Smoking Tobacco Industry in Russia is valued at USD 268.29 million in 2019 and is estimated to reach USD 280.1 million by the end of the year 2020.
It is expected to grow at the CAGR of 4.4% within the time horizon of 2020-2025 because of the high smoking rate among adult population. It will reach USD 347.38 million by the year 2025.
- Definition / Scope
- Market Overview
- Market Risks
- Top Market Opportunities
- Market Trends
- Industry Challenges
- Technology Trends
- Pricing Trends
- Regulatory Trends
- Market Size and Forecast
- Market Outlook
- Technology Roadmap
- Distribution Chain Analysis
- Competitive Landscape
- Key Market Players
- Strategic Conclusion
Definition / Scope
Tobacco smoking is the practice of inhaling tobacco products in form of smoke into the mouth through the use of tobacco pipes and cigarettes. Smoking is the most common method of consuming tobacco, which is the product processed from the fresh leaves of plants. Cigarettes are tightly rolled bundles, which are consumed through smoking.
It consists of finely cut, dried and fermented tobacco leaves, which are ignited for the production and inhalation of smoke in the mouth. It harms almost every organ of the body causing lots of respiratory, heart diseases and others and even deaths among the smokers resulting it as the major public health threats in the 21st century.
Smoking tobacco industry is concerned with the manufacturing, distribution and sales of the cigarettes. The smoking tobacco industry is categorized into following segments on the basis of the product type:
On the basis of the product type
- Cigars and little cigars
- Electronic cigarettes
- Others (hookah, shisha, etc)
As per the cigarette consumption per year per person is considered, Russia is ranked in 10th position and has one of the highest smoking tobacco rates globally. In the context of the volume of the production of tobacco products, Russia is ranked in the third position globally.
The total market size of the smoking tobacco industry in Russia is valued at USD 268.29 million in the year 2019 and is estimated to reach USD 280.1 million by the end of the year 2020. It is expected to grow annually at the rate of 4.4% within the forecasted time period of 2020-2025. It is projected to reach USD 347.38 million by the end of the year 2025.
On the basis of the product type, the cigarettes segment is dominating the market with the market size of 250.99 million as the most important product of consumption of overall smoking tobacco industry in Russia.
This segment accounts for the market share of almost 93.55% of total smoking tobacco industry in Russia. High smoking rate among adult population and high consumption of cigarette per capita consumption are the factors driving the growth and development of Russia smoking tobacco industry.
However, rising taxes on tobacco products, strict governmental regulations against advertisement, labeling and restricted consumption in the public places, and health risks associated with the consumption of tobacco might restrain the growth of its industry.
This market is largely dominated by the multinational companies engaged in tobacco production and sale.
The key multinational market players engaged in this smoking tobacco market are Japan tobacco Corporation, Philip Morris International Inc., British American Tobacco, and Imperial Tobacco Group while the key local tobacco production companies are Donskoi Tabek OAO, Tabakprom, etc.
- Health risks from the tobacco use
In the global context, the consumption of tobacco accounts for more than six million of death annually, which is the largest cause of the preventable deaths. Russia has the highest number of the smokers as more than 39% of the million adults are smokers.
In Russia, tobacco use is ranked as the third most important risk factor for the total mortality and DALYs. Its consumption causes almost deaths of 332,000 people every year, most specifically from the respiratory illnesses, cardiovascular diseases and cancer caused by its use.
It accounts for 30% of all death among male and 4% of all deaths among females. It also responsible for the declining the life expectancy of male and female by 6.7 years and 5.3 years respectively. Besides this, health issues caused by the smoke use has the huge economic burden, which accounts for almost 5.4% of the GDP of the country.
This sorts of the rising health issues might risk the demand for these tobacco products, which will ultimately create the risk for the growth of its market.
Top Market Opportunities
- Street smoking
Although the anti-tobacco law has restricted the use of smoking tobacco in indoor public places, the pattern of the smoking in the street is still common in Russia. The culture of smoking in the street area is increasing the popularity and influence of smoking in Russian culture.
Along with this, there is a trend of asking the cigarettes with strangers in the street. This trend of smoking in street places will create the significant opportunity for the growth of the smoking tobacco industry in the context of Russia.
- High smoking rate among Russian adults and early initiation of smoking
In Russia, almost 182000 children of 10-14 years and 39436000 adults of age more than 15 use the tobacco products each year. More specifically, a Russian longitudinal monitoring survey had revealed that the highest prevalence of smoking among the population of age group of 25-34 years, which is illustrated in the table below.
