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Chinese tobacco market dominated by China National Tobacco

Industry Sector

Consumer Goods

Published

23 November 2012

Author

Mike King

Type of News

Market

The Chinese tobacco market has been forecast to record steady volume growth over the next five years. Although several smoking control regulations have been implemented by the government, such as public smoking bans, they are not forecast to have much impact on the volume consumption of tobacco. Meanwhile, the price rises brought about by ad valorem excise tax adjustments are not expected to affect domestic smokers' consumption of tobacco products.

Over the past five years, the restructuring and integration of China's tobacco market steadily continued. Supported and supervised by the government and the STMA, leading tobacco companies in China made persistent efforts in terms of product quality control and research and development, with the aim of strengthening brand image and improving market penetration.

The figures are overwhelming. China manufactures 2.3 trillion cigarettes per year, inhaling most of them itself. About 57% of men smoke, though just 3 to 4% of women.

Six out of 10 doctors and professors smoke -- at work, too. The World Health Organisation estimates that tobacco kills a million Chinese yearly and that the figure will double by 2020. Lung cancer is up 465% since 1980 and accounts for nearly a quarter of cancer deaths. Smoking is on the rise, as elsewhere in the developing world.

Though more than 99% of the country's tobacco market is dominated by China's state-owned tobacco company, companies like British American Tobacco, which makes Lucky Strike and Pall Mall cigarettes among others, are slowly making inroads there. BAT recently announced that it is in discussions with the Chinese government to set up a joint venture in China.China National Tobacco

BAT is no stranger to the Chinese market. The recent WHO report notes that the company hands out free samples of its 555 brand of cigarettes at nightclubs in Beijing in an effort to attract the youth market, including women.

Last year, China National Tobacco, the state-owned tobacco company, generated $76 billion in taxes and profit, a year-on-year rise of $8.2 billion. Of that, $61 billion was taxes. The profit figure -- $14.3 billion -- far outstrips even Philip Morris International, the world's largest transnational tobacco company, which posted net earnings of $6.3 billion last year.

For more information on the Chinese tobacco market, see the latest research: Chinese Tobacco Market

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