Last updated: May 2019
Suggested citation: Freeman, B, Winstanley, M, Bayly, M. 10.2 The global tobacco manufacturing industry. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2019. Available from http://www.tobaccoinaustralia.org.au/chapter-10-tobacco-industry/10-2-the-global-tobacco-manufacturing-industry
The largest tobacco company in the world (measured by cigarette volume) is the state-owned China National Tobacco Corporation.1 Five of the 10 largest cigarette factories in the world are located in China.2 According to industry reports, China National Tobacco Corporation has approximately 98% market share in China,3 making it the single largest tobacco manufacturer in the world. Philip Morris—including both the separate Philip Morris International and US market (Altria) companies—runs second to China National Tobacco Corporation with 16.9% of the global market, followed by British American Tobacco, Japan Tobacco International and Imperial Brands (formerly Imperial Tobacco). See Table 10.2.1 for global market share for each of the five major tobacco companies.
Estimated percentage share of global market, 2018 (%)
*Altria is the completely separate US arm of Philip Morris.
Source: IBISWorld Pty Ltd1
The tobacco industry is highly globalised, and becoming increasingly concentrated.2 The share of tobacco sales volumes controlled by the leading global companies (including China National Tobacco Corporation) almost doubled between 2001 and 2017, from 43% to 81%.4 The driving force behind consolidation of the tobacco companies is the desire to increase market share, particularly in emerging markets, and maintain profitability in developed markets where consumption has fallen. This strategy has been increasingly important since 2009, the first time world cigarette sales volume fell (by 0.2%). However, as of 2018, the share of the global tobacco market made up by cigarettes has increased, with declines in consumption in mature markets only being partially offset by increases in emerging markets.1 Even with falling smoking prevalence, total growth in population—particularly in Asia—means there is opportunity and potential for growth.5 Additionally, in markets where volumes are declining, tobacco companies have raised the price of their tobacco products to maintain and even enhance profitability.1
Transnational tobacco companies have also established licensing agreements and joint ventures with local tobacco industries to gain entry and market share in previously restricted markets. One of the earliest and most significant of these agreements is Philip Morris International's partnership with China National Tobacco Corporation, formed in 2005.6 The agreement established a joint venture company equally owned by both tobacco groups. It licensed China National Tobacco Corporation to produce and distribute Marlboro in China, and in return, facilitated entry for China National Tobacco Corporation to the global tobacco market with a portfolio of 'Chinese heritage brands'7 carefully modified to appeal to foreign palates,6 as well as providing China National Tobacco Corporation with other international business opportunities. Both companies benefit from shared sales, distribution and other business infrastructure.7 Similar agreements with China National Tobacco Corporation were made by British American Tobacco in 2013, and Imperial Brands in 2017.8
Philip Morris International (including its US arm, Altria) is the largest of the multinational tobacco companies, in terms of overall global tobacco market share.1 PMI also has the largest share of the global cigarette market of any multinational corporation, accounting for 14.1% of global cigarette sales volumes in 2017 (excluding Altria’s US operation).4 Philip Morris International operates in more than 180 countries. It owns the most popular and valuable tobacco brand in the world, Marlboro, which was worth US$82 billion in 2018 and accounted for almost 10% of the international cigarette market (excluding China and the US). Philip Morris International has invested heavily in ’reduced risk products’i, including launching its flagship heat-not-burn tobacco product, iQOS, in 2014, and the acquisition of a 35% stake in the e-cigarette manufacturer Juul by Altria.9 In 2018, Philip Morris reported an 27.4% share of ‘the international cigarette category’ and owned 6 of the top 15 global cigarette brands including L&M, Chesterfield and Bond Street.10
British American Tobacco ranks as the second largest transnational tobacco company in terms of cigarette sales volumes after Philip Morris International, at 11.8% in 2017, and operates in more than 200 countries.4 British American Tobacco has around 300 brands in its portfolio, and the company regards Dunhill, Kent, Lucky Strike and Pall Mall as its most important 'Global Drive' brands. Since 2005, British American Tobacco has also become active in the market for Swedish-style snus,ii 11 and has also invested heavily in what it terms ‘potentially reduced risk products’iii, including so-called vapour products (e-cigarettes) and heat-not-burn products.12
