Essay

ssh840962430

Cigarettes_in_the_US.pdf

Home >Business & Finance homework help >Marketing homework help >Essay

Cigarettes in the US

Euromonitor International

July 2019

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

LIST OF CONTENTS AND TABLES

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

Menthol Faces Major Scrutiny .................................................................................................. 1 Economy Brands Gain Appeal .................................................................................................. 1 Smoking Rates on A Steady Decline ........................................................................................ 1

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

Natural American Spirit Stays Ahead of the Game ................................................................... 2 Altria Group Looks To the Future With E-vapour Investments .................................................. 2 Major Manufacturers Adopt New Strategies ............................................................................. 2

Taxation and Pricing ..................................................................................................................... 2

Taxation Rates.......................................................................................................................... 2

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

Average Cigarette Pack Price Breakdown ................................................................................ 4

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

Category Data .............................................................................................................................. 5

Table 1 Sales of Cigarettes: Volume 2013-2018 ....................................................... 5 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 .................................... 6 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 ........................... 7 Table 10 NBO Company Shares of Cigarettes: % Volume 2014-2018 ....................... 7 Table 11 LBN Brand Shares of Cigarettes: % Volume 2015-2018 .............................. 7 Table 12 Sales of Cigarettes by Distribution Format: % Volume 2013-2018 ............... 8 Table 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018................................ 9 Table 14 Forecast Sales of Cigarettes: Volume 2018-2023 ........................................ 9 Table 15 Forecast Sales of Cigarettes by Category: Value 2018-2023 ....................... 9 Table 16 Forecast Sales of Cigarettes: % Volume Growth 2018-2023 ..................... 10 Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2018-

2023 ........................................................................................................... 10 Table 18 Forecast Sales of Cigarettes by Blend: % Volume 2018-2023 ................... 10 Table 19 Forecast Sales of Cigarettes by Standard/Menthol/Capsule: %

Volume 2018-2023 ..................................................................................... 10 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 ............ 11 Table 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023 .......... 11

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

CIGARETTES IN THE US

HEADLINES ▪ In 2018, volume sales of cigarettes decline by 5% to 240.9 billion sticks, whilst negligible

growth is seen in current value terms, remaining at USD95.3 billion

▪ Cigarettes sees one of the largest volume declines in recent years, as smoking alternatives

gain popularity

▪ Philip Morris USA maintains its lead in cigarettes in 2018, with a 47% retail volume share, with

its Marlboro brand alone reaching a 40% share

▪ Over the forecast period, cigarettes is expected to record a negative volume CAGR of 3%,

due to continuing health concerns over smoking cigarettes and the rising popularity of vaping

PROSPECTS

Menthol Faces Major Scrutiny

There has been increasing concern about the continued distribution of menthol cigarettes.

Menthol cigarettes have been gaining volume share, whilst regular cigarettes have seen their

share decline. The main concern originates from the consumer demographic of menthols, which

consists of younger adults and minorities, especially black Americans. Considering the rising

popularity of menthol cigarettes, there are claims that a complete ban on flavours could push

smokers towards other nicotine products with no flavour restrictions, such as e cigarettes and

cigarillos. Brands with popular menthol SKUs, such as Newport, Camel and Maverick, would

also be likely to see a drastic drop in sales. The FDA has been a vocal proponent of the ban and

has tried to move towards a legislative ban for years. However, a strong pushback from

cigarette manufacturers, and the FDA commissioner Scott Gottlieb’s resignation in April 2019,

are likely to keep the decision up in the air for the near future.

Economy Brands Gain Appeal

Increasing taxes and rising cigarette upcharge rates imposed by manufacturers to combat

declining volume sales have slowly been altering the price band distribution within cigarettes.

Economy cigarettes saw a small share increase in 2018, and discounters saw strong retail

volume distribution growth. Smokers have been shown to consistently absorb price increases.

However, the rise in the share of economy brands may indicate the beginning of a shift in

purchasing behaviour. Over the forecast period, economy brands are expected to keep gaining

share, whilst premium brands are likely to gain modest share early in the forecast period, but

begin to lose share in later years, as consistent price increases begin to erode smokers’ brand

loyalty.

Smoking Rates on A Steady Decline

Cigarette smoking amongst adults in the US was at its lowest point in history in 2018.

Increasing regulation, rising public awareness and the growth of vaping prevalence have

consistently brought down smoking rates each year for decades. The FDA continues to consider

smoking cessation one of its top priorities, and its plans to ban menthol cigarettes and reduce

cigarette nicotine levels, if successfully passed, could drive smoking rates down even further,

guaranteeing a steady continued decline.

