T
JJ135 ANO DFV[LOPiVXfrM TIM TO"AC
M CO CONSU1.41"HOM
.i p:tl),ir inciiiiiies rrm,nt ir( ww ii, Iol,:,ct
o cow"impliem. Aflor i brief detctipti,.i. a the
vi,i
of ;.Igj their ur;,?:;, it jirocvcd:~ it) nuthile
thf, tI.A. tl;ivt- over it,,- Isold. flvf.a.. 11.
c(,!"0DTLjoil (if tiv, diffnivi.t tob;wco ;md
Hhows how Lt.,-. r1l:,111,cs beoll,
voo.im.-Minn of world Itibacco mtput. 'I he
cifeets of cit"ll of file ill-till factilri
inchielitA 1)j.. ( (sus'lilipt ival -
poTrilation, int-tisiws, prict:n, ta:JLv!3 1ICKILh
-on,i tvchno1o-,,y-- are then analyred and
thf., :mplivatiou.,; for the worhl'q fultirt:
tobacvo re (Vi ire mv tits arr, otiffluott in a
flual noutinn.
i 1. Types of Infiacco leaf
licaf tobacco comes in many different varlatics
rL-flut-Ung differciict,s, in Arain of plaitt,
cl!vL!r--"ty of .ojl.s
and Ofinates in which it is rrown, and variations
in harvostinj;, curing mid processing. inotlio(18.
Although it
IF. custornary to clAssity 1(.-al into seven broad
cntegwein~; -- flue-cured, light air-cured,
oriental, other light
Hu.. -C-urp-d, dark sun-cured, dark air-cured and
fire-clired - - it should N, emphasim'd that these
are by tin
1111.arts precise definitions and each group
covers a v1de rantle of type-, and grades which
cnMpV_tC Witt, CaCh
oth-r on the internationa't mai
-kets and between Which there ire very subtAwitial
price spread-
Basically, however, the first four categories of
leaf Wild to be used Plmost exclusively In the
production
of r1parettes, but a substantial proportion of the
remaining three it: used iv 4her products.
Flue-itred
tobacco'- the most important of all - ranger,
from- the highest quality. '.'Vi rginia leaf"
rrown in the United
States, which gives a distinctive taste and
flavour to many of the cigarvttes produced in a
large nunflier "~f
countries, to the much lower quality (and cheaper)
leaf grewn in some developing countries and used
mainly
as filler. Principally b,!cause of the accelerated
curing process, flue-cured leaf tends to havv a
higher
sugar, tar and nicotine content than do air-cured
or sun-exired categrories. Burley, the principal
light air-
cured tobacco, has excellent filling
characteristics and its capacity for aligurption
makes It Ideal for carrying
the flavouring compounds often added to blended
cigarettes. Maryland, the second largost variety
in this
category, is-low in nicotine and sugar and
possesses good burning characteristics... Oriental
leaf, a light sun-
cured type grmn principally in Mediterranean
emintries, Is light in weit!ht and low. in
nicotine; some variet)es
have a distinctive sweet aroma, others are
neutral. The leaf is used almost entirely in
cigarettes, as are the
other types of light sun-cured tobacco which are
grovil in tho southern and eastern parts of Asia
and in Latin
America. Dark sun-cured leaf, grown chiefly in
Asia, is smoked in pipes, including hookah (or
water)
pipes, or to made into cigars, cheap hand-made
cigarettes, such as bidis In India and kretek
cigarettes in
hidonesiat , or snuff. The more important dark
air-cured leaf is used In the production of all
kinds of cl-Larq;
especially in Latin America and parts of
south-east Asia. and in dark cigarettes, notably
in France, the
Soviet Union ani China. The main uses of fbe-cured
leaf, the -aiallest category of all, are in the
mating
of chewing and pipe tobaccos and snuff.
ff. Changes,in the cons:rpaption o4lobacco
Trends in -world tobacco leaf consumption have to
be deduced from production and stock figures as
comprehensive consumption data are lacking. In the
ten ye-ars 1962-71 world 't 'leaf pioduction Is
estimated
to bave increased at an average rate of 1.9 per
cent per annum, with most of the increase occuring
in the
-3 --itAypartafthepeyLod. Sinw stocks at the end
of the -perio(l were. lower than at the beantdor_
apd technical
developments resulted in a general reduction in
leaf wastage, it is probable that the average rate
ul grawth
in leaf consumption was higher than that for
production. The average rate of growth In the
world I output
n mft ei tobacco products over We Len, yeirib is
vistiandW at 2.4 1,,dr 1':ukXjjo,. wistusit.
A -Constv'mptlon of tobaccoproiticts miist also be
inferred from production data.- Estimates of
producti
4
of the different categories, a tobacco products in
the period 1962 -71 are given in the Appendix
(page 179)
trcm which the following tabulation has been
derived.
Paper prepared at the invitation of FAO by the
Trade and commodifica Division, Commonwealth
Secretariat, ri%d presented to the Ad hoe
Government Consultation on.Tobacco, Izznir,
Turkey., 5-10
-Novembor, 1%73,
t The hidi- tet -a,sinokimg pr oduct.made Im India
and.the, surrounding rewntries, by ralling spoc"y.
prepared tdbacco flakes in a piece. of wrapper
leaf from Utc Teadu tree. It Is between 50 and 100
Wm. long
and contains from 0. 23 to 0. 50 grammes of
tobacco. .Conical hi shape. it iii closad
completely -at the burning
end mid partly at tho raouth end aud is tied with
C(Aton thread. Tho'kretek cigarette is a strong
aromatic
product produced in Indonesia. TraditfolrallY it
Is lutud-maxle, wUh cigarette paper emea-.4ing
iobacco, -cloves'
and other flavouring additives, Including
vanillin, mesithol, cassia and sandalwood.
ExcludinflAslan centrally- planned econ0my
countries.
302057094
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V 1... 2' 5 No, I V NOVP-MIAPM
(pr, t, cent)
Ye-ar Economic 4.1.111.4 1-:,~-)nomir uins-;
III 1 71 111 World,
Michine- made OV,:irettr-s
112*3 411-4 IG-2 V-2
1971 86-2. 55-4 86-7 76-0 2-6 5-2 3-7 3-6
Machine-inade eigars/,zigarillos Machine-made
eig:~r./cigarillo3 -
1962 3.0 0.9 1.8 2,6
1-071 3-6 0-7 (1-9 2-7.
