The tax policy on cigarettes continues to drive away smokers. After a 2.7% drop in cigarette consumption in 2012, the trend intensified in 2013, with cigarette sales down 11.2% in quantitative terms. The plunge in sales was apparently due to last year's additional hike in purchase tax on cigars, cigarettes, and tobacco, which added NIS 2.50-3 to the price of a pack of cigarettes.
According to Storenext, despite the quantitative drop in cigarette sales, in financial terms, sales rose by 6.3% in 2013 to NIS 7.54 billion.
A top cigarette market executive told "Globes" that most of the drop in cigarette consumption occurred in the second half of 2013, because of the tax hike. Support for this can be found in sales data for December, which show a 15.4% drop in sales in quantitative terms, which, for the first time, was accompanied by a drop, albeit small, of 0.6% in financial terms.
The policy of raising taxation on cigarettes over the past two years has involved three tax hikes, which cumulatively boosted the price of a pack of cigarettes by NIS 5.50-6. Taxes currently account for 85% of the cost of a pack of cigarettes.
Three cigarette companies operate in Israel: Philip Morris International Inc. (NYSE: PM), which dominates the market, and Israeli companies Globrands Ltd. and Dubek Ltd. According to Storenext, the drop in cigarette consumption has affected almost all brands, except for Next, the third most popular brand, which is cheap.
Published by Globes [online], Israel business news - www.globes-online.com - on February 24, 2014
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