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Report a red flag for tobacco companies

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cigarettes, tobacco companies

 Many young people earn too little to afford tobacco products any longer

About 13% of smokers in SA have stopped smoking, largely citing health and financial reasons, and producers are likely to report reduced profits around the globe, according to a recently released report by UK-based analytics firm GlobalData.

About 13% of smokers in SA have stopped smoking, largely citing health and financial reasons, and producers are likely to report reduced profits around the globe, according to a recently released report by UK-based analytics and consulting firm GlobalData.

The survey covered 11 countries including SA, the US, the UK and China. It had a target sample size of 500 respondents per country. It found that about 8% of global consumers, which include more millennials than any other age group, intend to stop buying tobacco and its alternative products, such as e-cigarettes. They consider them to be beyond their current shopping budgets.

In SA 13% of the respondents stated that they have stopped buying tobacco and alternative products because of budget constraints, even after the lockdown ban was lifted. But 17% said they would be buying them at the lower end of the price range, said Carmen Bryan, a consumer analyst at GlobalData.

The survey states that it will take until at least 2023 for the tobacco industry to recover to precoronavirus levels as the pandemic continues to wreak havoc worldwide.

“In the long term, demand will likely pick up again, particularly among SA men for whom it is a popular and sociable pasttime. However, as valueconscious trends gain prominence, and people remain wary of smoking’s increased health risks associated with Covid-19, the market may head more towards budget buys and potential illicit sales,” Bryan said.

The government placed a ban on the sale of tobacco products when the country entered a strict lockdown at the end of March. The contentious ban, the only one of its kind worldwide, lasted five months, fuelling an illicit cigarette trade that has been estimated to cost the government R35m a day in foregone tax revenue.

Co-operative governance & traditional affairs minister Nkosazana Dlamini-Zuma has argued that research from China, the US and the UK showed that smokers are more likely to have lung problems than nonsmokers and might need ventilation if they get infected with the coronavirus. She also said smokers often share cigarettes, putting them in danger of contracting the virus.

Tobacco industry players approached the courts to challenge the ban, arguing there was no connection between the cigarette ban and the stated objective of preventing the spread of Covid-19. The court challenge was dropped after the ban was lifted.

INDUSTRY LOSSES

The survey forecasts that filtered cigarettes (introduced decades ago to reduce the amount of tar inhaled by smokers) will remain the largest selling tobacco product with global sales of $651bn in 2020. However, this is an 8% drop on sales of $707bn in 2019.

This amounts to a potential revenue loss of $56bn for the tobacco industry as the pandemic continues to cause significant numbers of consumers to quit tobacco products. GlobalData said that for plain cigarettes the fall is expected to be higher at 11%, and in niche categories, such as chewing tobacco, sales are expected to drop 13% in 2020.

Ryan Whittaker, another consumer analyst at GlobalData, said the latest data seems to corroborate studies from other institutions, such as University College London, which have found that people are quitting tobacco during the pandemic, and that this is especially pronounced among younger people such as millennials.

Many younger consumers are working in less secure jobs and earning smaller salaries and wages, Whittaker said.

Lower disposable income from lack of employment, lockdown-related closures and social-distancing have all resulted in fewer social settings for smokers,” he said.

Regardless of age, many consumers are concerned about their respiratory health due to Covid-19 ’ s propensity to attack the lungs, he said.

Our survey also found that over a quarter (26%) of global consumers are extremely concerned about their physical fitness and health with only 14% saying they are not concerned at all,” Whittaker said

AS VALUECONSCIOUS TRENDS GAIN PROMINENCE, THE MARKET MAY HEAD TOWARDS BUDGET BUYS AND ILLICIT SALES