WORLD CIGARETTE SITUATION
Table of Contents
Country Analysis By Region
A: World Cigarette Production By Country
Table B: Filter-Tipped Cigarette Production as Percent of Total
Table C: World Cigarette Exports by Country
Table D: World Cigarette Imports by Country
Table E: Top Cigarette Exporting Countries
Table F: Top Cigarette Importing Countries
Table G: World Cigarette Production Trends For Specified Countries
Country Analysis By Region
Mexico - Cigarette production for 1997 reached 47 billion pieces and is expected to increase slightly to 47.2 billion pieces this year due to strong export demand. Exports are expected to increase by 50 percent or 20 million pieces due to improved quality and price competitiveness in 1998. However, sources predict that exports will decline in the long term due to depressed economic conditions in its major export markets, Eastern European and Asian countries.
Domestic consumption continues to increase in 1998. Cigarette manufactures reported attractive returns in 1997 but many fear that consumption will decline due to anticipated economic problems fueled by the current oil slump. Sales of high-priced cigarettes continue to decline because of retail price hikes. Consumers are switching from high quality cigarettes produced from high quality flue-cured burley to mid and low-priced cigarettes produced from low quality flue-cured leaf tobacco. Furthermore, marketing opportunities for US cigarette brands are limited because they are more expensive than domestic products.
United States - U.S. cigarette consumption in 1997 is estimated at 480 billion pieces-compared with 487 billion the previous year. Since 1986, cigarette consumption has fallen nearly 17 percent. Declines in consumption can be attributed to health concerns, an aggressive anti-smoking campaign, price increases, and decreased social acceptance of smoking.
Cigarette production fell 5 percent in 1997 to an estimated 719.6 billion pieces, about the level of 1992 due to a decline in exports and in domestic consumption. Approximately two-thirds of U.S. cigarette output goes to the domestic market with the remainder going for export.
Exports dropped from last years 243.9 billion pieces to 217 billion pieces, about the same level as 1993. Shipments to the European Union fell 20 percent because cigarette production by some manufactures was shifted from the United States to Europe. Major destinations for U.S. cigarette exports in 1997 were Belgium/Luxembourg (a major transshipment point for cigarettes destined to other European markets), Japan, the Russian Federation, Lebanon, Cyprus, Saudi Arabia, and Singapore. The United States is not a significant importer of cigarettes. Total cigarette imports were up 14 percent in 1997, reaching 3.2 billion pieces.
Brazil - Cigarette production for 1997 totaled 182 billion pieces, up slightly in 1997. Sources estimate that cigarette production in 1998 will decrease by nearly 3 percent or 178 billion pieces due to decreased domestic consumption. Domestic consumption fell by 7 percent in 1997 and is projected to decrease by 10 percent in 1998 due to increases in retail prices coupled with reduced purchasing power. Although cigarette production is projected to decrease in 1998, exports are expected to increase by nearly 9 percent or to total 79 billion pieces. Major export markets for Brazilian cigarettes are Belgium, Paraguay, and the Russia Republic.
Venezuela - Cigarette production is expected to increase 16 percent to 27 million pieces in 1998 due to new markets for Venezuelan cigarettes in the Andean countries. Cigarette exports are estimated to reach 27 million pieces, up nearly 41 percent. Domestic consumption, however, is expected to drop 41 percent to 4.1 million pieces. Consumption of cigarettes in Venezuela has been declining about 8 percent annually because of lower disposable incomes. However, price increases by as much as 35 percent are expected to have a substantial impact on consumption levels in 1998.
Argentina - Argentine cigarette production for 1998 is estimated at 42.2 billion pieces, practically unchanged from 1997. Domestic consumption is forecast to drop marginally. However, exports are expected to offset reduced domestic demand. Exports are expected to increase by 16 percent or to total 3.5 billion pieces. Major markets for Argentine cigarettes are Paraguay and Belgium. Cigarette imports are insignificant. But cigarette smuggling in the northern provinces continue to be a problem. A large portion of Argentine trade consists of cigarettes that are exported, then illegally re-imported in order to bypass duties and taxes.
