Last updated: November 2017
Suggested citation: Freeman, B, Winstanley, M. 10.2 The global tobacco manufacturing industry. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2016. Available from http://www.tobaccoinaustralia.org.au/chapter-10-tobacco-industry/10-2-the-global-tobacco-manufacturing-industry
The largest tobacco company in the world (measured by cigarette volume) is the state-owned China National Tobacco Corporation.1 According to industry reports, China National Tobacco Corporation has a more than 99% market share in China,2 making it the single largest tobacco manufacturer in the world. Philip Morris—including both the separate Philip Morris International and US market (Altria) companies—runs second to China National Tobacco Corporation with 17.3% of the global market share, followed by British American Tobacco, Japan Tobacco International and Imperial Tobacco. See Table 10.2.1 for global market share for each of the five major tobacco companies.
Estimated percentage share of global market, 2010 (%)
*Altria is the completely separate US arm of Philip Morris.
Source: Euromonitor International 20113
The driving force behind consolidation of the tobacco companies is the desire to increase market share, particularly in emerging markets. Since 2009, this strategy has been increasingly important as it marks the first time world cigarette sales volume has fallen, by 0.2%. Market growth in favourable countries such as China failed to make up for declines (driven largely by tax increases) in the US and other less favourable countries. Even with falling smoking prevalence, total growth in population, particularly in Asia, means there is opportunity and potential for growth.1
The ability of the global companies to increase prices continued to outweigh the effect of volume falls in cigarettes in 2009 and in the first 9 months of 2010.4 The world tobacco market was worth US$664 billion in 2010, escaping relatively unscathed the global recession.5 However, tobacco as a category was downgraded by Citigroup analysts due to the unsustainability of profits rising amid volumes falling. According to the Citigroup report, tobacco could disappear from developed nations in the next 50 years:
“...no-one can be certain how smoking rates will play out in the distant future. [There are] three broad possibilities: Scenario A just extends the existing trend line until it hits zero. In Scenario B gradually fewer people quit, as we approach some sort of hard core of smokers, but in Scenario C smoking gets to a tipping point, as it becomes increasingly unacceptable and hence easier to regulate against. Possibly it may be (eventually) banned. We are certainly not saying that we know which is right; plainly we don't. We think that each scenario is quite plausible. [But] it is quite possible that there will be no smokers left in Britain or many other developed countries in about 30–50 years.”6
Philip Morris International is the largest of the multinational tobacco companies. It owns the most popular and valuable tobacco brand in the world, Marlboro, which was worth US$67 billion in 20107 and has 7.3% total share of all the tobacco brands sold globally.8 See Table 10.2.2 for a summary of the global brand share. The establishment of licensing agreements and joint ventures with local tobacco industries has extended PMI's market reach. One of the most important of these agreements is Philip Morris International's partnership with China National Tobacco Corporation.9 The agreement establishes a joint venture company equally owned by both tobacco groups, to be headquartered in Lausanne. It licenses China National Tobacco Corporation to produce and distribute Marlboro in China, and in return, facilitates entry for China National Tobacco Corporation to the global tobacco market with a portfolio of 'Chinese heritage brands'10 carefully modified to appeal to foreign palates,9 as well as providing China National Tobacco Corporation with other international business opportunities. Both companies benefit from shared sales, distribution and other business infrastructure.10
British American Tobacco ranks as the second largest transnational tobacco company after Philip Morris International. Although British American Tobacco has around 300 brands in its portfolio, it regards Dunhill, Kent, Lucky Strike and Pall Mall as its most important 'Global Drive' brands. Since 2005, British American Tobacco has also become active in the market for Swedish-style snus.i 11
Japan Tobacco International grew from a largely domestic company to an international one through acquisition of other companies/brands. The international business has a strong portfolio of brands lead by Winston (the second-largest international brand in the world and fastest growing over the last decade), and Camel (sold in over 100 countries). Mild Seven is the top-selling premium charcoal filtered brand in the world.4
Imperial is the smallest of the four international tobacco companies and the one most concentrated in a few markets. The Imperial Tobacco Group has substantially increased its global expansion since the mid-1990s, through brand acquisition (as has occurred in Australia) as well as increase in market share. Since its acquisition of Reemtsma Cigarettenfabriken GmbH in 2003, the Imperial Tobacco Group has become the second largest tobacco company in Germany and the fourth largest international tobacco company in the world, manufacturing and distributing cigarettes, loose tobaccos, cigars and smoking-related paraphernalia such as cigarette papers, filters and tubes. The company cites Asia, Eastern Europe, Africa and the Middle East as its key growth regions.12 Imperial Tobacco leads the global market in fine cut tobacco and reports its volume cigarette sales in terms of cigarette equivalents to demonstrate the way in which roll-your-own tobacco can mitigate volume falls in cigarette sales.4
The trend towards globalisation of the tobacco industry has led to a globalised approach to marketing, research and lobbying,13 and factors such as trade liberalisation have opened new and lucrative markets to the transnational companies. Companies are increasingly focused on their 'international' brands, it being more cost effective to manage and market a smaller number of iconic brands than to develop smaller, market-specific brands.14 The negative effects of tobacco industry globalisation can be illustrated through the imbalance between the money that flows from (often poor) smokers to (often not poor) shareholders and the money that flows from wealthy to poor countries to reduce tobacco use. For example, in 2005, British American Tobacco reported that smokers in the poorest countries of sub-Saharan Africa provided about $340 million to its bottom line, an amount equal to about 140% of the total global development assistance for tobacco control.15
Although the companies engage in strong competition, as an industry they are generally united in their desire to promote their products and undermine tobacco control measuresii. At an international level, the tobacco industry engages against instrumentalities including the World Health Organization, the World Bank and the United Nations. It strongly fights to discourage countries from adopting the effective measures mandated in the WHO Framework Convention on Tobacco Control. The industry has marshalled and given voice to an international lobby for tobacco growers, especially powerful in countries where tobacco is a major agricultural commodity.iii Using arguments honed over decades of cooperation, the industry as a whole continues to advance misinformation about the nature of its products, obfuscates about addiction, and persists in its denials that advertising recruits new smokers.14
A research project by Stanford University's Global Tobacco Prevention Research Initiative, the Cigarette Citadels, maps the location of more than 400 cigarette factories worldwide. The goal of the project is to pinpoint all the factories in the world producing cigarettes and provide basic facts about them.16 The interactive map can be accessed here: https://www.stanford.edu/group/tobaccoprv/cgi-bin/wordpress/
ii An important exception is Altris, which broke ranks by publicly supporting the legislation that granted the US Food and Drug Administration regulatory authority over tobacco products.
iii The tobacco industry argues that it is a vital, positive contributor to the economies of some countries. For discussion, see Chapter 17, Section 17.3.4.
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11. British American Tobacco. Corporate Website. London: British American Tobacco, 2008. Last update: Viewed Available from: http://www.bat.com/group/sites/uk__3mnfen.nsf/vwPagesWebLive/DO52AD6H?opendocument&SKN=1&TMP=1.
12. Imperial Tobacco Group. Corporate website. Bristol, UK: Imperial Tobacco Group, 2008. Last update: Viewed Available from: http://www.imperial-tobacco.com/index.asp.
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16. Stanford’s Global Tobacco Prevention Research Initiative. Pinpointing the factories: where are all those 'cancer sticks' produced? Stanford, California: Stanford University, 2011. Last update: Viewed Available from: https://www.stanford.edu/group/tobaccoprv/cgi-bin/wordpress/.