Tobacco Asia

44 tobaccoasia Issue 5, 2023 September / October Combustible cigarettes remain the core segment for tobacco companies, providing the largest share of revenue. Credit: Marco Verch, Creative Commons 2.0. This threatens not only the health and wellbe- ing of consumers, but also the tax revenue govern- ments could have had to use. The World Health Organization (WHO) estimates that up to one in every 10 cigarettes consumed worldwide come from the illicit tobacco market. A recent KPMG report commissioned by PMI on illicit tobacco in Europe revealed that consumption of illegal ciga- rettes in the EU increased by 0.3 billion cigarettes in 2022, with France accounting for 47% of the entire region's illicit consumption at 16.9 billion sticks. These illegal cigarettes would have brought in €11.3 billion in taxes. In Ukraine, 7.4 billion il- legal cigarettes accounted for 20% of the market, a record-high. Figures from the Confederation of Malaysian Tobacco Manufacturers (CMTM) show that the country's illicit cigarette prevalence is at 55.3%, despite a 1.3% drop from the previous year. Independent research puts South Africa's illicit to- bacco at 54% of the market, but British American Tobacco South Africa (BATSA) said almost 70% of all cigarettes consumed in the country were il- licit brands. According to BAT Kenya, illegal ciga- rettes took up 25.5% of the market last year, more than double the 11.3% three years prior. Tobacco companies are subject to regulations, taxes, and intense scrutiny, and their cigarettes have standards that must be met and are produced in facilities that employ the latest technology and know-how. With counterfeit cigarettes, there is no guarantee nor control over product quality or safety, which would end up harming consumers even more than the combustibles sold by tobacco companies. Combustibles remain the core segment for to- bacco companies, even as they diversify their prod- uct portfolios and increase investment and r&d in reduced risk products. PMI may be the most ag- gressive company, pushing forward to achieve a smoke-free future and no combustible cigarettes at all. For now, though, combustible sales pro- vide the biggest chunk of revenue that drives the company's smoke-free endeavors – not only in new tobacco products but also its diversification into health and wellness products. Other tobacco companies, such as Altria, BAT, RJ Reynold, JT Group, KT&G, and Imperial Brands, adopted a more well-rounded strategy and will continue to sell their combustible cigarettes as well as their less harmful products. The fact that any new tobacco product would have to jump through regulatory hoops before they can be marketed, which adds years to the process on top of the time required for r&d and innovation, also means that it will take more time for consumers to completely switch from com- bustibles to new products. During that time, com- bustibles would still be needed. Aside from that, it would be unrealistic to expect every smoker to want to quit smoking cigarettes. Reducing the demand for combustibles may happen, but eradicating it entirely does not seem possible, at least for the foreseeable future.

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