Trends affecting our industry
The value of the global cigarette market continues to grow and a next generation of tobacco and nicotine products is also being developed and commercialised.
There are an estimated one billion adult smokers worldwide, consuming around 5,600 billion cigarettes a year.
The size of the global tobacco market is estimated at some US$770 billion, of which the global cigarette market is valued at around US$700 billion.
Despite overall industry cigarette volume continuing to decline year-on-year at a global level, the value of the cigarette market continues to grow. We continue to increase our overall market share in our key markets (by 50 basis points in 2016), driven by the strong performance of our Global Drive Brands.
The tobacco industry remains a substantial contributor to the economies of many countries and the livelihoods of millions of people across the globe, including farmers, retailers and those employed in the tobacco supply chain.
Restrictions on the manufacture, sale, marketing and packaging of tobacco products are in place in nearly all countries and markets.
These restrictions include the introduction of plain packaging, product-specific regulation, graphic health warnings on packs, tougher restrictions on smoking in enclosed public places and bans on shops displaying tobacco products at the point of sale.
Sound regulation is important in the tobacco industry and, where it is developed with all stakeholders involved, can help to ensure an orderly marketplace that serves the interests of both consumers and governments.
However, excessive regulation may have unintended consequences. For example, sudden increases in excise rates can distort competition among tobacco companies and may result in consumers switching to cheaper, illegally trafficked products.
The illegal market for tobacco products is an increasing issue for governments and the industry across the world. It is estimated to account for some 460 billion cigarettes and deprives national treasuries of billions in legitimate taxes.
Efforts to tackle the issue of illicit tobacco at industry and government levels have seen some success in recent years. However, the relative punishments versus the profits for illegally selling tobacco products makes them an appealing prospect for criminals.
Next Generation Products (NGP) – alternative tobacco and nicotine products aimed at reducing the risks associated with smoking conventional cigarettes – are constantly advancing, both in terms of technology and market growth.
It is estimated that the global NGP market (excluding the US) will be worth £15 billion by 2020. Currently, these products can be broadly divided into two main categories:
Vapour Products (including e-cigarettes) – devices such as e‑cigarettes that contain no tobacco and deliver nicotine to the user in the form of vapour. Many respected scientists estimate them to be around 95% less harmful than smoking conventional cigarettes.
Tobacco Heating Products – these devices heat tobacco to release the nicotine, but not at a high enough temperature to burn it. This results in far lower levels of toxicants.
In the past five years, we have invested more than US$1 billion in building our Next Generation Products (NGP) business and, alongside our conventional tobacco products, making available a range of new products that meet the evolving preferences of different consumers.
We believe our strategy positions us to capture a significant share of this exciting market and will contribute substantially to our future growth.