ASH NEW ZEALAND Tobacco Returns Analysis 2013 1 TOBACCO

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ASH NEW ZEALAND Tobacco Returns Analysis 2013

TOBACCO RETURNS ANALYSIS 2013 Tobacco manufacturers and importers in New Zealand are required to file their annual tobacco returns pursuant to section 35 of the Smokefree Environments Act 1990. The tobacco returns consist of two components – Schedule A and Schedule B. Schedule A is the information about ingredients and amounts used in their tobacco products. Schedule B is the company list of all their products, retail price and sale quantity We analysed data from Schedule B in order to understand the brand positioning of the major tobacco companies. This includes analysis of retail price, sale volume and estimated sales returned of all tobacco brands. Market share also is estimated based on this data. This analysis accounted for cigarette and loose leaf tobacco products sold within New Zealand (or domestic market). Information provided by tobacco companies may vary and hence the results of the analysis. British American Tobacco New Zealand (BATNZ) provided recommended retail prices as at January 2013 while Imperial Tobacco New Zealand and Philip Morris provided theirs as at December 2013. This had resulted in artificially higher estimates of average retail price and sale return for BATNZ products due to the January 2014 tax increase. Having considered this, most of the results on overall tobacco market in this analysis were presented according to the sale quantity and hence better accuracy. Fourteen companies filed their tobacco returns in 2013. As this analysis only included cigarette and loose leaf tobacco products, three companies were excluded as they sold cigar or other tobacco products. Tobacco Returns 2012 can be accessed through the National Drug Policy New Zealand website (http://www.ndp.govt.nz/moh.nsf/indexcm/ndp-tobacco-returns-2012 ). Abbreviations: BATNZ – British American Tobacco New Zealand; ITNZ – Imperial Tobacco New Zealand; PMNZ – Philip Morris New Zealand

ASH NEW ZEALAND Tobacco Returns Analysis 2013

BRITISH AMERICAN TOBACCO NEW ZEALAND (BATNZ) BRAND POSITIONING (CIGARETTE)

BRITISH AMERICAN TOBACCO NZ TOBACCO RETURN (CIGARETTE) 2013 50% $1.40 45% $1.16 40% $1.20 $0.97 $1.00 $0.99 $0.99 $1.00 35% $0.94 $0.92 $0.87 $1.00 $0.82 30% $0.77 $0.80 (%) 25% NZD ($) 20% 31.1% 26.4% $0.60 15% 32.5% 26.0% $0.40 10% 11.4% 11.1% 9.0% 12.5% 6.5% 4.3% $0.20 5% 10.1% 8.3% 6.6% 3.6% 0% $0.00

Brand PERCENTAGE OF COMPANY SALE QUANTITY BY BRAND (%) PERCENTAGE OF COMPANY SALE RETURN BY BRAND (NZD$) AVERAGE RETAIL PRICE (NZD$) PER STICK

Figure 1 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price for BAT products was January 2014 (after tobacco tax increase in January 2014) 2

ASH NEW ZEALAND Tobacco Returns Analysis 2013 BRITISH AMERICAN TOBACCO NEW ZEALAND (BATNZ) BRAND POSITIONING (CIGARETTE) In 2013, BATNZ released 14 different brands for sale in NZ cigarette market. The average price per stick for the company products ranged from $0.77 to $1.16. The median price per stick of BATNZ cigarette brand was $0.97. The average price per stick for Pall Mall and Holiday and Benson & Hedges were $0.82, $0.87 and $0.77 respectively in 2013. Freedom was the cheapest BATNZ brand ($0.77 per stick) while Vogue was the most expensive BATNZ brand ($1.16 per stick). Pall Mall (31.07% of company sale quantity) remained the most popular cigarette brands sold in NZ in 2013. This is followed by Holiday (26.36% of company sale quantity) and Benson & Hedges (11.38% of company sale quantity). Around two-third per cent of sale quantity of the Pall Mall brand came from the variants Baseline. The average retail price per stick of Baseline was $0.78 in 2013. Table 2 gives a breakdown of the Pall Mall brand by its major variants.

AVERAGE PERCENTAGE OF PERCENTAGE OF ESTIMATED SALES RETAIL PRICE SALE QUANTITY BY COMPANY SALE COMPANY SALE BRAND RETURN BY BRAND (NZD$) PER BRAND (STICKS) QUANTITY BY BRAND RETURN BY BRAND (NZD$) STICK (%) (NZD$)

PALL MALL $0.82 440,523,000 32.52% $355,988,070 31.07% HOLIDAY $0.87 352,589,000 26.03% $302,071,953 26.36% FREEDOM $0.77 168,747,000 12.46% $130,430,966 11.38% BENSON & HEDGES $0.94 137,338,700 10.14% $126,641,491 11.05% WINFIELD $0.92 112,334,000 8.29% $103,011,836 8.99% DUNHILL $0.97 88,940,000 6.57% $74,233,510 6.48% ROTHMANS $1.00 49,281,000 3.64% $49,059,319 4.28% LUCKY STRIKE $0.99 2,181,000 0.16% $2,148,285 0.19% VOGUE $1.16 1,196,000 0.088% $1,387,360 0.121% KENT $0.99 561,000 0.041% $552,585 0.048% SPORTSMAN n/a 300,600 0.022% n/a n/a STATEEXPRESS 555 $1.00 222,000 0.016% $220,890 0.019% TOPAZ n/a 132,800 0.010% n/a n/a CAMEO n/a 120,400 0.009% n/a n/a BATNZ TOTAL 1,354,466,500 100% $1,145,746,265 100% Table 1 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price for BAT products was January 2014 (after tobacco tax increase in January 2014)

ASH NEW ZEALAND Tobacco Returns Analysis 2013 BRITISH AMERICAN TOBACCO NEW ZEALAND (BATNZ) BRAND POSITIONING OF PALL MALL (CIGARETTE) AVERAGE SALE QUANTITY BY PERCENTAGE OF ESTIMATED SALES PERCENTAGE OF RETAIL PRICE BRAND VARIANT BRAND VARIANT COMPANY SALE RETURN BY BRAND COMPANY SALE (NZD$) PER (STICKS) QUANTITY (%) (NZD$) RETURN (NZD$) STICK PALL MALL $0.88 145,980,000 10.78% $124,287,170 10.85% PALL MALL BASELINE $0.78 294,543,000 21.75% $231,700,900 20.22% PALL MALL TOTAL $0.82 440,523,000 32.52% $355,988,070 31.07% Table 2 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price for BAT products was January 2014 (after tobacco tax increase in January 2014)

ASH NEW ZEALAND Tobacco Returns Analysis 2013 IMPERIALTOBACCO NEW ZEALAND (ITNZ) BRAND POSITIONING (CIGARETTE)

IMPERIAL TOBACCO NEW ZEALAND TOBACCO RETRUN (CIGARETTE) 2013 50% $0.93 $1.00 $0.89 $0.85 45% $0.90 $0.79 $0.76 $0.76 $0.78 40% $0.73 $0.80

35% $0.70

30% $0.60 (%) 48.5% NZD($) 25% 49.5% $0.50 20% $0.40 29.3% 15% 28.7% $0.30 10% 13.8% $0.20 14.0% 5% $0.10 4.6%5.3% 2.5% 0.5% 0.3% 0.3% 0% 2.3% 0.6% $0.00 BRAND JPS HORIZON JOHN PETER WEST CAMEL DAVIDOFF BRANDON JACKSON

Brand

PERCENTAGE OF COMPANY SALE QUANTITY BY BRAND (%) PERCENTAGE OF COMPANY SALE RETURN BY BRAND (NZD$) AVERAGE RETAIL PRICE (NZD$) PER STICK

Figure 2 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price for ITNZ products was 31 December 2013 (before tobacco tax increase in 2014)

ASH NEW ZEALAND Tobacco Returns Analysis 2013 IMPERIALTOBACCO NEW ZEALAND (ITNZ) BRAND POSITIONING (CIGARETTE) ITNZ released 8 different cigarette brands for sale in NZ cigarette market in 2013. The average retail price per stick for ITNZ products ranged from $0.73 to $0.93. The median average price per stick was $0.78. The new brand, WEST, was the cheapest brand that cost $0.73 per stick on average. Davidoff remained the most expensive brands ($0.93 per stick on average). In 2013, JPS remained the most popular brand of ITNZ (49.47% of company sale quantity) followed by Horizon (28.65% of company sale quantity) and John Brandon (14.01% of company sale quantity). The average retail price per stick for JPS, Horizon and John Brandon were $0.76, $0.79 and $0.76 respectively.

