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Cigarettes in China

Euromonitor International

July 2019

C I G A R E T T E S I N C H I N A P a s s p o r t i

LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Prospects ..................................................................................................................................... 1

Cigarettes Posts Positive Growth in Both Volume and Value Sales ......................................... 1 Introduction of New Products Becomes Increasingly Important Amid Intense Competition ...... 1 Creativity Is Seen in Domestic Flavoured Capsule Cigarettes .................................................. 1

Competitive Landscape ................................................................................................................ 2

Domestic Cigarette Manufacturers Continue To Dominate ....................................................... 2 Yuxi Hongta Tobacco Group Co Ltd Retains Its Leading Place in Retail Volume Terms ......... 2 China Tobacco Guangxi Industry Corp Sees the Biggest Increase in Volume Share ............... 2

Taxation and Pricing ..................................................................................................................... 3

Taxation Rates.......................................................................................................................... 3

Summary 1 Taxation and Duty Levies 2013-2018 ........................................................... 3

Average Cigarette Pack Price Breakdown ................................................................................ 3

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples ....................... 4

Category Data .............................................................................................................................. 4

Table 1 Sales of Cigarettes: Volume 2013-2018 ....................................................... 4 Table 2 Sales of Cigarettes by Category: Value 2013-2018 ..................................... 5 Table 3 Sales of Cigarettes: % Volume Growth 2013-2018 ...................................... 5 Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018 ..................... 5 Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018 .................................... 5 Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-

2018 ............................................................................................................. 6 Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume

2013-2018 .................................................................................................... 6 Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018 ............................. 6 Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018 ........................... 6 Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018 ....................... 6 Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018 .............................. 7 Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018 ............... 9 Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018.............................. 10 Table 14 Forecast Sales of Cigarettes: Volume 2018-2023 ...................................... 10 Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023 ..................... 10 Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023 ..................... 10 Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-

2023 ........................................................................................................... 11 Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023 ................... 11 Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: %

Volume 2018-2023 ..................................................................................... 11 Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: %

Volume 2018-2023 ..................................................................................... 11 Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023 ............ 12 Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023 .......... 12

C I G A R E T T E S I N C H I N A P a s s p o r t 1

CIGARETTES IN CHINA

HEADLINES ▪ Cigarettes retail volume sales grow by 1% to reach 2.4 trillion sticks in 2018; retail current

value sales grow by 5% to reach CNY1.5 trillion

▪ Growth was mainly driven by new styles of products, including short, capsule, slim and super

slim products, benefiting from the diversification of consumer demand

▪ Domestic brands continue to dominate cigarettes with an overall retail volume share of more

than 99% in 2018

▪ Cigarettes is predicted to record a negative retail volume CAGR of 1% over the forecast

period to fall to 2.3 trillion sticks in 2023

PROSPECTS

Cigarettes Posts Positive Growth in Both Volume and Value Sales

Even facing challenges in the shape of the residual effect of rises in taxation, stricter

enforcement of smoking control in public areas and increasing health awareness of citizens,

cigarettes recorded an overall positive performance with modest retail volume growth and

slightly faster current value growth in 2018. With disposable income per capita surging in current

value terms, the increasing purchasing power has been cancelling out the negative effect of the

rising taxation. Moreover, even though regional restrictions have been implemented in several

major cities, the lack of national smoking ban regulations still means tobacco control progress in

China is a slow and inefficient process. Over the forecast period, the gradually declining

smoking prevalence will be offset by the growing population, resulting in relatively flat cigarettes

sales in China.

Introduction of New Products Becomes Increasingly Important Amid Intense Competition

Facing increasingly intense competition and saturated demand for cigarettes, many

manufacturers have continuously made efforts to launch new products. The new products are

mainly concentrated in non-standard categories, including slim, super slim, short and flavoured

capsule products. This is mainly driven by the diversified and individualised demand. Instead of

only considering the quality, price and brand, consumers now also look at factors such as

packaging, culture and innovation when making a purchasing decision. According to trade and

research sources, new styles of products accounted for the majority of new product

development in 2017 and 2018 and posted double-digit growth in volume sales in 2018.

