Released on = April 14, 2007, 5:09 am

Press Release Author = Bharat Book Bureau

Industry = Marketing

Press Release Summary = This Key Note Market Report on cigarettes and tobacco covers
the market for cigarettes, hand-rolling tobacco (HRT), cigars and pipe tobacco.

Press Release Body =
Cigarettes & Tobacco - Market Report

This Key Note Market Report on cigarettes and tobacco covers the market for
cigarettes, hand-rolling tobacco (HRT), cigars and pipe tobacco. In 2003, the total
UK cigarettes and tobacco market was worth £15.27bn at retail selling prices (rsp),
a rise of 2.3% on 2002. Cigarettes dominate sales and, in 2003, accounted for 90.2%
of the total market.

According to National Statistics\' Consumer Trends, cigarettes continue to account
for a significant proportion of consumer expenditure on tobacco. UK consumers spend
more on tobacco than they do on alcoholic beverages (expenditure on which amounted
to £12bn in 2003), health (£11.6bn) or education (£9.3bn). However, the popularity
of smoking is in long-term decline and this trend seems set to continue. In 2002,
just 26% of the adult population were smokers, compared with 45% in the mid-1970s.

The main factors driving the long-term decline include: concerns relating to the
impact of smoking on health, the growing view that smoking is an anti-social habit,
increasing restrictions governing where people can smoke and how companies can
market their products, and the rising cost of legally bought tobacco. Consumers are
increasingly turning to economy brands and smuggled tobacco - contraband products
and those legally bought abroad account for 31% of sales - in response to taxation
increases. In addition, this has a negative impact on the overall size of the market
in value terms.

The cigarettes and tobacco industry is highly concentrated, with just two companies
- Gallaher Group PLC and Imperial Tobacco Group PLC - accounting for around 80% of
sales by value. One other major firm, British American Tobacco PLC (BAT),
manufactures cigarettes in the UK, but sells almost all of them abroad. Although all
of these companies are based in the UK, they are, in effect, international companies
that sell their brands globally. Indeed, they are increasingly focusing activities
on developing countries, which tend to have less stringent health and advertising
regulations, and where the potential for brand development remains significant.

Key Note forecasts that, between 2004 and 2008, the cigarettes and tobacco market
will experience only limited growth. Following the introduction of the advertising
ban in February 2003, tobacco firms supply the only legally available product that
cannot be advertised. This ban means that it is almost impossible to launch new
brands or products in the UK. In addition, the Government is under great pressure to
introduce further restrictions, such as a ban on smoking in public areas.
Anti-smoking campaigns by the Government and anti-smoking bodies, as well as
mounting evidence of the adverse effects of smoking on health, will also resonate
strongly with an increasingly health-conscious population. Smoking among the adult
population has been in decline over the past 3 decades and this trend will almost
certainly continue. In addition, it might accelerate during the remainder of the
current decade. Although the market will continue to grow in value terms, this will
largely occur as a result of taxation increases and Key Note expects that sales
growth will decelerate over the 5-year period.

Key Note Market Reports
Invaluable aids to anyone needing to gain a highly detailed understanding of a
specific market for more informed decision-making.

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