Tobacco market in China: Slight growth under strict restrictions
China’s tobacco industry adopts a system of unified leadership, vertical management, and monopolized operation.The State Tobacco Monopoly Administration and China National Tobacco Corporation are responsible for centralized management of “staff, finance, properties, products, supply, distribution, domestic and foreign trade” of the country’s tobacco industry. Only the licensed retailers are allowed to sell tobacco products, and can’t sell online. Smoking ban extended from public officials to mass consumers nationally and people are generally aware of dangers of smoking. Even in an adverse environment, tobacco market in china still witnessed a slight growth. Moreover, high-end tobacco surprisingly has a fast increase. Meanwhile, STMA themselves also encourage tobacco companies to expand in global market using big brands strategy.
Sales of tobacco still increase
Despite tobacco control efforts by the Chinese government, Tobacco industry analysts project a continued growth of the Chinese market both for the volume and the value of cigarettes sold. However, the Chinese tobacco market has been registered for low growth in sales volume, but healthy growth in sales value.China is the world’s biggest market for cigarettes, with 300 million smokers, nearly three times as many as those in the next biggest smoking nation, such as India. Rigid demands for tobacco from a huge population of smokers keep the sales of cigarettes at a stable rising rate. In 2014, the tobacco market’s revenues have reached $125 billion, up from $47 billion in 2005. As a traditional gift in business lunch or marriage, Chinese people tend to offer cigarettes to their friends or clients as a sign of hospitality, which has greatly improved the sales of tobacco and created a smoking-tolerant environment, giving a sad chance for minors to smoke.
A general uptrend in female smoking population also leads to the increase of tobacco sales. In 2014, female smokers reached 14 million, up by around 2% compare to 2013 resulting from the influence of Western lifestyles along with growing work and life pressures. Some women also view smoking as a sign of independence and equality because of increasing awareness of women’s rights, which increases the number of female smokers at a fast rate.
A series of actions took by government influence the sales of tobacco to some extent. Increasing unit price because of adjustment of tax announced by the government in early 2015 attributes to the growth of sales value as well. Thus, the unit price of cigarette averagely increases by CNY 1-2.Structural optimization conducted by STMA accompanied by its encourage of promoting other tobacco products like cigars and vapor devices drive efficiently the industry.
High-end tobacco market grows fast
In contrast with the low growth of cigarettes, the market of high-end tobacco like cigar grows rapidly with a domestic production of 0.17 billion cigars with 93% of increasements in 2014. One reason is that the STMA suggested further improving cigar marketing to boost the development of domestic cigar brands in June 2013, which simulates the domestic cigar production. The other reason is that consumers with rising disposable income are seeking for a high-quality life of which cigar is a high-end symbol. Holding a cigar seems to be relaxed and cool, which attracts more and more rich men even for the young generation. There are actually 600,000 high-end cigar smokers in China and this number is still increasing. As for these high-end consumers, cigars are not only a kind of tobacco but an enjoyable element in life.
Big brands strategy to make both domestic and international expansion
Since 2000, the tobacco industry is promoting “Big Brand” strategy by shrinking the number of brands and eliminating small size and local brands in order to activate the domestic and international expansion with the help of premium products. Therefore, from 2001 to 2014, the number of brands has decreased from 1183 to 117 key brands. This strategy enables big brands to gather more resources in order, to accelerate its development and improve its competitive power. Supported by the government, domestic cigarette brands with abundant resources are seeking for growth, especially in a foreign market. Many tobacco manufacturers have invested heavily in product research to launch premium products which can help for the exportation of the Chinese local products.
Quit-smoking products have great potential
Tobacco control has become the trend of the world and China has also stepped into it. Having the biggest population of smokers in the world, China has a great potential market for giving up on smoking products. Only three foreign brands with an overwhelming advantage occupy the Chinese market. They are Champix from Pfizer, Nicorette from Johnson & Johnson and Nipai from Novartis. These three products have gained wide popularity because of their good effects and reputation. In contrast, domestic quit-smoking medicines rarely attract the consumers due to its lack of technology and curative effect. With a rising attention to healthier life, more and more Chinese smokers tend to quit smoking, which will definitely boost the demands ending smoking products. Thus, this market with only several current competitor’s has a huge potential.
To know more about the industry or China market, contact us!
See also:
#China smokes more than 1/3 of the world’s cigarettes. https://t.co/Uh6x9Ly88p @WHO #smoking pic.twitter.com/j0SFs6QQi2
— Daxue Consulting (@DaxueConsulting) October 27, 2015
