Table 2.12: Cigarette consumption and prices.
Year |
billion packets |
Price |
1983 |
6.46 |
1.08 |
1984 |
6.39 |
0.99 |
1985 |
7.32 |
0.75 |
1986 |
8.45 |
0.72 |
1987 |
8.07 |
0.87 |
1988 |
7.90 |
0.82 |
1989 |
8.14 |
0.88 |
1990 |
8.21 |
0.60 |
1991 |
7.82 |
0.63 |
1992 |
6.39 |
0.89 |
1993 |
5.98 |
0.84 |
1994 |
5.46 |
0.70 |
Note: Prices deflated by IPC/FGV (average 1994 = 100).
Source: SRF/Abifumo, Souza Cruz S. A., and IBRE/FGV.
Growth in cigarette production since 1985 has been associated with increasing cigarette exports, with little change in domestic consumption. The underlying competitiveness of Brazilian tobacco leaf and cigarettes is evident in the industrys strong export performance in the 1990s, despite initiatives in several countries to constrain smoking. Brazils share of the global cigarette trade increased from 2 percent in 1990 to 8 percent in 1994, but fell after 1995. Tobacco exports as a proportion of total Brazilian exports increased from 2.52 percent in 1995 to 3.17 percent in 1999.
An INCA (1998) survey indicated that 23.9 percent of the population over the age of five smoked - 30.6 million people. As elsewhere, more men than women smoked, and a high number of adolescents were starting to smoke at an earlier age. Around 2.7 million Brazilian children and adolescents smoke.
Table 2.13: Production, domestic consumption and exports of tobacco leaf and cigarettes
Year |
Leaf production |
Domestic cigarette consumption |
Exports of cigarettes |
Exports of leaf |
||||
tonne |
billion pieces |
Price |
billion pieces |
US$000 |
tonne |
US$000 |
US$/tonne |
|
1980 |
372 970 |
142.7 |
0.42 |
1.5 |
11 050 |
128 400 |
284 260 |
2 213.9 |
1981 |
352 360 |
134.9 |
0.54 |
1.6 |
12 170 |
131 690 |
356 490 |
2 707.0 |
1982 |
391 960 |
132.3 |
0.64 |
1.6 |
14 150 |
144 930 |
462 780 |
3 193.1 |
1983 |
399 120 |
129.2 |
0.56 |
1.7 |
14 030 |
155 260 |
457 920 |
2 949.4 |
1984 |
434 750 |
127.8 |
0.46 |
1.1 |
8 100 |
187 440 |
460 470 |
2 456.6 |
1985 |
410 280 |
146.3 |
0.27 |
1.3 |
9 630 |
198 660 |
449 700 |
2 263.7 |
1986 |
410 490 |
168.9 |
0.33 |
1.6 |
8 900 |
175 660 |
404 310 |
2 301.7 |
1987 |
398 150 |
161.4 |
0.55 |
2.8 |
16 040 |
173 680 |
415 500 |
2 392.3 |
1988 |
431 710 |
157.9 |
0.57 |
5.4 |
33 620 |
206 950 |
519 630 |
2 510.9 |
1989 |
462 010 |
162.7 |
0.55 |
8.6 |
45 050 |
193 660 |
524 540 |
2 708.6 |
1990 |
447 980 |
164.1 |
0.64 |
9.9 |
57 630 |
188 140 |
565 520 |
3 005.8 |
1991 |
433 900 |
156.4 |
0.54 |
20.5 |
137 740 |
190 440 |
680 620 |
3 573.9 |
1992 |
573 730 |
127.8 |
0.75 |
25.1 |
177 990 |
241 010 |
803 600 |
3 334.3 |
1993 |
633 100 |
119.5 |
0.92 |
29.7 |
203 780 |
245 540 |
697 000 |
2 838.6 |
1994 |
446 900 |
109.2 |
1.15 |
54.8 |
327 640 |
275 540 |
693 900 |
2 518.3 |
1995 |
390 000 |
119.7 |
1.29 |
55.0 |
406 390 |
256 270 |
768 570 |
2 999.1 |
1996 |
433 520 |
119.2 |
1.42 |
63.3 |
421 185 |
282 360 |
1 028 520 |
3 642.6 |
1997 |
588 170 |
110.8 |
1.42 |
72.0 |
566 059 |
318 950 |
1 091 383 |
3 421.8 |
1998 |
440 340 |
97.0 |
1.07 |
92.3 |
607 609 |
300 540 |
939 891 |
3 127.3 |
1999 |
590 100 |
101.5 |
0.97 |
17.8 |
49 426 |
340 920 |
892 687 |
2 618.5 |
2000 |
577 110 |
100.0 |
0.88 |
11.6 |
5 786 |
341 450 |
812 920 |
2 380.8 |
2001 |
544 780 |
100.0 |
0.95 |
8.0 |
2 932 |
410 000 |
921 135 |
2 246.7 |
Source: Afubra/Abifumo; Secretaria de Comércio Exterior (Secex)/ Departamento de Operações de Comércio Exterior (Decex).
