Tobacco Asia

Volume 20, Number 2

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Page 48 of 67

tobaccoasia 49 If the current slowdown in growth is an irre- versible trend and will become "business as usual", then it is even more worrisome that both markets and brands, which make up the basis for the to- bacco industry, are clearly in a state of depression and weak sales. When talking to various manufacturers in Chi- na, the mood is somber and you hear no reason for optimism. Some of the most common things you hear from Chinese producers are: "In the past, we would never worry about sales. But today, it is dif- ficult to increase sales even by a single case (50,000 cigarettes)."; "We are experiencing the winter of the tobacco industry, and this winter could be a long one." Such statements are a clear indication that both tobacco markets and cigarette brands in China are facing severe challenges. Sales Decline As the backbone that supports the development of the Chinese tobacco industry, many competi- tive cigarette brands witnessed some fluctuations in sales between the end of 2015 and early 2016, which undoubtedly dealt a serious blow to the confidence of those tobacco manufacturers. In January and February 2016, the tobacco industry in China saw the sales volume of its Grade One, Grade Two, and Grade Three cigarette products (from a total of five grades) sharply decline when compared to the same period in 2015, while the sales volume of its Grade Four and Grade Five cigarette products went up slightly year-on-year, which contributed to creating enormous pressure on improving the structure of cigarette products and increasing tax payment and profits. In January and February 2016, the tobacco in- dustry domestic sales were a total of 441.85 bil- lion cigarettes (8.837 million cases), down 7.34% year-on-year, and sold a total of 473.975 billion cigarettes (9.4795 million cases), down 9.43% year-on-year, with the sales volume of Grade One, Grade Two, and Grade Three cigarettes dropping 12.88%, 7.46%, and 11.92% respectively, and with the proportion of Grade One cigarettes in the to- tal cigarette sales volume of the tobacco industry reaching 26.82%, down 1.06% year-on-year. The big cigarette brands, which play the most important roles, are not optimistic either. In Janu- ary and February 2016, the sales volume of key cigarette brands designated by STMA reached 405.56 billion cigarettes (8.1112 million cases), down 11.87% year-on-year, and accounted for 85.57% of the total cigarette sales of the entire tobacco industry in the country, with the commer- cial sales revenue amounting to RMB298.713 bil- lion (US$45.95 billion), down 7.08% year-on-year.

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