Creativity Is Seen in Domestic Flavoured Capsule Cigarettes

Although only accounting for a very small share of total retail volume, flavoured capsules

became increasingly popular over the review period, recording triple-digit growth in 2018. The

success of flavour capsules is contributed to by the variety of capsule flavours, which are

constantly piquing consumer interest. Apart from normal flavours, such as fruit and menthol,

domestic manufacturers have been very creative in adopting flavours that have never been

applied in cigarettes before. Some products included ingredients with strong Chinese

characteristics to provide a more elaborate or even an upgraded flavour. For example, China

C I G A R E T T E S I N C H I N A P a s s p o r t 2

Tobacco Guizhou Industry Corp launched Guiyan Guojiuxiang, which has Maotai flavoured

capsules under its subbrand Guiyan. Maotai is a traditional and classic Chinese speciality liquor

from Guizhou province. Some products that included Chinese medicine or herbal ingredients

have gained traction among middle-aged smokers who were concerned about their health but

were struggling to give up smoking. For example, China Tobacco Sichuan Industry Corp

launched Kuanzhai Good Luck under its premium subbrand Kuanzhai. The new products used

fritillary and loquat leaf mixture, which is largely used in OTC syrup for the treatment of a cough

or throat discomfort. The product is popular among consumers who believe it can reduce the

damage to the throat caused by smoking. This is another new product joining the “healthy

concept” capsule flavour products that have been continuously rolled out since 2015, including

flavours such as ginseng, tangerine peel, Chinese yam, vitamin E, and royal jelly.

COMPETITIVE LANDSCAPE

Domestic Cigarette Manufacturers Continue To Dominate

Retail volume sales of cigarettes are completely dominated by domestic manufacturers, due

to the monopoly held by The State Tobacco Monopoly Administration (STMA), which is the sole

regulator of the tobacco industry. The STMA exercises unified, centralised leadership and

vertical management over the tobacco industry in China, covering responsibilities including

monitoring the implementation of tobacco-related regulations and standards and setting targets

with regard to production and retailing. To protect local brands, STMA completely controls the

import and export of cigarettes, with the development of international brands therefore having

been restrained in regulated channels.

Yuxi Hongta Tobacco Group Co Ltd Retains Its Leading Place in Retail Volume Terms

Yuxi Hongta Tobacco Group Co Ltd continued to lead cigarettes in China in 2018. This is

mainly due to the company’s wide cigarettes portfolio, with its two flagship brands Hongtashan

and Yuxi, which cover the economy, standard and premium segments, enabling the company to

cater to a large consumer base across different income levels. Moreover, the success of Yuxi

Hongta Tobacco is also attributed to its geographic location in Yunnan Province, where the

sunshine, fertile soil and suitable temperatures all provide excellent advantages for tobacco

plantations.

China Tobacco Guangxi Industry Corp Sees the Biggest Increase in Volume Share

China Tobacco Guangxi Industry Corp recorded the biggest increase in volume share thanks

to the good performance of its premium brand Zhenlong. China Tobacco Guangxi owns two

brands, Zhenlong and Jiatianxia. The Zhenlong brand has won the honorary title of “Guangxi's

60 Most Influential Brands for the 60th Anniversary of the Founding of the People's Republic of

China” and has been identified as the industry's key support brand by STMA. The company has

also actively explored the advantages of existing brands and local culture to “perfect product

styles, enrich brand connotation and gain brand awareness”. For example, the company chose

to show a portrait of “Third Sister Liu”, a well-known local singer, and the brocade pattern of

Minority Zhuang on the box of Zhenlong Beauty Vanilla, which was launched in 2018.