AVERAGE PERCENTAGE OF PERCENTAGE OF ESTIMATED SALES RETAIL PRICE SALE QUANTITY BY COMPANY SALE COMPANY SALE BRAND RETURN BY BRAND (NZD$) PER BRAND (STICKS) QUANTITY BY RETURN BY BRAND (NZD$) STICK BRAND (%) (NZD$) JPS $0.76 186,099,503 49.47% $140,472,107 48.48% HORIZON $0.79 107,783,355 28.65% $84,770,106 29.26% JOHN BRANDON $0.76 52,688,290 14.01% $39,871,548 13.76% PETER JACKSON $0.85 17,354,715 4.61% $15,223,721 5.25% WEST $0.73 9,348,560 2.49% $6,777,706 2.34% CAMEL $0.89 1,977,400 0.53% $1,759,886 0.61% DAVIDOFF $0.93 942,760 0.25% $872,053 0.30% SUPERKINGS $0.78 560 0.00015% $436.80 0.00015% ITNZ TOTAL 376,195,143 100% $289,747,564 100% Table 3 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price for ITNZ products was 31 December 2013 (before tobacco tax increase in 2014)

ASH NEW ZEALAND Tobacco Returns Analysis 2013 PHILIP MORRIS NEW ZEALAND (PMNZ) BRAND POSITIONING (CIGARETTE)

PHILIP MORRIS TOBACCO NZ TOBACCO RETURN (CIGARETTE) 2013 100% $1.00 $0.90 90% $0.90

80% $0.71 $0.70 $0.80 70% $0.70 60% $0.60 (%) NZD($) 50% $0.50 40% $0.40

30% 57.2% $0.30 62.2% 20% 36.5% 32.2% $0.20 10% $0.10 6.4% 5.5% 0% $0.00 BRAND MARLBORO LONGBEACH

Brand

PERCENTAGE OF COMPANY SALE QUANTITY BY BRAND (%) PERCENTAGE OF COMPANY SALE RETURN BY BRAND (NZD$) AVERAGE RETAIL PRICE (NZD$) PER STICK

Figure 3 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price for PMNZ products was 31 December 2013 (before tobacco tax increase in 2014)

ASH NEW ZEALAND Tobacco Returns Analysis 2013 PHILIP MORRIS NEW ZEALAND (PMNZ) BRAND POSITIONING (CIGARETTE) PMNZ released 3 cigarette brands for sale in NZ cigarette market in 2013. The average retail price per stick of PMNZ products ranged from $0.70 to $0.90. GT was the cheapest of PMNZ brands and Marlboro was the most expensive brand. Marlboro (57.19% of company cigarette sale) was the most popular brand of PMNZ followed by Longbeach (36.45% of company cigarette sale). The two brands comprised of 93.6% of the cigarette sale quantity of PMNZ.

PERCENTAGE OF PERCENTAGE OF AVERAGE RETAIL SALE QUANTITY ESTIMATED TOBACCO COMPANY SALE COMPANY SALE BRAND PRICE (NZD$) BY BRAND SALES RETURN COMPANY QUANTITY BY RETURN BY PER STICK (STICKS) BY BRAND (NZD$) BRAND (%) BRAND (NZD$)

PMNZ MARLBORO $0.90 76,443,000 57.19% $66,845,095 62.23% PMNZ LONGBEACH $0.71 48,721,000 36.45% $34,617,885 32.23% PMNZ GT $0.70 8,498,000 6.36% $5,948,600 5.54% PMNZ TOTAL 133,662,000 100% $107,411,580 100% Table 4 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price for PMNZ products was 31 December 2013 (before tobacco tax increase in 2014)

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (CIGARETTE) ALL TOBACCO MANUFACTURERS AND IMPORTERS 2013

PERCENTAGE OF PERCENTAGE OF AVERAGE SALE QUANTITY TOBACCO SALE QUANTITY ESTIMATED SALE SALE RETURN OF BRAND RETAIL PRICE OF NZ COMPANY (STICKS) RETURN (NZD$) NZ CIGARETTE PER STICK CIGARETTE BRAND MARKET BATNZ PALL MALL $0.82 440,523,000 23.26% $355,988,070 22.72% HOLIDAY $0.87 352,589,000 18.62% $302,071,953 19.28% FREEDOM $0.77 168,747,000 8.91% $130,430,966 8.32% BENSON & HEDGES $0.94 137,338,700 7.25% $126,641,491 8.08% WINFIELD $0.92 112,334,000 5.93% $103,011,836 6.57% DUNHILL $0.97 88,940,000 4.70% $74,233,510 4.74% ROTHMANS $1.00 49,281,000 2.60% $49,059,319 3.13% LUCKY STRIKE $0.99 2,181,000 0.12% $2,148,285 0.14% VOGUE $1.16 1,196,000 0.063% $1,387,360 0.089% KENT $0.99 561,000 0.030% $552,585 0.035% SPORTSMAN n/a 300,600 0.016% n/a n/a STATEEXPRESS 555 $1.00 222,000 0.012% $220,890 0.014% TOPAZ n/a 132,800 0.007% n/a n/a CAMEO n/a 120,400 0.006% n/a n/a ITNZ JPS $0.76 186,099,503 9.83% $140,472,107 8.97% HORIZON $0.79 107,783,355 5.69% $84,770,106 5.41% JOHN BRANDON $0.76 52,688,290 2.78% $39,871,548 2.54% PETER JACKSON $0.85 17,354,715 0.92% $15,223,721 0.97% WEST $0.73 9,348,560 0.49% $6,777,706 0.43% CAMEL $0.89 1,977,400 0.10% $1,759,886 0.11% DAVIDOFF $0.93 942,760 0.050% $872,053 0.056% SUPERKINGS $0.78 560 0.000030% $437 0.000028% PMNZ MARLBORO $0.90 76,443,000 4.04% $66,845,095 4.27% LONGBEACH $0.71 48,721,000 2.57% $34,617,885 2.21% GT $0.70 8,498,000 0.45% $5,948,600 0.38% HEALTHLINK DOUBLE HAPPINESS $0.72 40,000 0.0021% $28,600 0.0018% FU RONG WANG $0.79 30,000 0.0016% $23,700 0.0015%