Cut 1,01.1cco and snuff Cut t"bacco and tiraiff
19 G", 13.8 53-7 22-0 28-2
1071 10-2 43-D 12-A 21-8 0-4 -3-C -D-4
All tobacco products All t,,bacco products
19112 100-0 100.0 ~ 100.0 -.100.0
1971 100-0 100.0 100-0. ..)00.0 2-2 2.h ~.2-4 2-4
A' I Class 1: derelopt-d marLet-economy countries;
Class 11- developing countries; Class III:
centrally
0 e:
planned economy coui,tries (except in Asia). t
Data based on linear trends calculated by Tnethod
of least
squares. Excludes China, North Korea and North
VicUwi. No clear trend shown.
"V
7 1
Since trade in tobacco products is relatively
small and stock changes minimal, the figures of
production
are a fairly reliable indication of consumption in
each of the three economic classes of countries as
well as
In the world as a whole. As the tabl,~ indicates,
there have been considerable differences between,
the
economic claEscs in the r-ates of Crowth of
produPtion/consumption.
Machine-made cigarettes are by far the most
froportant of the products in each of the three
economic
groups anc, their d-minstnee f!.creused Vetween
11962 aud 1971. In both Class I and Class M
countries they
accounted for more than 86 per cent of the total
ouput of tobacco products in 1971, although their
rate of
growth In the preceding decade was slowest in the
Class I group. The fastest growth occurred in the
Class 11
ointries where, however, rnachine-made Ogarettes
still accounted for little mort than half the
total output
c
of all tobacco prodacts in 1971. For the world as
a whole the average rate of increase in cigarette
production
during the ten years was 50 per cerit more than
that for all tobacco products.
-
relative importance of cigars and cigarillos
declined during the period. They comprise only a
minor
I The
P-A of total production evert In developed inarket
economy countries where their proportion of the
total vat-
FA -is 1149-her -Van-ili. Ot".. -r. - rr_-_Ct-A-
in -the deevej-_-4 SL-_L,-ed a sjhtaR!J-'j ik~p n
IM, probably as a result o.' coacern about the
heath hazards of cigarette smoking !olloving
publication of the
Unite&States Surgeoa-Geae=1!.s firat.report
SubsequenUy ~t remained at a ht her level than in
the earlier
'
ye-m.of the.d&-Ade but there was no further growth
In iriont of the class I counir
les. Productionshowed
litUe growth in the developing countries and In
the centrally planned econon tea it declined.
f:
The cut tob-,incc, cate."ry in an arnalgam which
includes smoking tobacco for pipes, hand-made
cigarettes and cigars, chewing tobacco and snuff.
During the 1962-71 period total
prMuetton/consumption
in this category declkned In both the Class I and
Class M countries, especially the latter, but it
is estimated
'
to have increased slightly In the
developing countries, reflecting a continued rise
in the demand for such
products as bidis In India and kretek cigprettes
In Indonesia. In the world as a vhole, however,
there was a
wn
slight do ward trend.
Most co%intries ift each of the economic class
groups ishowed trends In thefr
produetion/consumption
ms similar to those for the 1graip as R whole.,
although there were Important variations.
hlacjuae-wmade
4 a aiv:irly all-Iitgh Incarrm comtrir~n In 4ft
"to
Uai;ed Kingdom, Australia, Nov - Zealand, Ireland,
Japan, Italy and South Africa than, In Denmark, -
the
Benelux cauut-ries, Svedeh and Mtzerlknd, where
the number of cigars and elgaollossinoked is pro-
portlonatcly much greater than In the'other
countries of the group.,; 4raQking tobacco
complides a, higher
proportion of toUil cuitsumption than in oU%cr
countries In Norway (for c1garuttes) and In the
Notherlattds
and the Federal Republic of Germany (for pipes),
while souff to still of seine importance in Sweden
and
chewing tobacco in Norway.
W-W
Q
zulikv varied picto re emerges from t1w.doveloping
coantrics, where vlutt inight be
tormrd-,!'tnd)Ceao-.w"
-
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172
t teliU ill houl'."th p1jr-, 111adi ci%art. ond
chvrontn xv~w. r, F..,:r cc%.-,' t;f thc totid,
-Ind
'r Wall ill
which If; !~iglw alu."t lvvulw ii"o;f. ill the I
eat'!gory. 11) uiw~t "Hwi, (1-IMI"i'llif"
r,c,lintrivs. Iii A!;i;i , [a:lilt v-1 I' tit OW
.1 M11.11101 lll'(j,!nl.tlOll o" Mt.- tutal, tit b
... 1,
(if the raore indimtrialized onwi, 1.11( tilL.
11,;~Public of the proporlion W-on Niiarply. )it
It as 1b"
the c(insumptioi. of havd-loac". prodkict';
conliwivd Lo :--how vh-4,ng lov-0
Vh:Wt(AQM.R1Jc!;V MIC
populkrity t-f Litt: kr(!h~k ill lndonc.,J~,.