C I G A R E T T E S I N C H I N A P a s s p o r t 3

TAXATION AND PRICING

Taxation Rates

The last major change to cigarette taxation in China came in May 2015, when the Ministry of

Finance and State Administration of Taxation announced an adjustment to Cigarette

Consumption Tax. The tax on wholesale tobacco was raised from 5% to 11%, along with an

extra charge of CNY0.005 per stick, leading to increases in unit prices in wholesale and retail.

The regulation was implemented on 10 May 2015. The announcement of the new taxation policy

was expected to increase government revenue at the same time as reducing smoking

prevalence. The increase in tax was expected to be reflected in the retail prices of cigarettes,

which would impact the purchasing behaviour of those consumers who are more price sensitive,

such as younger adults of legal smoking age, and lower-income consumers.

Summary 1 Taxation and Duty Levies 2013-2018

Taxatio

n Type

Product

Units 2013 2014 2015 2016 2017 2018

Specific

tax

Cigarett

RMB

per

1,000

3.0 3.0 3.0 3.0 3.0 3.0

Specific

tax

Cigarett

RMB

per

1,000

0.0 0.0 5.0 5.0 5.0 5.0

VAT/sal

es tax

Cigarett

% rsp 14.5 14.5 14.5 14.5 14.5 14.5

valorem

excise

Cigarett

% msp 5.0 5.0 11.0 11.0 11.0 11.0

valorem

excise*

Cigarett

% rsp 36.0 36.0 36.0 36.0 36.0 36.0

valorem

excise**

Cigarett

% rsp 56.0 56.0 56.0 56.0 56.0 56.0

valorem

excise

Cigars % rsp 36.0 36.0 36.0 36.0 36.0 36.0

VAT/sal

es tax

Cigars % rsp 14.5 14.5 14.5 14.5 14.5 14.5

Source: Euromonitor International from national statistics Note: *Prices below CNY70 per 200-stick carton; **Prices above CNY70 per 200-stick carton

Average Cigarette Pack Price Breakdown

In 2018, taxes accounted for a 68% share of the retail price of Shanghai Tobacco Corp’s

premium brand Chunghwa, while tax comprised a 54% share of the retail price of economy

C I G A R E T T E S I N C H I N A P a s s p o r t 4

brand Hongtashan by Yuxi Hongta Tobacco Group. This is because of different ad valorem

excise for manufacturers. Ad valorem excise for manufacturers is 36% of the manufacturer’s

selling price if this price is lower than CNY70 for one carton (200 sticks) or 56% of the

manufacturer’s selling price if the price is higher than CNY70 for one carton. The higher tax

rates for higher-priced products will marginally increase the prices of premium brands such as

Chunghwa, sales of which are less likely to be negatively impacted due to the less price-

sensitive nature of the brand’s consumers.

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples

P = price in

CNY

Premium Mid Priced Economy

Chunghwa

Hard

Shuangxi

Century

Hongtasha

n Hard

(Pack of

20)

(Pack of

20)

(Pack of

20)

P % P % P %

Wholesale 14.65 32.56 7.82 34.01 2.54 33.86

Retailer 5.69 12.65 2.43 10.56 0.69 9.18

TOTAL

Retained

20.35 45.21 10.25 44.57 3.23 43.04

Specific

excise

0.06 0.13 0.06 0.26 0.06 0.80

valorem

excise

16.16 35.90 8.26 35.90 2.69 35.90

VAT 6.54 14.53 3.34 14.53 1.09 14.53

Wholesale

ad valorem

1.80 4.00 0.99 4.30 0.30 4.40

Wholesale

specific

excise

0.10 0.22 0.10 0.43 0.10 1.33

TOTAL

Tax

24.65 54.79 12.75 55.43 4.27 56.96

End Price 45.00 100.00 23.00 100.00 7.50 100.00

Source: Euromonitor International from store check data and Taxation and Duty Levies Table Notes: Figures may not sum to 100% due to rounding

