In the last two years of the review period smoking became more expensive for Ukrainians. In 2014 the excise tax was raised three times – by 40% overall. In 2015 this tendency continued, with the introduction of 5% tax from retail value sales of products which are subject to excise tax. Income from such tax will be credited to local budgets, whilst final consumers will pay an additional UAH1 per pack of cigarettes. The next fiscal innovation in 2015 is connected with the equalisation of excise tax for cigarettes with filter and without. As a result, the price of cigarettes without a filter, which are mostly used by people with low incomes, will increase by a minimum of 60%. As part of its association with the EU, the Ukrainian government claims to be gradually raising the excise for tobacco products to make it equal to that introduced by EU countries. In practice, the rise in excise tax is perceived negatively by Ukrainians as an instrument to boost the government’s budget rather than to control the consumption of tobacco products. In 2016 the situation is forecast to be exacerbated, as the Ukrainian government promises to increase the excise on tobacco by 27%, in line with the forecast rate of inflation for 2015. Facing the need to cut expenditure on smoking, Ukrainians are increasingly tempted to quit smoking altogether. According to Euromonitor International, in 2015 the number of smokers in Ukraine fell by 4% to reach 8.9 million smokers overall.
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Competitive Landscape
MacNeil was the undisputed leader in NRT smoking cessation aids in 2015, holding a 99% value share. Its brand Nicorette achieved popularity through advertising campaigns and the launch of a specialised website to educate consumers about the potential harm of smoking and the products available from Nicorette. This brand is widely distributed all over Ukraine. An attempt to establish Nicotinell was made by Novartis International, but the brand was unsuccessful, and was no longer found in stores from 2014.
Industry Prospects
The government is considering a law according to which the indexation of excise tax according to the inflation rate will take place from January 2016. Thus, excise is set to increase from UAH227.33 to UAH288.03 per 1,000 cigarettes. The increase of 27% comes from the forecast inflation level calculated in 2014 for 2015. However, currently inflation is much higher, and thus the growth rate of excise tax is still not taken into account by the government. Moreover, according to conditions of association with the EU, the government aims to increase the excise tax every year to make it equal to the rate charged in EU countries. Thus, as excise will increase over the forecast period, it will lead to a decline in demand for cigarettes.
Report Overview
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New Market Report: NRT Smoking Cessation Aids in Ukraine
Company: Fast Market Research, Inc.
Contact Name: Bill Thompson
Contact Email: press@fastmr.com
Contact Phone: 1-413-485-7001
Contact Name: Bill Thompson
Contact Email: press@fastmr.com
Contact Phone: 1-413-485-7001