In U,tlit America the United "tates fillhwrw,~
11-is 1)(,.n rr'lich morp appar~.-ni mid its
rvvi!nt yvaj-i; mac.1da-
inade 0f,.-;.rett(:a have accouvited ro), around
f-ir-fiftliq or tit(., consumptifin Ilk the
inajr)r ennnoniinr counlritas,
such as Brazil, Mexico -art(] Arl,,entina. The
ljw;ition is 1-imr.1i less clear tit most of the
develop:.ng countrivs
of Africa (nouth of the Sahara and north Of WE
Z!Ltl)hCZi). In some of those Mth the )xr9cut
populations, slich
.as Zaire and Lthiopia, I" production is elthf:i
comparatively sinall or ne1rh[rilile, whilu nu
mi'miantin)
j)jjpf)lts (,f tobacco products vr(- re-corded,
alihnugh voligirierable unrevorded tranfiartions
prubahly ,eeur,
A tiinillat situ:.tion ey-ints In Ghtota. Ily
contr-r-ft cerhiin littler cotintries tit the same
domestic leaf supply
perhaps. tho foremost example. In
sibiation record faiii-, large imporW u[
c1j;ar(_ttcs, the Sudan heing
Nigeria - thu most pupuluti6 A16--ii comitry - i~;
qiiilc :-,ubstantial and in rcrrnt ynnrci the
domestic manufacture of cigarettc!3 lias ewpandt-A
greatly and imports have devIiacd to very sinall
amotintu. I
The smoking of machine-made cigarettes dominates
tobacco consumption in c"tern Europe, where up-
ward trends have been apparent In almost all
countries. In several of thein cight-titti;
cutismijiMuit has bz:el,
appreciably more buoyant than production-, there
Is an cxception tit the case of Bul_oaria which,
in accordance
with a CONECON plan has developed facilities for
supplying fellow members and has now overtaken the
United States as the world's foremost exporter of
cigarettes. The type of cigareites smoked in
eastern
Europe has tended to change from plain dark or
orletital varieties to blended types Incorporating
flue-cured
leaf, while the filter-tipped proportion, although
still inuch lower than in western'Europe, has
risen quite
considerably in recent years. Another inarked
feature is the decline in populnrity of the
pipirost type of
ctgarette* in the-Soviet Union, which now
accouiLts for less than.half the total cigarettes
smoked in that
country. Consumption of cigars and etgarillos is
declining but Is exceptionally high in the German
Democratic Republic where it still accounts jor
around a fifth of that country's total despite
falls in rment
years, Consumption of cut tobacco in the group has
fallen rapidly with Lite waning popularity of pipe
smoking and of chewing.
The different trends in the production of the
various tobacco products is reflected in the
chaugIng
composition of world tobacco leaf output as -shown
in the following tabulation:
Production of leaf ljy vRrteVj*,
Other Dark Dark
Total Flue- Ught rire-
j I ed Oriental lightsun- euwL air- cured Total
.prqduction cured air-cur
..,cured cured vred
(Umusand per
metric tons
71
Late, 1,93(s 21, M Is 5 100
2,400, M
Early 1950s .2i'100 -13 -5 11 23' 3 100...
31 14
Early IWOs 3,100 '38 10 15 4 11 20, 2 100
Early 1970s, 3.800 ...35 12 20 4 10 IP - 1 100
EsUmaWd worldtotal,'lexcluding Asian centrally
plaruipti economy' courltriis.' %
The outstanding features of the table are the
large increases In the proportion of total
production accounted
for by nue-cured tobacco betweem the late thirties
and -the early sixties. and by oriental leaf
between the . .....
early filliwi and Llw caily iXVcuUC!:;
conver"rl"', t"re ~Tnv n -s 0"M". I"
dark snn-~curvd leaf in the early- part of the
thirty ypar period and-ofdark alr-cured leaf
thraugboat_ During'
the sixties ae a whole,. 'the proportion- of flue
-cured leaf In Wtal production declined somowhat,
wberms.
that of light air-cured leaf (predominantly burtq)
rklade a partial recovery.
it is difficult to asuign pr&ise reasons for these
movements but for two of the-categories they would
seem to be largely due to, developments In the
United States. 'The Wit td-up, In. United States
stocks of flue-
extred leaf during the early six0es led to the
enacltment of the 1965 acreage-potuid-age controls
and a sub-
nequent decrease in Me Qutpi.IA of that type of
leat. Restraints a-% flue-cured p~oductlon werr
followed by
302057096
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in the prMortlun nf tit(, orlental. vfirioty
duritir, tho al)'Ait-H prlitril,;illy )-ellvcWd
int'reatiou crat-,;iti iii ~11 I.:,:..
sind Turl.-~y which wa:; fla! ren,dt or
vylo-t-Lattrill.; by if if I 1,v bicit-ittit, lit
cxposlft to Lhu EEC
than WAH 1,Lt%1;LllV I VdiriVtl.
Dvcallne or hiffint"1111:1) Fdory movollp.-I&I It
it] liki )y that vonrumption 1rvr;+t durinr ino-A
(if Vw
differed lit sonic respvct% frorn trvlld~i h, Thc
tacreanit'g inillortay've of jl,v 'M11.11111. (A
11,1,t
cil-prettes, whether or We bVnded Anif-rican and
(;crin:m typefi cr of we plain ;iuc-curud
l5rltl!;h typ,-, Ws
nicant that the proportion (if flue-exim-d leaf
constim(d hat. :dinw;t certalvily c(a,.inttvd to
risc, aq prolmbly
has Lhat ot lmrlcy. Decreasitip, demand for pure
orlmital vigarc-Ws tn,,~ellwr wil.h all increwie
forblerided
tyllen contailthil, that Variety of lc'.Lr illay
have illealit MA the relative inillortance of
oriental leaf in criii
ausurstiolt lWa Clianged For tht, (Alw). h,lWvVrr,
the world demaud [or da r k
in the pr&,-l--tlnn
cigarettes, cigam. and vir-trillon and for pipe
and ch(.-vjmj-. tutiauco haa IQLI W U ClQAL
IILOINC:
of consumption acctAint,A for by thone types,
Ill. Faclors influoicing thr conrunif-lion
oflo!,arrri
Taal consumption of tobacco products tendS to b0
hifrheSt in LIC Most P(jPUlOU8 The forerriost
consuming rountry is almost certainly China,
followed by tho Unhed States, the Soviut Unicia,
India, Japan,
the Federal Republic of Gcrrnauy, the Fritted
Kitirdom, Bra7ll, Frsnve, Pakistan and Italy. When
ranked
according to coubuniptiou livi. adulV thL C11'dQr
of countrics !s st-,nifienntly diff~-rtmt, nisd
generally Wiows a.
high correlation with Income. Consumption per
mlult is highest In North America (4.2 Vg. in (lie
Unit'A
States in 1970 and 4,4 kg in Canada) and in sonic
Wt;~ t European countries (4. 0 kg. in the
Netherlands and
3.8 kg, lit Treland) and lov?cst In tho-se nf the
less developed-countrics with very low incomes
(0.7 kg. in
India, for example)TI . There has been
comparatively little change in conqumrAion per
adult in recent V.Ar6
have tended to be fairly closely related to those
in the
so that rates of growth in aggregate consumption
adult population.
