Tobacco manufacturing decreased revenue in each of the last five years. There has been a long-term decline in smoking over the past few decades, mainly due to health problems.
Currently, only 21% of the population smokes. Although the price of tobacco products is the same, there have been some ups, which also contributed to the reduction of smoking. According to IBISWorld analyst Stephen O’Connell, “the rise in prices and led to a shift from premium brands to economy brands.” For example, the demand for roll your own cigarettes have increased due to filter cigarettes.
Government measures aimed at reducing smoking added to the negative press associated with health risks associated with smoking and contribute to reducing smoking. Examples of regulations introduced over the past five years are to increase the minimum age for purchase of 16 to 18 years, and the inclusion of pictorial health warnings on tobacco packaging. Industry revenue is expected to fall by 3.3% per year over five years to 2012-13 to reach £ 8.8 billion. This figure includes the excise tax, which accounts for about 74% of industry revenues. Industry revenue is expected to decline by 5.2% in 2012-13. IBISWorld expects the industry will continue to decline over the next five years, with the number of companies working in the industry is expected to drop to just 10 in 2017-18. Connell adds: “cigarette consumption is expected to continue declining, while the regulation and taxation of tobacco products increases.” Employment is expected to decline at an annual rate 3.9%. Hence the industry revenues are expected to decrease over the next five years in 2017-18.
The market concentration in manufacturing tobacco products is very high with the four leading manufacturers account for about 97% of the market in 2008. Large companies include Imperial Tobacco, Japan Tobacco and British American Tobacco.
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This industry includes companies that manufacture cigarettes, finely cut tobacco, cigars and pipe tobacco. The industry also includes companies that are involved in the morphology and re-drying tobacco leaf.
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