Austria - The combination of improved efficiency in cigarette manufacturing, the need to replenish cigarette stocks, and a favorable export outlook have encouraged Austria to increase cigarette production. Since 1996 when cigarette production in Austria grew over 16 percent from 17 billion to 19 billion pieces in one year, the growth rate of cigarette production has slowed down but continues to grow to record levels. During 1997, Austrias cigarette production increased 3 percent to slightly less than 20 billion pieces. Austrias cigarette production is expected to increase by another 2 percent in 1998 to over 20 billion pieces.
Domestic consumption for 1998 is expected to increase to 13.3 billion pieces, slightly above 1996 and 1997 consumption rates of 12.9 billion and 13.2 billion pieces, respectively. Reported domestic cigarette consumption is rising in part because improved border controls have curbed the amount of cigarettes smuggled into Austria. Less smuggled cigarettes are available, forcing some Austrians to purchase cigarettes from legitimate vendors. Exports have steadily increased in the past two years from 7.3 billion to 7.9 billion pieces in 1996 and 1997, and are expected to increase in 1998 to 8.4 billion pieces. Germany, United Kingdom, Greece, Yugoslavia, and Russia are important markets for Austria. However, Austria expects to increase exports by intensifying its marketing and promotional efforts in Japan, China, Taiwan, and Korea.
Belgium-Luxembourg - Cigarette production fell from 25 billion pieces in 1993 to just over 18 billion pieces in 1996. Production has not increased since 1996 and is expected to remain at 18 billion pieces in 1998. As anti-tobacco measures and Government controls on the promotion of cigarettes have stepped-up in recent years, cigarette consumption fell steadily from 19 billion pieces in 1992 to 12 billion pieces in 1997. Consumption is expected to stay at 12 billion pieces during 1998. Tobacco companies responded to the fall in consumption by cutting back their activities in the Belgium-Luxembourg Economic Union (BLEU). Of the six multinational companies that operate in the BLEU, two have closed-down their cigarette production units and are devoted solely to the importation and distribution of tobacco. Cigarette imports peaked at 12 billion pieces in 1996 and fell to 8 billion pieces in 1997. Imports are expected to remain at 8 billion pieces in 1998. Revised export figures indicate that BLEU exported over 14 billion pieces a year during 1996 and 1997. BLEU is expected to export about 14 billion again in 1998. BLEUs main export markets are the Netherlands, United Kingdom, and Germany.
France - The market for cigarettes in France continues to shrink as foreign suppliers of cigarettes increase market share at the expense of French cigarette manufacturers. Cigarette consumption has fallen steadily, from 97 billion pieces in 1991 to 83-billion pieces in 1997 and are estimated to be 80 billion pieces for 1998. Consumption fell-off due to the French Governments restrictions on the smoking and advertising of tobacco, in addition to a 72-percent tax rate on retail sales of cigarettes. The production of cigarettes in France also fell, from about 55.5 billion pieces in 1990 to 45 billion pieces in 1997. For 1998, production is expected to continue to fall to 44 billion pieces in 1998, its lowest level in over a decade. However, French cigarette exports are expected to increase in 1998 by 30 percent, from 11.4 billion in 1997 to 14.8 billion pieces, mainly due to sharp increases in sales to Spain and Turkey.
As domestic production slides, French cigarette imports continue to increase. France is expected to import 54 billion pieces, more than at anytime in recent history. France primarily imports from the Netherlands and Germany. Most of these cigarettes are American brands that are processed in the Netherlands and Germany. Imports of cigarettes directly from the United States to France are minimal and are expected to remain at about 3 million pieces in 1998.
