Previous Page Table of Contents Next Page


2.7 REVIEW OF DEVELOPMENTS IN TOBACCO CONSUMPTION


2.7.1 Cigarette consumption

Table 2.12: Cigarette consumption and prices.

Year

billion packets

Price
($R/packet)

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 industry’s strong export performance in the 1990s, despite initiatives in several countries to constrain smoking. Brazil’s 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
US$/pack

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.

2.7.2 Cigar consumption

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.

2.7.3 Impacts of price and income

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.

2.7.4 Future developments in tobacco demand

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.


Previous Page Top of Page Next Page