Brazilian Cigarette Industry Led by Souza Cruz with a 76% Volume Share

Source from:  Companiesandmarkets.com 11/14/2013

The Brazilian cigarette industry posted a volume decline in 2012, predominantly as a result of the rise in unit prices driven by the rise in taxation, of IPI, made by the Brazilian Government.

In March 2012, ANVISA prohibited the production, imports and sale of cigarettes containing additives such as menthol, gillyflower, chocolate and cinnamon flavours.

This is part of the strategy to discourage young consumers from starting to smoke, as it is claimed that the presence of additives in cigarettes attracts young consumers due to the sweet and light flavour.

Cigarette manufacturers will have 12 months to adjust their production to the new measure and six months to remove all products available in points-of-sale.

The approval of this new regulation represented a downfall for tobacco manufacturers, which had used scientific studies to attempt to prove that the use of these additives does not contribute to the addiction of smokers.

One of the major problems for the government proposal is the strength of the illegal market for cigarettes in Brazil, that corresponds to 35% of the consumption in the country and it is estimated to cause a loss of US$ 650 million to the federal government every year.

The illegal market for cigarettes increase the consumption as the illegal products are sold at a lower price, forcing the formal market to decrease prices as well.

According to a recent market report, 'Cigarettes in Brazil,' Souza Cruz is the key leader in Brazil's cigarettes industry, holding a 76% volume share in 2012. The top four brands belong to Souza Cruz - Derby, which remains the leader with a 29% share, Free, Hollywood, and Dunhill.

In 2012, the company experienced a significant decline in market share for some important brands such as Derby and Free. Derby continues to be negatively impacted by the illicit market.

Wider restrictions on the tobacco industry are expected to continue in the near future, affecting areas such as the advertising of cigarettes at points-of-sale and the use of additives, such as sugar, in the production of tobacco. Enditem