YUXI $0.83 140,000 0.0074% $115,500 0.0074%

LESSER PANDA $0.79 30,000 0.0016% $23,700 0.0015%

HUANGHELOU $0.83 320,000 0.017% $264,000 0.017%

GOOD LUCK $0.77 80,000 0.0042% $61,600 0.0039%

ASH NEW ZEALAND Tobacco Returns Analysis 2013 JTI CAMEL FILTER $0.90 12,000,000 0.63% $10,800,000 0.69% NEW WORLD CHUNGWA $0.83 2,907,000 0.15% $2,412,810 0.15% (NEW DOUBLE HAPPINESS $0.72 2,250,000 0.12% $1,620,000 0.10% ZEALAND) LTD GD $0.71 2,130,000 0.11% $1,501,650 0.10% NEW ZEALAND EASY $0.73 8,370,700 0.44% $6,110,611 0.39% TOBACCO REEF $0.74 869,960 0.046% $639,421 0.041% GROUP LTD TRADITION $0.74 320,220 0.017% $236,963 0.015% SCANINAVIAN TOBACCO DJARUM $1.06 139,590 0.0074% $147,965 0.0094% GROUP TOTAL 1,893,951,113 100% $1,566,891,929 100% Table 5 • The ten most popular cigarette brands sold in New Zealand in 2013 are highlighted in the table above. • Estimation of sale return by brand was the sum of sale returns of variants under the brand (i.e, the sale quantity of variant was multiplied by the average retail price per stick of the respective variant). • Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company listed are as follow: - BATNZ – January 2014 (after tobacco tax increase in January 2014) - ITNZ, PMNZ, Healthlink Distributors Ltd, JT International, New World (New Zealand) Ltd and Scandinavian Tobacco Group – end of December 2013 (before tobacco tax increase in January 2014) - NZ Tobacco Group Ltd - not specified

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (CIGARETTE)

TEN MOST POPULAR CIGARETTE BRANDS IN NEW ZEALAND 2012 and 2013 $0.97 $0.94 500,000,000 $0.92 $0.90 $1.00 $0.87 450,000,000 $0.82 $0.90 $0.77 $0.76 $0.79 $0.76 400,000,000 $0.90 $0.80 $0.88 $0.86 350,000,000 $0.78 $0.80 $0.79 $0.70 $0.75 300,000,000 $0.68 $0.70 $0.67 $0.60 (Sticks) 250,000,000 $0.50 (NZD$) 200,000,000 $0.40 150,000,000 $0.30 100,000,000 $0.20 50,000,000 $0.10 0 $0.00 JPS HORIZON DUNHILL HOLIDAY HOLIDAY WINFIELD FREEDOMFREEDOM MARLBORO PALL PALL MALL JOHN BRANDON JOHNBRANDON BENSON BENSON &HEDGES BATNZ ITNZ PMNZ SALE QUANTITY (STICKS) 2012 SALE QUANTITY (STICKS) 2013 AVERAGE RETAIL PRICE PER STICK (NZD$) 2012 AVERAGE RETAIL PRICE PER STICK (NZD$) 2013

Figure 4 Average retail price per stick and estimation of company sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company are : BATNZ – January 2014 (after tobacco tax increase i n January 2014); ITNZ & PMNZ – December 2013 (before toba cco tax increase in January 2014 ).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (CIGARETTE) TEN MOST POPULAR CIGARETTE BRANDS IN NEW ZEALAND 2010 – 2013 The ten most popular cigarette brands sold in New Zealand in 2013 are shown in Figure 4 and Table 6. Pall Mall of BATNZ remained the most popular brand in NZ and this was mainly due to a high sale volume of the cheaper variant, Baseline (around two-third of the total sale volume of Pall Mall brands). The overall sale volume of the Pall Mall brand has dropped slightly but remained relatively stable in 2013. Holiday of BATNZ remained the second most popular brand in NZ cigarette market and the sale quantity of the brand has declined from 411,199,000 sticks in 2012 to 352,589,000 in 2013. JPS of ITNZ was the third most popular brands sold in NZ cigarette market in 2013 and the sale quantity of the brand has dropped from 190,352,780 sticks in 2012 to 186,099,503 in 2013. Strong growth remained in the ultra low-cost brand, Freedom of BATNZ, and the sale quantity of Freedom has increased from 136,269,200 sticks in 2012 to 168,747,000 sticks in 2013. For PMNZ, Marlboro was the only PMNZ brand that remained to be the most popular brand in New Zealand and sale quantity of Marlboro brand has increased.

PERCENTAGE OF SALE QUANTITY OF NZ AVERAGE RETAIL PRICE PER STICK (NZD$) CIGARETTE MARKET TOBACCO BRAND COMPANY 2012 2013 2012 2013

BATNZ PALL MALL $0.78 $0.82 23.28% 22.72% HOLIDAY $0.80 $0.87 20.46% 19.28% FREEDOM $0.75 $0.77 6.78% 8.32% BENSON & HEDGES $0.88 $0.94 7.42% 8.08% WINFIELD $0.86 $0.92 6.42% 6.57% DUNHILL $0.90 $0.97 4.45% 4.74% ITNZ JPS $0.68 $0.76 9.47% 8.97% HORIZON $0.70 $0.79 6.38% 5.41% JOHN BRANDON $0.67 $0.76 2.98% 2.54% PMNZ MARLBORO $0.79 $0.90 3.78% 4.27% Table 6 Average retail price per stick and estimation of company sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company are: BATNZ – January 2014 (after tobacco tax increase in January 2014); ITNZ & PMNZ – December 2013 (before tobacco tax increase in January 2014).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET (SHARE) ESTIMATED CIGARETTE MARKET SHARE FROM TOBACCO ANALYSIS 2013 BATNZ, ITNZ and PMNZ remained the three tobacco companies with the highest cigarette sale quantity and also cigarette sale return in 2013. BATNZ had 71.52% of cigarette sale quantity in New Zealand market which generated around 73.12% of all cigarette sale returns in New Zealand. ITNZ comprised of 19.86% of cigarette sale quantity in New Zealand Market and PMNZ comprised of 7.06% of cigarette sale.

DOMESTIC CIGARETTE MARKET SHARE DOMESTIC CIGARETTE MARKET SHARE (PERCENTAGE OF SALE QUANTITY OF NZ MARKET) (PERCENTAGE OF SALE QUANTITY OF NZ MARKET) 2010 - 2013 100% 2010 - 2013 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 70.6% 71.5% 73.6% 40% 73.1% 74.2% 72.0% 40% 75.2% 74.8% 30% 30% 20.2% 20.4% 20% 20% 19.9% 6.9% 7.7% 7.1% 17.9% 10% 17.9% 18.5% 6.8% 7.2% 6.0% 6.9% 6.4% 1.0% 1.5% 1.2% 1.6% 10% 17.0% 18.1% 1.5% 0% 0.9% 1.3% 1.1% 0% BATNZ ITNZ PMNZ OTHERS BATNZ ITNZ PMNZ OTHERS PERCENTAGE OF SALE QUANTITY OF NZ CIGARETTE MARKET IN 2010 PERCENTAGE OF SALE RETURN OF NZ CIGARETTE MARKET IN 2010 PERCENTAGE OF SALE QUANTITY OF NZ CIGARETTE MARKET IN 2011 PERCENTAGE OF SALE RETURN OF NZ CIGARETTE MARKET IN 2011 PERCENTAGE OF SALE QUANTITY OF NZ CIGARETTE MARKET IN 2012 PERCENTAGE OF SALE RETURN OF NZ CIGARETTE MARKET IN 2012 PERCENTAGE OF SALE QUANTITY OF NZ CIGARETTE MARKET IN 2013 PERCENTAGE OF SALE RETURN OF NZ CIGARETTE MARKET IN 2013

Figure 5 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company listed are as follow: - BATNZ – January 2014 (after tobacco tax increase in January 2014) - ITNZ, PMNZ, Healthlink Distributors Ltd, JT International, New World (New Zealand) Ltd and Scandinavian Tobacco Group – end of December 2013 (before tobacco tax increase in January 2014) - NZ Tobacco Group Ltd - not specified

