Abstract
Why buy this report
- Get insight into trends in market performance
- Pinpoint growth sectors and identify factors driving change
- Identify market and brand leaders and understand the competitive
environment
Product coverage
Cigarettes; Cigars; Smoking tobacco
Executive summary
Sharp rise in fiscal charges leads to increasing competition and price wars
Adaptation to EU requirements obligates Poland to increase excise tax on
cigarettes almost threefold to the end of 2008. Until now, excise tax on 1,000
cigarettes in the most popular category was about €23. By the end of 2008,
this must rise to €64.
From 1 May 2004, excise duties on cigarettes have amounted to PLN64 on 1,000
cigarettes, and 26.67% on the retail price. The average excise duty to be
charged on cigarettes increased in 2004 by 9.1%. Three months later the Polish
government increased excise duties by nearly 5%.
The most important question at the moment for market players is not whether
excise tax will grow, but by how much.
Increasingly restrictive anti-smoking policies resulting in declining demand for cigarettes
Declining demand for cigarettes is an effect of government decisions as well
as initiatives like no-tobacco day.
Since mid-September 2004 tobacco product designations have not been allowed to
contain suggestive references like "light" or "low tar". Moreover, the size of
packaging area/side on which a health warning appears has been increased by
10%, from 30% to 40%, and an additional warning is mandated. Producers must
choose from among such dire warnings as "Smoking may cause a slow and painful
death".
The new health warnings may contribute to a decline in the number of people
who start smoking. However, they are not expected to have an impact on
existing smokers.
Imports of cheap cigarettes from new EU Member States threaten sales
After EU enlargement, leading market players expect an influx of cheaper
cigarettes from new EU Member States like Lithuania, Latvia and Estonia as
well as private imports of cheap cigarettes from Germany. Legal cigarettes
from neighbouring countries will be flowing onto the Polish market at low
prices. This could result in a fresh wave of price wars, because no Polish
manufacturer will want to lose market share.
Growth potential in exports to EU and shifting of facillities by multinationals to Poland stimulate production growth
British American Tobacco shifts is shifting production from its closed down
plant in Belgium to its Polish factory in Augustow in the east of the country.
The scope of future investments is largely dependent on VAT and excise
regulations, which are still partially in the making. In addition, Imperial
Tobacco transferred its production from three closed production plants in the
Southern Europe to its Polish plant. Such a tendency is expected to continue
as production costs in Poland are lower than in Western Europe. In addition,
after Poland' s joining of the EU access to many markets is easier.
The entrance of Gallaher Group
Gallaher Polska Sp zoo is a new player on the Polish tobacco market. It is a
division of Gallaher Group Plc.
The company emerged in July 2003 as a result of the acquisition of KT Merkury
Sp zoo by Gallaher Group Plc. Gallaher Polska' s factory is located in Stary
Gostkow in central Poland. Gallaher Polska Sp zoo captured a 2% share in 2003.
Since July 2003, when Gallaher acquired the former KT Merkury plant near Lodz,
the company has modernised the facility at a cost of PLN110 million.
Gallaher Group Plc is an international tobacco group headquartered in the UK.
Gallaher Group holds leading market positions in Germany, Estonia, Greece,
Ireland, Kazakhstan, Austria, Sweden, Russia and the UK. Gallaher' s stock is
quoted on the London Stock Exchange and ADRs are traded on the New York Stock
Exchange.
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