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

COMPETITIVE LANDSCAPE

Natural American Spirit Stays Ahead of the Game

Natural American Spirit from Santa Fe Natural Tobacco Co was the only brand to experience

consistent volume growth in the review period. A large part of its success originates from

smokers switching from other brands, because of the perception that Natural American Spirit is

“less harmful” and “organic”, and is advertised as additive-free and natural. New smokers are

also attracted to the brand for the same reasons. In 2018, a federal court dismissed a case that

challenged the use of the word “natural” by the brand. Natural American Spirit will therefore

continue to use the word in its branding; thus, remaining attractive to consumers. As volume

sales are declining for the majority of brands, Natural American Spirit will have the opportunity to

keep gaining share.

Altria Group Looks To the Future With E-vapour Investments

Philip Morris USA (Altria Group) continued to lead cigarettes in retail volume terms in 2018. Its

top brand Marlboro continued to account for the largest volume share, and saw share growth in

2018. Despite its rising share, the overall volume decline of the cigarettes category meant

Marlboro saw an actual volume decline. In 2018, Philip Morris International announced plans to

cease cigarette production completely. Whilst this plan does not have a definite timetable, Altria

has stated that it instead wants to start putting its focus on its heated tobacco system IQOS,

which from 2019 was approved for sale by the FDA, and is available in selected areas. With

Marlboro being the biggest brand in cigarettes, the company’s plans will mean a major shake-up

for the category. Other cigarette giants, such as British American Tobacco and Imperial

Tobacco, are likely to begin to develop their own heated tobacco and vaping systems. This will

slowly but surely reduce sales of cigarettes in the US.

Major Manufacturers Adopt New Strategies

Whilst e-vapour products accounts for a much smaller share of sales of tobacco than

cigarettes, its share is growing rapidly, and each year poses more of a threat to sales of

cigarettes. As smoking prevalence falls, e-vapour products are absorbing much of the loss,

leading to the increased prevalence of vaping. However, a large share of sales within e-vapour

products is accounted for by big tobacco players such as Reynolds and Imperial, with Altria

Group owning 30% of JUUL. This indicates a shifting strategy for major cigarette manufacturers.

Whilst cigarettes are losing the battle with the FDA and public perception, the future is much

more promising for e-vapour products. This, combined with the promising potential of heated

tobacco systems, could offer consistent profit margins for big tobacco companies despite the

decline in sales of cigarettes.

TAXATION AND PRICING

Taxation Rates

▪ The federal cigarette tax rate was USD1.01 per pack of 20 as of 2018; unchanged since

2009. State and local tax rates vary widely. New York taxes cigarettes at over USD4.00 per

pack, whilst Puerto Rico and Guam tax at USD3.00 or more. 17 states, DC, Guam and Puerto

Rico, have cigarette tax rates of USD2.00 per pack or more, and 35 states, DC, Guam, the

Northern Marianas and Puerto Rico have tax rates of USD1.00 per pack or more.

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

▪ In 2018, Washington DC, Kentucky, Oklahoma and Oregon increased the state tax on

cigarettes. Washington DC raised the tax per pack of 20 by USD2.50. In 2016, Connecticut,

Louisiana, Minnesota, Oregon, Pennsylvania and West Virginia all raised the excise tax on

cigarettes. California and Minnesota raised taxes during the first half of 2017. California’s

2016 tax increase was substantial, at a difference of USD2.00 per pack.

▪ Local taxes on cigarettes in the US can be quite significant. Although Illinois taxes cigarettes

at a rate of only USD1.98 per pack of 20, state, county and city taxes add up to a total of over

USD7.00 per pack in Chicago, the US’s third most populous city.

▪ Because taxes are levied on an excise, per-pack of 20 basis, further ad valorem taxes are not

charged. States may charge sales taxes on tobacco products, but in such instances tobacco

products are not treated differently from other consumer goods. Where applicable, state sales

taxes are usually based on purchase prices, and remain below 10%. The federal government

does not charge sales tax in the US. Neither the federal government nor individual states

charge VAT.

▪ Although the international illicit trade volume of cigarettes in the US is relatively low, interstate

smuggling is common. Interstate smuggling, where, for instance South Carolina-taxed

cigarettes are sold in New York, is a growing concern for state and local governments.

Cigarettes manufactured by Native Americans on reservations are exempt from state tax

collection. Tax exemption status extends to purchases by Native Americans of cigarettes sold

on reservations. This practice is often exploited, resulting in illicit sales to non-Native

Americans, interstate smuggling and tax-free resale.