Rates of growth in population have been highest in
the developing countries and loweE;t in the
devcloped
market economy countri eb. In the -ten years
1962-71 the world population grew on average by 2.
0 per c cat
annually, and It Is Hkely that the number of
tobacco consumers rose at least as fast. Although
the pro-
portion of smokers In the pollulation way have
declined in some developed countries, chlefty as a
result of
the prominence given to the health risks of
smoking, there are a number of offsetting factors.
Thesc irclude,
increases in the number of female qmokers in
various parts of the world and an increase in the
proportion
of adults in the populations of som"ountries due
to declines in adult death rates.
r41 In certain high Income countries, such as
theUnited States and the United Kingdom, the
weight of tobacco
consumed ver adult appears to have passed its peak
and has declined tit recent years. Tit the United
States a
maximum of 5.0 Irg. was rer-orded in 1963 and by
1972 this.had dropped to 4.3 lcg..; moreover - and
this is
probably unique - the actual number of cigarettes
smoked per adult also decline 'd In this period,
from 3,930
to 3, 59D annually. In the United Kingdom total
consumption per adult reached a.maximum in 1946
(3. 1 kg )
but-has since followed-a. downward trend which
reached its lowest point of 2.5 kg. in 1971; an
unusually large
fall in that year was probably Influenced by a
medical report on smokingi and there'was a slight
recovery in
1972. In part these declines were associated with
economies in the use of leaf - in the United
Kingdom, for
instance, the number of~cigarettes smoked per
adult romainedon an upward trend, the 1979 level
of 3,200,
being 23 &r cent above that of 1946.
The el-fectg on telk-a ...... tion.of. theyarlous
factors which_influenee consumption per adult are
exiintned-in. the following sectio G.
4 i
(1) Income ;,,. ! ; . '' . . . "
J_
positive correlation exists iwtveen the level of
personal disposable in-come per head and tobacco
cinsumption. Among the more populous countries, as
noted -9bove, tobacco consumption per adult is
Mghest
bi North-Ainerica, as is per'caput income Tfie
relationship is not always a stmple,-olie,
however, owieg Lo
& the effects on consumption of relative price
levels and of consumer preferences. In
Scajidinavla per caput
16
income is slightly higher In Sweden than in
Denmark, but Swedish tobacco consumption per adult
is little
more than half the Danish. Wel (2. 0 kg. tLnid 3.6
1,g - respectively). Similar divergencies e3dst
among low.
Irtcome countries, consumption per adult tending
to be particularly heavy in relation to income in
those
areao wiwre the product is readily davailable,
where its real price to low and where its
utilization involves
little -or no foreign excliatige cost. One example
is Malawi, where per caput income Is low6r
than'the
Wrican average, but-toUacr-a conslumptioij
peradt~lt Is three times the African- average.
e level of real personal disposable income per
head have some effect on Me tota
Chan-ges In th I
of consumers but probably their effect is much
more apparent on the level of consunipik'm per
head and. on
the form in. which the tabacecr is. consumed. The
income elasticity of demand for toln, cco products
as a whole
to a1m6st always positive, tending to vary
inversely With the level of Income, although at
certain levels it.
may become nogntivo for particular products, such
as haudTMled clorcites.
A'.
uust_ Luke, fttk tl~ie --- -
41. on
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:174 NCIVEMPElt 1073
lt,V,!l j,j Wi,jell it illi ill j110,101, )WIV t.
a I'l.1k., l" c(DIINIIJI'llill", If a
paytic0ar i,,N'wro prod,ict o, t.,;% chang', ill
t1je quftlity Or typ'. .1 pr,4101-1
I'(11IS11111VII, M' i!
abt tA", d
:Al Ilt (1": 1. leu ill illcoll", hiM, 1IM-1.
M.401-hit"d Will,
tgarcttr! constimption Init It) a considerolAw-
c%tent thi.': rL*l)l-es(:IIts it sul).,;taution of
iii;tchi iiu- madt- for lj;t
rollcd dgart,lh-s- 110., period, Ili,-- (limnlity
Of )e-,If m;e,l ill 11.11ld--l-olled wi it
pe,,Portl ... I uf
the loWl -,'ed In all llas falicl. fl.,)Il, Rj,out
40 to 10 per cei,t III A-. tralia, 14,W Z,:ahtild,
-y where the
W_ and lreland, ano to sonkt: G 1-;(-r cent ill
the United Kinrdoln; Norway W thc 0hY CiVvelOPUll
M U
joind-rolled prMuct still for ;4 sillifitalltial
proportion 'or the inial leaf uned ill cigarettes
(around M)
Cc ,t 1,y i*(:c, cnt yearn), :, I V a.ui,h cv(.j.
I : tl.c, 1) ,(,I,o rti,-I , I r; fall I 11f... 1,
1 L,~'ia, (1L1 I I Ili,. t " c pn --t dcl.;.". r
the quantity of leaf constuacd in machine-made
eirarettes rose by jilore than half, whereas
that'used in :-!iti
was un,hanged and conHumpti-m of hookah t4kiricen
fell by a third. In tht! liaited Kingdom, at
least, risil!:-,
Incom e8 appear to have bevit asriociated with
increa,Ld consmilption of eigirs and cigarillos
durin-~ thc,
filxtic!i; the Weight of ill(., leaf usLj Ili
(Igist,- lil-tAluctij lijore tllui trcluled E)vci
the puri(xI w6cru'ws t.ial
cwawaptiuil fell by over 10 1,-.--r cwit.
Tobacco cor istim ption per head is influenced by
ci Iang" in the pri ce of It bacco pi'o du vis 10
collS ill Ile I's"
and also by changcs made by manul..cturers in the
tobacco content of products In in attempt to
contain.
rising costs resulting from increases in the price
of lenf and in processing costs.
Changes in the price of tobacco products obviously
hue some effect on consumption, but at most price
levels it usually has not been particularly
inarked, at least in the long terin, and consumiur
demand is
believed to be relatively price Inelastic.