Germany - Structural changes in the cigarette industry continue to affect Germanys production, export and import of cigarettes. German cigarette companies invested heavily in cigarette manufacturing operations in Eastern European markets, pulling exports away from Germany and lowering cigarette production volume. Cigarette exports are expected to fall to 65 billion pieces in 1998, its lowest level since the reunification of Germany, and down from 81 billion pieces and 70 billion pieces in 1996 and 1997, respectively. Revised production figures for the past three years indicate that cigarette production in Germany is well below production volumes of the early 1990s and is trending downward. Germany is expected to produce 178 billion pieces in 1998, down from 193 billion and 182 billion pieces in 1996 and 1997, respectively. Cigarette imports achieved a record high in 1997, jumping to 25 billion from 15 billion pieces in 1996. Imports are expected to remain above 24 billion pieces in 1998. Consumption of cigarettes is expected to be relatively stable for 1998 despite ongoing discussion about nonsmokers rights and advertising bans on tobacco products. Domestic consumption unexpectedly dipped to 127 billion pieces in 1996 from 151 billion pieces in 1995, then rebounded to 137 billion pieces in 1997, and is expected to remain at 137 billion pieces for 1998.
Italy - Sales of domestic cigarette brands are steadily being replaced by foreign brands. In 1996, Italian cigarette production dropped to 51.5 billion pieces, its lowest level in well over ten years. Production increased to 51.9 billion pieces in 1997 and is expected to remain at that level for 1998. In the past five years, domestic cigarette consumption has shifted between 85 billion and 97 billion pieces. Domestic consumption for 1998 is expected to be almost 92.9 billion pieces, slightly less than the 93.2 billion pieces consumed in 1997. Cigarette imports are trending upward and are expected to reach 42 billion pieces in 1998, up from 41.5 billion pieces in 1997 and 39 billion pieces in 1996. Traditionally, Italian cigarette exports are relatively small. Exports in 1997 fell dramatically to 200 million pieces from 3.8 billion pieces in 1996. Most of these exports are destined for Eastern Europe where cigarettes are dependent on the local economy and prices. Exports are expected to increase to 1 billion pieces in 1998.
Netherlands - The Netherlands is one of the worlds top producers, importers, and exporters of cigarettes. Dutch cigarette producers import all of their leaf tobacco and rely heavily on U.S. flue-cured tobacco to produce American blend cigarettes for the European market. Cigarette production has steadily climbed to an all-time high of 116 billion pieces in 1997 and is expected to remain at this level for 1998. Projections for imported cigarettes also remain high at 19 billion pieces for 1998, up from 18.4 billion pieces in 1997. The Netherlands imported a record high of over 20 billion pieces in 1996. Imports of cigarettes by the Netherlands originate primarily from other European nations, most notably the United Kingdom, Belgium-Luxembourg, and Germany. During 1998, the Netherlands is expected to export about 118.5 billion pieces, making the Netherlands the worlds second largest cigarette exporter. Each year exports have risen from 36-billion pieces in 1983 to a revised figure of 118 billion pieces in 1997. The Netherlands largest export markets are France, Belgium-Luxembourg, Germany, and the United Kingdom. Domestic cigarette consumption is relatively small when compared to other European nations, and has fluctuated between 15 to 16.6 billion pieces over the last fifteen years. Consumption peaked in 1997 at 16.6 billion pieces and is expected to fall slightly in 1998 to 16.5 billion pieces.
Spain - Despite a 6-percent increase in cigarette production in 1997 to over 74 billion pieces from about 70 billion pieces in 1996, cigarette production in 1998 is expected to fall below 71 billion pieces. Exports have steadily increased from about 2 billion in 1993 to about 4.6 billion in 1997, and are expected to reach a high of 5 billion pieces in 1998. Imports have increased each year since 1992. Imports were reportedly 11 billion pieces in 1997 and are expected to increase to 12 billion pieces in 1998. Over the last ten years cigarette consumption has varied from year-to-year. Cigarette consumption is expected to fall to below 78 billion pieces in 1998, after increasing to over 80 billion pieces in 1997 from about 74 billion in 1996.