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (CIGARETTE) ESTIMATED CIGARETTE MARKET SHARE FROM TOBACCO ANALYSIS 2010 – 2013

2010 2011 2012 2013 PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE COMPANY OF SALE COMPANY OF SALE COMPANY OF SALE COMPANY OF SALE TOBACCO SALE QUANTITY OF SALE QUANTITY OF SALE QUANTITY OF SALE QUANTITY OF COMPANY QUANTITY NZ QUANTITY NZ QUANTITY NZ QUANTITY NZ (STICKS) CIGARETTE (STICKS) CIGARETTE (STICKS) CIGARETTE (STICKS) CIGARETTE MARKET MARKET MARKET MARKET BATNZ 1,660,739,700 74.17% 1,472,611,200 70.61% 1,445,944,400 71.95% 1,354,466,500 71.52% ITNZ 401,450,000 17.93% 420,973,000 20.19% 409,900,320 20.40% 376,195,143 19.86% PMNZ 154,183,000 6.89% 161,154,000 7.73% 129,447,520 6.44% 133,662,000 7.06% OTHERS 22,594,930 1.01% 30,777,675 1.48% 24,344,850 1.21% 29,627,470 1.56% TOTAL 2,238,967,630 100% 2,085,515,875 100 % 2,009,637,090 100% 1,893,951,113 100%

2010 2011 2012 2013 PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE ESTIMATED ESTIMATED ESTIMATED ESTIMATED OF SALE OF SALE OF SALE OF SALE COMPANY COMPANY COMPANY COMPANY TOBACCO RETURN OF RETURN OF RETURN OF RETURN OF SALE SALE SALE SALE COMPANY NZ NZ NZ NZ RETURN RETURN RETURN RETURN CIGARETTE CIGARETTE CIGARETTE CIGARETTE (NZD$) (NZD$) (NZD$) (NZD$) MARKET MARKET MARKET MARKET BATNZ $981,815,078 75.24% $1,076,152,841 73.64% $1,177,753,426 74.83% $1,145,746,265 73.12% ITNZ $221,721,166 16.99% $261,139,877 17.87% $284,508,932 18.08% $289,747,564 18.49% PMNZ $89,313,183 6.84% $105,072,843 7.19% $94,844,306 6.03% $107,411,580 6.86% OTHERS $12,007,352 0.92% $19,067,943 1.30% $16,724,097 1.06% $23,986,520 1.53% TOTAL $1,304,856,780 100% $1,461,433,503 100% $1,573,830,761 100% $1,566,891,929 100% Table 7 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company listed are as follow: - BATNZ – January 2014 (after tobacco tax increase in January 2014) - ITNZ, PMNZ, Healthlink Distributors Ltd, JT International, New World (New Zealand) Ltd and Scandinavian Tobacco Group – end of December 2013 (before tobacco tax increase in January 2014) - NZ Tobacco Group Ltd - not specified

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (CIGARETTE) TREND IN CIGARETTE SALE QUANTITY 2004 – 2013

COMPANY CIGARETTE SALE QUANTITY BY WEIGHT (KG) 2004-2013 1,400,000 1,279,954 1,262,572 1,187,366 1,200,000

1,042,002

1,000,000 936,514

800,000

(KG) BATNZ ITNZ PMNZ OTHER COMPANY

600,000

400,000 292,117 293,816 284,356 281,326 270,910

200,000 122,051 114,962 93,363 105,083 92,256

28,814 17,164 22,931 21,005 20,914 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (CIGARETTE) TREND IN CIGARETTE SALE QANTITY 2004 – 2013 The total cigarette sale quantity of most tobacco companies continued to fall in 2013. The combined sale volume of the other companies has increased from 16,716 kg in 2012 to 20,914 kg in 2013. Such growth was mainly driven by the increased sale quantity of JT International Ltd that released one cigarette brand, Camel Filter, for sale in New Zealand market. SALE QUANTITY (KG) TOBACCO COMPANY 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 BATNZ 1,291,460 1,279,954 1,295,860 1,262,572 1,263,233 1,187,366 1,155,490 1,042,002 1,050,787 936,514 ITNZ 285,111 284,356 281,532 292,117 278,221 293,816 283,011 281,326 294,119 270,910 PMNZ 101,525 93,363 104,289 105,083 102,632 122,051 119,887 114,962 92,509 92,256 COSMIC n/a n/a n/a n/a n/a n/a n/a 62 66 n/a HEALTHLINK n/a 584 816 576 704 849 317 2,940 2,119 449 DISTRIBUTORS LTD JT INTERNATIONAL 6,534 7,440 5,655 5,338 2,588 2,962 2,409 2,680 1,807 8,400 LTD S.A. KINGS 776 n/a n/a n/a n/a n/a n/a n/a n/a n/a KOREA TOBACCO 716 n/a n/a n/a n/a 602 n/a n/a n/a n/a LIMITED MODERNA TRADING 683 2,055 4,890 6,870 9,420 8,220 14,290 2,940 3,150 n/a CO LTD NEW WORLD (NEW 83 4,402 3,500 3,402 4,480 4,483 5,803 4,666 3,545 5,101 ZEALAND) LTD NEW ZEALAND n/a 2,683 3,777 6,745 13,866 10,992 7,918 7,698 5,996 6,884 TOBACCO GROUP SWEDISH MATCH n/a n/a n/a n/a 58 112 170 n/a n/a n/a LIMITED SOUTH AFRICAN n/a n/a n/a n/a n/a n/a n/a 19 34 n/a CAFFEE SOUTH AMERICAN n/a n/a n/a n/a 465 594 n/a n/a n/a n/a TOBACCO GROUP (NZ) LTD VE LOGISTICS 1,472 n/a n/a n/a n/a n/a n/a n/a n/a n/a SCANINAVIAN n/a n/a n/a n/a n/a n/a n/a n/a n/a 80 TOBACCO GROUP OTHER COMPANIES TOTAL 10,264 17,164 18,638 22,931 31,581 28,814 30,908 21,005 16,716 20,914 TOTAL 1,688,360 1,674,837 1,700,319 1,682,703 1,675,667 1,634,056 1,589,296 1,459,295 1,454,131 1,320,594 Table n/a – not available; some tobacco companies provided the sale quantity as number of cigarette sticks released. These data were converted into weight according to the information on the website of Ministry of Health. The weight of a cigarette stick is estimated to be 0.7 grams.

ASH NEW ZEALAND Tobacco Returns Analysis 2013 BRITISH AMERICAN TOBACCO NEW ZEALAND (BATNZ) BRAND POSITIONING (LOOSE LEAF TOBACCO)

BRITISH AMERICAN TOBACCO NEW ZEALAND TOBACCO RETURN (LOOSE LEAF TOBACCO) 2013 50% $0.80 $0.66 $0.65 45% $0.63 $0.70 $0.59 40% $0.60 35% 30% $0.50 (%) NZD($) 25% $0.40

20% 39.5% 40.4% $0.30 15% 31.7% 32.0% $0.20 10% 15.1% 14.1% 13.7% 13.5% 5% $0.10 0% $0.00 BRAND PORT ROYAL PARK DRIVE WINFIELD Brand

PERCENTAGE OF COMPANY SALE QUANTITY BY BRAND (%) PERCENTAGE OF COMPANY SALE RETURN BY BRAND (NZD$) AVERAGE RETAIL PRICE PER STICK 0.5g (NZD$)

Figure 6 Average retail price per kg and estimation of company loose leaf tobacco sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price of BAT was January 2014 (after tobacco tax increase in January 2014).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 BRITISH AMERICAN TOBACCO NEW ZEALAND (BATNZ) BRAND POSITIONING (LOOSE LEAF TOBACCO) In 2013, BATNZ has released 4 brands for sale in NZ loose leaf tobacco market. The average price per kilogram for the company products ranged from $1,190 to $1,315 ($0.59 to $0.66 per stick of 0.5g). The median price per kilogram of BATNZ loose leaf tobacco products were $1,284 ($0.64 per stick of 0.5g). Port Royal (39.5% of company sale quantity) remained the most popular loose leaf tobacco brands of BATNZ in 2013 followed by Park Drive (31.7% of company sale quantity). The average retail prices per kg of Port Royal and Park Drive in 2013 were $1,315 and $1,302 respectively ($0.66 and $0.65 per stick of 0.5g).

