Product Review: The Nigerian Cigarette market has only one winner

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Cigarette

Figures from the World Health Organisation (WHO) show that over 1.1 billion people light up cigarettes worldwide. By implication, more than 1/6 of the world’s total population is addicted to smoking, including tobacco’s main component – nicotine. Tobacco companies produce trillions of cigarettes sticks annually, and the consumption rate keeps increasing across the globe.

In Nigeria, despite the age restriction and government regulations that forbid smoking in public places, manufacturers have continued to churn out new cigarette variants to further appeal to the emotions of their expanding consumers. The increase in demand by Nigerian consumers is boosted by the growing population, urbanisation, and westernisation.

Bua group

Cigarettes come in blends of tobacco encased in paper, glue and also with cellulose acetate-based filters. The tobacco utilised in numerous cigarette brands includes more than one hundred substances, like additives and diverse flavourings.

Welcome to this week’s edition of product review, a weekly analysis where Nairametrics features products contending for leadership and prominence in Nigeria’s consumer market. This week, we take a look at the cigarette brands and how they are competing for profitability and visibility in the market space.

Facts and Figures

In a report by GulfTobacco.com, Nigeria produces an average of 19-21 billion cigarettes annually. It also revealed that on average, just one person smokes 162 cigarettes annually in Nigeria.

A Nairametrics research as at 2016 suggests that about 21 billion sticks of cigarettes were produced in the country. While 12 billion of these sticks were sold in Nigeria, the rest were sold in West African markets.

Brands in the market

Major brands in the Nigerian market include Benson & Hedges, Rothmans, St Moritz, Aspen, Pall Mall, and London. The Nigerian market is dominated by British American Tobacco (BATN) which controls over 78% of the market share and closer to 82% of the West African market. The reduction in illicit trade of cigarettes has also helped it to solidify its leadership position. The company’s range of brands is very strong and BATN is probably the only company to have a complete presence across the length and breadth of the country.

However, over the last five years, the company’s sales share has fallen, particularly due to competition from brands offered by multinational, Japan Tobacco Inc. (manufactured in Nigeria by International Tobacco Co Ltd).

Philip Morris Limited, maker of Marlboro and L&M brands, recently entered into a strategic partnership with International Tobacco Company for the local manufacturing of the products in Nigeria.

Coronation Research

SWOT Analysis of the market

Strength

The increasing population and growing socialisation culture among adults offer a good market for cigarettes in Nigeria. Though the industry is highly regulated – the National Tobacco Control Act 2015 was signed into law by the last administration in 2015. The law provides an effective regulation and control of production, manufacture, sale, labelling, advertising, promotion and sponsorship of tobacco products in Nigeria.

Weakness

The Nigerian market is prone to strict government regulation. Recently, in its bid to discourage people from smoking, the Federal Government announced a new tax regime for tobacco and other alcoholic beverages. Under the new rates for tobacco, each stick of cigarette will attract N1 specific rate per stick, that is N20 per pack of 20 sticks in 2018. While by next year, it will attract N2 tax per stick or N40 per pack of 20 sticks.

Opportunity

The main raw material, tobacco is widely grown in the country with manufacturers such as BATN actively involved in responsible tobacco leaf cultivation. According to the company, the volume of tobacco produced has increased from 2,088 tons in 2004 to over 2,500 tons in 2013, and about 10,000 people are currently directly involved in the tobacco growing operation.

Threats

The serious health implications attached to smoking of cigarettes, ban on single stick sales of cigarettes to the under aged, cultural and religious teachings against smoking, pose threats. Though so far, that has not really hampered the growth of cigarette sales in the country.

The emergence of substitutes in the market

The Nigerian market has also witnessed a growing market for e-cigarettes otherwise called vaping. Users see it as an alternative to smoking and it has been on the increase in the last five years. Many believe that it is less hurtful than smoking.

Also, it is not uncommon to see people smoking shisha at parties and night-clubs. Shisha smoking, also called narghile, water pipe, hookah or hubble-bubble smoking, has its origin from the Middle East and certain areas of Asia but has recently become more popular in the country, especially among young people. It involves smoking tobacco from a bowl through a hose or tube attached. The tube has a mouthpiece that the smoker uses to inhale the smoke.

Experts believe that shisha smokers are at risk of developing the same health problems as cigarette smokers, such as cancer and heart disease. A World Health Organisation study also suggested that a one-hour session of smoking shisha can be the same as smoking 100 or more cigarettes.

To further enhance its acceptability in the market, most shisha solutions come in various flavours such as peach, chocolate, mint, strawberry, and apple.

What consumers are saying

Nairametrics spoke with some consumers of cigarettes in Lagos. Most of them expressed divergent opinions on their choices of brands.

Muhammed Bashir, a trader, enjoys smoking and he doesn’t believe it is harmful to his health. “I love Benson.” he said with a smile.

Nairametrics also noticed that cigarette brands have very loyal consumers.  According to Femi, a banker in one of the first-generation banks:

“I have been taking Benson all my life and I am addicted to the brand.”

Mallam Isa, a trader at the popular Ikeja market, revealed that the largest consumers of cigarette brands are mainly youths, although old men also buy from him.

“The market dey sell fast. All these young boys and even mature men buy their favorite brands.”

Tunde, another respondent, said that he loves the Rothmans brand and enjoys it anytime he smokes it.

According to him:

“When u smoke it, your lips will be sweet like forever…you will just keep rolling your tongue around your lips.”

The verdict

In a Twitter poll by Nairametrics, Benson & Hedges got 40%, Rothmans got 13%, while Marlboro got 10%.

https://twitter.com/Nairametrics/status/107249811334304153

The Nigerian market offers a lot of opportunities to manufacturers and growers of tobacco leaves in Nigeria.

The recent influx of flavoured cigarettes into the Nigerian market, which is mostly targeted at luring children, calls for concern. The regulators must double down to rid the market of illegal brands and also step up its enlightenment campaigns on the implications of smoking.

Also, manufacturers must ensure strict adherence to international standards and global best practice. The country should not be a dumping ground for illicit tobacco products.

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