Sell SMOKE Magazine!

Burley Tobacco Growers

BMJ

Star Tobacco

SMOKE Magazine

Davidoff

Sell SMOKE Magazine!

Burley Tobacco Growers

BMJ

Star Tobacco

SMOKE Magazine

Davidoff

Sell SMOKE Magazine!

Burley Tobacco Growers

BMJ

Star Tobacco

SMOKE Magazine

Davidoff

Sell SMOKE Magazine!

Burley Tobacco Growers
  Home    Trade Shows    Advertising    Subscribe    Archives    Search    Tobacco Products International


March, 2010

BMJ

European Union Cigarette Trade Changing

By John Parker

John Parker picks apart the facts and figures to see what is going on in the large, robust, and rapidly changing European Union.

Total cigarette exports from the combined 27 countries of the European Union decreased 6% in calendar 2009 after reaching a peak in 2008. Higher retail prices and anti-tobacco measures tended to cause a slowdown for sales in some countries. These restrictions and the economic slowdown left a different setting from that found several years ago. Total EU 27 cigarette exports reached a peak of 552 bn pieces in 2008 and declined in 2009. Gains for exports by Poland, and Romania in 2009 were not enough to completely offset reductions for exports by Germany, France, and Austria.

Four countries combined accounted for about half of total EU cigarette exports in 2009. They were Germany, Netherlands, Poland, and France. Poland had the fastest pace of gains in exports in 2008, and Romania had an increase of about a fourth for exports in 2009. The share of EU cigarette exports coming from Germany declined in 2009, as exports from some newer facilities in East Europe gained market share. Total EU 27 net exports advanced in the last several years with much larger shipments to Japan and markets in the Middle East.

Import Tariff On Cigarette Limits Imports From Outside EU 27: The 57.6% ad valorem tariff tended to keep imports of cigarettes from exterior sources low. Yet, increased competition within the EU spurred efforts by exporters in Germany and some other EU members to find markets outside the EU, particularly in Japan and the Middle East. The CIS countries were a kind of difficult market for EU exporters because their intra-trade advanced with surplus supplies available in Russia and Ukraine. Only trivial quantities of US cigarettes went to EU markets in 2009, compared with peak deliveries in the mid 1990s.

Competition Increasing Among EU Cigarette Exporters: Cigarette exports from Germany have now run into so much competition that the first reduction came in 2009, after a decade with a remarkable upward trend. The average price for cigarette exports from Germany averaged about 46.4 cents per pack in the first ten months of 2009. That was above the 32.3 cents per pack for shipments from Poland. Cigarette exports from the Netherlands were strong in the last three years, remaining in the range of 111 bn to 116 bn, annually, although the average export price of about 60 cents per pack was relatively high, and the average of 59.6 cents per pack in 2009 remained high. Quality brands of some packs of 25 cigarettes were sought by a number of smokers in certain EU markets, especially to France and Italy.

Poland's share of EU cigarette exports advanced to about 18% in 2009 with the shipment of about 77 bn pieces, compared with less than 3% in 2004. Romania was not a significant cigarette exporter before the sudden leap in 2007. By 2009, Romania accounted for about 4% of EU cigarette exports as shipments moved to a record of about 21 bn pieces.

Cigarette factories have either closed or reduced operations sharply in some countries as free trade made their prospects dim. Factories closed in Estonia several years ago, and imports provide the needs of local smokers and a large number of tourists. Factories manufacturing cigarettes in Latvia were major suppliers of cigarettes for smokers in Estonia, before closing down. Rising imports contributed to the sharp decline for cigarette output in Slovakia and Slovenia. Imports recently provided more cigarettes for Hungarian smokers than local factories. Hungary was a leading destination for Polish cigarette exports in 2008 with the shipment of 8.6 bn pieces.

Greater Exports To Japan Helped To Modify Decline For German Cigarette Exports Recently: Germany was the leading EU cigarette exporter in 2008 with peak shipments of 177.7 bn pieces, valued at $4.1 bn. In the first ten months of 2009 German cigarette exports were down about 13.6%, although the average export price declined about 7% to approximately 43 cents per pack. Exports of cigarettes from Germany to Japan moved up from 10 bn pieces in 2006 to 29.3 bn pieces in 2008 and higher in 2009.