PERCENTAGE OF PERCENTAGE OF AVERAGE RETAIL AVERAGE RETAIL ESTIMATED SALE QUANTITY COMPANY SALE COMPANY SALE BRAND PRICE PER KG PRICE PER STICK SALES RETURN BY BRAND (KG) QUANTITY BY RETURN BY (NZD$) 0.5g (NZD$) BY BRAND (NZD$) BRAND (%) BRAND (NZD$)

PORT ROYAL $1,315 $0.66 157,179 39.51% $207,120,557 40.35% PARK DRIVE $1,302 $0.65 126,057 31.68% $164,333,049 32.02% WINFIELD $1,190 $0.59 59,978 15.08% $72,458,440 14.12% HOLIDAY $1,266 $0.63 54,633 13.73% $69,359,693 13.51% BATNZ 397,847 100% $513,271,739 100% Table 8 Average retail price per kg and estimation of company loose leaf tobacco sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price of BAT was January 2014 (after tobacco tax increase in January 2014).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 IMPERIAL TOBACCO NEW ZEALAND (ITNZ) BRAND POSITIONING (LOOSE LEAF TOBACCO)

IMPERIAL TOBACCO NEW ZEALAND TOBACCO RETURN (LOOSE LEAF TOBACCO) 2013 50% $0.80

45% $0.70 $0.60 40% $0.57 $0.59 $0.55 $0.53 $0.54 $0.60 35% $0.50 30% (%) NZD($) 25% $0.40 38.5% 20% 39.7% 26.5% $0.30 15% 27.2% 18.6% $0.20 10% 17.9% $0.10 5% 8.9% 9.6% 5.1% 5.6% 1.1% 1.2% 0% $0.00 BRAND RIVERSTONE JPS HORIZON POCKET DRUM EDITION Brand

PERCENTAGE OF COMPANY SALE QUANTITY BY BRAND (%) PERCENTAGE OF COMPANY SALE RETURN BY BRAND (NZD$) AVERAGE RETAIL PRICE PER STICK 0.5g (NZD$)

Figure 7 Average retail price per kg and estimation of company loose leaf tobacco sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price of ITNZ was December 2013 (before tobacco tax increase in January 2014).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 IMPERIAL TOBACCO NEW ZEALAND (ITNZ) BRAND POSITIONING (LOOSE LEAF TOBACCO) ITNZ released 6 brands for sale in NZ loose leaf tobacco market. The average price per kilogram for the company products ranged from $1,051 to $1,190 ($0.53 to $0.60 per stick of 0.5g). The median price per kilogram of ITNZ loose leaf tobacco products were $1,161 ($0.56 per stick of 0.5g). Riverstone and JPS were the most popular loose leaf tobacco brands of ITNZ in 2013. They comprised of 39.75% and 27.19% respectively of the company sale quantity. The sale quantity of both brands has gone up from the previous year. For Riverstone, the sale quantity has gone up from 52,684 kg in 2012 to 63,367 kg in 2013. JPS has gone up from 32,029 kg in 2012 to 43,342 kg in 2013. The average retail price per kilogram of Riverstone in 2013 was $1051 ($0.53 per stick of 0.5g) and JPS was $1,080 ($0.54 per stick of 0.5g).

AVERAGE AVERAGE SALE PERCENTAGE PERCENTAGE OF ESTIMATED SALES RETAIL PRICE RETAIL PRICE QUANTITY OF COMPANY COMPANY SALE BRAND RETURN BY PER KG PER STICK 0.5g BY BRAND SALE QUANTITY RETURN BY BRAND (NZD$) (NZD$) (NZD$) (KG) BY BRAND (%) BRAND (NZD$) RIVERSTONE $1,051 $0.53 63,367 39.75% $67,537,132 38.54% JPS $1,080 $0.54 43,342 27.19% $46,387,685 26.47% HORIZON $1,144 $0.57 28,488 17.87% $32,677,974 18.65% POCKET EDITION $1,177 $0.55 14,217 8.92% $16,742,625 9.55% DRUM $1,190 $0.60 8,200 5.14% $9,774,746 5.58% VIRGINIA $1,177 $0.59 1,813 1.14% $2,133,714 1.22% ITNZ TOTAL 159,427 100% $175,253,876 100% Table 9 Average retail price per kg and estimation of company loose leaf tobacco sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price of ITNZ was December 2013 (before tobacco tax increase in January 2014).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 PHILIP MORRIS NEW ZEALAND (PMNZ) BRAND POSITIONING (LOOSE LEAF TOBACCO) In 2013, the PMNZ has released only one loose leaf tobacco brand, Marlboro, for sale in the market. The PMNZ brand was first introduced into New Zealand loose leaf tobacco market in 2013. The average retail price per kilogram of Marlboro was $1,167 ($0.58 per stick of 0.5g). The sale quantity of sole PMNZ brand in 2013 was 14kg.

AVERAGE AVERAGE PERCENTAGE OF ESTIMATED PERCENTAGE OF SALE QUANTITY RETAIL PRICE BRAND RETAIL PRICE COMPANY SALE SALES RETURN COMPANY SALE (KG) PER STICK 0.5g PER KG (NZD$) QUANTITY (%) (NZD$) RETURN (NZD$) (NZD$)