Along with this, GATS has also found the prevalence of 39.1% among Russian adults, which is one of the highest adult smoking rate among the European countries. After this, the highest prevalence is observed among the population of the age group of 15 -24 years.
Almost 30% of boys and 22% of girls smokers has reported that they have started the smoking at the 13 years or younger. The early initiation of the smoking at the young stage will further drive the growth and development of the smoking tobacco market in Russia.
|Age group in years||Male – Prevalence of smoking (%)||Female Prevalence of smoking (%)|
Source: Russian Longitudinal Monitoring Survey
- High rate of cigarette consumption
On average, every Russian people consumes almost 2,690 cigarettes every year. There are almost 33 million smokers in Russia, who consume almost 321.4 billion cigarettes annually.
In comparison to the United Sates, the cigarettes consumption among Russians is almost 14% more than that of it. Along with this, Russia has been ranked in the tenth position in terms of highest per capita consumption of tobacco.
In 2019, almost 41% of Russians consume 11 to 20 cigarettes daily. This high level of smoking consumption is driving the growth and development of smoking tobacco industry in the context of Russia.
- Tobacco cessations programs
According to the Global Adult Tobacco Survey in Russia, more than 60% of the current smokers are interested to quit smoking. Almost 11% of them had successfully stopped smoking through their own effort, 20% has quit the smoking through the assistance of pharmacotherapy and 4% of them quit through counseling.
Although this cessation program is good for the health and development of the individual consumers, it will definitely restrain the growth and development of the smoking tobacco market in the context of Russia.
- Taxation on cigarettes products
The Russian government has exercised the specific excise tax, ad valorem excise tax and a value added tax for both filtered and non-filtered cigarettes. The amount of the specific excise tax is USD per 1,000 filtered cigarettes and USD for non-filtered cigarettes.
The ad valorem excise tax accounts for 7% of maximum retail price. The value added tax is ranges from 33%-43% of the retail price for filtered and non-filtered cigarettes. Along with this, within a year, the tobacco tax has been increased by 44%.
It is quite challenging for the market players to maintain the affordability of the price of the cigarettes for the consumers in the context of the increasing tax rates on the smoking products.
Advancement in the science and technology is widening the perspectives for the tobacco control among the population. Increasing use of the World Wide Web and the internet is favoring the awareness campaigns related to the health effects of the smoking tobacco.
Along with this, other technological trend such as use of assessment monitors, tracking systems is also being used for the smoking tobacco control. Some of the key technological changes, which are actually used for the control of the tobacco products, are discussed as follows:
Personal and wall monitors: This technology is used to assess and monitor the environmental tobacco smoke.
Medical record tracking systems: It facilitates the process of the smoking cessation among the smokers by tracking the consumption pattern of the cigarettes and their health effects.
Wearable sensor technology: It helps the people to quit the smoking through the development of the automatic alert system. It includes the smart phone based application, which detect specific arm and body motion associated with the smoking process.
Packaging technology: It is used for the marketing and production of the health messages and warnings in the multiple languages for the diverse linguistic groups.
Laser technology in advertising: This technology is used to delete the tobacco consumption related advertisements in the television broadcasts.
The price of the products of this market depends upon the Over the past one decade, the real price of the cigarettes has been decreased by 40% in Russia. The retail price of the pack of cigarettes containing 20 cigarettes is USD 0.13 for non-filtered cigarettes.
On average, the price of the most popular cigarettes costs USD 1.53 per pack. In the context of Russia, the per capita consumption has reached to more than 125 packs of cigarettes per year.
Here, smokers spend almost USD 18.7 per month on manufactured cigarettes. The average price of the smoking tobacco is USD 0.1 per unit in 2020.
The Russian federation has developed variety of regulatory policies and programs to control the use of the tobacco. Besides this, international NGOs such as Campaign for tobacco-free kids and other organizations such as Media Group Russian Tobacco are also supporting to control the use of tobacco products. Some of the key regulations related to the tobacco use are discussed as follows:
National Tobacco Control Legislature and tobacco control draft bill: It has been developed by the Russian Federal Ministry of Health and the Federal Ministry of Foreign Affairs. It prohibits the smoking on the public transport(local metro, buses), indoor workplaces, public places. The Russian federal laws prohibits the advertisement of the tobacco on television, radio and other outdoor billboards.
Along with this, the pictorial warnings are mandatory to be displayed in the cigarettes packs covering almost 505 of the back side of each pack. It has also restricted the sale of tobacco products via vending machine and the internet basically in the sport facilities, healthcare institutions, cultural institutions and within the distance of 100 meters of education institutions.
