Although BAT, whose biggest brands include Rothmans and
Peter Stuyvesant, has about a 93% share of the local tobacco market, Japan
Tobacco International, which has been in SA since 1997, has gradually grown its
share to about 5% with brands such as Camel and Winston. Swedish Match, which
entered SA in 1999 through the acquisition of Leonard Dingler and two other
tobacco-related businesses, describes SA as one of the group's more important
markets. It sells Taxi snuff as well as Boxer and Black and White pipe tobacco.
Two years ago Philip Morris, which is the biggest tobacco
group in the world, established an office in SA, from which it sells Marlboro.
Earlier this month, the Financial Times reported that Gallaher, maker of Benson
& Hedges and Silk Cut cigarettes, was buying a factory site in SA and would
start production later this year. The Daily Dispatch in East London reported
last month that Carolina Tobacco was about to start production at a factory in
Wilsonia, replacing liquidated African American Tobacco. Tobacco Institute of SA
chairman and CEO Francois van der Merwe says the local tobacco market is
shrinking, but is still a good market. "However, we don't know for how
long."
One of the advantages of SA is that it offers a
springboard to the rest of Africa. In SA, 23- 25-billion cigarettes are consumed
a year and the equivalent of about another 8-billion cigarettes is consumed in
the form of pipe tobacco, hand-rolled cigarettes and snuff. But in the past 10
years consumption of cigarettes has fallen by about a third as a result of
strict laws and higher taxes. It is estimated that the illicit trade, including
smuggled and counterfeit products, accounts for about 10%-15% of cigarettes
consumed in SA, Van der Merwe says. In the last budget, duty on tobacco products
rose between 7% and 15%. The health department has also put forward proposals to
make current restrictions on promoting tobacco products even more stringent. Van
der Merwe says the new proposals include further limits on smoking in public
places, with an increase in fines for contravention and a complete absence of
tobacco product displays at points of sale.
Tobacco warnings on packets will also have to be increased
and the tobacco industry will be prohibited from social spending. SA is not the
only developing market where international tobacco groups are establishing a
foothold. According to a report last year from the United Nation's Food and
Agriculture Organisation (FAO), world tobacco consumption in developed markets
is expected to continue declining until 2010 while demand in developing
countries will keep rising.
In Africa, tobacco demand grew throughout the 1990s and
reached a record growth rate of 3,5% in 2003. According to the FAO this growth
rate is expected to be maintained until 2010. Philip Morris recently agreed to
acquire a 40% stake in Sampoerna, one of Indonesia's biggest cigarette firms,
for 5,2bn. Indonesia is the fifth-largest cigarette market in the world after
China, the US, Russia and Japan. The Economist Intelligence Unit says in this
month's outlook for the global tobacco industry that access to China is a
priority. But the Chinese government is reluctant to allow foreign companies to
do more than sign distribution agreements with Chinese companies, and it said in
January that no new cigarette plants would be built, even as joint ventures
between international and Chinese companies.
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(Source: All Africa, March 31, 2005)
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