United Kingdom - Cigarette production is expected to fall from 170 billion pieces in 1997 to 160 billion pieces in 1998. The drop in production reflects expectations that exports will drop due to the strengthening of the pound against other currencies making British cigarettes more expensive to consumers overseas. The United Kingdom exported over 94 billion cigarettes in 1997, of which about 28 percent were exported to other European countries, primarily the Netherlands. The remainder was exported to several other countries, the largest importers being Singapore and Hong Kong. Domestic consumption in 1998 is also expected to drop to 87 billion pieces from 89 billion and 88 billion pieces in 1996 and 1997, respectively.
OTHER WESTERN EUROPE
Switzerland - Cigarette production is trending downward after peaking at 42 billion pieces in 1996. Production in 1997 dropped by 10 percent to under 38 billion pieces and is expected to remain at about 37.5 billion pieces in 1998. Phillip Morris accounts for about 31 percent of the cigarettes produced. F.J. Burris produces about 26 percent, British American Tobacco (BAT) produces 18 percent and R.J. Reynolds produces about 9 percent of the tobacco. Cigarette producers may be responding to a fall in demand in the export market and a dwindling domestic consumption rate. Exports represent over 50 percent of domestic production. After reaching a high of 27 billion pieces in 1996, exports fell to 23.4 billion pieces in 1997 and are expected to remain at that level in 1998. Eastern Europe is an important market for Swiss cigarette exports, but is becoming less attractive as cigarette companies develop cigarette production facilities in these countries. Consumption is at its lowest level in over a decade and is expected to drop 1 percent in 1998 to 14.3 billion pieces from 14.5 billion pieces in 1997. The fall in consumption reflects the effects of higher taxes on the sale of cigarettes and public health warnings. The volume of cigarettes imported by Switzerland each year is small relative to production and export levels. Imports for 1998 are expected to be 200 million pieces, the same level as 1997. Imports have stabilized in recent years after dropping over 64 percent to 142 million pieces in 1995 from 393 million pieces in 1994.
Bulgaria - Bulgaria's 1997 cigarette production fell to 45.3 billion pieces or 21-percent less that in 1996. The decline was the result of a weak domestic market in the first six months of 1997 and difficulties with exports throughout the year. According to experts, consumption of locally produced cigarettes in 1997 increased 15 percent to 20 percent at the expense of imported brands due to their lower price and good quality. Especially popular were local Virginia and luxury type brands. The "Bulgartabak" brand market share in 1997 was estimated at 95 percent and the remaining 5 percent were imported cigarettes. Prospects for 1998 are for slightly higher production based on expected sufficient domestic leaf tobacco to support the increase in production, increased demand for domestic brands and an increase in exports to Russia, Ukraine and other Former Soviet Union (FSU) republics. "Bulgartabak" long-term plans are to move 30 percent to 35 percent of their cigarette production to Russia and FSU countries (not counting licensed production which currently exists with companies in Russia, Ukraine, Moldova and Georgia). This policy will require investment of US$50 to $80 million.
The GOB recently implemented a new policy to fix retail prices both for local and imported brands. The prices will be printed on the excise labels in an attempt to stop price speculation, especially with imported cigarettes. The first cigarettes with fixed retail prices on the excise labels appeared on the market by March-April, 1998. Consumption of cigarettes (domestic plus imported) has been constant over the last three years (16,000 MT to 17,000 MT). This level should be the same in 1998.
Romania - Romanian cigarette production in 1997 is estimated at 23.5 billion pieces, up 15 percent from the previous year. For 1998, initial estimates indicate that cigarette production could jump to 26 billion pieces. Increased availability of raw materials for cigarette manufacture allowed the industry to substitute domestically produced cigarettes for imports. Although domestically produced cigarettes are lower quality compared to foreign brands, the demand for the cheaper domestic brands is expected to continue to increase because of the declining purchasing power of the population.
