Oriental Tobacco News: World Tobacco Development Report 2023 (Part 1)

Oriental Tobacco News: World Tobacco Development Report 2023 (Part 1)

 

In 2023, the world economy will grow slowly, tobacco regulation will face many challenges, and the tobacco industry will develop in a complex and changing environment. The sales of combustible tobacco products such as cigarettes, cigars, pipe tobacco, and hand-rolled cigarettes have all declined.

 

The sales of legal cigarettes in the world outside mainland China are 54.679 million boxes, a year-on-year decrease of 2.1%; the sales revenue growth rate of heated cigarettes and e-cigarettes remains above 10%, and the high-speed growth of nicotine bags remains unabated.

 

In 2023, the world economy will grow slowly, tobacco regulation will face many challenges, and the tobacco industry will develop in a complex and changing environment. The sales of combustible tobacco products such as cigarettes, cigars, pipe tobacco, and hand-rolled cigarettes have all declined.

 

The sales of legal cigarettes in the world outside mainland China are 54.679 million boxes, a year-on-year decrease of 2.1%; the sales revenue growth rate of heated cigarettes and e-cigarettes remains above 10%, and the high-speed growth of nicotine bags remains unabated.

 

The proportion of sales of various tobacco products in the world in 2023

World cigarette sales and growth rate from 2019 to 2023

Development Environment

 

(I) World Economic Recovery

 

In 2023, the World Health Organization announced that the COVID-19 pandemic no longer constitutes an "international public health emergency". The world finally emerged from the shadow of the COVID-19 pandemic, the economy entered a recovery process, and technological innovation and application such as artificial intelligence made rapid progress. However, the international situation continues to be turbulent, trade protectionism prevails, the inflation situation remains severe, and the continued negative impact of the epidemic on the supply chain has seriously dragged down the pace of economic recovery. World economic growth remains slow and uneven.

 

(II) Tobacco use continues to decline

 

The World Health Organization's "Global Tobacco Use Trends Report 2000-2030" shows that in 2022, about one-fifth of adults in the world use tobacco, a significant decrease from one-third in 2000. There are 1.25 billion tobacco users in the world, of which more than 1 billion are men and more than 200 million are women. The global tobacco use rate is 20.9%, the male tobacco use rate is 34.4%, and the female tobacco use rate is 7.4%. Southeast Asia has the highest tobacco use rate, at 26.5%. Europe follows closely behind at 25.3%, with the tobacco use rate among women in Europe more than twice the global average. 150 countries have successfully reduced tobacco use rates, with some countries having seen little change in tobacco use rates since 2010, and six countries, including Congo, Egypt, Indonesia, Jordan, Oman and Moldova, showing an upward trend in tobacco use rates.

 

(III) Unbalanced regulation of e-cigarettes

 

With the continuous innovation and rapid popularity of new tobacco products such as e-cigarettes, their social impact and controversy are also increasing, and calls for regulation are growing. In 2016, the Seventh Conference of the Parties to the Framework Convention on Tobacco Control urged Parties to consider applying regulatory measures to prohibit or restrict the manufacture, import, distribution, display, sale and use of e-cigarettes in accordance with the national laws and public health objectives of the Parties. According to the World Health Organization's "2023 Global Tobacco Epidemic Report: Protecting People from the Harms of Tobacco Smoke" sponsored by Bloomberg Philanthropies, a total of 121 countries regulate e-cigarettes in some way, of which 34 countries ban the sale of e-cigarettes, covering a population of 2.5 billion; 87 countries have taken one or more legislative measures to regulate e-cigarettes, covering a population of 3.3 billion. The regulatory schemes currently adopted by these 87 countries are different, and there is no global universal approach to managing e-cigarettes. At present, there are still 74 countries (7 fewer than in 2020) that have not formulated bans or regulations on e-cigarettes, covering a population of more than 2 billion.

 

(IV) US FDA supervision is frequently challenged

 

In 2009, the United States passed the Family Smoking Prevention and Tobacco Control Act, granting the U.S. Food and Drug Administration (FDA) extensive tobacco regulatory powers, but more than ten years have passed, and the operation of this regulatory mechanism has been exposed, the regulatory authority has been constantly challenged, and the regulatory effect has been questioned. The gap between ideal and reality has led to dissatisfaction from many parties. Recently, the FDA has been in trouble in promoting four regulatory measures:

 

The ban on menthol is difficult to implement. As early as 2013, the FDA received a petition to ban menthol cigarettes. Because it did not take action, the petitioner filed a lawsuit in 2020. The FDA had to announce new product standards in 2021 on the grounds of public health issues, and planned to ban menthol cigarettes and flavored cigars in 2022. However, since menthol cigarettes account for one-third of cigarette consumption in the United States, tobacco companies have expressed their willingness to fight to the end in law, and African Americans and other people of color have a high proportion of smoking menthol cigarettes. The ban plan has to be delayed again and again, and it is expected that it will be difficult to reach a conclusion before the presidential election.