Available'evidence suggests that iti high-tricome
countries the
elasticity of demand is only about -0. 5, i.e. a
rise of 1 per cent in the real price of tobacco
product;';
price
teods to result in an opposite move of 0. 5 per
cent in consurner demand. Tt is probable, however,
that
elasticity tends to increase with the size of
price changes and manufacturers in general have
beeu concerned
with cost saving innovations of various kinds in
order to contain the magnitude of retail price
Increases.
The price of tobacco products to consumers varies
substantially from one country to another but
within.
any country price changes for a particular type of
product tend to be relatively infrequent and to
reflect
secular movements In mitwifacturcral costs and
also in fiscal charges which are by far the most
important.
ation of retail prices in most countries. The
remainder of this' ction to devoted
rc
element in the determia.
to an examination of the influence of changes in
manufacturers' costs andI fiscal charges oil
tlic.pri.c .es and
consumption of tobacco and tobacco products.
m6 miact-'rer's", co'st~ -iA -:4- 1
_4
Costs of tobacco leaf are only one itern of
manufacturers' costs., Processing and marketing
costs are
equally important and can vary significantly from
one market or product to another, but these
factors P-re
outside the scope of this paper.
:-The price of leaf tobacco, with Its multiplicity
of grades and varieties, varies enormously, top
quality
et gar wrapper leaf being up to some fifty times
more expensive than some low grade leaf for other
forms of
consumption. The costs of tobacco leaf to
manufacturers (excluding fiscal charges) are
determined by th~.
-a-4 tL-e degree, Nuo bzt~_-,c= h -=d =Rcrz, by
the quallty~.sf the-
its production costs.
Aft~ Because of. the heterogeneity at Ahe product-
-ceneralisations an leal..larice. trends c4a he
auisleading,-but-_
In recent years there has been a clear upvArd
trend Ili the price of-Ulialted .54-tes tobacco,
reflecting a decrease
in supplies, improvements in quality and increased
government price support levcls. Other countries
have
experienced considerable fluctuatidfiS in tobacco
I)ricea. Sometimes these have been due to chaAges
In the
prices of Canadian flue-cured and Greek oriental
IeRf, for Instancei recovered considerably
SaWly situation
in 1972, following a fall in production due to the
effect in the first case of frost damage and In
the second of'
labour shortages; at other times they have been
due to changes in ccanpetitive conditions, as in
the case of
the fail in -prices for Greek burley exported to
the EEC arising from the effects of the common
agricultural
policy. In developing countries,. ispeclilly,
variations tfi the quality of the le2d from one
season to, another
bave had important eff"ts on price. Nevertliele3s,
fluctuations in prices of "acco have been less
than
those, In the prices of many other agricultural
commodities.
10 _.TobaczogrowU*-4s_stiU IaNxt,fntenaive-und
evea.in the UnitedStates tho devokopmentef
~meohwazatlon
~1 _ hasbcon-slow, With laboiwaftortage.- umcas_
have risen facter. than productivity and havc had
u marked
effect on costs. American support pri -linked with
production costs, act a floor to auction
values and therefore Und to raise export pfices;
the Lattur could Me even further after 1976 whe4-
an export
subsidy, which has been In vogue for a number Of
years, will no longer be payable.- High and rising
American prices have.affected the competitive
Position of American tobacc(F,~Ymt so much of the
highest
qualities but of the lower-grades, which lulve to
coMpete with cheaper supplies from developing
countries.'
T'his competition has provided a strong Incentive
~or cast savitW, Innovations by American grawers,
including
the Increasod use of difitAme resistant VArnins of
lea, improved oultivatiqn and growhW, methodst,
ipiuwhanjyv4
302057098
BATCo document for Province of BritiSh Columbia 19
April 1999


~11
_t~
;k
tit
P1 miuitern rather Mart. wr-ight MW t4eruhyre.
vontiumplion 'd hil'11 villativy
alily maller In Frvn~:,_ 1-i the -11,t ~,,tyid,
ill(- duti,:N ltitvu
1-. ot .m no vib.rvni iinhirc, ol, % 33 prr v, at
VAT) atid i' ort,-.WA - '~ .4 tht, raw I-A
therefore ba~4 a Very LIa- r,-Liii of It -60-0 pr-
-1 . Vi-viv;h
mus tend t" a relatiVely proportion ill It)w,--r
ftinlity, lt~ It,,-; othor L
fnur origival inewhert; flo; 1,m'.We Libuebire un
clgamlitm in much nimi, . t1w Vrmict, a tlw
Gviw.vi
position. Fle ciparu awl Smoking toliact-ti flit,
til.r"etwire it caf;h of thf., is heavil, -olghted
th,!
aj valorew clement.
Tilt: ra(IT, between the spevific and ad valorem
compnoffiAs of tnxeb 1.7~ lobacco has a,,
iatportant
eilect on 1.1ii- Lype of prrA-,r:L comiumed. Cont
consideratfinth lileall t11:11. L-.': increasc -.
the ratiii of tit#-- ad
vilorvin to the spoclific with an bicmill- 11~
minliri-- of
high tiualit; . leaf: moreover, the hirtier the
ratio, the jrrvattr the lncciit.-:-,~. in the
Kinj~don., the
introdiirtirr, of an ad vakomin cleint-ral (VAT)
Jitto wNA lkad lieva an specific 5ystem la~,
aircady
remilted in scome (inarginal) price cbangvs for
products. Future t!.,~ "proteeliv(: (A-,nimit"
of the United Kingdom tariff with the cominon
customs tariff and of t1w --rictures Rr,; !;Acs.
of the
or revenue &ty within tt-e enlarred C0ln)1)t1'1itV
HI)OUld M.O.L 131~lthqh t0-_- cm maniffar- --rs
re);tlI%,,Ay ii,uch
morv sensitive to the m-it rosts of leaf and
comparatively much less crin-rilvd than Jr khvrlo
wlih it,,:
possibilitic.s of aavlng5 I.,) he effected in the
quantity of leaf used per ui,., ol, product
i-entfachirud.
This wtqle process ur harnionizatinn is considered
in documunt '=W% TO 73/2 -1'he enn-minr
-~rimiltural
policy of the EEC in the field of tubacco". Here
it is sufficient to say the final 1,~d.Lnce of the
L-.f.Joe duty
will (presumably) be determined somewhere about
the mean of the exif~tli-; positions ;n member
cryuntries.
