import of e-vapour products and
heated tobacco. Due to the negative effects of e-cigarettes and shisha, particularly on young
people, and concerns over their effect on social order and security, the Ministry of Health is
working with the Ministry of Industry and Trade to propose that the government and the National
Assembly ban the use and import of e-cigarettes and shisha into Vietnam with this ban expected
to come into force in 2021.
According to studies both within Vietnam and across the world, e-cigarettes and shisha are
believed to have the same harmful effects on people’s health as cigarettes and other traditional
tobacco products. E-cigarettes are believed to be harmful due to their combination of flavour
additives and nicotine. Tests have shown that use of e-cigarettes that contain nicotine could
lead to cancer, including lung cancer, heart disease and respiratory-related diseases.

Young consumers expected to embrace e-vapour products and heated tobacco

Over the forecast period, both e-vapour products and heated tobacco are projected to gain
popularity among young smokers in Vietnam with these products perceived to have a less
harmful image. While these products are likely to be officially banned as from 2021, the illicit
trade in these products will depend on how strictly the government enforces the ban and also
how large the fines are. One factor that could help curb the sale and usage of these products is
their inclusion in the government’s public smoking ban regulation, as this would all allow law
enforcement to fine those who breach the regulation.

Smokeless tobacco set to remain A niche

There is no indication to suggest that interest will grow in smokeless tobacco, with cigarettes
expected to remain the most affordable and popular way of consuming tobacco. With a lack of
potential producers of smokeless tobacco are unlikely to make any significant investment in the
market and as such the already niche consumer base will likely continue to shrink.

TOBACCO FREE ORAL NICOTINE IN VIETNAM - CATEGORY

ANALYSIS

2020 IMPACT

▪ Vietnam National Tobacco Corp (Vinataba) is the only company authorised by the
Vietnamese government in the management of all tobacco products in the country. As of the
time of writing this report Vinataba did not retail or produce tobacco free oral nicotine and as

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such it had a negligible presence in Vietnam. In addition, tobacco free oral nicotine is a
completely new product to Vietnamese consumers. The majority of Vietnamese consumers
have little knowledge of tobacco free oral nicotine and instead prefer to smoke cigarettes
which are largely affordable and widely available. In term of personal imports, Vietnam did not
see any noticeable sales of tobacco free oral nicotine in 2020.
▪ Over the forecast period, tobacco free oral nicotine is expected to maintain a negligible
presence despite rising consumer demand for more sophisticated products. The majority of
Vietnamese consumers will instead continue to smoke cigarettes. Vinataba is unlikely to focus
on tobacco free oral nicotine due to a lack of consumer interest and demand. Therefore,
Vinataba is not expected to import tobacco free oral nicotine products into Vietnam, with the
sale of these products likely to be restricted to personal imports.

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