German cigarette exports to markets in the EU 15 were relatively flat in the last three years averaging about 93 bn pieces annually. Greater exports to Italy, France, Netherlands and Belgium in 2008 helped to provide a gain of 0.6% for German cigarette exports to 14 EU market to 92.9 bn pieces. Those gains more than offset the reduction in sales to customers in Spain. Shipments to Spain declined from a peak of 36.2 bn pieces in 2006 to 25.7 bn pieces by 2008 and faced greater competition in 2009. Exports of cigarettes from Germany to Italy rose to a peak of 24.6 bn pieces in 2008, but were down in 2009 as competition from newer sources like Romania intensified. Exports of German cigarettes top France reached 10 bn pieces in 2008, compared with an averge of about 7.3 bn pieces annually during 2005–07.

Following the entry of 10 countries to the EU in 2004, German cigarette exports to Czech Republic, Slovakia, Poland, Hungary, and the Baltic countries made dramatic gains. However, German cigarette deliveries to the newer EU 12 declined after reaching a peak of 19.6 bn in 2004, and by 2008, the volume had declined to 9.4 bn pieces. A major setback occurred in Czech Republic as the shift to imports from Poland and Romania trimmed German reported deliveries by 73% in 2008 to 1.4 bn pieces. After Bulgaria and Romania enter the EU on January 1, 2007, those countries were booming markets in 2008. Shipments to Bulgaria quadruped in 2008, reaching 1.66 bn pieces, and exports to Romania advanced to 1.9 bn pieces.

It is now obvious that the time of galloping gains for German cigarette exports to other EU members will be difficult to repeat. Multinationals have built new factories or remodeled existing factories to provide quality blended brands from an expanded number of places within the EU. In addition to the special market in Japan, German cigarette exports recently advanced to some customers in the Middle East, especially some countries with large petroleum export revenues. Exports to Saudi Arabia moved up to 13.1 bn pieces in 2008, compared with 1.2 bn pieces in 2006. Shipments to Kuwait rose to a peak of 1.75 bn pieces in 2008. Exports of 8.3 bn pieces to UAE in 2008 were double the 2004–06 average. Germany exports some cigarettes to over 50 countries.

While German cigarette exports to Russia of 674 mn pieces in 2008 were about half the 1.2 bn pieces shipped in 2003, sales to Azerbaijan were higher. Shipments to Azerbaijan advanced to 5.3 bn pieces in 2008, compared with 1.3 bn pieces in 2004.

Dutch Cigarette Exports Remained Steady In 2009: Exports from the Netherlands declined about 1% to about 115 bn pieces in 2009 despite comparatively high prices. Shipments to Italy in 2008 were 28.1 bn pieces as sales though reliable stores and tobacco shop of certain brands held up well. Tourists and visitors from other countries added to the demand for premium brands in Italy. France was the second leading destination for cigarette exports from the Netherlands in 2008 with the delivery of 27.9 bn pieces. Exports to Spain were down to 20.2 bn pieces in 2008, but shipments to Belgium were steady at 4.5 bn pieces.

Concern about intense competition within the EU caused Dutch cigarette exports to seek greater sales to customers outside the EU. Exports to Turkey moved up to 13.4 bn pieces in 2008, and shipments to Japan rose to 5.5 bn pieces. Some of the 2.7 bn cigarettes shipped to Ukraine in 2008 were for transit traders making deliveries in the Middle East. Dutch cigarette exports to Syria moved up to 359 mn pieces in 2008.

Poland's Cigarette Exports Show Strong Upward Trend: Poland had a 13% rise in 2008 for cigarette exports to 65 bn pieces, followed by a gain of about 19% for shipments in 2009. The value for Poland's cigarette exports advanced to over $1.2 bn in 2009. Poland made gains in cigarette exports to some of the earlier EU members. Exports to Netherlands rose to 6.6 bn pieces in 2008, and shipments to Germany were 4.8 bn pieces.

Poland's cigarette exports to Middle East markets expanded recently. Attractive prices for the same brands manufactured in a number of other EU countries contributed to the boom for Polish exports. Poland exported 2.5 bn cigarettes to Iraq in 2007, although South Korea provided about half of the total market for imported cigarettes there. Some of the 3.8 bn Polish cigarettes exported to Turkey in 2008 went to transit traders.

Poland became the major supplier of Hungarian cigarette imports with the delivery of 7 bn pieces in 2007. Then, Poland's deliveries to Hungary moved up to 8.9 bn pieces in 2008. Poland exported 6.5 bn cigarettes to Czech Republic in 2007, but shipments fell to 2.2 bn pieces in 2008.

Cigarette Exports From France Peaked In 2007: France had a 63.1% increase in cigarette exports to 30.3 mn pieces in 2007, following comparatively flat exports during 2000–06. Exports to Iraq rose to 3 bn pieces in 2007, but competition from South Korea caused a decline later. Reduced shipments to Middle East markets caused French cigarette exports to decline 44% in 2008 to 17 bn pieces. A further decline of about 18% was reported for the first eleven months of 2009.