Harmonization of VAT nales is ;A related inatter
with rdriWar conspquere-". AlthouO. these
lutr=nlzatinn
flect on consumption in Lritlaa beLore 1978,
eventually it is
me.i.sures are unlikely to have any significant e
likel)? that the cost incentive to manufacLure
cigareLtes blended from a variety of leaf types,
lincludifti; those
produced within the Community, will result in the
British type of cigamlte, manufaerired enUrely
from flue-
cured leaf and often containing comparatively
little tobacco, sharing thc- market with i
king-sized produce
blended from flue-cured and other leaf types,
-including burley. Repc:al of the present
legislation banning the
use-of additives In cigarettes manufactured in
Britain (which is possMe ill view of rwaves
towards legal
harmonization) would of course make such a
transformation the more M-mly.
(31 consinrer,41preferences
The third major factor influencing the per caput
demand for tobaccs, and the kinds of product
consumed,
is taste. This In turn is affected by such factors
as the.degree of persuasion exerted by
matulfa-ebwers
through the level and effectiveness of their
advertising expenditures, the attitudes c,!
governmelaLs, and the
lands of society lit which the consumors live, for
example the extent to -Atdch they.are _,ader
:;,resb or
mental pressurc, or undertake boring repetitive
Wks to earn their livLng. In rece:J years.
however, an
Increasingly important taste factor
influencing.the consumption of toba~~co products
in several countries
has been the recogniticyn of an appRrently
important connection bEtween smoking and health..
The health faclor
7 A possible relatlo4shlpbetween smoking and.
health has been undpir investigatien in a.few
countries- for
a generation or more, and in recent years public
health authorities in a number of industrialized
cou'utries
have taken measures villich they hoped would
reduce or at least stabilize the amouzt of
smoking. This h"-
placed goveramen in something of a dilewma owing
to the large amsarats of reves-m raised by fiscal
ctarges
Aft. on tobacco, but both they and the tobacco
companies have sponsored rt:;s.~arch sWid-l" whose
sim has been:to
1 W =Jw3 c=jnnZeqiri"ihqtRWef; in tobacco-smiLe,
to~e1ji-ili~-u-ate Vwm As far as y9ssible and thus
hopefully toreOuce any h4rmful effecth of smoking.
i. -Public concern over a possible healUx hazard
in sineking- has Increased. In recent years,
following reports
by the-RoyalCotlege of Physicians in the United
Ktn,,dom in 1962 nne !971 and by the Surgeon
General-in. the.
United States In 1964, 1967, 1968 and 1069. These
presented a greit 4,~Al 'of stattst"X.21 and
mediell evidence
on the relationship between smoking and serious
ailments such as Iunz- cancer and !~vnirt disease.
They
casxires In-ft-number
provoked widespread pulft. discussion and were
Instrumental In leadir.Z'to.'kov~erw.Q-tt
im
.
,
Of co.Wries aimed at reducing the Incidence. of
smoking,
Such measms have ine luded the banning of smofdng
in certain public plaeos,- such as cinemas in
-goverall..
EEC countries and in underground trains in Paris,-
New York and Moscow; the publication of health
warniags,
from ING In the United States 11PInd-with
sLron-ner and Wore explicit,wording from
-
-
the U&l_LWd'T,-W&4o1u-, -Alirit 1072-In 1472'in
Jams: tile-
November 1970), mid-1971
in
IncorMtration of health warnthga in cigarette
advertisements, libm the mttkrunof 19rt I in the
United Kingdoni
and frorn March IM In the United States (although
five of the air, maier n~vjq*avlnreps had carried
voluiftry
'
'
warnings in their promotional attTial
from.mid-1071)
and the rest n
ictlon or banattli; of cigntrette advvrti
M sing
On varlittiss medla; on television in the United
Kingdom -since 1965, to Canada-ijince 10,70 and In
Lite United States.
-
since 1971' on all *utlets ill Italy 3M Yugonlaftt
and,on ;.t n%imber of thent -in-scandinavia.
TWe pumcaMon. of the ipedical reporfs also
sUmulated the use of public funds lor anti-smoking
pro-
ivb, und allAtough th1whas so ittir Wen winute
conipatred 'Alth industry pronmAtoet, mlch a
cooWarism,
302057099
BATCO document for Province of British Columbia 19
April 1999


~li
4
e.
Ilualth Organinati(,ii t.4 the pul,lkt!atjon of
data ii6owing the llwr"-isicothic cotitii-it of of
Mrartlttv. In the Ibith,d nn0i d-,it:t h,-, W-rn
invorpfiratt-0 111LO hy innillifnetitl~-irs
f1 w:,, 1116B, 11,.~ Vo-iilr:d 'I l;l.1V
VnllIT,J,:r1P,n fir,:t r, ::iiltr: of If-, .&, r
t1 w ftdlowil.r Ill C.11146" Vv~.,War llillent
ill)- '-jl"a
has twell av.0hdiv. for severol Y(Arll Ill BMW:
ilhor coui,trier. ine1whill,, tho r,f Gornifiny
;.i,,l
Sweden, Wherv thi-11. filfluelic(m li.in. buci)
parlicidarly njarkvd, and laijan, wlitert! Llic
;jic,ljoptily fjl~.j
releafied detullu i,, 1969 and utalt(A tu
plibitrill rel-tilar and compreliew4vu lindinfrf;
I r(iin /%I,iil 19'11 . In tt,,:
Unlied Kitirdorn thf; firq unoffiCi41 fijlur~,s
were inade avallabl". by I collsulners,
allHociAi",- ill sppt,~ I'll'! - r
197i; the firnt offiLlal sLatiotic- (and
acc(i,iqj;ktiyinl; rect ill lilwill." ti olw)
w,~rv tn,~,icd ill April 11-73. Thu
publication of dat., on "tar"- nicUine content of
cij,,arctL,;.-;, wiLl, it.'; implication that it
I:; s:0-I r to tilljoke a low
114qr-Meotim- Wd- in -niOdsirrililt- swilt-hinir
(if lirocids towl-r-4m U.'. -vi-i"I
such chatiges weip often of rel.,tively short
duration. "Even so, the averwrt, "Car" yield of
;~il cil'a'CUL-1 ha!;
fallen substantially ill recent ycarq - by nearly
a third in the 11nifed Y trqdom since thv
example.
