Global duty free and travel retail tobacco sales slumped by -19.3%..

August 13, 2009 - In the first quarter of 2009, global duty free and travel retail tobacco sales slumped by -19.3% compared with the same quarter in 2008 – according to the Travel Retail Executive News (TREND) Tobacco Index which is based on actual audits of retail sales among a panel of locations worldwide.

"This is probably the worst quarter ever recorded for the tobacco business which has been battered in travel retail and elsewhere", says Yngve Bia, President Generation Research. "Sales were especially poor onboard airlines with a sales decline of -26.5%. Also airport sales were down steeply by -24.0%".

Sales in Asia Pacific and the Middle East held up relatively well in 1Q 2009 whilst significant drops were recorded in Europe (-21.2%) and the Americas (-12.3%). In Europe it is especially intra-EU duty-paid sales that have suffered, down by -21.6% in Euros and equal to a drop of -31.5% in US dollars.

The TREND 12 Months Tobacco Moving Average Index, adding together the results in the past four quarters up to 1Q 2009, closed at 99.3 (see chart) effectively meaning that the trend in global sales – in US$ – is flat or marginally down -0.7%. The pace in the downturn has been accelerating, however, as seen in the most recent six-month period between October 2008 and March 2009 where sales have dropped by -13.4% on average.

Amidst concerns of dramatically falling sales numbers, the tobacco industry is also faced with the challenging fact that many governments around the world – and particularly some in Asia – are considering supporting a ban on duty free cigarettes as part of the Framework Convention on Tobacco Control (FCTC).

Cigarette sales slumped -19.0%; Cigar sales plummeted -23.0% and Cut Tobacco joined on the downside with a drop of -19.9% in sales. In the overall duty free and travel retail tobacco market some companies managed to improve their market shares including market leader Philip Morris stretching its lead from a 35.5% market share in 1Q 2008 to 35.6% in 1Q 2009. Among the Top 4 Companies, the biggest loser was BAT that saw its market share being reduced by 0.67 percentage points to 25.6%.

The global duty free and travel retail tobacco market is totally dominated by the Top 4 Companies Philip Morris International, BAT, JT International and Imperial Tobacco that together represent 88.7% of global sales in value terms.

The fifth most important company now ranks as Gold Bond Enterprises with a market share of 1.7% in 1Q 2009. Gold Bond Enterprises is the exclusive agent for the Shanghai Tobacco (Group) Corp's brands, including its best-seller brand Chung Hwa.

"A lot is being said about the growing importance of China as an economy to reckon with in the future. Now we also start to see products from China making inroads in the duty free and travel retail market, supported by the growing number of Chinese nationals travelling abroad", says Bia.

Chung Hwa is a golden virginia type cigarette, regarded as one of the top ten brands in China with annual turnover of some US$ 3.0 billion. Its export volume has grown steadily since the late 1980s and it is today sold in a total of some 50 countries in duty free and duty paid.

In 1Q 2009 Chung Hwa ranks as the No. 9 most important cigarette brand in global duty free and travel retail tobacco trade. "The Chinese consumers are very brand loyal so where the Chinese go Chung Hwa is a straight sell", says Bia.

Additional cigarette brands that kept or improved their market shares in 1Q 2009 as compared to 1Q 2008 include market leader Marlboro as well as Rothmans, Winston, Lucky Strike, Davidoff and Karelia. Important brands losing market share included B&H and Silk Cut.

It may be too early to say that the cigar craze is over, but the fact remains that cigar sales tumbled -23.0% in 1Q 2009 vs 1Q 2008. Among the top brands market leader Davidoff saw its market share drop from 13.4% in 1Q 2008 to 12.6% in 1Q 2009. Additional major cigar brands with falling market share numbers included Cohiba, Romeo y Julieta, King Edward and Hoyo.

Cigar brands strengthening their importance and market share included Villiger, Danneman and Partagas especially.

Earlier today on TREND it was reported that the Villiger Group, celebrating its 120th Anniversary this year, is enjoying a booming business. Commenting on the progress, Chris Pfister, Director of Export Sales said: "We have recently obtained the first official listing of cigars in Vietnam with 'Villiger 1888' and 'Villiger Premium brands'. Substantial expansion has also been noted in Middle East travel retail markets due to extensive sales training and effective point of sale branding".

Additional cigar winners gaining market share in 1Q 2009 were Montecristo, Wintermans and Agio.

Meanwhile, sales of Cut Tobacco plunged -19.9% in 1Q 2009 versus 1Q 2008. Market leader Golden Virginia lost 1.8 percentage points in market share ending 1Q 2009 with a share of 24.1% of the global Cut Tobacco market. Among the major brands also Port Royal, General (= Snuff) and Borkum Riff experienced declining market share numbers.

In roll-your-own tobacco, Drum showed progress in terms of gaining market share, whilst both van Nelle and Samson lost market share.

The global duty free and travel retail tobacco market is supplied by a total 101 companies offering a total of 345 brands offering products in some 3,500 varieties. Interestingly, apart from the Top 4 companies (see above) representing 88.7% of the total business, no less than 97 companies compete for a slice of the remaining 11.3% portion of the market.

Source to above data: TRAQ Tobacco, Generation Research, Sweden

The statistical contents in this feature are only as up-to-date as their availability and compilation allowed at the time of publishing. All statistical numbers shown here are subject to review and revision in subsequent features and charts as additional source material becomes available.

Read more about the TREND Indices and their compilation – click here.

Read more about the duty free and travel retail Tobacco industry on www.generation.se in section Best & Most.

Reference: In the first quarter of 2009, global duty free and travel retail tobacco sales slumped by -19.3% compared with the same quarter in 2008 by Generation Research, TrendNews, 8/11/2009.