Austria's Cigarette Exports Down A Third In 2009: Austria's upward movement for cigarette exports hit a snag in 2008 from so much rising competition, and declined nearly a fourth to 19.7 bn pieces. A further decline of about a third was reported for the first ten months of 2009. Austria exported 9.9 bn cigarettes to Germany in 2007, but deliveries were down by about half in 2009. Austria exported over 1.4 bn cigarettes to Sweden in 2009. Austrian cigarette exports to Italy in 2009 were about a third below the 2.6 bn pieces shipped in 2008. Competition from Poland and Romania contributed to smaller exports from Austria to some nearby markets, especially Czech Republic and Hungary.

Czech Republic Exporting More Cigarettes: Exports of cigarettes from Czech Republic were up 14% in the first eleven months of 2009, after rising 42% to 15.9 bn pieces in 2008. Czech cigarette exports to Italy reached 5.8 bn pieces in 2008. Exports to Slovenia rose to 2.6 bn pieces. Shipments to United Kingdom reached 2.2 bn pieces. Some relaxation for taxes in Sweden apparently provided an incentive for greater imports from some EU suppliers, and Czech shipments to Sweden rose to about 1.4 bn pieces in 2008. Partly for distribution to tourists, Czech cigarette exports to Finland were 1.5 bn pieces in 2008. Some German market analysts have indicated that purchases by smokers traveling to Prague are greater than the reported exports of 441 mn Czech cigarettes to Germany in 2008. Ireland was a customer for 388 mn cigarettes from Czech Republic in 2008.

Romania 's Astonishing Rise As A Cigarette Exporter Continued In 2009: Romania's cigarette exports increased from less than 200 mn pieces in 2006 to about 9.9 bn pieces in 2007 and then to 16.9 bn pieces in 2008 valued at $394 mn, before advancing 24% in the first ten months of 2009. Romania's cigarette exports to Italy more than doubled in 2008, reaching 7.7 bn pieces. Historical background was an additional reason for greater exports from Romania to Italy, than the average export price of about 43.5 cents per pack of 20. Romanian cigarette exports to Bulgaria rose 92% in 2008 to nearly 2.9 bn pieces. Exports to Poland advanced from 85 mn pieces in 2007 to nearly 1.8 bn pieces in 2008. Romania's cigarette exports to Germany moved up from 48 mn pieces in 2007 to 390 mn pieces in 2008. Shipments to neighboring Hungary advanced from 92 mn pieces in 2007 to 363 mn pieces in 2008. Efforts by Czech manufacturers to provide more quality brands may have contributed to the decline of about a third to 593 mn pieces for purchases of Romanian cigarettes.

Bulgarian Cigarette Exports Rebounding: Bulgarian cigarettes had reached a peak of 75 bn pieces about three decades ago when trade agreements facilitated large sales to Russia and other markets of the FSU. Following the events of the early 1990s and breakup of FSU, Bulgarian cigarette exports tumbled. Recently, Bulgaria has become a busy transit center for some EU cigarettes on their way to Middle East markets. Bulgaria exported more cigarettes to EU customers in 2009 when total exports rose sharply to about 6.8 bn. Turkey was a market for 3.2 bn Bulgarian cigarettes in 2008. Iraq was a customer for 165 mn pieces in 2008 and about 156 mn pieces from Bulgarian factories went to Azerbaijan.

Greek Cigarette Exports Were Steady Recently: Exports of cigarettes from Greece averaged about 18 bn pieces annually in the last three years. Greek exporters found customers in Albania, Bulgaria, the Middle East and Africa. Greek cigarette imports from other EU countries increased and German shipments rose to over 8 bn pieces in 2008.

Portugal Exports Go Mostly To Mediterranean Markets: Greater output of improved brands contributed to Portugal's 23.7 increase in cigarette exports to 14.8 bn pieces in 2007, followed by a relatively flat setting for the two following years. Italy was a leading destination for Portugal's cigarette exports recently. Spain and Algeria were important markets.

Danish Cigarette Exports Remained Strong In 2009: Exports of cigarettes from Denmark reached 6 bn pieces in 2008, and shipments in 2009 were higher in the first ten months of 2009. Sweden, Norway, and Germany are leading destinations for cigarettes from Denmark. Various versions of the high quality House of Prince brands dominate Denmark's cigarette business. Danish cigarette exports to Sweden were 2.2 bn pieces in 2008, and shipments to Norway rose to 859 mn pieces. Shipments to Germany remained strong at 816 mn pieces in 2008. The busy tourist trade in Latvia contributed to Danish exports of 267 mn pieces to traders in Riga in 2008.

