Increased wholesale bypass and falling consumption rates will force smaller operators to exit the industry.
Melbourne, Australia (PRWEB) September 09, 2014
Operators in the Tobacco Product Wholesaling industry in Australia have been suffering due to falling consumption, increasing regulation, declining enterprise and establishment numbers and a persistent decline in industry revenue. Smoking rates are falling in Australia due to rising public concern about the health risks of smoking, rising prices and anti-smoking campaigns designed to reduce the appeal of tobacco products. Combined, these factors are expected to cause a 0.5% decline in industry revenue over 2014-15. According to IBISWorld industry analyst Ryan Lin, “the industry continues to suffer reduced demand, due to the Federal Government's 25.0% increase in the tobacco excise tax, introduced in 2010.” Overall, industry revenue is estimated to fall by an annualised 1.8% over the five years through 2014-15, to $1.5 billion.
The industry exhibits a medium level of market share concentration. Major players include Imperial Tobacco Australia Limited. The two local tobacco product manufacturers, British American Tobacco and Philip Morris, dominate tobacco manufacturing in Australia. In addition to selling products to independent wholesalers, these companies sell their products directly to retailers, meaning they circumvent the wholesale function and compete against independent industry wholesalers. British American Tobacco manufactures Imperial Tobacco products in Australia under licence. “This allows Imperial to focus on its wholesaling operations, making it one of the fastest growing players in the industry,” says Lin. However, as the incidence of wholesale bypass increases and consumption falls, IBISWorld expects the number of smaller wholesale establishments to decline over the five years through 2014-15, as they are unable to compete with larger operators. These factors are likely to cause a drop in employment and industry wage costs.
The Tobacco Product Wholesaling industry will continue to battle the same problems over the next five years. Government anti-smoking legislation has increased, with the introduction of plain packaging for tobacco products. Anti-smoking campaigns will intensify, thereby increasing public concern for smoking-related health risks and reducing the appeal of smoking. However, Philip Morris is anticipated to cease Australian manufacturing operations by the end of 2014 and become a pure-play wholesaler.
For more information, visit IBISWorld’s Tobacco Product Wholesaling industry in Australia report page.
The Tobacco Product Wholesaling industry includes businesses that purchase tobacco products from the manufacturers and then distribute them to retailers such as specialist tobacconists, supermarkets and convenience stores.
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