GLOBAL TOBACCO IN TRANSITION - BRUSSELS, 2018 36TH UNITAB CONGRESS - Fattoria Autonoma ...
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GLOBAL TOBACCO IN TRANSITION 36TH UNITAB CONGRESS BRUSSELS, 2018
Navigating change, reinvigorating the core mission 2
Consumer and technological shifts disrupt the means but core purpose remain
“Mental wellbeing”
© Euromonitor International
The 2017 global cigarettes market in figures
Volume performance best since 2014 but smoking prevalence drop speeds up
2.8% = value growth
5,420 billion = in cigarettes
cigarettes consumed
(2.1% exc China)
1.4% = decline in USD699 billion =
2017 v 2016 value of global
(3.1% exc China) cigarettes market
5,420 billion =
cigarettes consumed
11% = illicit USD2.58 = average
penetration of total amount spent per
sales (exc China) pack of 20
19.8% = proportion of 89.4% = cigarettes as
adults in the world share of total value
smoke sales
© Euromonitor International
Tobacco and vapour market outlook 2017-2022
Cigarette value growth looks increasingly under pressure
World* Volume Outlook by Category 2017-2022 Vapour Products Value
2017-2022
115 350
110 SHISHA
Index 2017=100
105
100
95
90 300
85
80
75
2017 2018 2019 2020 2021 2022
250
Index 2017 = 100
Cigarettes Cigars Fine Cut Pipe Moist Snuff
World* Value Outlook by Category 2017-2022
120
200
115
Index 2017=100
110
105
150
100
95
90 100
2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Closed Systems
Note: *Excluding China Open Systems
© Euromonitor International Heated Tobacco
Vapour products market sizing and user population
Continues to grow but remains almost negligible in total tobacco context
Vapour Products Global Market Size 2012-2022
7% 2%
45
40
US$ billions
35
30
25
20
15
10
5
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Closed Tank Open Tank Heated Tobacco
2011 2017 2022
11 39 64 @ 10 sticks per day
=
235 billion sticks
million vapers impact
© Euromonitor International
Vapour products market sizing and user population
Continues to grow but remains almost negligible in total tobacco context
Vapour Products V Cigarettes Global Market Selected Tobacco Categories Global Market
Size 2012-2022 Size 2017 (US$ billion) 2%
800
700
600
Fine Cut
22.6
US$ billions
500
Tobacco
400
300
200
Cigars
20.8
100 Largest single
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Vapour Products Cigarettes
OTP category
Vapour
Products 17.7
2012 2017 2022 by 2020
Moist
Snuff 11.2
871 874 879
Pipe
Tobacco 5.3
million smokers
© Euromonitor International
Cigarette retail volume projections 2017–2032
Global decline expected in range of 25% to 40% in next 15 years
Absolute World Volume Growth 2002-2017: -2.5%
Positive Realist Scenario: Fading status quo; Incrementally stricter excise and regulation; Relatively slow migration to RRP
6 000
5 000
billion sticks
4 000
Absolute:
3 000
2 000 -33
1 000 -22
0
-28
2017
2018
2019
2020
2021
2022
2023
2034
2025
2026
2027
2028
2029
2030
2031
2032
World excl China China
Pessimistic Realist Scenario: Significant adoption of RRP in dev markets; Substantially enhanced reg and excise in CN
6 000
5 000
billion sticks
4 000
3 000
2 000 Absolute:
1 000 -44
0 -31
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
-39
Note: Absolute -39%
© Euromonitor International
Top 20 cigarettes markets by volume 2017-2032
Global leadership will disperse
2017 2032
1 China China • 2017 top 20 = 10 Asia-Pac, 7 Europe, 2
2 Indonesia Indonesia Americas, 1 MEA
3 Russia USA • 2032 top 20 = 9 Asia-Pac, 5 Europe, 3 MEA, 3
4 USA Egypt Americas
5 Japan Bangladesh
6 Turkey Russia • Growth in absolute terms will come exclusively
7 Egypt Turkey from countries in the AP and MEA regions.
8 Bangladesh Vietnam Advancement in rankings elsewhere is only due
9 India Iran to moderated rates of decline
10 Germany Philippines
11 Vietnam India • Iran will rise furthest (from 16th to 9th) while Japan
12 Italy Pakistan will suffer steepest drop (5th to 16th)
13 South Korea Germany
14 Ukraine Ukraine
15 Philippines Algeria
16 Iran Japan
17 Pakistan Spain
18 Brazil Brazil
19 Spain Saudi Arabia
20 France Mexico
© Euromonitor International
Trends in smoking prevalence by region
Smoking incidence is under pressure across the universe
40
30
30 20
30 10
20
0
20
10 2012 2017 2022
10 66 million smokers in 2022
0
2012 2017 2022 0
2012 2017 2022 30
36 million smokers in 2022
83 million smokers in 2022 20
30 10
20 0
2012 2017 2022
10
558 million smokers in 2022
30 0
2012 2017 2022
20
66 million smokers in 2022
10 30
0 20
2012 2017 2022
10
63 million smokers in 2022
0
% prevalence 2012 2017 2022
Daily per capita retail + 3 million smokers in 2022
illicit
© Euromonitor International
Generation Z: future market driver
World's largest demographic begins to enter the adult consumer equation
Top 10 Countries with the Largest Generation Z Population 2017
20,0
USA
Growth in Generation Z population 2012-2030
China
India
Brazil
%
0,0
Indonesia
Pakistan
Ethiopia
Nigeria
Mexico
Bangladesh
-20,0
10,0 25,0 40,0
Generation Z as percentage of total population, %
Average Gross Income of Population Aged 20-24 by Region 2017
North America
Australasia
Western Europe
Latin America
Eastern Europe
Asia Pacific
Middle East & Africa
0 20 000 40 000
US$
© Euromonitor International
*Generation Z findings apply only to likely future adult consumer behaviourChanging attitudes driven by Generation Z
Generational differentials clear on tobacco
Factors Described as Extremely “Not Smoking is Extremely Important to
Important For Health Globally Health” % by Generation 2015 and 2016
France China
80 100
Not smoking 60
40 50
20
Eating fruit and 0
0
vegetables 2015 2016 2015 2016
Germany Japan
Drinking plenty of water 100 100
50 50
Limited alcohol
consumption
0 0
2015 2016 2015 2016
Regular exercise Russia USA
100 100
Taking dietary
supplements 50 50
0 20 40 60 0 0
2015 2016 2015 2016
2011 2015 2016
Average Gen Z Millenial Gen X
© Euromonitor InternationalStandardised packaging = standardised product In the medium to long term plain packaging is the thinner end of a wedge © Euromonitor International
NEW NICOTINE CONSUMER
Detaching nicotine from the sins of its delivery platforms
Accurate perception of nicotine is central to industry evolution
© Euromonitor InternationalThe JUUL phenomenon Disrupting the emerging harm reduction consensus A wall of pod mods (from left to right): Bo by Jwells, myblu by Imperial Brands, Phix by MLV, Myle by ?, Vuse Alto by BAT, Mate 1 by Vapecinno, MarkTen Elite by Altria, iQ Air by Hangsen, Hexa by Hexa Vapor, Mylo by Mylo Vape, Rubi by Kandy Pens, Infinix and Fit by Smok, Kilo by Kilo E-liquids, Uboat by Kangertech © Euromonitor International
What shape will the endgame for combustible tobacco take?