MARLBORO 14 $1,167 $0.58 100% $16,333 100% PMNZ TOTAL 14 $1,167 $0.58 100% $16,333 100% Table 10 Average retail price per kg and estimation of company loose leaf tobacco sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price of PMNZ was December 2013 (before tobacco tax increase in January 2014).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (LOOSE LEAF TOBACCO) ALL TOBACCO MANUFACTURERS AND IMPORTERS 2013 PERCENTAGE PERCENTAGE AVERAGE OF SALE OF SALE AVERAGE RETAIL SALE QUANTITY OF ESTIMATED RETURN OF RETAIL TOBACCO COMPANY BRAND PRICE PER QUANTITY NZ LOOSE SALE RETURN NZ LOOSE PRICE STICK OF (KG) LEAF (NZD$) LEAF PER KG 0.5g TOBACCO TOBACCO MARKET BRAND BATNZ PORT ROYAL $1,315 $0.66 157,179 27.88% $207,120,557 29.79% PARK DRIVE $1,302 $0.65 126,057 22.36% $164,333,049 23.64% WINFIELD $1,190 $0.59 59,978 10.64% $72,458,440 10.42% HOLIDAY $1,266 $0.63 54,633 9.69% $69,359,693 9.98% ITNZ RIVERSTONE $1,051 $0.53 63,367 11.24% $67,537,132 9.71% JPS $1,080 $0.54 43,342 7.69% $46,387,684 6.67% HORIZON $1,144 $0.57 28,488 5.05% $32,677,974 4.70% POCKET EDITION $1,177 $0.55 14,217 2.52% $16,742,625 2.41% DRUM $1,190 $0.60 8,200 1.45% $9,774,746 1.41% VIRGINIA $1,177 $0.59 1,813 0.32% $2,133,714 0.31% PMNZ MARLBORO $1,167 $0.58 14 0.0025% $16,333 0.0023% COSMIC AMERICAN SPIRIT $1,249 $0.62 93 0.017% $116,683 0.017% MODERNA TRADING CO LTD DOMINGO $850 $0.43 40 0.007% $34,000 0.0049% NEW ZEALAND EASY $1,04 $0.52 2,432 0.43% $2,537,898 0.37% TOBACCO GROUP REEF $997 $0.50 593 0.11% $591,452 0.085% LTD ASHFORD $1,077 $0.54 303 0.054% $326,424 0.047% MANITOU $1,140 $0.57 104 0.019% $119,062 0.017% R&S KING LTD KNIGHT $904 $0.45 439 0.078% $391,452 0.056% SUNNY'S $890 $0.45 88 0.016% $77,537 0.011% NICKY'S $890 $0.45 21 0.0037% $18,600 0.0027% RASTA $875 $0.44 22 0.0039% $19,250 0.0028% SCANINAVIAN BALI $1,033 $0.52 831 0.15% $858,700 0.12% TOBACCO GROUP COLTS $983 $0.49 1,606 0.28% $1,579,233 0.23% TOTAL 563,862 100% $695,212,239 100% Table 11 • The six most popular loose leaf tobacco brands sold in NZ in 2013 are highlighted in the table above. • Estimation of sale return by brand was the sum of sale returns of variants under the brand (ie the sale quantity of variant was multiplied by the average retail price per kg of the respective variant).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 • Average retail price of loose leaf tobacco products and estimation of company loose leaf tobacco sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company listed are as follow: - BATNZ – January 2014 (after tobacco tax increase in January 2014) - ITNZ, PMNZ, Cosmic, JT International, Moderna Trading Co Ltd – December 2013 (before tobacco tax increase in January 2014) - R&S King Ltd and NZ Tobacco Group Ltd – not specified • For better comparison with cigarette products, the average retail price for loose leaf tobacco per stick was also calculated. For calculation, the weight of a loose leaf tobacco stick was assumed to be 0.5 grams (Source: Laugesen M . Epton M, Frampton C, Glover M. Lea RA. Hand-rolled cigarette smoking patterns, compared with factory-made cigarette smoking in New Zealand men. BMC Public Health 2009, 9:194. http://www.biomedcentral.com/1471-2458/9/194 )

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (LOOSE LEAF TOBACCO) SIX MOST POPULAR LOOSE LEAF TO BACCO BRANDS IN 2013

SIX MOST POPULAR LOOSE LEAF TOBACCO BRAND IN NZ 2012 and 2013

200,000 $0.66 $0.65 $0.70 $0.63 180,000 $0.59 $0.54 $0.60 160,000 $0.53 $0.59 $0.59 $0.57 140,000 $0.54 $0.50 $0.51 $0.48 120,000 $0.40 (KG) 100,000 NZD($) $0.30 80,000

60,000 $0.20 40,000 $0.10 20,000

0 $0.00 PORT ROYAL PARK DRIVE WINFIELD HOLIDAY RIVERSTONE JPS BATNZ ITNZ

SALE QUANTITY (KG) 2012 SALE QUANTITY (KG) 2013 AVERAGE RETAIL PRICE PER STICK OF 0.5g (NZD$) 2012 AVERAGE RETAIL PRICE PER STICK OF 0.5g (NZD$) 2013

Figure 8 Average retail price and estimation of company sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company are : BATNZ – January 2014 (after toba cco tax increase in January 2014); ITNZ & PMNZ – December 2013 (before tobacco tax increase January 2014 ).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (LOOSE LEAF TOBACCO) SIX MOST POPULAR LOOSE LEAF TOBACCO BRANDS IN 2013 In 2013, the three most popular loose leaf tobacco brands sold in New Zealand were Port Royal, Park Drive and Winfield. All three products belonged to BATNZ and made up of 60.88% of all loose leaf tobacco products released for sale in NZ in 2013. Riverstone of ITNZ has replaced Holiday of BATNZ becoming the forth most popular loose leaf brand. Riverstone comprised of 11.24% of sale quantity of NZ loose leaf market. AVERAGE RETAIL PRICE PER STICK OF PERCENTAGE OF SAL E QUANTITY OF NZ

0.5g (NZD$) LOOSE LEAF MARKET (%) TOBACCO BRAND COMPANY 2012 2013 2012 2013

BATNZ PORT ROYAL $0.60 $0.66 29.91% 27.88% PARK DRIVE $0.59 $0.65 23.78% 22.36% WINFIELD $0.54 $0.60 10.02% 10.64% HOLIDAY $0.57 $0.63 10.07% 9.69% ITNZ RIVERSTONE $0.49 $0.53 9.04% 11.24% JPS $0.51 $0.54 5.49% 7.69% Table 12 Average retail price and estimation of company sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company are: BATNZ – January 2014 (after tobacco tax increase in January 2014); ITNZ & PMNZ – December 2013 (before tobacco tax increase in January 2014).

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (LOOSE LEAF TOBACCO) ESTIMATED LOOSE LEAF TOBACCO MARKET SHARE FROM TOBACCO ANALYSIS 2013 BATNZ and ITNZ remained two tobacco companies with the highest loose leaf tobacco sale quantity as well as the highest sale returns in New Zealand in 2013. BATNZ had 70.56% of loose leaf tobacco market in NZ whereas ITNZ shared 28.27% of the New Zealand loose leaf tobacco market in 2013.

DOMESTIC LOOSE LEAF TOBACCO MARKET DOMESTIC LOOSE LEAF TOBACCO MARKET (PERCENTAGE OF SALE QUANTITY OF NZ LOOSE LEAF (PERCENTAGE OF SALE QUANTITY OF NZ LOOSE TOBACCO MARKET) LEAF TOBACCO MARKET) 2010 - 2013 2010 - 2013 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 75.6% 40% 72.2% 70.6% 40% 79.0% 76.3% 73.8% 76.6% 73.8% 30% 30% 20% 20% 25.5% 28.3% 22.2% 25.2% 22.6% 22.8% 24.9% 10% 20.5% 10% 2.3% 1.2% 0.1% 0.1%0.4% 2.1% 1.1% 1.0% 0.1% 0.1%0.6% 1.3% 0% 0% BATNZ ITNZ PMNZ OTHERS BATNZ ITNZ PMNZ OTHERS PERCENTAGE OF SALE RETURN OF NZ LOOSE LEAF TOBACCO MARKET IN PERCENTAGE OF SALE QUANTITY OF NZ LOOSE LEAF TOBACCO MARKET IN 2010 2010 PERCENTAGE OF SALE QUANTITY OF NZ LOOSE LEAF TOBACCO MARKET IN PERCENTAGE OF SALE RETURN OF NZ LOOSE LEAF TOBACCO MARKET IN 2011 2011 PERCENTAGE OF SALE QUANTITY OF NZ LOOSE LEAF TOBACCO MARKET IN PERCENTAGE OF SALE RETURN OF NZ LOOSE LEAF TOBACCO MARKET IN 2012 2012 PERCENTAGE OF SALE QUANTITY OF NZ LOOSE LEAF TOBACCO MARKET IN PERCENTAGE OF SALE RETURN OF NZ LOOSE LEAF TOBACCO MARKET IN 2013 2013