Besides this, the sale of these products to the persons under the age of 18 years.
Technical regulations for Tobacco Products: It includes the definitions for the packaging and labeling of the tobacco products.
Concept of the Government Policy on Combating Tobacco Use : According to it, the government and Duma must pass the legislation related to full alignment with the FCTC in order to create smoke-free environment in indoor public and work places and public transport by 100% and ban all type of the advertisement, promotion and sponsorship for tobacco products.
Bloomberg Initiative: The Russian government has implemented the best buy measures with a view to reduce the consumption of the tobacco. It is supporting the government for capacity development to operate the tobacco control activities.
Market Size and Forecast
Russia is ranked in 10th position in terms of the per capita consumption of the cigarettes and has one of the highest smoking tobacco rates globally.
The total market size of the smoking tobacco industry in Russia is valued at USD 268.29 million in the year 2019 and is estimated to reach USD 280.1 million by the end of the year 2020.
It is expected to grow annually at the rate of 4.4% within the forecasted time period of 2020-2025.
On the basis of the product type
- The cigarettes segment is dominating the market with the market share of 93.55 % of the total smoking tobacco industry in Russia. The market size of this segment is estimated to value at USD 250.99 million in 2019.
- The remaining market share is accounted by others smoking tobacco products such as little cigars, hookah, shisha, etc.
The smoking tobacco industry is expected to grow at the CAGR of 4.4% within the forecasted time period of 2020-2025 because of the high smoking rate among adult population and high per capita consumption of the smoking in Russia. The market size of the smoking tobacco industry is estimated to reach USD 347.38 million by the year 2025.
The technological changes such as adoption of the tracking system, monitors, laser technology, sensor technology, etc are assisting the anti-tobacco campaigns, which aims to control the use of the tobacco products among the smokers.
Advancement in technology and innovative concepts are directly impacting the demand and consumption of the smoking tobacco products. It is favoring the control of the use of tobacco products, which will ultimately restrain the growth of the smoking tobacco market.
Distribution Chain Analysis
The key stakeholders involved in the operation of this market are raw materials production and supply, product manufacturers, distributors, sales, and consumers. At first, the raw materials used for the production of the smoking tobacco i.e. fresh or dried tobacco leaves are supplied to the tobacco manufacturing companies where are tobacco products are produced.
As the final product is manufactured, they are sold through a variety of distribution channel such as retail shops, super markets, etc. to the consumers.
The transnational companies such as Japan Tobacco International, Phillip Morris, British American Tobacco Imperial Tobacco accounts for more than 90% of the Russian tobacco market.
Here, Japan Tobacco International is dominating the smoking tobacco market with the market of 37.5% of total Russian smoking tobacco industry. The market share of the key market players are presented as follows:
Key Market Players
Short profile of the key market players of Smoke tobacco industry in Russia are discussed as follows:
Japan Tobacco Inc.: It is the global leading manufacturers of cigarettes accounting the highest market share of 37.5% in the context of Russia. The most cigarettes brands of this company are Winston, LD, Dukat, and Pyotr 1.
Philip Morris International Inc.: It is the USbased company holding the market share of almost 26% in the Russian smoking cigarette market. It is operated through three entities i.e. Philip Morris Sales & Marketing Ltd., OAO Philip Morris Kuban, and ZAO Philip Morris Izhora.
British American Tobacco: It is the British company holding the third highest market share in Russian Smoke Cigarette company. It accounts for 20% of the total Russian Cigarette market.
Imperial Tobacco Group: It holds the market share of 9% of total Russian smoke tobacco industry with its brands of the cigarettes such as maxim, west, Balkan star, Davidoff R1, gauloises, etc.
Donskoi Tabek OAO: It is one of the Russian largest local tobacco company. 21 Vek, Kiss, and Nasha Marka are the most popular of this company.
Tabakprom: It is the non-governmental organization known as the association of Manufacturers of tobacco products in Russia. Prima is the most popular cigarette brand of this entity.
The smoking tobacco industry is growing at the rate of 4.4% because of the high prevalence of smoking among the adult population and high per capita consumption of the cigarettes.
However, governmental anti-tobacco laws, taxes related to the tobacco products, and health risks associated with the consumption of the smoking tobacco products might restrain the growth of its market.
- FCTC= Framework Convention on Tobacco Control
- NGOs= Non-governmental organizations
- GATS= Global Adult Tobacco Survey
- USD= United States Dollar
- CAGR= Compound Annual Growth Rate