The short term affects of these ruports on smoking
and the related actions taken by th~, aut.horities
h~ivc
twelve mirintAily periotW foliowing the
publication (it .,w bm~ British
been quite considerable. In earh of th,
reports the nurrib-r of elgnrett,~,i smoked in
that country fell ljy ro per cent (alLbliugh cigar
and pip stilohim'-
received a I>oo,,L,'-. in the United States the
1964 rcport wan foll:)wcd by a 2 per rent fnll in
mimber of
cigarct.tz-o sniol:c', that year (I r-cr cent pcr
ndiilt) %,.,hllc% th,~, n,%rp)rniC1nt:iry- rtrrrtn
of I I.W.7 1:9 led to -1 fh!] in
the total number (if cigarettes E;mukcd in tw,,
(if the years, and ill cunsuniptioti per ; Ju)l.
III adi Lhroo. The
effects of the 19G4 American report were also fc1t
in othcr countries, including Canada, hif-yico,
Brazil,
Iceland, Ireland, France, the Netherlands,
Scandinavia and the United Kingdom, all of which
reported a
decrease tit cigarette smoking that year..
The longer-term effects hive been less obvious but
the rate of growth in the number of cigrtreR-"
sm&ked
er adult has fallen in the Federal Republic of
Germany and Sweden and a decline was evident in
sonic years
RR the United States (1964, 1967-69, and 1971) and
the United Kingdom (1962, 1964-65 and 1971). These
declines can be the result of a fall either In the
number of cigarettes smoked per smoker, or in the
number of
smokers, or both. It is probable that the last of
the three alternatives Is the most usual. There is
little
accurate data to substantiate. such a conclusion,.
but It is of some significance to note that in the
'United
Kingdom, where a wealth of statistical evidence
has been gathered by the Tobacco research
Council*, the
proportion of smokers in the adult male population
fell from 71.9 to 64.6 per cent between 1961 and
1971 while
the proportion in the adult fernale population
fell from 43.7 to 412.3 per -cent. In the same
puriod Me pro-
portion of male ex-swokers row from 14.2 to 17.2
per cent and of fem4le ex-smokers frora 6. 9 to
11.2 per
cent. Men clairning, never to htve-smoked: rose
from 13.9 to 18.3 per ceTrt of the adult mille
population; it
should be noted, however, that the opposite was
the case for women, the proportion clatwiug never
to have
smoked being lower in 1971 than In M (46.5 and
40.4 per zent rcspcztively).
The health factor has also had important effects
on the type of cigarettes smoked and on the
characteristics
of the leal used. It lias.becojn~- fairly
generally accepted that the filter-tipped variety
is safer than the
um-Upped variety and in cons,--quence there has
been a marked trend towards filter-tipped
cigarettes. In 1961
these accounted for only 20 per cent of the total
consumed in the United Kingdom but by 1971 the
proportion
had risen to 79 per cent; corresponding increases
in other important consuming countries were United
States-
53 to 82 pe~,' - cent, Canada 54 to 87 per cent,
the Federal RepubUc of Germany 73 to 85 per cent,
Australia
65 to 94 per ce!it, New Zealand 43 to 88 per cent
and Japan 7 t3 93 per cent. The trend was not so
marked
in some other emantries; in 1971 the filter-tipped
proportion in both France and the Netherlands was
no
higher thin 40 per cent. In most less developed
countries, espeetally outside Win America 11 it Is
very
uch lower still,, 8 pqr corLkia India for
example,,but even this is very. jn~uch.Wgher ti an
the 4 per ~;qpt of kep,.
.4
ars earli er . As noted above, the. savings made
possi ble- i n. i he use, of ~tobicco in c
igarettes was anothe r
factor whic h eacou raged th e use of filter-tips.
eigtrettes-bas~41e,cLts::i,n",s,ev'er.,Lt
The search for 'safer'
directions. At the leaf growir_- L-tage the'
development of sfralus and varieties low in "tar"
and nicotine hAs been encouraged bythe strict
sliectfications
laid down by niost biu yers, and in severn),
countric s reseArch is being undertaken in order
to lower the 'It-tr"
and filcoune content or leaf that is presently
growal. In'Can' adai. for exaniple,
the.Agrijetiltural Resewmh
Station at Delhi, Ontario, has a programme to
Investigate the bulk harvesting and curing wetbqds
necessary.,,,,
to produce bGmo,,cniz6d sheet low An "tar" and
niwttric'but of sufficlv~tjy high quaWy.UqtUp to
some 30 per
cent may. be used in -cigarette manufacture,
A& the, manufacturing stage the- development e(
'new aniokiRg materials' b" been intensified. In
the
biilo -"ew
reportedly containing no 'Ur".or nicotine, which
could be brought into full scale produ~~o. within
a short
time. In. the United.Ktnadoip. severRI mWr
companies ha" Filso bwa working an a
coUtilose-based mat~riaa-
obtained [rQni sue h sources as ~-ucalyptus,
wattle bark and wuod pulp. Durlogthe course of
this year two
coinpanAe4, .are se .het~uled to test market a
cigarette coutaining between 20 a6d 50 per, cent
of the now Smoking
niaieriall. iu ordur to. aseertain its consumer
acceptability. Meanwhile the 8tanding'Sclentitic
I~Wson
C"mittee, a Imidy set up jointly by the United
Kingdoin Government and industry,, in giving
active consider-
ationto the testing of these new pr6ducts In order
to evaluate their mcdlW.bafety.
Providednoo4joctions
are raised by tlic Committee, output of the now
smoking inaterial couid be ralwd to I tona by
1915,
Sir =--tr , --- ---_91
302057100
BATCo document for Province of BritiSh Columbia 19
April 1999


4'
_A
IV_.2:1W-u11O01- /Or lobac, 0 t1v,,!.tfmp1k4,.
