Eye on the Industry 2016
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Eye on the Industry Spring 2016 Edition Smoking and Health Action Foundation/ Non-Smokers’ Rights Association Table of Contents Introduction .................................................................................................................................................. 3 Main Tobacco Companies in Canada ............................................................................................................ 3 Key Canadian Tobacco Market Indicators .................................................................................................... 4 Issues Facing the Industry in Canada ............................................................................................................ 7 Plain & standardized packaging ................................................................................................................ 7 Pack-based promotion stronger than ever ........................................................................................... 7 Canada moves forward ......................................................................................................................... 9 Flavour bans ............................................................................................................................................ 10 Quebec bans payments to retailers ........................................................................................................ 11 Minimum warning size in Quebec .......................................................................................................... 11 Litigation ................................................................................................................................................. 12 Tobacco taxes.......................................................................................................................................... 14 E-cigarettes ............................................................................................................................................. 15 The Canadian market .......................................................................................................................... 15 The regulatory environment ............................................................................................................... 16 Industry tactics ............................................................................................................................................ 17 Litigation ................................................................................................................................................. 17 Use of front groups ................................................................................................................................. 18 Next generation products ....................................................................................................................... 19 Corporate social responsibility: science and scientific collaboration ..................................................... 21 Scientific collaboration and FCTC Article 5.3 ...................................................................................... 22 Conclusions ................................................................................................................................................. 22 Smoking and Health Action Foundation Page 2 Introduction This is NSRA/SHAF’s last full length tobacco industry backgrounder document; later this spring the first in a series of tobacco industry bulletins will be published. This document, aimed at policy makers and public health intermediaries, provides an overview of the tobacco industry in Canada and its multi- national parent companies, issues facing the industry in the form of legislation and regulation, and strategies employed by Big Tobacco to address them, such as litigation and appeals. Of particular note is plain and standardized packaging, which was explicitly included in Prime Minister Trudeau’s 2015 mandate letter to the federal Minister of Health. As well, a recent ban on manufacturer payments to retailers and a new minimum size for graphic health warnings on cigarette and little cigar packages in Quebec have set a new bar in Canada for provincial legislation. Main Tobacco Companies in Canada Imperial Tobacco Canada Limited - www.imperialtobaccocanada.com Largest tobacco company: 49% market share in 2015 President and CEO: Jorge Araya since December 2014 Head office: Montreal Manufacturing plant: Monterrey, Mexico Fully owned by British American Tobacco (BAT) since 2000 BAT’s global profits increased 0.2% in 2015 to approximately $8.68 billion CAD Most popular