A mixed picture likely globally but a decisive model could emerge
Fading status quo Coercive Incentivised
• Regulation or excise continues • Becoming a policy framework • Along with consumer
to increase, but not radically in preference, maintenance of
most markets • Potentially involves shareholder value has the
• Reducing nic content potential to slow migration to
• Smoking prevalence and • Sinking lid production cap reduced risk products
denormalisation gradually • Birth year bans
declines as some consumers • State ownership of • Governments could intervene
exit, others slowly migrate to tobacco companies positively (through excise and
reduced risk products occurs • Price control/profit caps regulation) to incentivise and
accelerate this shift
© Euromonitor InternationalNEW NICOTINE CONSUMER
Balance of vapour consumption globally by 2022
E-liquid will dominate in the majority of markets
Predominantly (>70%) Heated Tobacco
Mixed use
Predominantly (>70%) E-Vapour
No data/no market/vapour prohibited
© Euromonitor InternationalLiquid consumption set to shift back to closed systems
E-liquid will dominate in the majority of markets
Retail Value Sales of Closed and Open Vapour Systems 2012- 2022
18
16
14
70% 55%
US$ bn
12
10
8
6
4 45%
2
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Closed System Open System
• Key markets but projected to expand
• Regulatory concerns
• Ease of product use for mainstream
consumer
• Involvement of tobacco and large
independent organisations
© Euromonitor InternationalWhat Japan can tell us about HT growth elsewhere
Transferrable drivers of rapid uptake
• Collective, per-oriented mindset
• Predisposed to novelty/innovation
• Relatively low competition from other
alternative products
• High cultural affinity with tobacco use and
strong identity relationships at the
individual smoker level
• Ability to communicate with consumer
relatively freely
• Favourable tax treatment
• High levels of disposable income
© Euromonitor InternationalEstimated heated tobacco volume by region
Were sales in China to be licensed it would become the 2nd largest market
300
250
About 200 billion
billion sticks
sticks were
200 China not to
allow sales
150
100
50
0
2017 2018 2019 2020 2021 2022
WE NA EE AP CN LA MEA
© Euromonitor InternationalSignificant next gen innovations emerging
If successful could appeal to different demographics enhancing migration
Heated Tobacco Nicotine Liquid Alternative Platforms
© Euromonitor InternationalCannabis presents an opportunity throughout the value chain
But shifts in delivery format and distribution mirror those in tobacco/nicotine
US Cannabis Use & Smoking Prevalence 2007-2019*
c. 200m 25
20
global 15
10
cannabis 5
consumers 0
2007 2009 2011 2013 2015 2017 2019
Cannabis Tobacco
% of WSH State Cannabis Sales by Product**
100
% of total sales
80
60
40
20
0
Dec.14 Mar.15 June.15 Sep.15 Dec.15 Mar.16 Jun.16
Flowers Vapor Pens Concentrates
© Euromonitor International
*Sources: SAMHSA & Euromonitor **Source: HeadsetGLOBAL The growth – especially in vapourisation – is on now …
CBD is already a viable alternative to nicotine
US Open System Share of Sales
1200
1000
800
600
Cannabis
400
Vapourisation
200
0
2017 2022
Devices E-liquid
© Euromonitor InternationalSo, platform and substance agnosticism is the future The industry is only just beginning to metabolise these elements © Euromonitor International