 

The chaos in the e-cigarette market is difficult to ban. On the one hand, the FDA stipulates that e-cigarettes must first submit a pre-market application (PMTA) and obtain a marketing authorization order (MGO) before they can be put on the market for sale. However, the number of PMTAs submitted is large, and the FDA has repeatedly delayed because it cannot complete the review on time. Currently, only 23 tobacco-flavored e-cigarettes have been approved for listing. The approved products are not popular with mainstream users, and the unauthorized products have not been removed from the shelves. On the other hand, illegal disposable flavored e-cigarettes are rapidly spreading in the United States, especially among American teenagers. The FDA has repeatedly sent warning letters and fined manufacturers, importers, retailers, etc., and carried out joint law enforcement actions with customs, etc., but it is still difficult to stop the spread of disposable e-cigarettes.

 

Litigation over graphic warnings on cigarette packaging continues. In 2011, the FDA issued the "Regulations on Warning Requirements for Cigarette Packaging and Advertising". Five tobacco companies subsequently sued the FDA for violating the freedom of speech rights of the First Amendment of the U.S. Constitution and violating the Federal Administrative Procedure Act. After appeal, the FDA lost the case in 2012. In 2019, the FDA again proposed regulations on the use of graphic warnings on cigarette packaging and tobacco advertisements. This time, the FDA was sued by tobacco companies again. The first instance was still determined to violate the First Amendment of the Constitution and was sentenced to revoke the regulations, but the FDA won a phased victory in the subsequent appeal. It is expected that the judicial dispute over graphic warnings will continue.

 

There are constant disputes over the regulation of handmade premium cigars. In 2016, the FDA introduced new regulations to include non-cigarette tobacco products such as cigars and e-cigarettes under regulation. Cigars need to submit PMTA before they can be put on the market, which has aroused strong opposition from handmade premium cigar manufacturers. Handmade premium cigars account for less than 3% of all cigar sales in the United States. The entire industry consists of dozens of small family manufacturers and thousands of small independent stores across the country, which can hardly bear the heavy regulatory costs and burdens. As a result, three cigar associations took the FDA to court, demanding exemption from regulation. In 2023, handmade premium cigar manufacturers won, but the FDA subsequently appealed. At present, several members of Congress have written to the FDA, proposing a motion to request the FDA to exempt handmade premium cigars, citing the 2022 research report "Premium Cigars:

Usage Patterns, Marketing, and Health Impacts" commissioned by the FDA and the National Institutes of Health and the National Academy of Sciences, Engineering, and Medicine (NASEM) of the United States. The report pointed out that most handmade premium cigar consumers are occasional rather than daily smokers, and only 1% of adults smoke handmade premium cigars, and there are very few young people. Therefore, handmade premium cigars should be treated as a separate category.

 

Various tobacco products

 

In 2023, the world's sales of various tobacco products will be US$645.65 billion, of which cigarettes account for 78.5%, cigars and other combustible tobacco products account for 9.6%, and smokeless tobacco products such as heated cigarettes and e-cigarettes account for 11.9%. (Data on various tobacco products are from the Euromonitor International database, excluding data from mainland China)

 

(I) Cigarettes

 

In 2023, the world's legal cigarette sales will be 54.679 million boxes, a year-on-year decrease of 2.1%. There are 15 countries with annual sales of more than one million boxes, accounting for a total of 59.7% of the world, of which Indonesia (5.652 million boxes), Russia (3.644 million boxes), and the United States (3.557 million boxes) rank among the top three in the world; Turkey has the highest sales growth rate, a year-on-year increase of 17.7%; the United States has the largest decline, a year-on-year decrease of 8.7%. The world's legal cigarette sales are US$506.97 billion, a year-on-year increase of 1.5%. There are 14 countries with annual sales exceeding US$10 billion, accounting for 62.4% of the world's total. The United States (US$93.99 billion) is in an absolute leading position in the world, followed by Indonesia (US$35.77 billion) and Germany (US$25.00 billion); Turkey has the highest sales growth rate, up 25.1% year-on-year; Russia has the largest decline, down 11.2% year-on-year. Poland withdrew from the ranks of cigarette sales of one million boxes and US$10 billion in 2023.

 

In 2023, the world's illegal cigarette trading volume was 9.336 million boxes, up 7.8% year-on-year. The countries with trading volumes exceeding 500,000 boxes include Brazil (988,000 boxes), Pakistan (828,000 boxes), India (664,000 boxes), Indonesia (586,000 boxes), and Russia (531,000 boxes). The global illegal cigarette penetration rate (the proportion of illegal cigarette transactions to total cigarette consumption) is 14.6%. Countries with a penetration rate of more than 50% include Panama (84.5%), Ecuador (76.7%), Peru (58.5%), Uganda (57.9%), and Malaysia (55.6%).