CATEGORY DATA

Table 1 Sales of Cigarettes: Volume 2013-2018

C I G A R E T T E S I N C H I N A P a s s p o r t 5

bn sticks 2013 2014 2015 2016 2017 2018 Cigarettes 2,490.5 2,549.5 2,489.5 2,350.5 2,343.9 2,368.8

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

Table 2 Sales of Cigarettes by Category: Value 2013-2018

CNY bn 2013 2014 2015 2016 2017 2018 Cigarettes Including 1,269.4 1,359.0 1,422.3 1,370.6 1,419.8 1,497.1 Fine Cut Stick Equivalent Fine Cut Cigarettes - - - - - - Cigarettes 1,269.4 1,359.0 1,422.3 1,370.6 1,419.8 1,497.1

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

Table 3 Sales of Cigarettes: % Volume Growth 2013-2018

% volume growth 2017/18 2013-18 CAGR 2013/18 Total Cigarettes 1.1 -1.0 -4.9

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

Table 4 Sales of Cigarettes by Category: % Value Growth 2013-2018

% current value growth 2017/18 2013-18 CAGR 2013/18 Total Cigarettes Including Fine Cut Stick 5.4 3.4 17.9 Equivalent Fine Cut Cigarettes - - - Cigarettes 5.4 3.4 17.9

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

Table 5 Sales of Cigarettes by Blend: % Volume 2013-2018

% retail volume 2013 2014 2015 2016 2017 2018 American Blend 2.3 2.3 2.3 2.3 2.3 2.3 Virginia 97.6 97.6 97.6 97.5 97.5 97.5 Other Blend 0.1 0.1 0.2 0.2 0.2 0.2 Total 100.0 100.0 100.0 100.0 100.0 100.0

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

C I G A R E T T E S I N C H I N A P a s s p o r t 6

Table 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-2018

% retail volume 2013 2014 2015 2016 2017 2018 Standard (non-capsule/ 99.9 99.8 99.8 99.6 99.2 98.3 non-menthol) Flavour Capsule (all 0.0 0.1 0.1 0.3 0.7 1.6 flavours) Menthol (non-capsule) 0.1 0.1 0.1 0.1 0.1 0.1 Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume 2013-2018

% retail volume 2013 2014 2015 2016 2017 2018 Regular 99.5 99.1 98.2 96.6 94.3 91.8 Slim 0.3 0.3 0.4 0.5 0.7 0.9 Superslim 0.3 0.6 1.4 2.9 5.0 7.3 Microslim - - - - - - Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 8 Sales of Cigarettes by Pack Size: % Volume 2013-2018

% retail volume 2013 2014 2015 2016 2017 2018 < 20 0.0 0.0 0.0 0.0 0.0 0.0 20s 100.0 100.0 100.0 100.0 100.0 100.0 20 + 0.0 0.0 0.0 - 0.0 - Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 9 Sales of Cigarettes by Price Band: % Volume 2013-2018

% retail volume 2013 2014 2015 2016 2017 2018 Economy price band 31.6 29.2 26.6 25.6 23.5 21.4 Mid price band 53.5 53.8 54.8 56.0 57.2 59.1 Premium price band 14.9 17.0 18.7 18.5 19.3 19.5 Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018

