3.2 PROJECTIONS OF DEMAND

World demand for tobacco in the baseline scenario is expected to increase to 7.1 million tonnes in dry weight in 2010, reflecting two divergent trends. In developed countries overall demand is declining slightly and it is expected to be about 2.05 million tonnes in 2010, or about 10 percent lower than in 1998 (2.23 million tonnes). The decline is weaker in Europe than in North America and Oceania. However, total tobacco consumption in the developed countries in 2010 is likely to represent only 29 percent of world tobacco demand (down from 34 percent in 1998), the remaining 71 percent being consumed in the developing countries. Thus, the world picture of tobacco demand in the future is determined mainly by the developing countries.

Tobacco consumption in developing countries is expected to increase to 5.09 million tonnes in dry weight, up from 4.2 million tonnes in 1997-1999. This represents an average annual growth rate of 1.7 percent between 1998 and 2010, significantly lower than the 2.8 percent observed in the period 1971 to 1998. About 80 percent of the projected increase in demand is in the Far East and in particular in China. The share of China in total world tobacco demand is projected to increase in 2010 to 43 percent, up from 38 percent in 1991.

3.2.1 Overall demand projections

World tobacco demand in dry weight is projected to reach 7.1 million tonnes in 2010 in the baseline scenario and 6.4 million tonnes under the policy scenario (see Figure 3.1 and Table 3.4).

The decline in consumption during the 1990s should be considered with caution because the second half of the 1990s shows an unusual volatility. China, for example, shows a high volatility in production and consumption (see Figure 3.1). Also the years 1998 and 1999 show an unusually strong decline in consumption which may be related to changes in stocks.

Figure 3.1 Tobacco leaf - consumption trends, 1970-2010 (baseline scenario) (dry weight)

Although one would accept production volatility as normal, such volatility is rather unusual in consumption given that tobacco use is habit related. If one examines world-without-China consumption figures, the observed pattern of consumption increases steadily from 4.1 million tonnes in 1991 to 4.3 million tonnes in 1998 and to 4.5 million tonnes in 2010. The projected pattern of tobacco consumption is given in Figure 3.1 and the expected consumption shares in 2010 in Figure 3.2.

Figure 3.2 Tobacco leaf - consumption share, 2010

Table 3.4 Tobacco consumption and demand projections

(scenarios - baseline and policy)

In developed countries tobacco consumption is declining and the developed country share in world tobacco consumption is projected to drop in 2010 to 29 percent from 35 percent in 1991. This is a major change in the structure of tobacco consumption at world level.

Among developing countries, China, the world's largest consumer, increased tobacco leaf consumption from 0.7 million tonnes in 1971 to 1.4 million tonnes in 1981, 2.5 million tonnes in 1991 and 2.2 million tonnes in 1998. The projected tobacco leaf consumption figures for China for 2005 and 2010 in the baseline scenario are 2.4 and 2.6 million tonnes respectively. Given the increase in population projected for the period to 2010, this projection assumes that both cigarette consumption per capita and the smoking rate are going down as a result of present restrictive policies for smoking.

Figure 3.3 Tobacco leaf demand, world, 1970-2010 (scenarios - baseline and policy) (dry weight)

In the developing countries other than China consumption increased smoothly from 1.8 million tonnes in 1991 to 2 million tonnes in 1998, 2.2 million tonnes in 2005 and 2.4 million tonnes in 2010. Although tobacco consumption per capita is low compared to developed countries, consumption is projected to increase and the share of developing countries in global consumption is expected to rise from 31 percent in 1991 to 36 percent in 2010.

In the policy scenario, overall tobacco demand in the world is expected to be lower in 2010 by about 10 percent at about 6.5 million tonnes, as a result of strong anti-smoking policies, as shown in Figure 3.3. However, despite very strong measures such as an increase in taxation and strong smoking restrictions, the overall decline in tobacco leaf demand is still modest.

3.2.2 Developed countries

Detailed figures about actual consumption and projected demand for tobacco products are given in Table 3.4. The difference between the baseline and policy scenarios is rather small due to the fact that cigarette demand has a very low price elasticity and direct anti-smoking measures are already adopted. Demand is projected to decline from 2.3 million tonnes in 1998 to a little over 2 million tonnes in 2010 in both scenarios.

Figure 3.4 Tobacco leaf demand, developed countries, 1970-2010 (scenarios - baseline and policy) (dry weight)

The major consuming countries or groups of countries are the United States and the EU. Tobacco demand in the United States is expected to continue to decline further. It is expected to decline in Europe also, but with some diversity between the EU and other countries. In the EU (15) demand is expected to decline following a strengthening of the anti-smoking campaign and an increase in cigarette taxation. In other countries of Europe, however, such as the transition economies of central and eastern Europe, demand is expected to increase due to a significant improvement in income. This is expected to happen also in the area of the former USSR.