Figure 9 Average retail price of loose leaf tobacco products and estimation of company loose leaf tobacco sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company listed are as follow: - BATNZ – January 2014 (after tobacco tax increase in January 2014) - ITNZ, PMNZ, Cosmic, JT International, Moderna Trading Co Ltd – December 2013 (before tobacco tax increase in January 2014) - R&S King Ltd and NZ Tobacco Group Ltd – not specified

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (LOOSE LEAF TOBACCO) ESTIMATED LOOSE LEAF TOBACCO MARKET SHARE FROM TOBACCO ANALYSIS 2013

2010 2011 2012 2013 PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE OF SALE OF SALE OF SALE OF SALE COMPANY QUANTITY OF COMPANY QUANTITY OF COMPANY QUANTITY OF COMPANY QUANTITY OF TOBACCO SALE NZ LOOSE SALE NZ LOOSE SALE NZ LOOSE SALE NZ LOOSE COMPANY QUANTITY LEAF QUANTITY LEAF QUANTITY LEAF QUANTITY LEAF (KG) IN 2010 TOBACCO (KG) IN 2011 TOBACCO (KG) IN 2012 TOBACCO (KG) IN 2013 TOBACCO MARKET IN MARKET IN MARKET IN MARKET IN 2010 2011 2012 2013 BATNZ 579,892 76.59% 477,079 72.20% 430,128 73.78% 397,847 70.56% ITNZ 172,356 22.77% 168,399 25.49% 145,035 24.88% 159,427 28.27% PMNZ 588 0.08% 307 0.05% 316 0.05% 14 0.0025% OTHERS 4,271 0.56% 14,990 2.27% 7,526 1.29% 6,574 1.17% TOTAL 757,106 100% 660,775 100% 583,005 100% 563,862 100%

2010 2011 2012 2013 PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE ESTIMATED OF SALE ESTIMATED OF SALE ESTIMATED OF SALE ESTIMATED OF SALE COMPANY RETURN OF COMPANY RETURN OF COMPANY RETURN OF COMPANY RETURN OF TOBACCO SALE NZ LOOSE SALE NZ LOOSE SALE NZ LOOSE SALE NZ LOOSE COMPANY RETURN LEAF RETURN LEAF RETURN LEAF RETURN LEAF (NZD$) IN TOBACCO (NZD$) IN TOBACCO (NZD$) IN TOBACCO (NZD$) IN TOBACCO 2010 MARKET IN 2011 MARKET IN 2012 MARKET IN 2013 MARKET IN 2010 2011 2012 2013 BATNZ $537,014,893 78.97% $510,482,830 75.63% $502,230,785 76.31% $513,271,739 73.83% ITNZ $139,496,720 20.51% $150,155,358 22.25% $148,632,478 22.58% $175,253,876 25.21% PMNZ $452,760 0.07% $257,880 0.04% $335,732 0.05% $16,333 0.0023% OTHERS $3,030,772 0.45% $14,100,724 2.09% $6,972,983 1.06% $6,670,291 0.96% TOTAL $679,995,145 100% $674,996,792 100% $658,171,979 100% $695,212,239 100% Table 13 Average retail price of loose leaf tobacco products and estimation of company loose leaf tobacco sale return were based on the value of recommended retail price provided by the tobacco companies. Dates of recommended retail price of each company listed are as follow: - BATNZ – January 2014 (after tobacco tax increase in January 2014) - ITNZ, PMNZ, Cosmic, JT International, Moderna Trading Co Ltd – December 2013 (before tobacco tax increase in January 2014 - R&S King Ltd and NZ Tobacco Group Ltd – not specified

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (LOOSE LEAF TOBACCO) TRENDS IN LOOSE LEAF T OBACCO SALE QUANTITY 2004 – 2013

COMPANY LOOSE LEAF SALE QUANTITY BY WEIGHT 2004 -2013 800,000

700,000 666,073 644,261 632,118

600,000

477,079 500,000

BATNZ ITNZ PMNZ OTHER COMPANY 397,847 (KG) 400,000

300,000

200,000 158,921 168,399 159,427 143,838 145,378

100,000

5,948 14,990 777 3,394 6,574 0 1,013 921 307 14 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ASH NEW ZEALAND Tobacco Returns Analysis 2013 DOMESTIC MARKET SHARE (LOOSE LEAF TOBACCO) TRENDS IN LOOSE LEAF TOBACCO SALE QUANTITY 2004 – 2013 The total sale quantity of loose leaf tobacco products in New Zealand market in 2013 has declined from 613,451 kg in 2012 to 563,862 kg in 2013. The sale quantity of ITNZ in has slightly increased while the sale quantity of BATNZ has declined from 461,172 kg in 2012 to 397,847 kg in 2013. The sale quantity of PMNZ in the loose leaf market has reduced to 14 kg. The combined sale quantity of other companies has slightly increased from 3,604 kg in 2012 to 6,574 kg in 2013.

SALE QUANTITY (KG) TOBACCO COMPANY 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 BATNZ 646,281 666,073 670,023 644,261 630,567 632,118 579,891 477,079 461,172 397,847 ITNZ 175,919 143,838 145,475 145,378 143,464 158,921 151,280 168,399 148,359 159,427 PMNZ 0 0 0 1,013 821 921 568 307 316 14 COSMIC CORNER n/a n/a n/a 14 n/a n/a 46 53.6 83.3 93 HEALTHLINK n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a DISTRIBUTORS LTD ISLA SERVICES LIMITED n/a 47 n/a n/a n/a n/a n/a n/a n/a n/a JT INTERNATIONAL LTD n/a n/a n/a n/a n/a n/a 170 10,000 204 n/a S.A. KOREA TOBACCO n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a LIMITED MODERNA TRADING CO n/a n/a n/a 125 153 129 257 157 289 40 LTD NEW WORLD (NEW n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a ZEALAND) LTD NEW ZEALAND n/a n/a n/a 2,948 5,883 5,569 3,628 4,379.5 3,027.5 3,434 TOBACCO GROUP NZ TOBACCO COY n/a 428 1,396 n/a n/a n/a n/a n/a n/a n/a STUART ALEXANDER 243 302 354 308 289 250 170 n/a n/a n/a VE LOGISTICS 7 n/a n/a n/a n/a n/a n/a n/a n/a n/a R&S KING n/a n/a n/a n/a n/a n/a n/a n/a n/a 570 SCANINAVIAN n/a n/a n/a n/a n/a n/a n/a n/a n/a 2,437 TOBACCO GROUP OTHER COMPANY 251 777 1,750 3,394 6,324 5,948 4,271 14,990 3,604 6,574 TOTAL TOTAL 822,451 810,688 817,248 794,046 781,176 797,908 736,010 660,775 613,451 563,862 Table 14 n/a – not available

ASH NEW ZEALAND Tobacco Returns Analysis 2013 TRENDS IN TOBACCO SALE QUANTITY 2004 – 2013

TOTAL SALE QUANTITY OF TOBACCO PRODUCTS IN NZ 3,000,000 2004-2013

2,510,811 2,485,524 2,517,568 2,476,749 2,456,843 2,431,964 2,500,000 2,325,306

2,120,070 2,067,582

2,000,000 1,884,456 1,688,360 1,674,837 1,700,319 1,682,703 1,675,667 1,634,056 1,589,296 1,459,295 1,454,131 (KG) 1,500,000 1,320,594

1,000,000 822,451 810,688 817,248 794,046 797,908 781,176 736,010 660,775 613,451 563,862

500,000 ALL CIGARETTE BRANDS ALL LOOSE TOBACCO BRANDS TOTAL (ALL CIGARETTE & LOOSE LEAF TOBACCO BRANDS) 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Figure 10

ASH NEW ZEALAND Tobacco Returns Analysis 2013 TRENDS IN TOBACCO SALE QUANTITY 2004 – 2013 PERCENTAGE OF CHANGE OF SALE QUANTITY Sale quantity of the overall tobacco market in 2013 has seen a rapid drop by 8.9% from 2012. Both cigarette market and loose leaf tobacco market have rapidly declined by 9.2% and 8.1% respectively from the previous year. Such a trend that sale quantity of tobacco market rapidly decline was notable after the ongoing increase in tobacco excise tax since 2010. This pattern of decline (between 2010 and 2013) is not as rapid in the cigarette market.