Summary 1 Taxation and Duty Levies 2013-2018

Taxation

Type

Units 2013 2014 2015 2016 2017 2018

Illinois

State

Excise

USD/per

pack of

1.0 2.0 2.0 2.0 2.0 2.0

Illinois

State

Sales

Tax

% retail

price

9.8 9.8 9.8 9.8 9.8 9.8

Cook

County

Cigarette

Tax

USD/per

pack of

2.0 2.0 3.0 3.0 3.0 3.0

City of

Chicago

Cigarette

Tax

USD/per

pack of

0.7 0.7 0.7 1.2 1.2 1.2

Federal

Excise

Tax

USD/pac

k of 20

1.0 1.0 1.0 1.0 1.0 1.0

Specific

taxes

USD/1,0

00 units

105.7 105.7 105.7 105.7 105.7 105.7

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

Source: Euromonitor International from US Tax and Trade Bureau, Campaign for Tobacco-Free Kids, company sources

Average Cigarette Pack Price Breakdown

▪ The example below shows the cigarette pack price breakdown for cigarettes sold in Chicago,

Illinois. The breakdown includes federal, state, county and municipal taxes, with total taxes

accounting for 70% of the total pack price for premium cigarettes. For mid-priced cigarettes,

total taxes comprise 74% of the average pack price, whilst for economy cigarette brands, total

taxes comprise 75% of the average pack price. It is important to note that Chicago has the

highest incidence of cigarette taxation in the US.

▪ Manufacturers’ pricing of cigarettes in the US changes frequently, with manufacturers raising

prices to offset volume declines and maintain or increase revenues. Price increases generally

occur bi-annually, and this is expected to continue in the future.

Summary 2 Average Cigarette Pack Price Breakdown: Brand Examples

P= price in

US dollars

Premium Mid-priced Economy

Marlboro L&M Pall Mall

(Pack of

20)

(Pack of

20)

(Pack of

20)

P % P % P %

Wholesale 1.85 15.45 1.20 10.77 1.12 10.19

Retailer 1.80 15.00 1.67 15.00 1.65 15.00

Total

retained

3.65 30.45 2.87 25.77 2.78 25.19

Federal

Excise

1.01 8.42 1.01 9.08 1.01 9.17

Illinois

State

Excise

1.98 16.51 1.98 17.81 1.98 17.97

Cook

County

Cigarette

Tax

3.00 25.02 3.00 26.98 3.00 27.22

City of

Chicago

Cigarette

Tax

1.18 9.84 1.18 10.61 1.18 10.71

valorem

excise

0.00 0.00 0.00 0.00 0.00 0.00

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

Sales/VAT 1.17 9.75 1.08 9.75 1.07 9.75

TOTAL tax 8.34 69.55 8.25 74.23 8.24 74.81

End price 11.99 100.00 11.12 100.00 11.02 100.00

Source: Calculated from store check data and Taxation and Duty Levies Table. Based on a pack of cigarettes bought in Chicago, Illinois

Notes: Figures may not sum up to 100% due to rounding

CATEGORY DATA

Table 1 Sales of Cigarettes: Volume 2013-2018

million sticks 2013 2014 2015 2016 2017 2018 Cigarettes 279,538.8 270,638.8 269,894.3 262,467.7 252,609.0 240,888.3

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

USD million 2013 2014 2015 2016 2017 2018 Cigarettes Including 91,888.6 91,299.7 93,948.9 95,017.9 95,766.0 95,760.0 Fine Cut Stick Equivalent Fine Cut Cigarettes 634.9 616.3 578.1 539.3 500.0 437.7 Cigarettes 91,253.7 90,683.4 93,370.8 94,478.6 95,266.0 95,322.2

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 -4.6 -2.9 -13.8

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 0.0 0.8 4.2 Equivalent Fine Cut Cigarettes -12.4 -7.2 -31.1 Cigarettes 0.1 0.9 4.5

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

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 99.5 99.5 99.5 99.5 99.5 99.5 Virginia 0.4 0.4 0.4 0.4 0.3 0.3 Other Blend 0.1 0.1 0.2 0.1 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 6 Sales of Cigarettes by Standard/Menthol/Capsule: % Volume 2013-2018

% retail volume 2013 2014 2015 2016 2017 2018 Standard (non-capsule/ 69.9 69.5 69.1 60.1 65.9 65.1 non-menthol) Flavour Capsule (all 3.8 4.8 4.9 4.9 5.4 5.8 flavours) Menthol (non-capsule) 26.3 25.7 26.0 35.0 28.8 29.0 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 7 Sales of Cigarettes by Regular/Slim/Superslim/Microslim: % Volume 2013-2018