The Romanian industry currently consists of six cigarette plants and eight tobacco curing facilities. The monopoly was broken in 1997 when it was changed into a national joint-stock company. This company will soon be privatized through public tenders. The local industry hopes that this process will result in an influx of capital that will allow cigarette plants to modernize their equipment and increase productivity.
As a result of the GOR's campaign to curb smuggling and tax evasion, Romania's 1997 imports of cigarettes dropped significantly. Cigarette imports in 1997 were unofficially estimated at about 8 billion pieces or about 34-percent lower than the 1996 level which was revised down to 12 billion cigarettes following release of official statistics. The main suppliers of cigarettes to Romania in 1997 were the United States, Germany, Greece, Bulgaria, Switzerland, and Belgium.
Turkey - Turkeys 1997 cigarette production reached 112 billion pieces, up almost 3 percent from the 1996 level. Industry sources forecast 1998 cigarette production (based on estimated sales) at 114.5 billion pieces. Oriental cigarettes are expected to account for about 44 percent of total 1998 production, compared to 45 percent of 1997 production. About two-thirds of TEKEL's (the government controlled tobacco corporation) production are oriental cigarettes and the rest are blended. About 99 percent of the production of private manufacturers are blended cigarettes.
Fierce competition for market share continues. TEKEL, whose share is declining, now controls about 72 percent of the market. Philip Morris (PM) controls about 22 and RJ Reynold about 6 percent. TEKEL-2000 remains the single most popular blended cigarette, with a 35-percent share of the blended market. The market share of oriental brands is declining, mainly at the expense of value blended brands, which continue to capture greater share of the market. To meet both domestic and export demand, manufacturers are increasing their production capacity. PM is increasing its capacity from 20 to 28 billion pieces and RJR is increasing its capacity from 12 to 20 billion pieces. TEKEL's new plant in Samsum is now on line. This new plant has a 5 billion per shift annual capacity and can produce both oriental and blended cigarettes.
The controversy over the proposed TEKEL and British American Tobacco (BAT) joint venture continues. According to the proposed agreement, TEKEL and BAT will form a partnership under which BAT will have a 52-percent interest and TEKEL 48 percent. The total capital of the new venture will be $280 million. TEKEL will contribute land, buildings and tobacco, and BAT will provide equipment. The new plant is expected to begin operating in 18 months and will produce about 25 billion cigarettes per year. The agreement has caused fierce resistance from trade unions, farmers, and various other groups. Trade unions argue that the agreement will lead to a loss of jobs. Tobacco producers worry that the new venture will produce BAT (blended) brands rather than oriental brands, which will reduce demand for local oriental tobacco.
Despite strict anti-smoking legislation, cigarette consumption is expected to increase 2 percent annually for the foreseeable future. Sources expect the anti-smoking regulations, which ban advertizing, to increase the already intense price competition between manufacturers. Manufacturers continue to adjust prices frequently due to the high rate of inflation, which equaled about 97 percent during 1997.
Turkey is becoming a major cigarette exporter due to its location and lower production costs. During the first eight months of 1997, exports totaled 7.5 billion pieces, of which two thirds were exported by private manufacturers and the rest by TEKEL. The EU and neighboring Middle Eastern markets are the main destinations for Turkish cigarette exports.
AFRICA AND MIDDLE EAST
Egypt - In 1997, Egyptian cigarette production increased 4 percent to 47 billion pieces compared to the 1996 level of 45 billion. The current forecast is for a one-percent increase during 1998. The Egyptian Government has maintained a monopoly on cigarette production in Egypt since 1956. The Eastern Tobacco Company (ETC) has been the sole manufacturer of cigarettes since it merged with the El-Nasr Tobacco Company in 1984. Eastern operates three cigarette factories. The main factory in Cairo produces about two-thirds of the total output of cigarettes. Domestic cigarette brands comprise over 95 percent of Eastern's production. The remaining 5 percent consists of foreign brands (mainly Philip Morris and R.J. Reynolds) manufactured by Eastern under agreements with the parent companies. Currently Eastern Tobacco Company has manufacturing agreements with six foreign companies. The foreign companies provide Eastern with specifications and raw materials. Virtually all cigarettes produced in Egypt are of a regular, filtered type.