SALE QUANTITY (KG) TYPE OF TOBACCO PRODUCTS (Percentage of change from previous year %) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1,688,360 1,674,837 1,700,319 1,682,703 1,675,667 1,634,056 1,589,296 1,459,295 1,454,131 1,320,594 ALL CIGARETTE BRANDS (-0.8%) (+1.5%) (-1.04%) (-0.4%) (-2.5%) (-2.7%) (-8.2%) (-0.4%) (-9.2%)

ALL LOOSE TOBACCO 822,451 810,688 817,248 794,046 781,176 797,908 736,010 660,775 613,451 563,862 BRANDS (-1.4%) (+0.8%) (-2.8%) (-1.6%) (+2.1%) (-7.8%) (-10.2%) (-7.2%) (-8.1%)

TOTAL NZ MARKET 2,510,811 2,485,524 2,517,568 2,476,749 2,456,843 2,431,964 2,325,306 2,120,070 2,067,582 1,884,456 (-1.0%) (+1.3%) (-1.6%) (-0.8%) (-1.0%) (-4.4%) (-8.8%) (-2.5%) (-8.9%)

Table 15

ASH NEW ZEALAND Tobacco Returns Analysis 2013 CHANGES IN SALE QUANTITY IN DIFFERENT PRICE SEGMENTS The New Zealand government has increased excise tax of tobacco products since 2010. The first one was a 10% tax increase on manufactured cigarettes and 25% increase on loose tobacco in 2010, and was followed by subsequent annual increases of 10% that will continue until 2016. To compare the changes in sale quantity in different price segments after the first tax increase in 2010, we have categorised cigarette brands of the three main companies (BATNZ, ITNZ and PMNZ) into four price segments – budget (or ultra low-cost), value, mid-price and premium. All cigarettes of the three companies were categorised into these segments which were based on the price segments used by Ernest & Young in their report 1 in reference to the price of the representative brands in the report. Budget brands include Freedom, Pall Mall Baseline, JPS and Longbeach. Value brands include Holiday, Pall Mall and Horizon. Mid-price brand includes Winfield. Premium brands include Benson & Hedges, Dunhill and Marlboro (Table 16).

PERCENTAGE OF SALE AVERAGE RETAIL SALE QUANTITY QUANTITY OF THREE TOBACCO COMPANY BRAND PRICE PER STICK (STICKS) IN 2013 COMPANIES COMBINED IN 2013 BATNZ FREEDOM $0.77 168,747,000 9.05% BATNZ PALL MALL BASELINE $0.78 294,543,000 15.80% ITNZ WEST $0.73 9,348,560 0.50% ITNZ JOHN BRANDON $0.76 52,688,290 2.83% ITNZ JPS $0.76 186,099,503 9.99% PMNZ GT $0.70 8,498,000 0.46% PMNZ LONGBEACH $0.71 48,721,000 2.61% BUDGET/ULTRA LOW-COST 768,645,353 41.24% BATNZ HOLIDAY $0.87 352,589,000 18.92% BATNZ PALL MALL $0.88 145,980,000 7.83% ITNZ SUPERKINGS $0.78 560 0.00% ITNZ HORIZON $0.79 107,783,355 5.78% VALUE 606,352,915 32.53% BATNZ WINFIELD $0.92 112,334,000 6.03% ITNZ PETER JACKSON $0.85 17,354,715 0.93% MID-PRICE 129,688,715 6.96% BATNZ BENSON & HEDGES $0.94 137,338,700 7.37% BATNZ DUNHILL $0.97 88,940,000 4.77% BATNZ LUCKY STRIKE $0.99 2,181,000 0.12% BATNZ KENT $0.99 561,000 0.03% BATNZ STATEEXPRESS 556 $1.00 222,000 0.01% BATNZ ROTHMANS $1.00 49,281,000 2.64% BATNZ VOGUE $1.16 1,196,000 0.06% 32

ASH NEW ZEALAND Tobacco Returns Analysis 2013 ITNZ CAMEL $0.89 1,977,400 0.11% ITNZ DAVIDOFF $0.93 942,760 0.05% PMNZ MARLBORO $0.90 76,443,000 4.10% PREMUM 359,082,860 19.27% TOTAL 1,863,769,843 100% Table 16 Average retail price per stick and estimation of company cigarette sale return were based on the value of recommended retail price provided by the tobacco companies. Date of recommended retail price for BATNZ was January 2014 (after tobacco tax increase in January 2014). For ITNZ and PMNZ, it was end of December 2013 (before tobacco tax increase in January 2014)

ASH NEW ZEALAND Tobacco Returns Analysis 2013 CHANGES IN SALE QUANTITY IN DIFFERENT PRICE SEGMENTS Table 17 and Figure 11 compare the changes in the sale quantity by price segments between 2009 and 2013, i.e., before and after the first round of tobacco excise tax in 2010. The sale quantity of the budget segment has rapidly increased from 8.5% in 2012 to 41.2% in 2013. Such an increase was due to the introduction of a new variant, Pall Mall Baseline of BATNZ and the increase in the sale quantity of other budget brands, in particular, JPS of ITNZ. The sale quantity of premium segment has dropped from 23.4% in 2009 to 19.3% in 2013 but the rate of change is relatively stable compared with other price segments.

2009 2012 2013

SALE QUANTITY PER CENT OF SALE QUANTITY PER CENT OF SALE QUANTITY PER CENT OF (STICKS) BY SALE QUANTITY (STICKS) BY SALE QUANTITY (STICKS) BY SALE QUANTITY SEGMENTS OF ALL THREE SEGMENTS OF ALL THREE SEGMENTS OF ALL THREE COMPANIES COMPANIES COMPANIES BUDGET/ULTRA LOW- 178,658,177 8.45% 754,467,960 38.00% COST BRAND 768,645,353 41.24% VALUE 1,221,152,580 57.77% 699,386,950 35.23% 606,352,915 32.53% MID-PRICE 219,699,000 10.39% 129,242,600 6.51% 129,688,715 6.96% PREMIUM 494,136,300 23.38% 402,194,730 20.26% 359,082,860 19.27% ALL THREE COMPANIES 2,113,646,057 1,985,292,240 1,863,769,843 Table 17

PER CENT OF SALE QUANTITY (THREE COMPANIES (%) COMBINED) BY PRICE SEGMENTS 100% 90% 23.38% 20.26% 19.27% 80% 6.51% 6.96% 70% 10.39% 60% 35.2% 32.5% 50% 40% 57.8% 30% 20% 38.0% 41.2% 10% 8.5% 0% 2009 2012 2013 YEAR BUDGET VALUE MID -PRICE PREMIUM

Figure 11 Percentage of sale quantity by price segments 2009, 2012 and 2013

ASH NEW ZEALAND Tobacco Returns Analysis 2013

1. Ernst & Young Limited. Out of the shadows: an independent report of New Zealand's illicit tobacco market, 2010.