 

Markets with cigarette sales exceeding one million boxes and sales exceeding US$10 billion in 2023

(II) Cigars and other combustible tobacco products

 

Traditional cigars. In 2023, sales of traditional cigars fell by 9.1% year-on-year to 6.95 billion. Countries with sales exceeding 100 million are the United States (5.27 billion), Cuba (310 million), Spain (280 million), Italy (180 million), Germany (150 million), France (140 million), and the Netherlands (110 million). The United States accounts for about 75.8% of the world's sales, and sales fell by 11.4% year-on-year. Traditional cigar sales were $17.92 billion, down 1.8% year-on-year. The only countries with sales exceeding $1 billion were the United States (US$11.02 billion) and Cuba (US$1.27 billion). The United States accounted for 61.5% of the world's sales, and sales fell by 7.7% year-on-year.

 

Mini cigars. In 2023, sales of mini cigars fell by 13.6% year-on-year to 19.34 billion. The countries with sales exceeding 1 billion are the United States (6.06 billion), Japan (3.20 billion), Germany (2.51 billion), and Spain (1.58 billion). The sales of micro cigars were $7.23 billion, down 5.9% year-on-year. The only country with sales exceeding $1 billion is the United States (2.71 billion).

 

Hand-rolled cigarettes. In 2023, the sales of hand-rolled cigarettes will be 99,000 tons (equivalent to 2.827 million boxes of cigarettes), down 3.8% year-on-year; sales will be $29.80 billion, up 3.7% year-on-year; the countries with sales exceeding $1 billion are the United Kingdom (6.41 billion), Germany (4.55 billion), Australia (3.46 billion), France (3.26 billion), Italy (1.82 billion), and Spain (1.37 billion).

 

Pipe tobacco. In 2023, the sales volume of pipe tobacco was 129,000 tons (equivalent to 668,000 boxes of cigarettes), a year-on-year decrease of 1.1%; the sales volume was US$7.08 billion, a year-on-year increase of 1.1%; the countries with sales exceeding US$1 billion include Saudi Arabia (US$1.8 billion) and the United States (US$1.52 billion).

 

(III) Smokeless tobacco products

 

Heated cigarettes. In 2023, the sales volume of heated tobacco products was 40.4 million pieces, a year-on-year increase of 18.2%; the sales volume was US$2.12 billion, a year-on-year increase of 13.3%. The sales volume of heated cigarettes was 3.196 million boxes, a year-on-year increase of 12.4%; the countries with sales exceeding 100,000 boxes include Japan (1.132 million boxes), Russia (473,000 boxes), Italy (291,000 boxes), South Korea (244,000 boxes), Poland (142,000 boxes), and Ukraine (114,000 boxes). Among them, Japan's sales accounted for 35.4% of the world, and sales increased by 12.3% year-on-year. The sales of heated cigarettes reached 34.44 billion US dollars, an increase of 11.6% year-on-year; the countries with sales exceeding 1 billion US dollars include Japan (11.49 billion US dollars), Italy (4.55 billion US dollars), Russia (2.58 billion US dollars), South Korea (2.48 billion US dollars), Germany (1.47 billion US dollars), Poland (1.27 billion US dollars), and the Czech Republic (1.10 billion US dollars). Among them, Japan's sales accounted for 33.7% of the world, and sales increased by 11.6% year-on-year.

 

Electronic cigarettes. In 2023, the sales volume of electronic cigarettes in terms of liquid was 16.119 million liters, an increase of 6.9% year-on-year; the total sales of liquid and smoking utensils was 20.88 billion US dollars, an increase of 15.6% year-on-year; the countries with sales exceeding 1 billion US dollars include the United States (5.96 billion US dollars), the United Kingdom (3.30 billion US dollars), Canada (2.14 billion US dollars), and France (1.26 billion US dollars). From the perspective of e-cigarette categories, the sales of open e-cigarettes that need to be refilled with liquid e-cigarettes reached US$7.66 billion, a year-on-year increase of 7.5%, accounting for 36.7% of e-cigarette sales; the sales of closed e-cigarettes reached US$13.22 billion, a year-on-year increase of 20.8%, accounting for 63.3% of e-cigarette sales, of which disposable e-cigarettes continued to grow rapidly, up 54.9% year-on-year to US$5.37 billion.

 

Traditional oral tobacco. In 2023, the sales of traditional oral tobacco, including chewing tobacco, American snuff, and Swedish snuff, continued to decline, down 1.8% year-on-year to 116,000 tons; sales continued to grow, up 2.2% year-on-year to US$13.83 billion, of which US sales accounted for 75.3% of the world.

 

Nicotine pouches. In 2023, as a tobacco product that has rapidly emerged in recent years, nicotine pouches continued to maintain rapid growth, with sales increasing by 43.5% year-on-year to 15.51 billion pouches, and sales increasing by 61.1% year-on-year to US$7.86 billion, and US nicotine pouch sales accounting for 75.8% of the world.