Cigarette market in SA: Winston won share, but other big brands lost after ban, survey shows
- A new survey by a UCT research unit shows a big shift in the market share of cigarette brands following the 20-week tobacco sales ban.
- Apart from Winston, most of the large international brands gave up market share to small brands, the survey showed.
- All cigarettes are now pricier than before the ban.
- For more articles, go to www.BusinessInsider.co.za.
The tobacco ban may have brought a permanent shift in South Africa’s cigarette market, a new study shows.
Following its third survey of almost 4,000 smokers this year, the Research Unit on the Economics of Excisable Products (REEP) at the University of Cape Town released its new findings this week.
Tobacco sales were banned for 20 weeks during the first phase of lockdown. Only Botswana (12 weeks) and India (6 weeks) banned tobacco sales in reaction to the pandemic.
Professor Corné van Walbeek, Kirsten van der Zee and Samantha Filby of the unit found that before the tobacco ban nearly 74% of cigarettes smoked by respondents were produced by multinational companies (British American Tobacco, Japan Tobacco International and Philip Morris International). By June their share dropped to 17%, but by September it had increased to 66%.
During the tobacco ban, sales of smaller, Africans brands like Zimbabwe’s Gold Leaf Tobacco, which sells RG and Chicago cigarettes boomed. Gold Leaf faces accusations that it is part of the illegal cigarette trade and that it is evading tax in South Africa.
Gold Leaf’s RG became the single most-sold brand during lockdown. While its market share has fallen since ban was lifted, it is still bigger than BAT’s Dunhill, Rothmans and Kent brands, as well as Philip Morris’s Chesterfield, which were all more popular in the pre-ban period.
Of the international brands, only Winston had a bigger market share after the ban was lifted than in March 2020. Dunhill, Chesterfield, Rothmans, Peter Stuyvesant and Camel all gave up market share.
REEP found that cigarette prices have increased significantly this year. British American Tobacco announced price increases of between 4% and 10% within a week of the lifting of the ban. The reported average price of the multi-national companies’ (MNC) brands was nearly 5% higher in September 2020 than before lockdown, while non-MNC brands were now 30% pricier.
“It seems that the various tobacco companies took the view that smokers had become used to high prices during the sales ban and that they could enhance their profitability by increasing the price, vis-à-vis the pre-ban period, after the ban was lifted. The very substantial increase in the retail price of non-MNC brands means that they are converging towards the MNC prices,” the report found.
“We recommend that National Treasury should increase the excise tax at the earliest opportunity. This will decrease cigarette consumption and increase government revenue,” the authors recommend.
Of the participants, only 9% have successfully quit smoking, and had not relapsed, in response to the ban.
Some 22% of respondents indicated that they smoked more cigarettes after the ban, 38% smoked fewer cigarettes, and 40% smoked the same number of cigarettes as they did before the ban.
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