China: Tobacco Sales Drop Sharply As Anti-smoking Campaign Intensifies

Source from:  Macau Daily Times 12/27/2012

Tobacco sales are reported to have slumped as much as 40 percent this year as anti-smoking campaigns intensify in the city and the industry is bracing for another bleak year in 2013 with an expected 10 percent decline as a new regulation requiring a larger space of health warning on cigarette boxes is taking effect from the beginning of next month. Industry players are being warned of possible layoffs in some companies.

 

The new law requires all cigarette packages to reserve at least 50 percent of their spaces for warning slogans or pictures provided by the Health Bureau on the possible risks caused by smoking. Starting from the 1st of January, retailers selling cigarettes that fail to comply with the new rules will face a MOP 2,000 penalty. In the newspaper stalls where cigarettes are also sold, some operators said they didn't know much about the details of the new rules and fine, they blamed the government for insufficient publicity on the issue. Some dealers also said producers could not change the old packages by this year and some cigarettes might have to be recalled next month for re-packaging. The retail sector would suffer losses as much as hundreds of thousands of patacas for those cigarettes that can't be returned to producers for re-packaging.

One year after the implementation of the anti-smoking law and the hefty increase on tobacco tax, industry players told the media that their sales dropped by as much as 40 percent year-on-year in 2012. They expected another 10 percent dip in the coming year and are preparing to cut operational costs, as well as possible layoff. But the industry stressed it's too early to say if the government's aggressive anti-smoking measures would result in any significant drop of the number of smokers, despite the dramatic fall on sales. 

To coordinate with the implementation of anti-smoking laws, the government ordered a dramatic upward adjustment of tobacco tax at the end of last year, from MOP4 to MOP10 for each box of tobacco containing 20 cigarettes. The new tax meant many smokers resorted to the mainland for cheap alternatives that are yet to pay the Chinese duties. Industry players said the Custom's crackdown on illicit cigarette smuggling has greatly reduced the number of cigarettes circulating in the black market but further efforts are needed to tackle the problem. 

Facing a new year of challenges in new regulations and tax burdens, the industry is yet to see massive closures but warned that massive sacking of employees is possible if conditions continue to deteriorate. Enditem