Lithuania's Cigarette Exports Remained Steady Recently: Germany was the leading destination for Lithuanian exports of about 14 bn pieces in 2008 and again in 2009, with the delivery of over 5 bn pieces annually. Latvia was the second major destination. Lithuanian manufacturers may import more tobacco in 2010 to provide a greater volume of cigarettes for Latvia and Estonia. Tobacco shops in Lithuania have a wide array of brands available, including various supplies from Poland.

Modern Infrastructure Contributes To Intra-EU Cigarette Trade: Dramatic changes have occurred in the cigarette trade of most countries of the European Union in recent years. The adoption of the euro as the currency of 11 members of the EU in 2002 tended to spur intra-EU cigarette trade. This tended to lower transaction and banking cost for trade among the eleven members using the euro. Importers in the 15 countries using the euro as their official currency may tend to seek to request prices from other countries using the euro as a step in planning their import purchases.

A rise in the value of the euro from an equivalent of about 82 US cents in 2002 to a range of $1.42 in early 2009 had some influence on the significant growth in the value for both cigarette exports and imports by some EU members. While the UK, Denmark, and Sweden retained their traditional currencies, their good showing from trade and financial flows helped the value of their currencies to also rise against the US dollar.

So much has been happening in the 27 countries belonging to the EU that it is feasible to observe changes in market share for imported cigarettes in specified countries. German cigarette exporters had remarkable gains in cigarette exports to other EU countries during 2002–08, but a change began in 2009. Following Italy, Spain, and France as the leading EU cigarette importers, the market for imported cigarettes is also important in some of the significant exporters like Germany, Netherlands, and United Kingdom. Smokers in many cities of Europe tended to explore less costly brands in the recent year. The idea that retail prices for cigarettes should be over 5 euros per pack or about $7 may not have set well with some smokers.

Total cigarette exports from countries of the earlier EU 15 combined increased slightly to 423 bn pieces,in 2008 and dropped about a tenth during 2009. Intra-EU trade accounts for much of this tabulation. Exports from the established multinationals with large factories in some of the earlier EU 15 to traders have faced more competition from manufacturers in the newer EU 12. At first it appeared that established manufacturers had new market opportunities in 2004 and 2005. That idea changed to how much new competition do we have to deal with by 2008, as they explored ways to cope with the new free trade setting. The flow had been mostly from the earlier 15 EU members to importers in the newer member countries during 2004–07. Then it changed to surprising gains for exports from the newer EU 12 for exports to Italy, UK, Germany, and Netherlands.

Trade among the newer 12 EU countries became significant as Poland had remarkable gains for exports to Czech Republic, Slovakia, Hungary, and the Baltic countries.

Poland expanded cigarette exports to the Middle East with remarkable gains for shipments to UAE, Iraq, and Jordan. The search for better quality in the competitive setting has contributed to a 12.6% rise in EU purchases of US leaf tobacco to 92,222 tons valued at $563.8 mn in 2006. The proportion of US tobacco in most cigarettes manufactured in Germany was relatively high before Brazil gained a greater share of the market for imported leaf tobacco. Subsidies for tobacco farmers in the EU are scheduled to end three years from now. That may affect farmers in Italy, Greece, and Bulgaria.

Spain Remains A Leading EU Cigarette Importer: Cigarette imports into Spain increased to about 61 bn pieces, valued at $1.7 bn in 2007, coming mostly from Germany, Netherlands, and France. Spain was also a leading destination for exports from the UK and Portugal. Spanish cigarette imports were down sharply in 2009. Spain advanced cigarette exports to 10.6 bn pieces in 2008, with gains for shipments to Algeria, Morocco, and some other countries bordering the Mediterranean. Spain also developed a new export market for cigarettes in Iraq.

Italy Diversifies Cigarette Imports: Imports of cigarettes into Italy increased to a peak of 76.7 bn pieces in 2007 and remained high in the two following years The Netherlands provided 37 bn cigarettes to Italy in 2008, or about half of the total imports. The share of the Italian cigarette import market held by German declined to less than a third in 2008, as the share for Romania and Czech Republic increased. About half of the cigarettes smoked in Italy are imported.

Italy is a competitive market where arrivals from Austria, and France have drifted downward as deliveries from East Europe advanced.

French Cigarette Imports Rebounded In 2008: Imports into France peaked at about 56 bn pieces in 2008, and declined in 2009. Dutch cigarette exports to France rose to 27.9 bn pieces in 2008. France was the fifth leading customer for German exports of 10 bn cigarettes in 2008. Spain exported 3.7 bn cigarettes to France in 2008, as mergers contributed to increased contacts among tobacco trade workers. Polish cigarette exports to Spain rose to 1.2 bn pieces in 2008.