In 1997, about 6.8 million packs (136 million pieces) of cigarettes were imported from the United States through regulated channels. Egypt exports cigarettes to other Arab countries, mainly for consumption by Egyptian expatriate workers. The GOE does not publish statistics on the quantity, value, or destination of cigarette exports, but sources indicate that Saudi Arabia, Yemen and the Gulf countries are important destinations. Egyptian cigarette exports increased in 1997 by 18 percent, as compared to 1996, the result of a barter trade agreement with China, that allowed Egypt to import raw tobacco and export cigarettes. In addition to China, the Eastern Tobacco Company was able to export limited quantities to Eastern European countries (e.g., Bulgaria).
South Africa - Cigarette production increased 2 percent in 1997 to 37 billion pieces. Cigarette production for 1998 is estimated at 36 billion pieces, down nearly 2 percent due to increased taxes and stringent labeling and advertisement restrictions for cigarettes. Cigarette imports, over 80 percent from the United States, were down nearly 34 percent in 1997 to 652 million pieces. Imports are projected to continue to decline in 1998 by 23 percent or to total 500 million pieces. This drop is due to American companies moving cigarette production to South Africa. Exports mostly to other African countries increased almost four fold in 1997 to nearly 6 billion pieces. However, exports are expected to decrease by 15 percent or 5 billion pieces in 1998.
China - China remains the largest consumer of cigarettes in the world and produces over 2,000 brands of cigarettes to fulfill the Chinese desire to smoke. The tobacco industry is the largest producer of tax revenue but it is facing severe pressure from overproduction. The Chinese government is attempting to modernize the tobacco industry by asserting control over leaf and cigarette production, upgrading factories, and curtailing cigarette smuggling. Chinas annual cigarette production rate is set by the State Tobacco Monopoly Administration (STMA) which assigns production quotas to factories that are not to be exceeded. For 1998, cigarette production is expected to drop to 1.68 trillion cigarettes, the lowest production level since 1993. The STMA appears to be lowering production quotas in an attempt to reduce large cigarette stocks. Cigarette production peaked at 1.74 trillion pieces in 1995 and has dropped by a little more than 1 percent in each of the following years. However, a consumption tax of 30 to 40 percent on cigarette products provides incentives to smuggle cigarettes into China. The consumption rates for smuggled and counterfeit cigarettes in China are unknown. Crackdowns by the Chinese government are highly publicized but sources indicate that such illegal activities continue to be widespread. Chinese cigarette exports have also slowed from a high of 62 billion pieces in 1995 to 40 billion pieces in 1997. Cigarette exports are expected to increase to 45 billion pieces in 1998. Over 90 percent of Chinas cigarette exports go to other Asian countries. The Philippines, Singapore, South Korea , and Hong Kong are the largest importers of Chinese cigarettes. Cigarette imports by China reached a high of 18 billion pieces in 1997 and are expected to remain at 18 billion pieces during 1998.
