Global and EU tobacco market developments Technical Assistance for Development of a Strategy for Alignment with Common Market Organisation (CMO) Requirements TR2014/AG/10-A1-01/001 This Project is co-financed by the European Union and the Republic of Turkey Global and EU tobacco market developments Miroslav Božić Ankara, 10th May, 2018

Global and EU tobacco market developments: topics for discussion Global production of tobacco and markets International trade of tobacco and products EU tobacco production and future developments

Characteristics of world tobacco production Since 2000 stable area of tobacco production (around 4 million hectares globally), but slightly rising yields and production Highly concentrated tobacco production – top 3 producers in 2016 produced 2/3 of total world tobacco production (China, India, Brazil) EU is the 6th biggest world producer with 2.8% of world production Very concentrated tobacco processing – more than 80% of the global market in cigarettes controlled by 5 companies

World tobacco production 1961 - 2016 (FAO) Declining tobacco area since 1997/98…

Main tobacco producers in the world (FAO, 2016) China biggest increase & EU bigggest decline 1 China 2.806.770 11 Argentina 93.671 2 India 761.318 12 Mozambique 92.995 3 Brazil 675.545 13 Bangladesh 87.628 4 United States of America 285.181 14 Malawi 84.962 5 Indonesia 196.154 15 People's Republic of Korea 82.727 6 EU 187.885 16 Turkey 70.000 7 Zimbabwe 172.266 17 Lao People's Dem. Republic 66.800 8 Zambia 124.642 18 Thailand 60.826 9 Pakistan 116.157 19 Philippines 56.457 10 Tanzania 102.473 20 Uganda 31.476 Only Italy would be in top 20 in the world!

Share of the most important tobacco producers in the world Tobacco is grown in 124 countries. China produces ~43% of the world’s tobacco and has posted a 200% increase in production in the last 30 years! Turkey’s share: 1,1% Source: FAO

Global tobacco production by type Tobacco is extremely robust plant, able to grow in various climates and soils; flu-cured nearly 73% of total

Main tobacco exporting countries: average values & prices Cijene turskog su za 28% veće od svjetskog prosjeka: 7,3 vs 5,7 $/kg Source: Own analysis, UN database

Global trade in tobacco sector, mil. $ average 2013 – 2016 (incl Global trade in tobacco sector, mil. $ average 2013 – 2016 (incl. products) TOP 15 IMPORTERS Total world 44.812 1 Japan 3.960 2 Italy 2.405 3 Germany 2.385 4 France 2.254 5 USA 2.154 6 China 1.786 7 Spain 1.668 8 Belgium 1.582 9 Netherlands 1.417 10 United Arab Emirates 1.319 11 Russian Federation 1.205 12 SAudi Arabia 1.136 13 Hong Kong 923 14 Singapore 828 15 Poland 743 TOP 15 EXPORTERS Total world 42.938 1 Germany 4.966 2 Netherlands 3.165 3 Brasil 2.521 4 Poland 2.306 5 United Arab Emirates 2.105 6 USA 2.023 7 Belgium 1.477 8 China 1.334 9 Hong Kong 1.144 10 Singapore 1.074 11 India 997 12 Indonesia 987 13 Turkey 975 14 Zimbabwe 892 15 Romania 889 Source: Own analysis, UN database

Top 20 volume and value cigarette markets in 2016 Top cigarette volume markets in 2016 (bns of sticks): T. no. 5 Top cigarette value markets in 2016 ($mns): Turkey no. 10 Source: Euromonitor, 2017

Market leaders in cigarette production: Cigarettes are still the industry’s ‘bread and butter’ source: https://tobaccoatlas.org/topic/manufacturing/

Cigarette consumption (no. of cigarettes per person per year, 2016) Turkey: around 12 mil. male smokers (11th in the world) & 4 mil. female (13th in world); China: 288 mil. male and only 14 mil. female! https://tobaccoatlas.org/topic/consumption/

North America and West Europe radically loosing market shares … % of global cigarette volume (2002 vs. 2016) % of global cigarette value (2002 vs. 2016)

Production of tobacco in EU: general overview 12 MS produce tobacco Italy, Bulgaria, Greece, Spain and Poland main producers with 85% of total EU tobacco production Varieties grown (2014): Virginia („flue-cured”): 53% Burley („light-air-cured”): 15% oriental („sun-cured”): 29% other: 3% Sharp reduction in production after 2005 (cancellation of premia system); today’s production less than 45% of that in 2003 although EU has 13 more Member States

EU tobacco production 2000 - 2016 Area, production but also yields are declining

Tobacco production in the EU by Member States, ha in 2014 Without subsidies → tobacco production is dissapearing in the EU !

Market developments and future prospects for tobacco Like no other agricultural sector, tobacco production and processing is influenced by health concerns In EU and globally (WHO) strong policies are promoted to reduce tobacco consumption WHO Framework Convention on Tobacco Control entered into force in 2005 and contains guidelines for measures such as tobacco taxation, smoke-free policies, packaging and labelling provisions, marketing bans; the Convention is ratified by 181 Parties (Turkey ratified in 2004) Consumption is declining in developed, but rising in developing countries or countries with weaker tobacco control; in those countries consumption is likely to further rise due to income and population increases Globally smokers are looking for tobacco products that are less harmful and altering their consumption, often to non-combustible products that deliver nicotine, including e-cigs, heat-not-burn (HNB) products, moist snuff/snus, and other nicotine containing products

This publication has been produced with the financial assistance of the European Union The contents of this publication is the sole responsibility of NIRAS IC Sp. z o.o. and can in no way be taken to reflect the views of the European Union