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Economic Condition Leading to Fall in Domestic Demand for Cigarettes in Belarus: Ken Research by Ankur Gupta

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Economic Condition Leading to Fall in Domestic Demand for Cigarettes in Belarus: Ken Research by
Article Posted: 01/19/2017
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Economic Condition Leading to Fall in Domestic Demand for Cigarettes in Belarus: Ken Research

Food & Beverages
Ken research announced its recent distribution on, "Cigarettes in Belarus, 2016 ". Report provides extensive and highly detailed current and future market trends in the Belarus market. The report offers Market size and structure of the overall and per capita consumption based upon a unique combination of industry research, fieldwork, market sizing analysis, and our in-house expertise. To get a detailed understanding of consumption and to align your sales and marketing efforts with the latest trends in the market, you may undoubtedly refer to this far-fetched market outreach analysis. It closely identifies the areas of growth and opportunities, which will aid effective marketing planning. The differing growth rates in regional product sales drive fundamental shifts in the market. This report provides detailed, authoritative data on changes and hence, acts as prime intelligence for marketers. It highlights the market dynamics and essential data to benchmark your position and to identify where to compete in the future.

Belarus has a state controlled economy where incompetent, government-run businesses from the Soviet era dominate markets and the state spends billions every year on handouts, tariffs and subsidies. Belarus, like many other of the former Soviet Republics, suffered badly during the early 1990s after the break-up of the Soviet Union and the resultant economic turbulence. Belarus’ economy suffered a broad-based decline in the third quarter of 2016, with a dip in GDP this fiscal year, with private consumption, investment and government spending all falling compared to the same period last year. The country was negatively impacted by the continuing recession in Russia, its largest trading partner, as well as by weak domestic bank balance sheets, which impeded private lending. The energy dispute with Russia is another persistent cloud on the horizon, which is causing geopolitical uncertainty and could increase the cost of Belarus’ energy imports. However, some green shoots of recovery are visible in industry, with industrial production growing at the fastest pace in two years in November. Belarus’ economic advancement depends in large part on the implementation of the government’s 2016-2020 action plans, which aims to break up monopolies, improve governance and prepare the country for accession to the World Trade Organization.

In 2015 retail volume sales of cigarettes in Belarus saw an increase, whilst in 2014 sales declined. This was because the excise on cigarettes in 2015, and as a consequence their unit prices, grew more slowly than the Belarusian rubel devalued. This led to an increase in the retail price disparity for cigarettes between Belarus and nearby European countries (such as Lithuania, Latvia and Poland). This disparity remained the main reason for so-called “people’s exports” – cigarettes which are sold in Belarus and taken out of the country to nearby European countries by private travellers. Because the prices of cigarettes in Belarus are lower than in these EU countries, Belarus remained a conduit for cigarette smuggling to neighbouring EU countries. The Belarussian Cigarette market is heavily regulated by the government, with production quotas, restrictions on imports, and retail price control shaping the market. President Lukashenko is set to continue this regulation, with a view to increase tax receipts from the industry. The government aims to do this through strengthen local production, through a crackdown on counterfeit products. Despite this, sales are set to fall by 35.5% by 2025. Let us cross examine these in details:

Increase in Excise duty and Disposable income

In the framework of harmonization of excise policy within the EEA from 1st January 2013, Belarus increased excise taxes on tobacco and alcohol. As a natural result, the sales of alcohol and tobacco products decreased. Belarusian manufacturers of these products, given the reduced domestic market opportunities are forced to look for export options to maintain their production volumes. Excise taxes on tobacco products from 1 January 2013 increased by 1.5-3.5 times. In Q3 and Q4 further were envisaged. Belarusian government introduced these measures to meet its commitments within the EurAsEC Anti-Crisis Fund and to harmonize the excise policy within the CES. It is planned to continue gradual increases of excise duties on tobacco to level with Russia. Resultantly, the prices on tobacco and its products have increased radically.

Ban on open retail advertisement of Cigarettes

From 1 July 2015, the open display of tobacco products was not allowed in retail outlets. Information on the various brands available in retail can only be in the form of a list of tobacco products, indicating their names and prices. This list should be drawn up in accordance with the approved model. The storage of tobacco products in retail outlets should be in enclosed cabinets. Also from 1 July 2015, the term “electronic cigarette” was banned in retail. Such products continued to be sold, but under different names, for example “vapour device” or “steam generator”. In addition, The Customs Union has decided not to import snuff from 2016. After the sale of the existing stock, sales of snuff will cease in Belarus.

Increase in domestic supply of cigarettes with changing patterns, split in price Band

In 2015 the share of domestically produced cigarettes continued to increase, leading to declining imports. The share of imports within total volume sales fell in 2015. In 2015 the share of purely domestic brands also increased, at the expense of the share of international brands (both imported and produced locally). 2015 also saw changes in the spilt of cigarettes by price, with the increasing share of the economy segment and the declining share of the premium segment. All these changes, which can be classed as de-premiumisation, were caused by the worsening economic conditions in Belarus in 2015, with decreasing consumer purchasing power and the growing trend for economical consumption.

Shift of consumers to modern Outlets

The development and increasing popularity of modern retail formats such as supermarkets, hypermarkets, discounters, convenience stores and forecourt retailers continues in Belarus. The share of modern retail formats within total sales of tobacco products keeps increasing. This is because modern retail outlets offer more advantages for consumers, such as convenient locations, free parking and a wider product assortment.

For more coverage click on the link below:

Contact: Ken Research

Ankur Gupta, Head Marketing & Communications


Related Articles - Cigarette Market Consumption Belarus, Global Cigarette Production Volume,

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