C I G A R E T T E S I N C H I N A P a s s p o r t 7

% retail volume Company 2014 2015 2016 2017 2018 Yuxi Hongta Tobacco 10.9 10.8 10.6 10.1 10.0 Group Co Ltd Hongyun Honghe Group 10.4 10.3 10.1 9.7 9.9 China Tobacco Hunan 9.7 9.9 9.8 9.6 9.3 Industry Corp China Tobacco Zhejiang 5.1 5.8 6.4 6.8 6.7 Industry Corp China Tobacco Guangdong 6.1 6.5 6.6 6.5 6.4 Industry Corp China Tobacco Henan 7.1 6.8 6.6 6.6 6.3 Industry Corp China Tobacco Hubei 6.0 5.5 5.5 5.9 5.9 Industry Corp China Tobacco Jiangsu 4.4 4.9 5.3 5.7 5.7 Industry Shanghai Tobacco Group 5.2 5.3 5.3 5.3 5.3 China Tobacco Shandong 5.4 5.3 5.1 5.0 4.8 Industry Corp China Tobacco Guizhou 4.3 4.5 4.5 4.6 4.6 Industry Corp China Tobacco Anhui 5.2 4.4 4.0 4.1 4.1 Industry Corp China Tobacco Fujian 3.4 3.3 3.3 3.3 3.3 Industry Corp China Tobacco Sichuan - 3.4 2.8 2.7 2.8 Industry Corp China Tobacco Shaanxi 2.0 2.0 2.2 2.3 2.3 Industrial Co Ltd China Tobacco Hebei 1.7 1.6 1.7 1.9 2.0 Industry Corp China Tobacco Jiangxi 1.6 1.6 1.6 1.8 1.9 Industry Corp China Tobacco Guangxi 1.3 1.4 1.5 1.5 1.8 Industry Corp Gansu Tobacco 1.6 1.6 1.7 1.7 1.7 Industrial Co Ltd Jilin Tobacco 1.4 1.3 1.4 1.5 1.7 Industrial Co Ltd China Tobacco Chongqing - 1.0 1.3 1.5 1.5 Industry Corp Philip Morris 0.1 0.1 0.1 0.1 0.1 International Inc China Tobacco Chuanyu 4.4 - - - - Industry Corp Others 2.7 2.6 2.6 1.9 1.9 Total 100.0 100.0 100.0 100.0 100.0

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

Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018

% retail volume Brand (GBO) Company (NBO) 2015 2016 2017 2018 Yunyan (China Hongyun Honghe Group 7.4 7.4 7.3 7.6

C I G A R E T T E S I N C H I N A P a s s p o r t 8

National Tobacco Corp (CNTC)) Shuangxi (China China Tobacco Guangdong 6.2 6.3 6.2 6.2 National Tobacco Industry Corp Corp (CNTC)) Liqun (China China Tobacco Zhejiang 5.1 5.7 6.1 6.1 National Tobacco Industry Corp Corp (CNTC)) Hongtashan (China Yuxi Hongta Tobacco 5.6 5.5 5.4 5.4 National Tobacco Group Co Ltd Corp (CNTC)) BaiSha (China China Tobacco Hunan 5.3 5.2 5.1 4.9 National Tobacco Industry Corp Corp (CNTC)) Nanjing (China China Tobacco Jiangsu 3.5 4.0 4.4 4.5 National Tobacco Industry Corp (CNTC)) Yellow Crane Tower China Tobacco Hubei 3.6 3.6 4.0 4.1 (China National Industry Corp Tobacco Corp (CNTC)) Golden Leaf (China China Tobacco Henan 3.5 3.5 3.9 4.0 National Tobacco Industry Corp Corp (CNTC)) Furongwang (China China Tobacco Hunan 3.8 3.9 4.0 3.9 National Tobacco Industry Corp Corp (CNTC)) Huangshan (China China Tobacco Anhui 4.0 3.6 3.8 3.9 National Tobacco Industry Corp Corp (CNTC)) Taishan (China China Tobacco Shandong 2.6 2.7 3.0 3.1 National Tobacco Industry Corp Corp (CNTC)) Septwolves (China China Tobacco Fujian 3.0 2.9 3.0 3.0 National Tobacco Industry Corp Corp (CNTC)) Yuxi (China Yuxi Hongta Tobacco 2.7 2.5 2.6 2.7 National Tobacco Group Co Ltd Corp (CNTC)) Huangguoshu (China China Tobacco Guizhou 2.4 2.5 2.6 2.4 National Tobacco Industry Corp Corp (CNTC)) Chunghwa (China Shanghai Tobacco Group 2.3 2.4 2.4 2.4 National Tobacco Corp (CNTC)) Honghe (China Hongyun Honghe Group 2.2 2.2 2.1 2.2 National Tobacco Corp (CNTC)) Guiyan (China China Tobacco Guizhou 1.5 1.5 1.7 2.0 National Tobacco Industry Corp Corp (CNTC)) Diamond (China China Tobacco Hebei 1.6 1.7 1.9 2.0 National Tobacco Industry Corp Corp (CNTC)) Hongqiqu (China China Tobacco Henan 2.7 2.6 2.2 1.9 National Tobacco Industry Corp Corp (CNTC)) Red Dragon (China China Tobacco Hubei 1.9 1.9 1.8 1.7 National Tobacco Industry Corp Corp (CNTC)) Lanzhou (China Gansu Tobacco 1.6 1.7 1.7 1.7 National Tobacco Industrial Co Ltd

