Tobacco Asia

Volume 18, Number 1

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Page 54 of 79

tobaccoasia 55 Although some countries in the region have no sizeable market for cigars, where markets do exist, growth has been seen across the board, for the most part achieving double-digit CAGRs as disposable incomes rise. Some 76% of this success has come from China. And this is almost entire- ly in cigars excluding cigarillos, for which, unusually, there is no market. India is showing a similar pattern with a preference for cigars rather than cigarillos. Japan has the second biggest value and volume growth contributor to the region, but this is based on the opposite scenario to China, as its market is al- most entirely confined to cigarillos. Japan has the biggest slice of the cigarillo market, with Taiwan a distant second. What factors are driving the increase in cigar consumption? Besides the fact that the APAC region, and China in particular, seem to be more economically safe than the EU, we also see the growing middle-class looking at luxury brands and western products. Naturally this includes an interest in cigars. Although cigars do not offer a direct substitute for the cigarette smoker, there is a role for cigarillos in this respect, being similar in terms of size and taste. This similarity is one of the key reasons for their growth within the cigar market, along with price benefits and advantages over cigarettes in areas such as flavour and single stick purchases. What are the current cigar consumption patterns in Indonesia, Malaysia and the Philippines? Indonesia and Philippines are not fully representative markets in the Asia Pacific region [APAC] for cigars, whether premium or machine made [MMC]. The main issue in Indonesia is the high import tax that leads to illicit trade. In the Philippines, the situation is similar to Indonesia, with the added factor that the local brands manufactured in the country, both premium and MMC, are very competitive price-wise compared with imported brands. Overall volume in the domestic market for both countries is quite small. Of these three countries, in my opinion Malaysia is the most interesting, as it has a good retail network with tobacco specialists. As well as offering wider product variety, these specialists are better able to give advice to customers. What types of cigar do these specialists bring to the market? For the premium range, the Malaysian domestic market is dominated by Ha- banos brands, up to 70% to 80% market share. This figure is representative of the Habanos global market share, if you exclude the US. However, thanks to the large number of independent tobacco specialists, consumers are also offered a large selection of cigars from other terroirs. For example, VegaFina and Don Diego from the Dominican Republic, the new Da- vidoff from Nicaragua, and Macanudo from the US. For the machine made range, you also find a large selection, from the Co- hiba Mini and Club to the Hav-A-Tampa Jewels, Phillies flavoured as well as the European brands AGIO and others. How do anti-smoking regulations affect cigar consumption in these countries? In most Asian markets, excluding the People's Republic of China [PRC], the restrictions led by anti-smoking regulations and high taxes affect tobacco con- sumption, hence tremendously affecting cigar consumption. But, in a difficult tobacco market environment, continuously challenged by the persistent economic crises and harder regulatory environment, there are still examples of brands that are willing to bet on growth and build value within the premium cigar category. VegaFina is one of the best recent examples. It has begun expanding to new markets worldwide, confirming its commitment to being a successful global brand within the premium cigar industry. "We see a growing number of cigar divans and cigar bars, which is good news for aficionados, who can now find dedicated spaces" Eric Piras, Imperial Tobacco, premium cigars div Pacific Cigar Divan Hong Kong Great Wall Cigar No.2

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