Cigarette ban cut market share of giants British American Tobacco, Philip Morris - UCT study

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  • South Africa instituted a 20-week ban on the sale of cigarettes' and tobacco products at the start of the lockdown, the most strangest in the world. 
  • According to a new report by researchers at UCTs school of economists, the ban has led to a loss of market share for multinational manufacturers. 
  • Cigarettes were widely available during the lockdown, in spire of the ban, with researcher's that over 90% of smokers who wanted to were able to purchase cigarettes.

Large multinational cigarette manufactures that have long dominated South Africa's tobacco industry have lost market share because of the cigarette ban, according to a new paper by researchers from the University of Cape Town. 

The sale of cigarettes and tobacco products was banned at the start of the nationwide lockdown in late March, despite strong pushback from the tobacco industry about the potential for job losses, the rise of an illicit market, and a fall in excise tax revenues.

The government said the ban was needed to lessen the strain on SA's health system, given evidence that smoking would produce more severe cases of Covid-19.

In mid-August, as South Africa entered level 2 of the lockdown, the ban was lifted.

During the five months that the sale of cigarettes was banned, prices on the black market rocketed as supply dwindled. Previous evidence from UCT studies suggests that cigarettes were easily available, with 90% of smokers able to purchase them. 

In its new study published this week, UCT researches from its Research Unit on the Economics of Excisable Products say that the market share of the big multinational companies that sell the lion's share of SA's cigarettes fell after the ban was lifted.

These companies include British American Tobacco, Japan Tobacco International and Philip Morris International.

Before the lockdown went into effect, they accounted for about three-quarters of cigarettes smoked. After the ban was repealed and legal sales resumed, this dropped to 66%. The researchers based their findings on the answers of 3 766 respondents who responded to a survey.

"Compared to the pre-lockdown period, all three MNCs lost market share between 10% and 14% in relative terms," state the authors. 

The difference made up by local producers, many affiliated to the Fair-trade Independent Tobacco Associations. 

"After the sales ban was lifted, their [FITA's] market shares were substantially higher than before the ban."

The report also stated that while prices plunged from highs of the ban – when an illicit box of smokes could cost up to R150 - average prices were higher after the ban that before it was instituted.

"It seems that the various tobacco companies took the view that smokers had become used to high prices during the sales ban and that they could enhance their profitability by increasing the price."

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