C I G A R E T T E S I N C H I N A P a s s p o r t 9

Corp (CNTC)) Changbaishan (China Jilin Tobacco 1.3 1.4 1.5 1.7 National Tobacco Industrial Co Ltd Corp (CNTC)) Pride (China China Tobacco Sichuan 2.4 1.7 1.5 1.7 National Tobacco Industry Corp Corp (CNTC)) Hongmei (China Yuxi Hongta Tobacco 2.0 2.0 1.8 1.6 National Tobacco Group Co Ltd Corp (CNTC)) Zhenlong (China China Tobacco Guangxi 1.2 1.3 1.3 1.6 National Tobacco Industry Corp Corp (CNTC)) Double Happiness Shanghai Tobacco Group 1.6 1.6 1.6 1.5 (China National Tobacco Corp (CNTC)) Hatamen (China China Tobacco Shandong 1.7 1.7 1.5 1.4 National Tobacco Industry Corp Corp (CNTC)) Jinsheng (China China Tobacco Jiangxi 0.8 0.8 1.0 1.2 National Tobacco Industry Corp Corp (CNTC)) Suyan (China China Tobacco Jiangsu 1.2 1.1 1.1 1.1 National Tobacco Industry Corp (CNTC)) Longfengchengxiang China Tobacco Chongqing 0.8 0.9 1.1 1.1 (China National Industry Corp Tobacco Corp (CNTC)) Others Others 14.4 14.1 12.4 11.7 Total Total 100.0 100.0 100.0 100.0

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

Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018

% retail volume 2013 2014 2015 2016 2017 2018 Store-Based Retailing 96.2 97.1 97.0 96.8 96.7 96.5 - Grocery Retailers 96.2 97.1 97.0 96.8 96.7 96.5 -- Convenience Stores 3.1 3.1 3.5 3.9 4.3 4.5 -- Discounters 0.1 0.1 0.1 0.1 0.1 0.1 -- Forecourt Retailers - - - - - - -- Hypermarkets 7.6 7.6 7.6 7.6 7.5 7.3 -- Supermarkets 4.4 4.5 4.5 4.5 4.6 4.8 -- Food/drink/tobacco 38.6 39.0 36.2 33.2 30.4 28.1 specialists --- Food/drink - - - - - - specialists --- Tobacco specialists 38.6 39.0 36.2 33.2 30.4 28.1 -- Independent Small 29.4 30.0 33.3 36.8 40.0 41.3 Grocers -- Other Grocery 13.0 12.8 11.8 10.7 9.8 10.5 Retailers --- Newsagent- 0.8 0.8 0.8 0.7 0.7 0.7 tobacconists/kiosks --- Street vendors 12.2 12.0 11.0 10.0 9.1 9.8 - Mixed Retailers - - - - - - -- Department Stores - - - - - -

