21 Feb 2018
Posted in Press Release
Australian smoking tobacco market to grow in short term despite tax hikes
Since 2014, the popularity of smoking tobacco has been growing in Australia with legal per capita consumption increasing to 90.8g in 2017. In addition to this, there is a considerable amount of “chop-chop” or illegal loose tobacco available to consumers, according to leading data and analytics company GlobalData.
Smoking tobacco, which includes product segments such as fine cut tobacco (FCT) and pipe tobacco, has been experiencing this growth despite tax hikes. Within these two segments the consumption of pipe tobacco has experienced a steady decline, which is offset by the strong growth in fine cut tobacco, GlobalData says in its report ‘Smoking Tobacco in Australia, 2018’.
The overall smoking tobacco volume consumption has seen an increase of 29.5% between 2007 and 2017.
In the Australian tobacco market, smoking tobacco constitutes the second largest tobacco product sold, the largest being cigarettes. Fine cut tobacco enjoys a vast majority of the product segment within smoking tobacco with a volume share of 99.6% in 2017. The prospects for the Australian FCT market are mixed: in the short term, volumes will continue to expand, despite tax hikes since 2010; however, the long-term prospects are more pessimistic as a result of the ever-tightening regulatory restrictions.
Australia is a highly regulated market and the government has been using tax policies to curb tobacco consumption. Smoking appears to be in decline with the latest data placing adult smoking at only 14.9% compared to almost 30% in 1990.
Ranjan Singh, Tobacco Markets Analyst at GlobalData says, “Current strategies to make the habit more expensive and harder to practice in public can be expected to reduce smoking even further, although at present it does seem that the country’s smoking population has stabilized.”
The market share of manufactured cigarettes had declined from 92.4% in 2007 to 86.9% in 2017, partly because of the rise in the non-duty paid tobacco sector and partly because of rising taxation. This fall has resulted in strong growth of loose tobacco, which is priced competitively against manufactured cigarettes, and subsequently led to the growth of sales in the smoking tobacco sector. Smoking tobacco accounted for 12.6% of overall tobacco consumption in 2017, up from 6.8% in 2007, as the dominance of cigarettes weakened.
There is evidence that the number of smokers moving into the FCT sector is beginning to shape its future in a different way from how it has traditionally operated. Increasingly, the major players are creating a smoking tobacco market that can operate alongside the much larger manufactured cigarette market with similar brands.
Analysts available for comment. Please contact the GlobalData press office at firstname.lastname@example.org.