Table 2.14: Balance of trade in tobacco and tobacco products
Item |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
|
US$ million, fob |
|||||
Tobacco leaf |
||||||
Exports (a) |
1 028 521 |
1 091 394 |
939 891 |
892 687 |
812 921 |
921 135 |
Imports (b) |
51 871 |
67 180 |
50 695 |
5 533 |
13 175 |
20 974 |
Balance (a) - (b) |
976 650 |
1 024 214 |
889 196 |
887 154 |
799 746 |
900 161 |
Total Trade (a) + (b) |
1 080 392 |
1 158 574 |
990 586 |
898 220 |
826 096 |
942 109 |
Cigars and cigarillos |
||||||
Exports (a) |
1 071 |
1 742 |
917 |
249 |
350 |
201 |
Imports (b) |
340 |
2 540 |
2 667 |
1 500 |
1 339 |
1 490 |
Balance (a) - (b) |
732 |
(799) |
(1 750) |
(1 251) |
(990) |
(1 288) |
Total Trade (a) + (b) |
1 411 |
4 282 |
3 585 |
1 749 |
1 689 |
1 691 |
Cigarettes |
||||||
Exports (a) |
481 186 |
566 060 |
607 609 |
49 426 |
5 787 |
2 932 |
Imports (b) |
51 |
2 165 |
2 033 |
1 405 |
1 827 |
1 495 |
Balance (a) - (b) |
481 135 |
563 895 |
605 576 |
48 021 |
3 960 |
1 437 |
Total Trade (a) + (b) |
481 237 |
568 224 |
609 642 |
50 831 |
7 613 |
4 427 |
Other (raw tobacco for smoking) |
||||||
Exports (a) |
4 614 |
5 611 |
10 572 |
18 875 |
22 416 |
20 047 |
Imports (b) |
13 674 |
20 198 |
22 656 |
4 903 |
1 939 |
1 084 |
Balance (a) - (b) |
(9 060) |
(14 587) |
(12 084) |
13 972 |
20 477 |
18 963 |
Total Trade (a) + (b) |
18 288 |
25 810 |
33 228 |
23 779 |
24 356 |
21 131 |
Total |
||||||
Exports (a) |
1 515 392 |
1 664 806 |
1 558 990 |
961 237 |
841 474 |
944 316 |
Imports (b) |
65 936 |
92 083 |
78 051 |
13 341 |
18 280 |
25 042 |
Balance (a) - (b) |
1 449 456 |
1 572 723 |
1 480 939 |
947 896 |
823 193 |
919 273 |
Total Trade (a) + (b) |
1 581 329 |
1 756 890 |
1 637 040 |
974 578 |
859 754 |
969 358 |
Source: Secretariat of Foreign Commerce, Ministry of Industry and Commerce.
Notwithstanding the uncertainty in statistics on domestic cigarette consumption due to the unknown extent of smuggling, it seems that Brazilians have been smoking less since 1990.
Cigarette consumption is fairly stable, despite the nominal drop in supply in 1999. The overall impression among market specialists is that there is little growth in domestic sales of cigarettes.
Taking the figures for the legal market and estimating those for the illegal market, Brazilian consumption seems to be around 142 billion cigarettes a year, according to Abifumo. Legal production and processing amounted to 95.1 billion units, while the number of cigarettes originating elsewhere (contraband) has been estimated at 46.86 billion, or one third of the total market.