brands in Canada: du Maurier, Player’s, Peter Jackson and Matinée Rothmans, Benson & Hedges - www.pmi.com Second largest tobacco company: 37.3% market share in 2015 Managing Director: Mindaugas Trumpaitis since 2013 Head office: Toronto Manufacturing plants: Quebec City and Brampton Fully owned by Philip Morris International (PMI) since 2008 PMI’s global net earnings decreased 8% in 2015 to approximately $9.13 billion CAD Most popular brands in Canada are Canadian Classics, Next, Number 7 and Belmont JTI-Macdonald - www.jti.com Third largest tobacco company: 13.1% market share in 2015 Regional President, Americas: Marchant Kuys since 2016 Head office: Mississauga Manufacturing plant: Montreal Fully owned by Japan Tobacco International (JTI) since 1999 JTI’s global profits decreased 5.2% in 2015 to approximately $7.32 billion CAD Most popular Canadian brands are Export A and Macdonald Smoking and Health Action Foundation Page 3 Grand River Enterprises (no website) Canada’s largest native tobacco manufacturer CEO: Jerry Montour Head office: Six Nations of the Grand River Reserve near Brantford Wholly native owned - financial information not publicly available Canadian brands: Sago, Putters, DK's and Golden Leaf Casa Cubana Spike Marks Inc. (www.casacubana.ca) Privately owned and operated: distributor of pipe tobacco, cigars and cigarillos Head office: Montreal Established in 1998 National Smokeless Tobacco Company Ltd. (www.nstco.ca) Largest distributor of smokeless tobacco products in Canada Marginal share of the Canadian tobacco market Head office: Montreal Popular brands: Skoal and Copenhagen Key Canadian Tobacco Market Indicators Cigarette Smoking Prevalence in Canada, age 12+ 27% 25.9% Among the 25% 23.0% 22.0% population as a 23% 21.8% 21.4% 20.8% whole, smoking 21% 20.0% 19.9%20.3% 19.3% prevalence in 19% 18.1% Canada has never 17% been lower. 15% Source: Canadian Community Health Survey Smoking and Health Action Foundation Page 4 Cigarette Sales in Canada (in billions) 45 43.4 42.1 40 37.6 The increase in legal 35.8 34.6 sales after 2008 is 35 33 31.7 31.1 31.3 31.5 related to better 30.2 29.5 28.7 28.6 contraband control 30 27.6 measures and 25 increased enforcement 20 activities. Source: Health Canada Cigarette Smoking Prevalence in Provinces and Territories, 2014 (age 12+) 70% 62.0% 60% The province with 50% the lowest smoking 40% 33.3% prevalence is still 30% 26.2% British Columbia, 20.9% 22.1% 21.7% 19.0% 20.5% 19.6% 19.7% 16.3% 17.4% followed by 20% 14.3% Manitoba and 10% Ontario. 0% BC AB SK MB ON QC NB NS PE NL YT NT NU Source: Canadian Community Health Survey Tax Revenues in Billions (No GST and PST or HST) Federal Prov & Terr 8 7 Government tax 6 4.98 revenues have been 4.68 4.91 4.66 4.65 5 4.39 4.30 4.30 4.16 4.05 increasing in 4 response to tighter 3 controls on 2 contraband and in 3.27 2.77 2.66 2.63 3.01 2.92 2.75 2.98 some cases tax 1 2.49 2.53 hikes. 0 Source: Government Budgets and Public Accounts Smoking and Health Action Foundation Page 5 Market Share in Canada Premium Mid-priced Economy 100% 90% 33.0% 80% 37.7% 40.5% 41.3% 42.8% 41.8% 41.7% Sales of premium 70% brands have been 60% decreasing in favour of 50% 24.7% 35.0% 24.7% 25.2% 25% 26.0% 26.1% more affordable mid- 40% priced and economy 30% brands. 20% 37.6% 34.8% 33.5% 32.2% 32.2% 32.3% 32.0% 10% 0% 2008 2009 2010 2011 2012 2013 2014 Source: Euromonitor International Cigarette Brand Share, 2014 (14 brands = 94.8% of total market) 22% 19.0% ITL Canada’s top 3 20% 18% 15.7% RBH cigarette brands—du 16% Maurier, Player’s and 14% 11.0% JTI-M 12% 10.7%10.6% Peter Jackson—are all 10% owned by Imperial 8% 6.4% Tobacco Canada; 6% 4.0% 3.9% 3.1% 2.9% 4% 2.4% 2.3% 2.0% together they 2% 0.8% represent 45.7% of the 0% market. Source: Euromonitor International Market Share in Canada ITL RBH JTI-M Others 1.4% 1.8% 1.3% 1.3% 0.9% 0.0% 0.0% 0.0% 0.0% 100% 11.9% 12.0% 12.2% 90% 13.8% 12.9% 13.9% 13.8% 14.6% 13.1% 80% RBH’s 5 percentage 70% 32.2% 33.4% 33.8% 33.3% 34.1% 36.9% 37.2% 37.6% 37.3% point increase in 60% market share over the 50% last 8 years reflects its 40% 30% aggressive move into 52.6% 51.9% 51.0% 51.6% 50.4% 51.2% 50.8% 50.2% 49.6% 20% the discount market. 10% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Citi Group and company financial reports Smoking and Health Action Foundation Page 6 Estimates of the Contraband Market in Canada 30% To divert attention 24.8% from other issues, the 25% 22.8% National Coalition 20.5% 20.0% 20% 18.6% 17.7% 17.5% 18.5% Against Contraband Tobacco, an industry 15% front group, often 10% portrays the contraband market as 5% much larger than it 0% actually is. 2007 2008 2009 2010 2011 2012 2013 2014 Source: Euromonitor International Issues Facing the Industry in Canada Canada is one of the most regulated tobacco markets