Asia''s Cigarette Markets Overview

Source from:  Tobacco Asia  02/11/2014

Following on from last issue's coverage of the NTA meeting held last April 18 in Singapore, we look at South Korea, Taiwan and Singapore.　

South Korea

Around 9 million South Koreans (26.3% of the population) smoke about 88 billion sticks annually, according to the Korea Tobacco Association, making it the 11th largest tobacco consuming nation in the world. Koreans smoke an average of 1,866 sticks per person per year, way above the world average of 844 sticks as noted in the ERC global data base of 2011. In 1980, the number of Koreans that smoked was 79.3%. By 2008, this number had shrunk to 47.7%.

The number of smokers has remained relatively static over recent years.

Super Slims account for about 30% of market share and super low tar segment has grown significantly, to hold approximately 35% of the market share. Charcoal filter and full flavored brands are also popular.

Taxes account for about 62% of the price of a pack of cigarettes which typically range from KRW2,500 to 2,700 (US$2.2 to 2.38) per pack of 20.

Tobacco farming employs around 4,000 people, another 10,000 are involved in tobacco products and related manufacturing industries and tobacco sales retailers account for a further 130,000 persons.

Reducing the number of underage smokers is a major target for government anti-smoking strategies with an estimated 11% of under-age Koreans believed to be smokers: 15% of all male youths under the age of 20 are reckoned to be smokers, a figure the government aims to reduce to 12% by 2020.

Raising taxes is seen as a prime factor in helping to achieve a reduction in smoking among all groups with the phased introduction of a KRW7,000 (US$6.2) tax increase on a pack of cigarettes coupled with strict non-pricing policies from 2013 onwards.

The legislative climate is dominated by the Tobacco Business Act governing raw materials, manufacturing, sales, import and export segments and the National Health Promotion Act which covers advertising and promotion restrictions and the collection of the National health Promotion Fund. Smoking ordinances are governed by three distinct authorities, the Ministry of Health and Welfare and the Ministry of Strategy and Finance for the central government, local government authorities and the Health, Welfare Affairs Committee of the National Assembly.

Smoking is currently banned in large buildings, most public facilities, schools and transport facilities. Partial bans exist for restaurants and cafes, with a total ban on smoking in restaurants to be imposed by 2015. Future plans include a total ban in public facilities and outdoor areas other than those specifically designated as smoking areas.

Health warnings and other information currently cover 30% of the front back and sides of a pack, GHW, descriptor bans and plain packaging are all being discussed for future implementation.

Taiwan

Taiwan is not an FCTC signatory, but it has adopted aggressive anti-smoking policies and continues to debate ever-more stringent regulations.

As of 2011, an estimated 18.7% of Taiwanese adults smoke, down from 24.1 million in 2004.

Taiwan has long been a major importer of foreign brands (the market was opened in 1987), but since 2007 domestic brands have increased market share from 40% to 59% in 2012.

The Tobacco Hazards Prevention and Control Act came into effect in 1997, the first set of amendments were introduced from 1999 to 2002, the second stage from November, 2005 to June, 2007, implemented after an 18 month grace period in January, 2009. Current regulations require 35% front and back text and GHW warnings and impose a total smoking ban (with some exemptions) in indoor public places and workplaces and further restrictions in entertainment and dining facilities. Only one pack of any brand may be displayed in a store, and cigarettes may not be presented in packs of less than 20 sticks.

A tobacco health surtax of NT$20 (US$0.67) is levied per pack together with tobacco excise of NT11.8.

Proposed future amendments to the regulations include a NT$20 increase in tobacco excise; a further increase of NT$80 in the tobacco health surtax to be introduced in stages over seven years, increasing GHW coverage from the current 35% to 70%; plain packaging; a comprehensive display ban, including in duty-free areas; a total smoking ban in indoor public and work places and the designation of permitted outdoor smoking areas and a total ban on duty-free sales.

The illicit tobacco trade has long been a thorn in Taiwan's side. Taiwan's duty unpaid segment was estimated to account for 5.3% of total sales in 2012, or almost 2 billion sticks. In 2010, it was estimated to be 7.6%.

The Tobacco Institute of the Republic of China (TIROC) signed a Memorandum of Understanding with the government in 2005 to promote joint efforts between the authorities and the industry including the sharing and exchange of information, mutual assistance in search and seizure of smuggled goods and media communication and relevant public announcements.

TIROC has held an annual anti-illicit trade conference since 2007 attracting representatives of industry, government and academia to discuss the issues.

Singapore

About 14.3% Singaporean residents smoke 2.6 billion sticks annually, purchasing their cigarettes from around 5,000 licensed retailers. Full flavor products predominate with a 57.3% market share, followed by lights (39.5%) and ultra lights (3.5%).

The pack of a price of cigarettes in Singapore is significantly higher than in neighboring Asian countries, so it is not surprising that illicit sales have historically been a major issue in Singapore, with genuine non-domestic (GND) products apparently seeing a significant rise in market share. Most GND products originate in Indonesia and Malaysia. The government introduced new regulations in March, 2013, that require markings to be printed on each stick to make it easier for enforcers to identify duty paid cigarettes from illicit brands coupled with hefty fines and the possibility of a jail sentence to encourage smokers to stick with duty paid products. The domestic industry has worked closely with the government and supports this initiative.

Singapore's strong antismoking initiatives are well-known, but an outright ban seems unlikely anytime soon.

"There are significant practical difficulties and risks in implementing and enforcing such a measure and it may not result in the desired reduction in smoking rates," according to health minister Gan Kim Yong, quoted in April, 2012.

Smoking bans were initially introduced in 2005 covering specific public places, expanded in 2006 to include coffee shops without designated smoking areas, hawkers centers and non-air-conditioned foods shops, amended in 2007 to include restrictions for entertainment outlets and again in 2009 to cover shopping centers, factories, offices, markets, car parks, ferry terminals, lift lobbies, hotel lobbies, playgrounds and exercise areas and entrances. Further restrictions were imposed from January 15, 2013, covering more public areas such as covered drop-off or pick up points for passengers and common areas of residential buildings. However, enforcement is not 100%, social pressure is regarded as a more compelling factor in getting smokers to adhere to the regulations.
The government is aiming to eventually limit smoking to designated areas.

As of March 1, 2013, certain descriptors including light, low tar mild and ultra light are banned, new GHW images are required on 50% of the front and back of packs an cartons as well as test warnings on one side replacing tar and nicotine contents and No Sale to Persons Under-18 is imposed on a side panel.

The government is targeting a 10% smoking incidence by 2020 and as part of this strategy the Ministry of Health is considering a point of sale display ban, a move that has retailers concerned and which has sparked fears of a possible impact on illicit trade. Enditem