Although consumers see primarily the price difference between contraband and legal goods, illegal cigarettes are of such poor quality that it has been predicted that buyers of cheap cigarettes will shift to higher quality brands. Smuggled cigarettes, typically produced with minimal surveillance and quality control, are of poor quality and cause greater damage to health.
The northeast region produces dark tobaccos from locally adapted varieties for manufacture of cigars and cigarillos - both in strong demand in recent years - for both the domestic and foreign markets, and intends to increase the area planted. The expanding domestic cigar consumption in part reflects the anti-smoking campaigns, which make smokers switch to cigars, with the argument that there is less or no inhalation of cigar smoke.
The cigar manufacturing companies in Bahia have been increasing their production year after year, keeping pace with higher domestic consumption and the expansion of international markets. According to market analysts, there are promising prospects for Brazilian cigars in international markets following the adoption in 1999 of a floating dollar. Exporting firms are focusing on growing niches (in the United States of America and Europe), with increasing penetration as Brazilian brands become better known, with their strong commitment to quality. Investment has also brought the introduction of Cuban technology in the production and processing of tobacco for cigars. Strong domestic and export markets will favour investment of scale in the industry.
The floating dollar also discouraged smuggling. Although there are no official figures, the Bahia Tobacco Industries' Union estimates that 6 out of 10 cigars sold are contraband.
It was predicted in the mid-1990s that, by 2000, North America would be consuming one million Brazilian cigars a year. This prospect generated a production boom, although market analysts did not confirm the estimates. Currently, demand for imported premium cigars in the United States of America is about 400 million pieces a year, with Brazil hardly represented.
Companies in Bahia are also making some political moves, including the creation of a Brazilian Cigar Chamber to promote their interests in government and society. The Chamber aims to create and to have adopted a quality mark to differentiate Bahia products, today recognized both for using raw materials of excellent quality and for tight control over industrial processing.
Innovative companies are testing the production, in summer crops, of the Sumatra variety, characterized by a light colour and used for cigar wrappers. Instead of the traditional drying in simple, plastic-roofed sheds set up near the fields, companies are introducing a curing-barn model, allowing total control over moisture and temperature conditions, ensuring uniformity and quality in the cured leaf. All this is a demand-driven investment by cigar companies.
Descriptive analyses of cigarette consumption have shown that consumers of more expensive brands are less sensitive to price and income changes. In contrast, consumers of cheaper cigarettes respond to price and income changes and marketing strategies. It has been empirically determined that cigarette consumption in Brazil is affected by the rate of growth of the economy; the purchasing power (income) of consumers; cigarette prices (related mainly to changes in excise tax and marketing); and the quality of public policies (laws, decrees, and norms) that discourage smoking.
Overall, the predictable inverse association between cigarette price and consumption (i.e. the lower the price, the greater the consumption) held true until the mid-1990s. Thereafter, however, consumption shows an atypical relationship, probably due to a fall in real incomes and increasing underestimation of domestic consumption by statistics due to cigarette smuggling and excise falsifications.
According to more recent data, there was an increase in consumption from the mid-1990s to 2000. This increase was apparently due to stabilization of the economy, resulting in control of inflation and increasing real incomes, particularly in the case of lower socio-economic groups. Nonetheless, in 1997, as the Brazilian tobacco industry has pointed out in their annual reports, there was a 5.6 percent fall in the volume of legal cigarette sales in the domestic market.
There are clear trends in consumer preferences, in both domestic and world markets. Consumers prefer cigarettes with low nicotine content; lighter cigarettes; and cigarettes produced from regular O grade tobacco. Companies are therefore changing production technology by reducing fertilizers - especially nitrogen - to reduce yields, and adjusting planting time, spacing, topping and harvesting systems, as well as striving to reduce nicotine levels and not harvesting overripe tobaccos to avoid R grades.
Although proportionally minor, aromatic tobacco (oriental type) is important for a number of small farms in the northeast. Production has been about 800 to 1 000 tonne/year of high-value tobacco. The area planted has been increasing, to some 1 500 ha, with 1 176 growers in the 2000/01 crop. It is mainly used in blends for cigarette brands - the so-called American blend. Export of such blending types is a promising sector.
The suitable soil and climate in the northeast has made aromatic tobacco production an important agricultural activity and a major source of income for producers. It helps the regional economy by creating around 16 000 jobs from May to November each year.