Centro de Documentos
The world tobacco industry: Trends and prospects
por Gilberto Ortiz
This paper is essentially on cigarette manufacturing. Its focus is on the 1990s. Tobacco is grown in more than 100 countries. China is the world’s leading producer. Other principal suppliers are the United States, India, Brazil, Turkey, Zimbabwe and Malawi. Tobacco products are consumed all over the world. Most tobacco is used for smoking. Tobacco is the essential ingredient for cigarettes, pipes, cigars, roll-your-own, bidis, and kretek cigarettes. Tobacco is also used for smokeless tobacco such as snuff and chewing tobacco. Over 80 per cent of world tobacco is used for cigarettes.
Among cigarettes, the worldwide share of the “American blend” (a mixture of Virginia, Burley and Oriental tobaccos) is increasing, and that for dark cigarettes is in decline. China accounts for 30 per cent of world production and consumption of cigarettes by volume. At 12 per cent of the total, the United States is the world’s second largest producer. Other principal suppliers are Japan, Indonesia, Brazil and Germany. Following many decades of steady growth, in the 1990s the growth of world demand for tobacco products came to a halt. Demand in the more developed countries is in decline. In the less developed countries its growth has slowed down.
The world cigarette market is becoming more concentrated by company. The three largest companies sell close to two-thirds of the world’s total. In individual countries, the degree of concentration can be much higher. The tobacco companies have reacted to the stagnation of demand in their traditional markets in three ways: consolidation (the recent period has seen a wave of mergers and acquisitions), diversification (exploring new markets and new market segments), and raising productivity. Governments face a dilemma. They have an economic and a social interest in tobacco. It provides jobs, tax revenue and (for some) foreign exchange earnings. But governments also have a duty to protect their population’s health. Treating people for smoking-related illnesses can be costly. In practice, governments cope with these conflicting pressures by discouraging demand in several ways (and with varying degrees of intensity). Raising cigarette tax is a favourite. Some have sued the tobacco companies in an effort to recover the cost of treating people for smoking-related illnesses. Worldwide employment prospects in the tobacco processing industry are not bright. Consolidation, privatization, higher productivity and stagnating demand growth together have a dampening effect on employment prospects. Jobs in countries with high costs and declining demand look particularly vulnerable. But in an open world economy it is ultimately up to the large corporations to decide where to concentrate production, and which market will be supplied from where.
Among cigarettes, the worldwide share of the “American blend” (a mixture of Virginia, Burley and Oriental tobaccos) is increasing, and that for dark cigarettes is in decline. China accounts for 30 per cent of world production and consumption of cigarettes by volume. At 12 per cent of the total, the United States is the world’s second largest producer. Other principal suppliers are Japan, Indonesia, Brazil and Germany. Following many decades of steady growth, in the 1990s the growth of world demand for tobacco products came to a halt. Demand in the more developed countries is in decline. In the less developed countries its growth has slowed down.
The world cigarette market is becoming more concentrated by company. The three largest companies sell close to two-thirds of the world’s total. In individual countries, the degree of concentration can be much higher. The tobacco companies have reacted to the stagnation of demand in their traditional markets in three ways: consolidation (the recent period has seen a wave of mergers and acquisitions), diversification (exploring new markets and new market segments), and raising productivity. Governments face a dilemma. They have an economic and a social interest in tobacco. It provides jobs, tax revenue and (for some) foreign exchange earnings. But governments also have a duty to protect their population’s health. Treating people for smoking-related illnesses can be costly. In practice, governments cope with these conflicting pressures by discouraging demand in several ways (and with varying degrees of intensity). Raising cigarette tax is a favourite. Some have sued the tobacco companies in an effort to recover the cost of treating people for smoking-related illnesses. Worldwide employment prospects in the tobacco processing industry are not bright. Consolidation, privatization, higher productivity and stagnating demand growth together have a dampening effect on employment prospects. Jobs in countries with high costs and declining demand look particularly vulnerable. But in an open world economy it is ultimately up to the large corporations to decide where to concentrate production, and which market will be supplied from where.