The Outlook for Smoking in 2011

Published on January 21st, 2011 13:55

Will smoking trend grow across the world this year or we finally get rid of the pernicious habit?

In a recent report Citigroup experts believe that smoking rates will continue to decline steadily this year, as smokers across the world are quitting. The analysts have estimated that in case the downward trend continues, smoking rate may fall to zero in several major markets by 2050. For instance, in the United Kingdom, the nationwide smoking rate fell from 50% in the 1950s to 20% in 2009.

However, excluding Lorillard, all global tobacco companies performed better than it was predicted in 2010. So, it is not clear now whether some of the tobacco giants will continues to get larger profits or the entire industry will fail to overcome the growing taxes, smoking bans and anti-tobacco propaganda.

tobacco Outlook

Well, while anti-smoking advocates are eager to make the world free of smoking within the next 40 years, that’s simply not going to happen for sure. Though smoking rates have decreased significantly since the 1950s, the drop has virtually stabilized in the last several years, at 20% percent across the U.S.

Despite the constantly-growing prices on tobacco, smokers keep puffing. So, the major question is which companies will succeed in the shrinking market.

Experts believe the world’s leading tobacco firm Philip Morris International will continues to grow after its spin-off from Altria, which also remains an attractive prey for investors with a growth of nearly 21% in value. Reynolds American is an interesting play as well as its parent-company British American Tobacco.

Of course, investing in some tobacco companies can be a risky venture. With a possible ban on menthol cigarettes, the future of Lorillard is not clear, as it flagship brand, Newport gives the company more than 90% of its overall sales.

The New Year brings major changes to tobacco companies, as the majority of big tobacco firms have already announced or plan to change their corporate structure or executive board. As tobacco is a difficult market, strong and clever managed is a vital part of success.

British American Tobacco has reduced the number of regions to 4 in order to adjust to a shrinking international market. Altria has changed its executive team with an higher focus on regulatory matters, while major competitor Reynolds American will appoint a new CEO in early 2011, when current CEO Susan Ivery retires. This makes the companies more attractive to investors.

The U.S. Food and Drug continuous regulation of the tobacco industry prompted fears and doubts into the market, however, there are no dramatic changes yet. The Regulations approved by the FDA are concentrated on changes in health warnings, smoking prevention among adolescents and minor tobacco products (such as ban on flavored cigarettes, excluding menthol), and experts are not sure whether these measures will have an impact on reducing smoking rate in the USA.

At this moment, besides the menthol issue for Lorillard, there doesn’t seem to be any significant problem that dramatically could affect the market in 2011.

By Joanna Johnson, Staff Writer. Copyright © 2011 All rights reserved.

Related tags: tobacco market | big tobacco | smoking researcher | tobacco company

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