C I G A R E T T E S I N C H I N A P a s s p o r t 1 0

-- Other Mixed Retailers - - - - - - - Non-Grocery Specialists - - - - 0.0 - -- Drugstores/ - - - - - - parapharmacies -- Other Non-Grocery - - - - 0.0 - Specialists Non-Store Retailing - - - - - - - Vending - - - - - - - Internet Retailing - - - - - - Non-retail channels 3.8 2.9 3.0 3.2 3.3 3.5 - Bar-tobacconists 0.7 0.2 0.2 0.2 0.2 0.3 - Hotels/restaurants/bars 3.1 2.7 2.8 3.0 3.1 3.3 Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018

bn sticks 2013 2014 2015 2016 2017 2018 Legal sales 2,490.5 2,549.5 2,489.5 2,350.5 2,343.9 2,368.8 Illicit trade 149.4 134.8 124.8 116.0 108.0 97.4 % penetration of 5.7 5.0 4.8 4.7 4.4 3.9 illicit trade Actual consumption 2,640.0 2,684.3 2,614.3 2,466.5 2,451.9 2,466.1

Source: Euromonitor International from official statistics, trade associations, trade interviews

Table 14 Forecast Sales of Cigarettes: Volume 2018-2023

bn sticks 2018 2019 2020 2021 2022 2023 Cigarettes 2,368.8 2,371.6 2,371.8 2,352.9 2,315.2 2,259.7

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

Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023

CNY bn 2018 2019 2020 2021 2022 2023 Cigarettes Including 1,497.1 1,516.2 1,526.0 1,519.0 1,497.6 1,463.1 Fine Cut Stick Equivalent Fine Cut Cigarettes - - - - - - Cigarettes 1,497.1 1,516.2 1,526.0 1,519.0 1,497.6 1,463.1

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

Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023

% volume growth 2018/19 2018-23 CAGR 2018/23 Total

C I G A R E T T E S I N C H I N A P a s s p o r t 1 1

Cigarettes 0.1 -0.9 -4.6

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

Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-2023

% constant value growth 2018/2019 2018-23 CAGR 2018/23 Total Cigarettes Including Fine Cut Stick 1.3 -0.5 -2.3 Equivalent Fine Cut Cigarettes - - - Cigarettes 1.3 -0.5 -2.3

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

Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023

% retail volume 2018 2019 2020 2021 2022 2023 American Blend 2.3 2.3 2.3 2.3 2.3 2.4 Virginia 97.5 97.5 97.5 97.5 97.4 97.4 Other Blend 0.2 0.2 0.2 0.2 0.2 0.2 Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2018- 2023

% retail volume 2018 2019 2020 2021 2022 2023 Standard (non-capsule/ 98.3 97.8 97.7 97.6 97.5 97.4 non-menthol) Flavour Capsule (all 1.6 2.1 2.3 2.3 2.4 2.5 flavours) Menthol (non-capsule) 0.1 0.1 0.1 0.1 0.1 0.1 Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 20 Forecast Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume 2018-2023

% retail volume 2018 2019 2020 2021 2022 2023 Regular 91.8 89.4 87.4 85.7 84.0 82.2 Slim 0.9 1.3 1.8 2.4 3.1 4.0 Superslim 7.3 9.3 10.8 12.0 12.9 13.8

C I G A R E T T E S I N C H I N A P a s s p o r t 1 2

Microslim - - - - - - Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 21 Forecast Sales of Cigarettes by Pack Size: % Volume 2018-2023

% retail volume 2018 2019 2020 2021 2022 2023 < 20 0.0 0.0 0.0 0.0 0.0 0.0 20s 100.0 100.0 100.0 100.0 100.0 100.0 20 + - - - 0.0 0.0 - Total 100.0 100.0 100.0 100.0 100.0 100.0

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

Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023

% retail volume 2018 2019 2020 2021 2022 2023 Economy price band 21.4 17.8 15.5 13.5 11.7 10.2 Mid price band 59.1 61.1 62.5 63.5 64.2 64.7 Premium price band 19.5 21.1 22.0 23.0 24.1 25.2 Total 100.0 100.0 100.0 100.0 100.0 100.0

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