Generation forecasts tobacco sales hardening

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In 2000 sales of tobacco products in global duty-free reached an estimated $2 billion at consumer prices which represents a significant 20% decrease compared to the results of 1999. Between 1998 and 2000 alone the EU market alone lost sales worth $910m. Tobacco's share of global duty-free sales has plummeted from 24.0% in 1983 to 13.5% in 1991 to 9.7% in 2000 and forecasts estimate this share at only 7.7% in 2010.

However suppliers Generation spoke to for the latest Tobacco Goods Profile report just out, say that the market last year was nothing like as bad as expected. Many report growth overall, especially from the second-half 2000 results and describe the current EU situation as far from the disaster that had been feared. 

The European market has fully adjusted to abolition and consumers generally are still purchasing tobacco when travelling, even when the price advantage is small. This is mainly driven by tax discrepancies between countries. The lack of vendor control also means that consumers are getting accustomed to much larger, duty-paid, pack sizes as they are no longer restricted to the 200 cigarette allowance. In the supplier community Altadis reported that it had succeeded in recovering almost all lost sales from 1999, thanks to the growth of its flagship brand Gauloises Blondes. Reemtsma reported a duty-free sales rise of 19% in 2000 and describes the EU market as "more challenging but definitely viable." Denmark-based House of Prince commented that although retailers seemed to take three-quarters of the year to tackle the problem from July 1999 onwards, it has seen sales increase above what it expected. The situation is also very different in Asia/Pacific where tobacco products overall posted sales growth of 14% in 1999 and similar growth is expected for 2000.

Generation is forecasting annual compound sales growth of tobacco products of 4.0% from 2000 to 2010 which is roughly constant on a sales per passenger basis. Global duty-free tobacco sales are estimated to reach $3,068m in 2010 from $1,995m in 2000. Cigars are forecast to be the fastest-growing segment with annual growth of 4.6% compared to RYO tobacco 4.6% and cigarettes 3.8%.

• For full details of the Generation Profile reports click on www.generation.se or email to: best.n.most@generation.se