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September, 2009

World tobacco sales fall by 19.3%

In the first quarter of 2009, global duty free and travel retail tobacco sales slumped by 19.3% compared with the same quarter in 2008 according to the TREND Tobacco Index which is based on actual audits of retail sales among a panel of locations worldwide.

"This is probably the worst quarter ever recorded for the tobacco business which has been battered in travel retail and elsewhere", says Yngve Bia, President Generation Research. "Sales were especially poor onboard airlines with a sales decline of 26.5%. Also airport sales were down steeply by 24.0%".

Sales in Asia Pacific and the Middle East held up relatively well in 1Q 2009 whilst significant drops were recorded in Europe (-21.2%) and the Americas

(-12.3%). In Europe it is especially intra-EU duty-paid sales that have suffered, down by 21.6% in Euros and equal to a drop of 31.5% in US dollars.

Amidst concerns of dramatically falling sales numbers, the tobacco industry is also faced with the challenging fact that many governments around the world - and particularly some in Asia - are considering supporting a ban on duty free cigarettes as part of the Framework Convention on Tobacco Control (FCTC).

Cigarette sales slumped 19.0%; Cigar sales plummeted 23.0%; and Cut Tobacco joined on the downside with a drop of 19.9% in sales. In the overall duty free and travel retail tobacco market some companies managed to improve their market shares including market leader Philip Morris stretching its lead from a 35.5% market share in 1Q 2008 to 35.6% in 1Q 2009. Among the Top 4 Companies, the biggest loser was BAT that saw its market share being reduced by 0.67% to 25.6%.

The global duty free and travel retail tobacco market is totally dominated by the Top 4 Companies Philip Morris International, BAT, JT International, and Imperial Tobacco that together represent 88.7% of global sales in value terms.

Additional cigarette brands that kept or improved their market shares in 1Q 2009 as compared to 1Q 2008 include market leader Marlboro as well as Rothmans, Winston, Lucky Strike, Davidoff, and Karelia. Important brands losing market share included B&H and Silk Cut.

Cigar sales tumbled 23.0% in 1Q 2009 vs 1Q 2008. Among the top brands market leader Davidoff saw its market share drop from 13.4% in 1Q 2008 to 12.6% in 1Q 2009. Additional major cigar brands with falling market share numbers included Cohiba, Romeo y Julieta, King Edward, and Hoyo. Cigar brands strengthening their importance and market share included Villiger, Danneman, and Partagas especially.

Meanwhile, sales of Cut Tobacco plunged 19.9% in 1Q 2009 versus 1Q 2008. Market leader Golden Virginia lost 1.8% points in market share ending 1Q 2009 with a share of 24.1% of the global Cut Tobacco market. Among the major brands also Port Royal, General, and Borkum Riff experienced declining market share numbers.

In roll-your-own tobacco, Drum showed progress in terms of gaining market share, whilst both van Nelle and Samson lost market share.

China to ban tobacco ads by 2011
Beijing - China will ban tobacco advertisements and promotion activities starting from January, 2011, Xu Guihua, vice chairmen of the Chinese Association on Tobacco Control said, according to the Beijing News.

In addition, the cost of advertisements and promotions will also no longer be able to be deducted from business income taxes of tobacco companies, the Ministry of Finance and the State Administration of Taxation announced recently. Previously, advertising expenditure could be deducted from business income taxes, giving companies an incentive to spend more on advertising.

Taliban turn to tobacco smuggling
Islamabad - The smuggling of tobacco is helping to fuel the Taliban insurgency in Pakistan, according to analysts and officials. While the poppy trade still contributes nearly half of the funds funneled to the Taliban - both in Afghanistan and Pakistan - officials now believe the militants are increasingly turning to other sources.

According to the World Health Organization, cigarette and tobacco smuggling provides about $40bn a year to extremist groups, including the Taliban. Analysts inside Pakistan estimate the group receives about 20% of its funding from counterfeit cigarette production and smuggling.

According to analysts based in the US, factories churning out millions of counterfeit cigarettes every month have been set up across the lawless parts of northern and western Pakistan where the Taliban operate and the government has little sway. The Taliban take taxes and provide protection for the shipment of cigarettes across the country for sale in Central Asia.

Turks rally against smoking ban
Ankara - According to a BBC report hundreds of Turks have taken to the streets of Ankara to protest against a ban on smoking in bars and restaurants enacted in in July.

Many of the protesters are cafe owners who say the ban is hurting trade and want smoking to be allowed in special areas of their establishments. The government banned smoking in most enclosed public spaces in May last year and extended the ban in July. Turkey has 20 mn smokers but polls suggest most people support the ban.

Turkey aspires to become a member of the EU, and the ban brings the country into line with most EU countries. Anyone caught lighting up in a designated smoke-free area faces a fine of 69 lira ($45; £28). Bar owners who fail to enforce the ban could be fined from 560 lira for a first offence up to 5,600 lira. The protest included about 1,000 protesters gathered in a park outside the health ministry buildings.

United States
FDA moves to implement tobacco “advisory committee”
Washington, DC - The US Food and Drug Administration (FDA) says it has officially established the Tobacco Products Scientific Advisory Committee. The FDA said establishment of the committee is a step toward full implementation of the recently enacted Family Smoking Prevention and Tobacco Control Act. The federal agency said the committee will provide advice, information, and recommendations to the Commissioner of Food and Drugs on health and other issues relating to tobacco products. The FDA said the committee will be asked to consider a variety of topics, including: Identifying effects of the alteration of the nicotine yields from tobacco products; Reporting on the impact of the use of menthol in cigarettes; Advising on an application for modified risk - such as the use of descriptors such as "light" in selling tobacco product.

The committee will consist of 12 members, including a chairman or chairwoman to be selected by the FDA commissioner from among experts knowledgeable in the fields of medicine, medical ethics, science or technology involving the manufacture, evaluation or use of tobacco products. There will be nine voting and three non-voting members, the FDA said.

Tobacco International - September, 2009

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