In other developed countries, such as Japan, Israel, South Africa and Oceania, demand is expected to decline with trends similar to those observed in North America and the EU.

3.2.3 Developing countries

China

China's consumption of tobacco is higher than that of all other developing countries together. It is estimated that more than 320 million Chinese smoke, making China the largest cigarette consuming country in the world. Cigarette consumption in China jumped from 38 packs per capita per year in 1981 to 71 packs in 1990, but declined to 65.4 packs in 1999. Since incomes have been increasing during the 1990s, the observed decline in cigarette consumption may be attributed to other reasons such as health awareness or smoking restrictions.

Tobacco demand projections for the period to 2010 are shown in Figure 3.5. Demand is expected to increase but much more slowly than in the past and is expected to reach 2.6 or 2.2 million tonnes in 2010 in the baseline and the policy scenarios respectively. This level of demand is much lower than some years in the 1990s, as shown in Figure 3.5 and it implies a significant decline in consumption per adult and in smoking rates.

Figure 3.5 Tobacco leaf demand, China, 1970-2010 (scenarios - baseline and policy) (dry weight)

Furthermore, it is expected that some decline in tobacco leaf consumption may originate in the introduction of new technology in cigarette manufacturing that has already had a significant impact on demand for tobacco leaf and is expected to continue having a strong negative impact.

Overall, the prospects for the decade to 2010 are for slower growth of demand for tobacco leaf in China. The slower population growth and the increasing awareness of the health hazards of smoking may prevent significant growth in cigarette consumption. Furthermore, the improved technology in cigarette manufacturing may lead to further reduction in the use of tobacco leaf in cigarette production. Finally, consumption would also depend on whether or not the government were to take any effective measures towards smoking. Overall, total demand for tobacco in China is expected to grow but more slowly than in the past.

Other developing countries

The evolution of demand for tobacco in all other developing countries is shown in Figure 3.6. This group includes rest of Asia (excluding China), Africa, Latin America, and the Near East. Growth in tobacco consumption in these countries is expected to continue along past trends. Although a strong anti-smoking policy would certainly reduce demand, it would probably not reverse the positive trend. However, the overall impact of a strong policy is estimated to be a sizeable 16 percent.

The second most populous and also most important tobacco consumer is India. In India most consumption of tobacco is in the form of non-cigarette items, such as bidi, natu, chewing, hooka, etc. accounting for 75 percent of total consumption. Cigarette consumption accounts for only 25 percent. In spite of government efforts to curtail tobacco use, total apparent consumption of tobacco increased at a rate over 2.2 percent per annum during the last decade. Bidi recorded the highest rate, and the use of cigarette tobacco also grew, while non-smoking uses recorded a fall in consumption. The tax structure is also different. Bidi use is taxed lightly, while cigarette use, in particular filtered cigarettes, is taxed heavily.

Prospects for the decade to 2010 are for continuing growth in tobacco use in India. Population growth is expected to increase by 1.8 percent per annum. Urbanization will continue also, bringing urban population to above 30 percent in 2010 from 25 percent in 1991. Further, GDP is likely to grow at 5 to 6 percent per annum. Under present Government policies, the bidi sector will most likely continue to expand at its present rate of 2 percent per annum, and the cigarette sector will continue to expand at a higher rate of growth than in the last decade. Overall, total demand for tobacco is likely to continue to increase, but more slowly than in previous decades.

Figure 3.6 Tobacco leaf demand, developing countries excluding China, 1970-2010 (scenarios - baseline and policy) (dry weight)

In Latin America, consumption of tobacco in 1998 was about 0.55 million tonnes, of which just over half was in Brazil, and most of the increase in the region's demand is expected to occur in that country. Overall, demand in the countries of the region is expected to increase modestly during the period to 2010.

In Africa, total demand for tobacco increased in the 1990s with record growth of 3.5 percent per annum, much faster than in the 1970s and 1980s, due mainly to the increasing population. Growth for the period to 2010 is expected to continue at a similar rate.

In the Near East, demand for tobacco is expected to grow at rates a little lower than those experienced in the 1980s and 1990s. In Turkey, which is the main market in the region, consumption increased rapidly in the 1970s and 1980s and declined a little in the 1990s (see Table 3.4). The growth of consumption is expected to continue in the period to 2010, but at a lower annual growth rate than in the 1970s, 1980s and 1990s.