Reflected in an increasingly diverse range of competitive activity From an industry castigated for internal pollution to one addressing external fug © Euromonitor International
Key drivers of a changing industry
Explanatory factors (and open issues) in shift to post-combustible era
• Migration to • Prevalence
vapour products; declines and
increasing generational
viability of other transition
substances
Competing
substances Socio-
and modes of demographic
consumption
Regulatory Technological
squeeze revolution
• Regulation not • Tobacco within a
only as a volume wider
inhibitor but digitalisation
commodifier context
© Euromonitor InternationalTHANK YOU
Thank you … questions
Dankie, falemnderit, شكرا, Շնորհակալություն, sağ olun, Eskerrik asko, Дзякуй, ত োমোকে ধন্যবোদ, благодаря,
gràcies, 谢谢, 謝謝, hvala, děkuji, Tak, dank u, Thank you, Dankon, aitäh, salamat, kiitos, merci, Grazas,
დიდი მადლობა, Danke, σας ευχαριστώ, આભાર, Mèsi poutèt ou, תודה, शुक्रिया, köszönöm, Þakka þér, terima
kasih, Go raibh maith agat, grazie, ありがとう, ಧನ್ಯ ವಾದಗಳು, 감사합니다, gratias, paldies, ačiū, ви
благодариме, terima kasih, Grazzi, Takk, با تشکر از شما, dziękuję, obrigado, mulţumesc, спасибо, хвала,
ďakujem, Hvala, Gracias, Asant Дзякуй, ত োমোকে ধন্যবোদ Дзякуй, ত োমোকে ధన్య వాదాలు, ขอบคุณ, teşekkür
ederim, Спасибо, آپ کا شکریہ, cảm ơn bạn, Diolch yn fawr, אַ דאנק, Dankie, falemnderit, شكرا,
Շնորհակալություն, sağ olun, Eskerrik asko, Дзякуй, ত োমোকে ধন্যবোদ, благодаря, gràcies, 谢谢, 謝謝, hvala,
děkuji, Tak, dank u, Thank you, Dankon, aitäh, salamat, kiitos, merci, Grazas, დიდი მადლობა, Danke, σας
ευχαριστώ, આભાર, Mèsi poutèt ou, תודה, शुक्रिया, köszönöm, Þakka þér, terima kasih, Go raibh maith agat,
grazie, ありがとう, ಧನ್ಯ ವಾದಗಳು, 감사합니다, gratias, paldies, ačiū, Shane MacGuill terima kasih, Grazzi,
ви благодариме,
Takk, با تشکر از شما, dziękuję, obrigado, mulţumesc, спасибо,
Head ofхвала,
Tobaccoďakujem,
Research
Hvala, Gracias, Asante, Tack,
நன் றி, ధన్య వాదాలు, ขอบคุณ, teşekkür ederim, Спасибо, آپ کا شکریہ, cảm ơn bạn, Diolch yn fawr, אַ דאנק,
Shane.MacGuill@euromonitor.com
Dankie, falemnderit, شكرا, Շնորհակալություն, sağ olun, Eskerrik asko, Дзякуй, ত োমোকে ধন্যবোদ, благодаря,
@ShaneMacGuill
gràcies, 谢谢, 謝謝, hvala, děkuji, Tak, dank u, Thank you, Dankon, aitäh, salamat, kiitos, merci, Grazas,
დიდი მადლობა, Danke, σας ευχαριστώ, આભાર, Mèsi poutèt ou, תודה, शुक्रिया, köszönöm, Þakka þér, terima
kasih, Go raibh maith agat, grazie, ありがとう, ಧನ್ಯ ವಾದಗಳು, शुक्रिया, köszönöm, Þakka þér, terima kasih,
Diolch yn fawr, Dankie falemnderit, شكرا, Շնորհակալություն, sağ olun, Eskerrik asko, Дзякуй, ত োমোকে
ধন্যবোদ, благодаря, gràcies, 谢谢, 謝謝, hvala, děkuji, Tak, dank u, Thank you, Dankon, aitäh, salamat, kiitos,
merci, Grazas, დიდი მადლობა, Danke, σας ευχαριστώ, આભાર, Mèsi poutèt ou, תודה, शुक्रिया, köszönöm,
Þakka þér, terima kasih, Go raibh maith agat, grazie, ありがとう, ಧನ್ಯ ವಾದಗಳು, 감사합니다, gratias, paldies,
ačiū, ви благодариме, terima kasih, Grazzi, Takk, با تشکر از شما, dziękuję, obrigado, mulţumesc, спасибо,
хвала, ďakujem, Hvala, Gracias, Asant Дзякуй, ত োমোকে ধন্যবোদ Дзякуй, ত োমোকে ధన్య వాదాలు, ขอบคุณ,
teşekkür ederim, Спасибо, آپ کا شکریہ, cảm ơn bạn, Diolch yn fawr, אַ דאנק, Dankie, falemnderit, شكرا,
Շնորհակալություն, sağ olun, Eskerrik asko, Дзякуй, ত োমোকে ধন্যবোদ, благодаря, gràcies, 谢谢, 謝謝, hvala,
děkuji, Tak, dank u, Go raibh maith agat
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