Hong Kong - Cigarette production is expected to fall to 19 billion pieces in 1998 from 20.4 billion pieces and 19.6 billion pieces in 1996 and 1997, respectively. Cigarettes produced in Hong Kong are mainly for export to China and Singapore. Hong Kong cigarettes contain primarily Virginia tobacco due to the Chinese preference for straight-Virginia tobacco. The largest cigarette manufacturing companies in Hong Kong are Nangyang Brothers Tobacco Co., British-American Tobacco Co. (BAT) and Hong Kong Tobacco Co. Nangyang Brothers Tobacco Co., operating at full capacity, produced about 10 billion sticks in 1997, much of it containing straight Virginia tobacco. BAT, which produces American blend cigarettes for the Singapore market, announced it will move from Hong Kong to Malaysia where operation costs are lower. The Hong Kong Tobacco Co., the smallest of the three companies, may be negotiating to sell its operation to Phillip Morris. Hong Kongs smoking prevalence rate is among the lowest in the world. During 1996, less than 15 percent of the population above 14 years of age were daily smokers. Cigarette consumption is unlikely to grow due to increased anti-smoking sentiment in Hong Kong. Cigarette consumption is expected to be 5 billion pieces for 1998, less than 2 percent below consumption rates for 1996 and 1997. Hong Kong is a significant re-export point for cigarettes entering China. Many cigarettes are imported into Hong Kong from other countries that ultimately are re-exported to China. In 1997, Hong Kong experienced extensive drops in cigarette export and import levels mainly due to the Chinese government limiting cigarette purchases of expensive imported cigarettes. Cigarette exports peaked at 79 billion pieces in 1996, dropped to 45 billion pieces in 1997 and are expected to remain at 45 billion pieces in 1998. Hong Kong imports dropped 50 percent from 64 billion pieces in 1996 to 31 billion pieces in 1997. Imports are expected to remain low at about 32 billion pieces in 1998.
Indonesia - The cigarette industry has been shaken by Indonesias economic crisis. The sudden increase in the cost of imported components, minimum wages, and excise taxes, coupled with the decrease in disposable incomes among Indonesian consumers, have lowered cigarette production and consumption. Cigarette production is expected to fall to 214 billion pieces in 1998 after peaking at 224 billion pieces in 1997. Consumption is expected to fall to 189 billion cigarettes in 1998 from 202 billion pieces for 1997. However, cigarette exports are expected to reach a high of 25 billion pieces in 1998. Due to the devaluation of the Indonesia currency (rupiah), foreign consumers are more likely to increase purchases of Indonesian cigarettes. Indonesia is not a significant importer of cigarettes and is not expected to import any in 1998 due to limited availability of foreign exchange.
Japan - In anticipation of a decline in domestic consumption, Japanese cigarette production is expected to fall to a six-year low of 250 million pieces in 1998, down from 271 billion pieces and 254 billion pieces in 1996 and 1997, respectively. During 1997, the Japanese government raised the sales tax from 3 percent to 5 percent which lowered consumption of cigarettes. Domestic cigarette consumption is expected to drop by about 2 percent to 311 billion pieces in 1998 from 315 billion pieces in 1997. Japanese cigarette consumption peaked at 336 billion cigarettes in 1996 and is not expected to rebound soon because of anticipated tax hikes on the consumption of tobacco. Japanese cigarette imports and exports are also trending downward. Japan is expected to import about 73 billion cigarettes in 1998, down from 77 billion pieces in 1996 and 73 billion pieces in 1997. U.S. produced cigarettes continue to dominate Japanese imports, representing over 90 percent of the market. Cigarette exports for 1998 are expected to drop 4 percent to 12 billion pieces from 12.5 billion pieces in 1997.
Philippines - The Philippine cigarette market has experienced major shifts in production and consumption due to a sluggish economy and the devaluation of the peso. In addition, the Government of the Philippines introduction of a tax scheme in 1997, which lowered the price differential between local and foreign brand cigarettes, limited cigarette production. In 1996, before the introduction of the tax scheme, cigarette production stood at 79 billion pieces. Once the tax scheme was put in place, cigarette production dropped to 68 billion pieces in 1997 because consumers preferred foreign brands over local cigarette brands. But with the devaluation of the peso in 1998, consumers are more likely to purchase local brands over more expensive foreign brands. As a result, cigarette production is expected to increase to 75 billion pieces in 1998, while imports are expected to fall from 1.6 billion pieces in 1997 to 1.5 billion pieces in 1998. Also as a result of the peso devaluation exports are expected to increase from 975 million in 1997 to 1.5 billion pieces in 1998. Cigarette consumption dipped to 69 billion pieces in 1997 from 78 billion pieces in 1996 and is expected to rebound to 75 billion pieces in 1998.