Dutch Cigarette Imports Fluctuate: Cigarettes manufactured in the Netherlands are usually more costly than a number of brands delivered from Germany and East Europe. Cigarette imports into Netherlands rose to about 26 bn pieces in 2008. Dutch purchases of cigarettes manufactured in Germany rose to 9.5 bn pieces in 2008, after averaging about 7 billion pieces annually during 2004–07. Polish cigarette exports to Netherlands rose to 6.6 bn pieces in 2008.The Netherlands imports most of the cigarettes purchased by smokers at convenience markets, grocery stores, tobacco shops, and stores located at places where petroleum is sold.

Sales To Finland Apparently Influenced By Attractive Prices For Traveling Shoppers: Finland’s fascinating business related to the inexpensive boat trips to Estonia appears to have contributed to larger imports than sales of those supplies in Finnish shops. Finland's cigarette imports were reported at 6.7 bn pieces in 2007. Arrivals remained near that level in 2008. Exports of cigarettes from Germany and Czech Republic to Finland were each about 1.5 bn pieces in 2008. Poland was narrowly in the lead with the delivery of 1.6 bn cigarettes to Finland in 2008.

Danish Buying More German Cigarettes: The average price for Danish cigarette exports fell 2009 to about 30 cents per pack and exports remained strong at nearly 6 bn pieces. Sweden, Norway and Germany were leading export markets.

Imports of cigarettes entering Denmark declined to about 3 bn pieces in 2008. Shipments from Poland to Denmark rose to 725 mn pieces, and deliveries from Germany were 440 mn pieces in 2008. Dutch shipments were slightly greater than German arrivals in 2008.

Denmark has excellent quality cigarettes containing a high proportion of US leaf tobacco.

Sweden’s Cigarette Imports Rebounded Recently: Sweden’s cigarette imports were steady in 2008 at 8 mn pieces. Sweden was an interesting example of how pushing taxes on cigarettes to astronomical levels can apparently reduce actual tax collections. A change in policy with a reduction in taxes reportedly resulted in a lift for tax collections. Poland and Czech Republic increased deliveries of cigarettes to Sweden in the last several years at lower prices than paid for arrivals from Germany and Denmark.

German Cigarette Imports Show Downward Trend: German imports of cigarettes fell from 44 bn pieces in 2008 to about 11% less in 2009. The Netherlands, Austria, Czech Republic, Lithuania, and France are major suppliers of German cigarette imports. Lower prices for certain imported cigarettes appeal to many German smokers.

UK Cigarette Business Suffers From High Retail Prices: It has been difficult for the UK to have very high retail prices for cigarettes in the range of $8 per pack of 20 in the last three years. The high prices tend to contribute to efforts by smokers to find cigarettes where the high taxes have been eluded. Taxes account for over 80% of the retail price for cigarettes distributed through appropriate channels.

The difficult setting in the UK has caused Imperial to focus on investments in other countries to offset sagging sales at home. Imperial accounts for over half of the UK market for cigarettes. Lambert & Butler manufactured by Imperial accounted for 15.5% of UK cigarette sales during recent years. Richmond was the second leading brand. Imperial’s profit rose in recent years.

Imports of cigarettes into the UK were steady during 2007–09. Netherlands, Germany, Belgium, Poland, Romania, and Czech Republic were major suppliers. Czech cigarette shipments to the UK rose to 2.3 bn pieces in 2008, compared with 1 bn for German deliveries.

UK cigarette exports to the Far East were in the range of 25 bn pieces annually during the 1990s, but greater intra ASEAN trade pushed the volume of shipments down to token levels by 2009. Singapore had been a great distribution center for UK cigarettes two decades ago. Also, Hong Kong was once an important market before Asian suppliers gained most of the market. UK cigarette exports from the UK and Iraq declined sharply in the last several years as other suppliers gained a greater market share. Competition from Germany and Netherlands contributed to a steep reduction for UK cigarettes to Saudi Arabia and other markets in the Arabian Peninsula in 2008 and 2009.


Tobacco International - March, 2010

Essentra


Tobacco International is published by Lockwood Publications, Inc., 26 Broadway, Floor 9M, New York, NY 10004 U.S.A., Tel: (212) 391-2060. Fax: (1)(212) 827-0945. Printed in the U.S.A.. HTML production and Copyright © 2000 - 2009 by Keys Technologies and Tobacco International Magazine. All rights reserved.