% retail volume 2013 2014 2015 2016 2017 2018 Regular 98.1 98.3 98.3 98.4 98.6 98.7 Slim 1.7 1.6 1.5 1.4 1.3 1.2 Superslim 0.2 0.2 0.2 0.2 0.1 0.1 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 20s 99.6 99.6 99.7 99.7 99.7 99.7 20 + 0.4 0.4 0.3 0.3 0.3 0.3 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

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

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

% retail volume 2013 2014 2015 2016 2017 2018 Economy price band 21.5 21.7 23.6 24.1 23.9 24.0 Mid price band 7.1 6.5 6.2 5.7 5.2 5.2 Premium price band 71.4 71.8 70.2 70.1 70.9 70.8 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

% retail volume Company 2014 2015 2016 2017 2018 Philip Morris USA Inc 46.9 46.9 46.5 46.4 47.1 RJ Reynolds Tobacco Co 24.0 31.9 32.3 32.6 32.8 Commonwealth Brands Inc 3.1 9.7 9.5 9.6 9.6 Liggett Group Inc 3.3 3.2 3.2 3.8 4.1 Santa Fe Natural 1.5 1.8 2.1 2.3 2.5 Tobacco Co Inc Japan Tobacco Inc 0.4 0.4 0.4 0.4 0.4 Lorillard Tobacco Co 14.8 - - - - Others 6.1 6.0 5.9 4.8 3.5 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 Marlboro (Altria Philip Morris USA Inc 40.1 39.6 39.6 40.4 Group Inc) Newport (Reynolds RJ Reynolds Tobacco Co 13.4 14.4 15.2 15.3 American Inc) Camel (Reynolds RJ Reynolds Tobacco Co 8.1 8.1 8.1 8.2 American Inc) Pall Mall (Reynolds RJ Reynolds Tobacco Co 8.2 7.9 7.7 7.7 American Inc) L&M (Altria Group Philip Morris USA Inc 4.0 4.2 4.2 4.1 Inc) Natural American Santa Fe Natural 1.8 2.1 2.3 2.5 Spirit (Reynolds Tobacco Co Inc American Inc) Winston (Imperial Commonwealth Brands Inc - 2.4 2.4 2.4 Brands Plc) Maverick (Imperial Commonwealth Brands Inc - 1.8 1.8 1.9 Brands Plc) Kool (Imperial Commonwealth Brands Inc - 1.8 1.8 1.8 Brands Plc) Eagle 20 (Liggett Liggett Group Inc 0.7 1.0 1.5 1.8

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

Vector Brands Inc) Pyramid (Liggett Liggett Group Inc 1.8 1.6 1.6 1.7 Vector Brands Inc) Virginia Slims Philip Morris USA Inc 1.1 1.1 1.1 1.1 (Altria Group Inc) USA Gold (Imperial Commonwealth Brands Inc - 1.0 0.9 0.9 Brands Plc) Parliament (Altria Philip Morris USA Inc 1.0 1.0 0.9 0.9 Group Inc) Doral (Reynolds RJ Reynolds Tobacco Co 0.9 0.9 0.9 0.9 American Inc) Salem (Imperial Commonwealth Brands Inc - 0.9 0.9 0.9 Brands Plc) Misty (Reynolds RJ Reynolds Tobacco Co 0.7 0.6 0.5 0.5 American Inc) Basic (Altria Group Philip Morris USA Inc 0.3 0.3 0.2 0.2 Inc) Winston (Imperial Commonwealth Brands Inc 2.3 - - - Tobacco Group Plc) Maverick (Imperial Commonwealth Brands Inc 1.9 - - - Tobacco Group Plc) Kool (Imperial Commonwealth Brands Inc 1.7 - - - Tobacco Group Plc) USA Gold (Imperial Commonwealth Brands Inc 1.0 - - - Tobacco Group Plc) Salem (Imperial Commonwealth Brands Inc 0.9 - - - Tobacco Group Plc) Sonoma (Imperial Commonwealth Brands Inc - - - - Tobacco Group Plc) Grand Prix (Liggett Liggett Group Inc - - - - Vector Brands Inc) Liggett Select Liggett Group Inc - - - - (Liggett Vector Brands Inc) Newport (Lorillard Lorillard Tobacco Co - - - - Inc) Kool (Reynolds RJ Reynolds Tobacco Co - - - - American Inc) Salem (Reynolds RJ Reynolds Tobacco Co - - - - American Inc) Winston (Reynolds RJ Reynolds Tobacco Co - - - - American Inc) Others Others 10.1 9.4 8.2 6.8 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 99.4 99.4 99.6 99.7 99.7 99.7 - Grocery Retailers 91.7 91.9 93.0 93.9 93.8 93.6 -- Convenience Stores 16.2 16.4 17.1 17.8 18.0 18.1 -- Discounters - - - - - - -- Forecourt Retailers 47.7 48.3 50.3 52.1 53.1 53.1 -- Hypermarkets 1.0 1.1 1.3 1.6 1.6 1.7 -- Supermarkets 3.9 3.9 3.9 3.9 4.0 4.0

