Flavor capsule cigarettes, e-cigarettes and China are giving a much needed boost to the global tobacco market.
According to a recent Euromonitor webinar, “The Tobacco Industry at a Crossroads: Cigarettes Growth Falters as Focus Falls on Alternatives,” a key innovation trend is flavor capsule cigarettes, which reached sales of 70 billion sticks in 2012 and Euromonitor predicts will comfortably break 100 billion in 2013.
All major international brands now have a capsule variant used across all price levels, the analysts mentioned. Philip Morris International has launched Marlboro W-Burst, the world’s first double capsule, while Esse launched the world’s first slim capsule. Euromonitor analysts said to expect flavors beyond menthol, such as kretek. However, they warned that growth is threatened by flavorings bans.
World volume growth in cigarettes has slowed to 0.2% growth, although China has been keeping the market afloat. Excluding China, this figure would have been a 1.7% decline in growth. In fact, as Western Europe dominated the top decline in cigarette usage in 2012 (the top five decliners being Spain, Brazil, Italy, Poland and France), the analysts predict that China, Indonesia and Vietnam will be the future of the world’s top 10 cigarette markets as a percentage of Compound Annual Growth Rate (CAGR) volume growth from 2012 through 2017.
Future growth for smoking tobacco in 2012-2017 is predicted to be 21%, representing growth in volume and in value. Smoking shisha, water pipe tobacco, dominates in the Middle East and Africa with expected 21% volume growth from 2007-2012. The global smokeless tobacco market fell 22% in 2012 and India gutka bans, analysts said, are poised to decimate Asian-style chewing tobacco’s share of the global smokeless tobacco market (In 2007 it had 50% of the market; analysts predict Asian-style chewing tobacco will represent 0.12% of value sales of the smokeless tobacco market in 2017).
Meanwhile, $3 billion was spent on e-cigarettes globally in 2013, with the U.S. leading the majority of sales in 2012. Nicotine Replacement Therapy (NRT) smoking cessation products, including e-cigarettes, in the U.S. are predicted to reach $51 billion in 2013. (Read more about the flavor market for e-cigarettes in P&F’s April 2013 issue). At the time of publication, these devises which use atomizers powered by batteries that vaporize a liquid solution into an aerosol mist that's inhaled, were not specifically regulated in a number of countries including the U.S. and China. They are regulated as medicines in several countries including the U.K., but bans have cropped up in Brazil, Singapore (sale and use), Denmark (nicotine), Japan (nicotine), Hong Kong (nicotine), Australia (nicotine), Switzerland (sale), Columbia, Mexico (sale), Norway (sale), Estonia (sale), Argentina, Indonesia, Malaysia and Thailand.
Still, Euromonitor says that the tobacco industry will benefit from higher prices, up trading in developing markets, cigarette alternatives and the rising smoking population in Asia Pacific.