Tobacco Asia

Tobacco Asia 39 Cigars find their premium lane China Tobacco's cigar business perhaps offers the most apparent example of the system's deliberate effort to ex- tract more value from a smaller tobacco category. China Tobacco has authorized four major domestic cigar brands: Great Wall under Sichuan China Tobacco, Yel- low Crane Tower under Hubei China Tobacco, Taishan under Shandong China Tobacco, and Wangguan under Anhui Chi- na Tobacco. Domestic cigars account for more than 99% of the market, according to data from 2Firsts. Machine- made cigars dominate volume, while handmade cigars ac- count for a disproportionate share of the market's value. "The China cigar market is moving up in the value chain," Zhao said. "China Tobacco, in recent years, has invested a lot. They want to improve the Chinese cigar, the product quality and pricing, and to enlarge the domes- tic market, so the cigar business can get more revenues." That effort extends all the way to the farm. "Cigar leaf is another area worth watching," Zhao said. "China has been developing specialized domestic cigar leaf growing regions with more attention to consis- tency, quality and industrial usability." Selected industry examples indicate that Chinese leaf can account for nearly half of the blend in some domestic handmade cigars. Do- mestic filler can reach approximately 90% in some prod- ucts, and some handmade cigars use 100% Chinese leaf. But China is not merely trying to eliminate import- ed cigar tobacco. "International tobacco still plays a role when specific origins, wrapper characteristics, or flavor profiles are needed," Zhao said. "So, the direction is not simply import replacement." Instead, he said, "China is building stronger domes- tic cigar leaf capability, while international leaf continues to have a role." The import numbers support that more complicated picture. Within a cigar-related analytical scope created by 2Firsts using China Customs data, import value increased from US$12.1 million in 2023 to US$77.9 million in 2024, then fell to US$74.3 million in 2025. Volume reached 1.66 million kilograms in 2025, with a weighted average unit value of US$44.78 per ki- logram. Zhao stressed that this is not an official China Customs cigar-leaf category. It is a research definition that covers trade that may be relevant to the cigar-leaf market. Within that scope, the Dominican Republic ac- counted for 89% of the import value in 2025, followed by Indonesia at 7.7% and Honduras at 3.3%. "Cigar-related tobacco is small in volume, yet unusually high in unit val- ue and concentrated in a few origins," Zhao said. The combination is revealing. China is developing its own cigar tobacco while continuing to buy specialized foreign leaf, as its cigar manufacturers move toward high- er-value products. Beyond China None of the new nicotine-delivery categories are expect- ed to replace cigarettes anytime soon. Zhao said neither heated tobacco nor nicotine pouches are likely to offset pressure on China's conventional cigarette business in the near term. "They want to develop the new tobacco busi- ness to add value for the industry," he said. "But in the short term, it hardly can be done." That does not make the transition insignificant. China Tobacco is developing the industrial infra- structure for heated tobacco. Nicotine pouches have be- come a major research focus and a product-development track. Cigar companies are moving toward higher-value handmade products. China's private vapor manufacturers continue to supply billions of dollars' worth of products to overseas markets. Meanwhile, international tobacco companies con- tinue to explore opportunities in China's next-generation market. However, industry experts caution that the do- mestic framework is still evolving, the commercial model is not settled, and current engagement should not yet be interpreted as meaningful market access. China's next-gen- eration market, in the firm's formulation, is moving from "whether" toward "how," but it has not reached scale. And Zhao argues that the implications eventually extend well beyond China's domestic market. "China's transition will not stay in China," he said. The reason is not simply the size of the domestic market. Changes in China could affect technical standards, manufacturing in- vestment, supply chains, and global competition. As China develops its own regulatory and technical framework for newer nicotine categories, Zhao argues that those standards could eventually serve as a reference point beyond China. China Tobacco is also expanding the international role of China Tobacco International (HK), CNTC's listed offshore business platform. Its international activities now span tobacco leaf, cigarettes, new tobacco products, and cigars. Zhao expects the organization to become much more active overseas. "China Tobacco (HK) will be the main player in the global markets," Zhao said, presenting this as his long-term assessment rather than an established market outcome. His broader message to international companies was simple: China is moving beyond its traditional role as a manufacturing base. In technology, next-generation products, cigars, and international markets, Chinese com- panies could increasingly participate directly in global competition. "You will be a partner, or you will be a com- petitor," Zhao said. Sometimes, his presentation suggested, they may be both. How quickly that happens remains uncertain. In the short term, Zhao said, STMA can strongly influence whether categories rise or fall. "But the market will not definitely follow STMA in the long term because it's fol- lowing economics," Zhao said. That means the longer-term question is not simply what China Tobacco wants to sell. "You need to realize what's the driving strength, what's the consumer doing, how's the consumer changing," Zhao said. "Don't just believe data, especially short-term data." For an industry accustomed to measuring China by the sheer size of its cigarette market, that may be the more signif- icant signal. The world's largest tobacco system is preparing for what's next. Whether Chinese consumers follow along is something even China Tobacco cannot predict.

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