Tit(! 0,-v MIAY1';i .. ....
nr.- I,-,t vol , h-.V, (.I JACLO11; :;- wl
Vb.in;-, ;;1,litII.ILiUtI:; ...d
will trild to encoul'.11,C; Culitilluod ill
Nk'orld constimpLiolt ;t,IJ u[ cJI,;JJ(,ttC-!;
wilil., ollo.-th, Ilk-, Ow Inten~1171r:.lJoll or
:116. and 11 for will t!-Ild t(,
rPqtrWt it ICA.St III NOIJIC! VillintriCt'.
Thi- TJniti-d Nations has proi(wti.1 nn ffirrease.
of 2.1 ))( I ut-nt onowtiv, in world liq)-olatilin
Judry!,. till,
Seventies wills separate increao,~-l of I , 0 per
cent, 2.7 Ixr cent, and 1 .7 -r evnt for 1, It
;lhd M
countries rf;.spectively . Till- rtllvs for the
vnw]d and tile c1".,;:; 11 CuuJILl iL.6 Ar,~
.,4r,M 0. 1 of -.1
p,ont Phw- !nrrvrpnndf,-;. lates )CII, ille SWUM,
whi1c. for ft". "lliel. two classv~-. are about
0.1
of it pvreentaic point below,
On a world ba.9iq.. consuiners' real expeuditure
per caput is projecV4 to rl8v at zn averarre rate
of 3.a
per cent annually between 1970 and 19RO, 0. 2 of a
pcrconta,~(% point than duriticr the sixties. The
anniml rate for developed marked crnnnmy emmirirs
Ir, pr4Jj~.LtLA aL 4. 1 pet- eent and that fur
tiLveloping
countries at 2.4 per ~-ent, in carl; case 0.4 of I
point abovo that ill the prr-viotts decao,!. For
centrally
planned eronon,les t1,,, prrjcrL(,(l annual
Ii.t-rema- is 3.7 per cetAt, 1.6 pt-r -10 In Asia
and 4. 9 per ci.~ot it) th'..
Soviet Union and eastern Eurioivv; the mte
projected for the first of OPP,- !'InRn ITT r~u'j
froups W ~il;tihcaiffly
highcr than durial; thc IOG5-7U period whcrei:;
that tit [fie. sccund 1.3 noticea!,ly lower
Inflationary influences will continuo to affect
"i-noney" prices of tobacco leaf and tobacco
products but
with continued emphasis on cost saving in both
leaf prodtirttrin and-manuf..-_turikIJ-., th"C
allixuars to he 110
reason to cxi)ecL any major increases In
"rcal"-prices. While fiscal chnr;;(_,s, which are
the inair iat'luanec
on prices on tobacco producis, will probably
undergo some chiinges, esp(rially I n the EFC,
these are likely
to be in the structure of tile charges rather than
in their overall level.
-If tobacco producers were to take hecount only
Iof expectations about pqmlations, iw'onies -E.U)d
prices,
they could eWct.a steadily rising demand for their
products. Probably thi, rreatest rise would be
expected
in developing countries, becauso of their lavge
and rapidly increasing aggre.-~ate population, nnd
the tendency
for their tobacco consumption per head, though
lower than in other countries, to be more
re:;poilsive to rises
in income. On the basis of these factors, tile
rise in con6umption over th-L next decade could bq
expected
to be at least as great as in the previous one and
possibly a little higher. However, it is also
neces-tary for
producers to take account of other factors that
have,been, rnentioned,. principally the Imblicity
about Cic health-
aspects of smoldng, and cost saving innovations.by
manufacturers.
The study of the relationship between sinoking
-and health and the propagstion'of infoirnation
about it his
become Institutionalised and could well be more
widespread Pnd- effective the future.' ru.--;iblc!
effects of'this
are a reduction In tile number of smokers and in
consumptioti of tobacco prcducts per *lead or'a
switch to -
products considered to be less dangerous to health
than others. It is almost certalin to leatil to a
general effort
among tobacco growers to, reduce the
"tar"-nicothic content ofthekr leaf andwdld
resultinsome replacelitent offlue-
cured_tobacco by )Jght air-cured and, oriental
varieties and of tobacco In general by man-mado,
substitutes.
-As far as manufacturers are concerned there are
limits to the extent to which they can carry such
cost
savin
_g practices as reducing the- tobacco content of
cigarettes -.uld Vic use of chealper varieties of
leaf in
bleads, and these limits may have virtually been
reached in some countries, notably the United
States and
the UnitM Kingl;Jom. There would still, however,
seem io be avenues for saving by the greater use
cki home-
genized sheet tobacco and freeze-dried leaf
as-well as of tobacco substitates. The use of
substitutes will
be affected by their Tblative costs at, well as
their acceptability to consumers,
but.roanu$acturers iWil -
undorubtedly be influenced in their use of L~ aid
V_Xiept to whith tticir products are
_jcqujred, either by public dcmaxid orby
regulatioa, to mcet specified licalth standards.
Producers in developlug countries have been able
to increase their ex1mirts of tobncTo leaf in
rece.nI..,
years because of their ability to supply
relatively clwap leaf, 4wltpble for Mending, to
ninuidw-turers iii
dpveloped countries. Their.ability to make such
exports in the future will be influenced by th~
eXteat to
vetitch they can provide lear that macts
consuators' requirements, tncludln6
~ acceptable levels of content of
"tat" and nicotine aiiii of residues such as DDT
or 71)E, at prices competitive-vAth thow
of.suppucrs in
developed countries. Anyr6duction of Import duties
as ~ result of the forthcoming inunilatbral trade
negotiations or other aseasures to case market
access should also assist developing exporters.
rottintry
Oa the other h3nd, they might risk losIng some of
their markets..to producers of homogenized tobacco
Allect
and new -smoking -materials unless they ve
themselves able 1:6 -instal fhe Intgnsive
prucesaos UaE
are n A for prod
cede adiciii ottheau items.
VI
'the statisti cal basis for this paragraph is to
be found in tha rAO Agricultural Commodity
Ppojectivils;
1970-80, Volume U, talAc, 7. The figur"a cpioted
rvlnto to th'e trend projections of per enlyul,
private
consumption expenditure at 1970 constant prices.
-j
302057101
BATCO document for Province of British Columbia 19
April 1999