GLOBAL TOBACCO: CONTINUITY AND DISRUPTION WT EUROPE 2018
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GLOBAL TOBACCO: CONTINUITY AND DISRUPTION WT EUROPE 2018
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Reinvigorating the core mission
PLEASURE AND MENTAL
WELLBEING
© Euromonitor International
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Reinvigorating the core mission
PLEASURE AND
PLEASURE AND
MENTAL WELLBEING
MENTAL WELLBEING
© Euromonitor International
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
The 2017 global cigarettes market in figures
2.8% = value growth
5,420 billion = in cigarettes
cigarettes consumed
(2.1% ex-CN)
1.4% = decline in US$699 billion =
2017 v 2016 value of global
(3.1% ex CN) cigarettes market
11% = illicit
US$2.58 = average
penetration of total
amount spent per
sales (excluding
pack of 20
China)
19.7% = proportion of 89.4% = cigarettes as
adults in the world share of total value
smoke sales
© Euromonitor International
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Trends in smoking incidence by region
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
0
2012 2017 2022
30
66 million smokers in 2022
20 30
10 20
0 10
2012 2017 2022
0
63 million smokers in 2022 2012 2017 2022
3 million smokers in 2022
% smoking incidence Per capita retail + illicit sticks per day
© Euromonitor International
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Cigarette retail volume projections 2016–2031
Absolute World Volume Growth 2001-2016: +2%
Positive Realist Scenario: Fading status quo; Incrementally stricter excise and regulation; Relatively slow migration to RRP
6000
5000
4000 Absolute:
3000 -18
2000
-33
1000
0 -21
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
World excl China China
Pessimistic Realist Scenario: Significant adoption of RRP in dev markets; Substantially enhanced reg and excise in CN
6000
5000
4000
3000
Absolute:
2000
-31
-45
1000
0 -38
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
© Euromonitor International
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Top 20 cigarettes markets by volume 2017-2032
2017 2032
1 China China • 2016 top 20 = 9 Asia-Pac, 8 Europe, 2 Americas,
2 Indonesia Indonesia 1 MEA
3 Russia USA • 2032 top 20 = 8 Asia-Pac, 6 Europe, 4 MEA, 2
4 USA Egypt Americas
5 Japan Bangladesh
6 Turkey Turkey • Growth in absolute terms will come exclusively
7 Egypt Russia from countries in the AP and MEA regions.
8 Bangladesh Vietnam Advancement in rankings elsewhere is only due
9 India Germany to moderated rates of decline
10 Germany Pakistan
11 Vietnam India • Pakistan will rise furthest (from 16th to 10th) while
12 Italy Philippines Japan will suffer steepest drop (5th to 20th)
13 South Korea Ukraine
14 Ukraine Spain
15 Philippines Algeria
16 Pakistan Mexico
17 Brazil Saudi Arabia
18 Spain Morocco
19 France Italy
20 Poland Japan
© Euromonitor International
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Changing attitudes driven by Generation Z
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 International
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Behaviour reflecting expressed attitudes
The Times of London, 19th December 2014 The Guardian, 10th December 2016
New Scientist, 30th November 2016
• Virtual space expands physical space contracts – smoking is related both to space and time
• Sober but not opposed to substance use – excess is the issue
• Control is cool – recklessness no longer valued as ‘highly’
• The power of social media – ‘socially unacceptable’ behaviour can be shared swiftly
• ‘Your grandfather’s cigarette’
© Euromonitor International
NEW NICOTINE CONSUMER
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Detaching nicotine from the sins of its delivery platforms
© Euromonitor InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION
What shape will the endgame for combustible tobacco take?
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 InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Changing characteristics of the new nicotine consumer
Habitual Considered
Branding Design
Seeking lowest Open to overall
price value
Analogue Digital
Format Format
consolidation fragmentation
Identity Identity
determinant dependent
© Euromonitor InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Evolution of consumption – nicotine v tobacco vapour
Vapour Category Value by Region 2017-2022 (US$ billion)
Western Europe USA Rest of World
14 14 14
12 12 12
10 10 10
8 8 8
6 6 6
4 4 4
2 2 2
0 0 0
2017 2022 2017 2022 2017 2022
• By 2022 balance in two regions remains in favour of liquid nicotine products
• Suggests a balanced portfolio approach is appropriate but heated tobacco much more dynamic.
• Regulatory impact on category evolution projected to become significant (US FDA v EU TPD)
• Strengths v weaknesses of each type of product
• Conversion from trial of HT appears higher
• Nicotine vapour is potentially more malleable
© Euromonitor InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Liquid consumption set to shift back to closed systems
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 InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION
What Japan can tell us about HT growth elsewhere
• 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
• Countries which exhibit some or all of
these characteristics can be expected
to receive heated tobacco more or less
well
© Euromonitor InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Heated tobacco volume estimates in near term
Heated Tobacco Volume (stick) 2016-2021 Estimated
200 11
4
45
150
billion sticks
100 81
50 20
16
26
0
2016 2017 2018 2019 2020 2021
Western Europe NA Eastern Europe Asia-P China Latin America MEA
© Euromonitor InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Significant next gen innovations emerging
Heated Tobacco Nicotine Liquid Alternative Platforms
© Euromonitor InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION
Cannabis presents an opportunity throughout the value chain
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 TOBACCO: CONTINUITY AND DISRUPTION
The growth – especially in vapourisation – is on now …
US Open System Share of Sales
1200
1000
800
600
Cannabis
400
Vapourisation
200
0
2017 2022
Devices E-liquid
© Euromonitor InternationalGLOBAL TOBACCO: CONTINUITY AND DISRUPTION So, substance and platform agnosticism is the future © Euromonitor International
GLOBAL TOBACCO: CONTINUITY AND DISRUPTION Reflected in an increasingly diverse range of competitive activity © Euromonitor International
THANK 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, ಧನ್ಯವಾದಗಳು, 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 ధన్యవాదాలు, 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, ಧನ್ಯವಾದಗಳು, 감사합니다, gratias, paldies, Shane
ačiū, MacGuill
ви благодариме, terima kasih,
Grazzi, Takk, با تشکر از شما, dziękuję, obrigado, mulţumesc,
Headспасибо, хвала,Research
of Tobacco ďakujem, Hvala, Gracias, Asante,
Tack, நன்றி, ధన్యవాదాలు, ขอบคุณ, teşekkür ederim, Спасибо, آپ کا شکریہ, cảm ơn bạn, Diolch yn fawr, ַַא
Shane.MacGuill@euromonitor.com
דאנק, Dankie, falemnderit, شكرا, Շնորհակալություն, sağ olun, Eskerrik asko, Дзякуй, ত োমোকে ধন্যবোদ,
@ShaneMacGuill
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, ಧನ್ಯವಾದಗಳು, 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, ಧನ್ಯವಾದಗಳು,
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 ధన్యవాదాలు, 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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