The Higher Prices and Lower Sales of Cigarettes – the Biggest States Problem

This year in Croatia is expected to be doubled the fall in tobacco sales, due to higher excise duties on local tobacco products.
On this month the government decided to end the preferential treatment of local tobacco manufacturers and tax local and foreign cigarettes equally.
“From April 1, we will increase prices of almost all of our products by 2 kuna to offset higher excise taxes. Without that our revenues this year would fall some 450 million kuna ($81.73 million), or 30 percent down from 2008,” said Davor Tomaskovic, TDR’s Chief Executive.
TDR is one of the most profitable Croatia’s firms, is a part of Adris Grupa which is also involved in tourism. The share of TDR’s market in Croatia is 85 percent, while it takes some 27 percent of the market in former Yugoslavia.
Mr. Tomaskovic complained that, unlike the EU newcomers who fought for adjustment periods, Croatia had decided to harmonize its legislation with the EU several years before it is to become a member, which may have a negative impact on the local market.
The higher prices and lower sales of cigarettes will increase the illegal trade and citizens will buy cigarettes across the border where cigs are not so expensive. Local tobacco growers will also be worse-off because until now they were buying tobacco in Croatia although its prices were 30 percent higher than abroad.
The price of the most popular TDR’s product, Ronhill, in Croatia will cost from April 18 kuna. In other former Yugoslav republics, it costs at between 7.50 and 7.80 kuna. ($1=5.506 Croatian Kuna)
Raising the price of tobacco is one of the simplest and most effective methods for rapidly and significantly reducing tobacco use, especially in developing countries and among young people. Because children are more sensitive to changes in cigarette prices because they have less disposable income than adults and are less addicted to nicotine.

Source: Topcigarettes.net