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

-- Food/drink/tobacco 20.4 19.7 17.7 16.0 14.6 14.1 specialists --- Food/drink - - - - - - specialists --- Tobacco specialists 20.4 19.7 17.7 16.0 14.6 14.1 -- Independent Small 2.2 2.2 2.3 2.3 2.3 2.3 Grocers -- Other Grocery 0.3 0.3 0.3 0.2 0.2 0.2 Retailers --- Newsagent- 0.3 0.3 0.3 0.2 0.2 0.2 tobacconists/kiosks --- Street vendors - - - - - - - Mixed Retailers 4.0 4.3 4.2 4.0 4.3 4.7 -- Department Stores - - - - - - -- Other Mixed Retailers 4.0 4.3 4.2 4.0 4.3 4.7 - Non-Grocery Specialists 3.7 3.3 2.4 1.8 1.6 1.5 -- Drugstores/ 3.7 3.3 2.4 1.8 1.6 1.5 parapharmacies -- Other Non-Grocery 0.0 0.0 0.0 - 0.0 - Specialists Non-Store Retailing 0.2 0.2 0.1 0.1 0.1 0.1 - Vending 0.1 0.1 0.1 0.1 0.0 0.0 - Internet Retailing 0.1 0.1 0.1 0.1 0.1 0.1 Non-retail channels 0.5 0.4 0.3 0.2 0.2 0.1 - Bar-tobacconists 0.1 0.1 0.1 0.1 0.1 0.1 - Hotels/restaurants/bars 0.4 0.3 0.2 0.1 0.1 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 13 Illicit Trade Estimate of Cigarettes: Volume 2013-2018

million sticks 2013 2014 2015 2016 2017 2018 Legal sales 279,538.8 270,638.8 269,894.3 262,467.7 252,609.0 240,888.3 Illicit trade 10,965.1 10,860.4 10,207.3 10,059.3 9,843.9 9,579.8 % penetration of 3.8 3.9 3.6 3.7 3.8 3.8 illicit trade Actual consumption 290,503.9 281,499.2 280,101.6 272,527.0 262,452.9 250,468.1

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

Table 14 Forecast Sales of Cigarettes: Volume 2018-2023

million sticks 2018 2019 2020 2021 2022 2023 Cigarettes 240,888.3 230,458.5 222,384.4 214,878.5 209,105.6 203,379.6

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

USD million 2018 2019 2020 2021 2022 2023

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

Cigarettes Including 95,760.0 95,477.3 95,894.1 95,993.1 96,490.7 96,856.8 Fine Cut Stick Equivalent Fine Cut Cigarettes 437.7 434.4 411.4 393.9 380.3 368.8 Cigarettes 95,322.2 95,042.9 95,482.7 95,599.2 96,110.4 96,488.0

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 Cigarettes -4.3 -3.3 -15.6

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 -0.3 0.2 1.1 Equivalent Fine Cut Cigarettes -0.8 -3.4 -15.7 Cigarettes -0.3 0.2 1.2

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 99.5 99.5 99.5 99.5 99.5 99.5 Virginia 0.3 0.3 0.3 0.3 0.3 0.3 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/ 65.1 64.8 64.6 64.5 64.5 64.4 non-menthol) Flavour Capsule (all 5.8 6.1 6.2 6.2 6.3 6.3 flavours) Menthol (non-capsule) 29.0 29.2 29.2 29.3 29.3 29.3 Total 100.0 100.0 100.0 100.0 100.0 100.0

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

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 98.7 98.7 98.7 98.7 98.7 98.8 Slim 1.2 1.2 1.1 1.1 1.1 1.1 Superslim 0.1 0.1 0.1 0.1 0.1 0.1 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 20s 99.7 99.7 99.8 99.7 99.8 99.8 20 + 0.3 0.3 0.3 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 22 Forecast Sales of Cigarettes by Price Band: % Volume 2018-2023

% retail volume 2018 2019 2020 2021 2022 2023 Economy price band 24.0 24.2 24.4 24.6 24.9 25.1 Mid price band 5.2 4.9 4.7 4.7 4.8 4.8 Premium price band 70.8 70.9 70.9 70.6 70.3 70.0 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