Melbourne, Australia (PRWEB) July 26, 2013
While the Cigarette and Tobacco Product Manufacturing industry in Australia is restricted to two companies, competition is fierce. Heavy government regulation makes it very difficult for players to thrive, leading the companies to become battle hardened in their tactics. IBISWorld industry analyst Craig Shulman states “demand for cigarettes has declined over the past five years as increasing health concerns, anti-smoking campaigns, increasing regulations and higher excise taxes discourage smoking.” Recent regulatory restrictions include state bans on indoor smoking, state retail display bans and the introduction of plain packaging in December 2012. Plain packaging is expected to have a significant effect on the industry, leading revenue to decline by 4.4% in 2013-14 to reach $1.8 billion.
Demand for the industry's products is considered relatively price inelastic. However, increases in prices and excise taxes are expected to lead to lower demand. Excise taxes, which are excluded from the industry, have risen over the past five years. This has been driven by the Federal Government's 25.0% increase in excise tax in April 2010, which has pushed up prices for tobacco products in the past two years. Despite these burdens, revenue after excise taxes is expected to only decline at an annualised 0.2% over the five years through 2013-14, indicating near stagnation. According to Shulman, “Producers have been able to benefit from consumers choosing to move from purchasing high price cigarettes to unpackaged tobacco, which is used with roll-your-own cigarettes.” This shift has allowed producers to focus more on unpackaged tobacco, which costs less to manufacture. As a result, profit margins have increased over the past five years. Over the next five years, the Cigarette and Tobacco Product Manufacturing industry is expected to continue to endure rising government regulation in the form of increasing health regulations, rising excise taxes and increased spending on intense anti-smoking campaigns. Further declines in the national smoking rate will reduce the size of the market. Higher prices are expected to offset some of this. However, the shift to unpackaged tobacco is anticipated to continue, undercutting potential revenue growth while bolstering profit margins.
The industry has a very high level of concentration, as there are only two manufacturers that operate in Australia. The companies operate globally and have manufacturing facilities in Australia. In global terms, there has been a high degree of merger and acquisition activities. However, the number of companies operating in Australia has remained at two over the past five years. The two industry players are British American Tobacco (Australian Holdings) and Philip Morris (Australia). For more information, visit IBISWorld’s Cigarette and Tobacco Product Manufacturing report in Australia industry page.
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IBISWorld industry Report Key Topics
Companies in the industry manufacture smoking tobacco products. These are sold to specialist tobacco wholesalers and retailers, general grocery distributors, supermarkets and convenience stores. Specifically, the products included in the industry are cigarettes, cigars and smoking tobacco. Smokeless tobacco is banned in Australia and therefore not included. Industry revenue does not include excise taxes.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
About IBISWorld Inc.
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every Australian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Melbourne, IBISWorld serves a range of business, professional service and government organisations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com.au or call (03) 9655 3886.
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