Aftermath of change in tax structure-Cigarette Market in Cambodia: Ken Research
Cambodia's return to democracy in 1993, while bringing about conditions that should in theory benefit a market such as cigarettes, was also accompanied by rising non-duty paid sales. This resulted in duty paid volumes dropping to around six billion pieces in 2006, although some improvement to 7.5 billion pieces was recorded by 2014. Per capita consumption rates have fallen as the country's population has expanded and stood at 485 pieces in 2015, 24.9% lower than in 1990. Cambodia has a rapidly growing population of 15.5 million people in 2014.
Only just over half of cigarettes smoked are filtered, their share up only slightly on 1990. Virginia blends are the most popular. With per capita incomes rising, demand for mid-priced brands is growing. However, it is high priced brands that are seeing the strongest growth, their share rising to 6% of volumes in 2007 compared with only 2% in 2004. Until the mid-2000's Cambodia had a relatively relaxed approach towards the regulation of the tobacco market. This changed in November 2005, when the country's government ratified the WHO's Framework Convention on Tobacco Control. Moves following the ratification of the FCTC include the launch of graphic on-pack warnings in July 2010.
America, Vietnam, Malaysia, Indonesia, Switzerland, Thailand, and China are just a few of the sources of imported cigarettes in Cambodia. Cigarette promoters will have to stop work when a tobacco advertisement ban takes effect in late August, a health official said yesterday. A February sub-decree, which also bans advertising tobacco in the media and on billboards, states that the “promotion of tobacco products to customers by agents of tobacco companies shall be prohibited.” Yel, Daravuth, tobacco-free initiative project managed at the World Health Organization, said this clause meant that cigarette promoters would have to seek alternate jobs.
Within almost six months of a sub-decree going into effect requiring graphic warnings on all cigarette packages, Health Minister Mam Bunheng issued a second warning this month to tobacco companies not complying with the regulations, threatening to take legal action. The January 16 warning follows a first notice issued in early October prompted by companies’ low compliance with the sub-decree, which went into effect in July. Under the rules, graphic photos must cover 50 percent of cigarette packets, and a written message in Khmer must cover another 5 percent. Those found violating the rules are subject to fines of about $1,000 for tobacco companies, $500 for distributors and wholesalers, and $2.50 for retailers. The ministry will take legal action soon for companies that don’t obey the law and sub-decree,” Bunheng said in the warning. “The ministry . . . will not issue a third warning.” Ung Phyrun, secretary of state at the Ministry of Health, said the ministry will only warn companies twice before punishing them. “This is the principle to make everyone obey the law, to make the companies aware of this,” he said. Phyrun would not directly address why companies are still non-compliant. “We will talk to all the [tobacco] companies that are doing [business] in Cambodia,” he said.
Cigarette companies are spending millions of dollars in advertising and promotional campaigns in Cambodia. Yet the market is small - five to seven billion sticks sold per year - and annual growth, at roughly three percent, is not spectacular. According to studies by, 70 percent of all males smoke, while cultural taboos suggest that the cigarette industry will not be able to make inroads among females: only one female in ten smokes, and nearly all of them are above 40 years old. Instead, companies are spending millions building brand loyalty in a country where consumers seem to switch brands on a whim. This means targeting the 18 to 35-year-old smoker and depending on the aspiring middle class to move from their medium-priced cigarettes to higher-priced brands.
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Ankur Gupta, Head Marketing & Communications
Ken Research is a Global aggregator and publisher of Market intelligence research reports, equity reports, data base directories and economy reports. Our market research reports provides market sizing analysis, insights on promising industry segments, competition, future outlook and growth drivers in the space. The company is engaged in data analytics and aids clients in due-diligence, product expansion, plant setup, acquisition intelligence to all the other gamut of objectives through our research focus.
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