Japan Tobacco International grew from a largely domestic company to an international one through acquisition of other companies and brands. At 2017, Japan Tobacco controlled 8.4% of cigarette sales volumes globally, and operated in more than 120 countries.1, 4 The international business’s portfolio of brands is led by Winston (the second-largest international brand in the world and fastest growing over the 2000s), and Camel (sold in over 100 countries), and Mevius (formerly Mild Seven).13
Imperial Brands, formerly operating as Imperial Tobacco Group Plc, is the smallest of the four multinational tobacco companies, controlling 3.7% of global cigarette sales volume and selling its key brands such as Davidoff, John Player Special, West, and Gauloises in 160 markets.4 The UK-based Imperial Tobacco Group substantially increased its global expansion since the mid-1990s, through brand acquisition (as has occurred in Australia) as well as increase in market share. Following its acquisition of Reemtsma Cigarettenfabriken GmbH in 2003, Imperial Tobacco Group became the second largest tobacco company in Germany and the fourth largest multinational tobacco company in the world, manufacturing and distributing cigarettes, loose tobaccos, cigars and smoking-related paraphernalia such as cigarette papers, filters and tubes. The company cites Asia, Eastern Europe, Africa and the Middle East as its key growth regions.14 Imperial Tobacco is a global market leader in fine cut tobacco and has reported its volume cigarette sales in terms of cigarette equivalents to demonstrate the way in which roll-your-own tobacco can mitigate volume falls in cigarette sales.13
The trend towards globalisation of the tobacco industry has included a globalised approach to marketing, research and lobbying,15 and factors such as trade liberalisation have opened new and lucrative markets to the transnational companies. Companies are increasingly focused on their 'international' brands, it being more cost effective to manage and market a smaller number of iconic brands than to develop smaller, market-specific brands.16 The negative effects of tobacco industry globalisation can be illustrated through the imbalance between the money that flows from (often poor) smokers to (often not poor) shareholders and the money that flows from wealthy to poor countries to reduce tobacco use. For example, in 2005, British American Tobacco reported that smokers in the poorest countries of sub-Saharan Africa provided about $340 million to its bottom line, an amount equal to about 140% of the total global development assistance for tobacco control.17
Although the companies engage in strong competition, as an industry they are generally united in their desire to promote their products and undermine tobacco control measuresiv. At an international level, the tobacco industry engages against instrumentalities including the World Health Organization, the World Bank and the United Nations. It strongly fights to discourage countries from adopting the effective measures mandated in the WHO Framework Convention on Tobacco Control. The industry has marshalled and given voice to an international lobby for tobacco growers, especially powerful in countries where tobacco is a major agricultural commodity.v Using arguments honed over decades of cooperation, the industry as a whole continues to advance misinformation about the nature of its products, obfuscates about addiction, and persists in its denials that advertising recruits new smokers.16
A research project by Stanford University's Global Tobacco Prevention Research Initiative, the Cigarette Citadels, maps the location of more than 400 cigarette factories worldwide. The goal of the project is to pinpoint all the factories in the world producing cigarettes and provide basic facts about them.18 The interactive map can be accessed here: https://www.stanford.edu/group/tobaccoprv/cgi-bin/wordpress/
i For more information on potential harm reduction products, see Chapter 18
iii For more information on potential harm reduction products, see Chapter 18
v The tobacco industry argues that it is a vital, positive contributor to the economies of some countries. For discussion, see Chapter 17, Section 17.3.4.
2. American Cancer Society and World Lung Foundation. The Tobacco Atlas. Manufacturing. Atlanta, Georgia: American Cancer Society, 2018. Last update: Viewed Available from: https://tobaccoatlas.org/topic/manufacturing/.
3. Xu SS, Gravely S, Meng G, Elton-Marshall T, O’Connor RJ, et al. Impact of China National Tobacco Company’s ‘Premiumization’ Strategy: longitudinal findings from the ITC China Project (2006–2015). 2019:tobaccocontrol-2017-054193. Available from: https://tobaccocontrol.bmj.com/content/tobaccocontrol/early/2019/01/23/tobaccocontrol-2017-054193.full.pdf
4. Campaign for Tobacco Free Kids. The global cigarette industry. 2018. Available from: https://www.tobaccofreekids.org/assets/global/pdfs/en/Global_Cigarette_Industry_pdf.pdf.
5. American Cancer Society and World Lung Foundation. The Tobacco Atlas. Tobacco companies. Atlanta, Georgia: American Cancer Society, 2009. Last update: Viewed Available from: http://www.tobaccoatlas.org/companies.html.
6. O'Connell V. Philip Morris readies aggressive global push. The Wall Street Journal Online, 2008; 29 Jan. Available from: http://online.wsj.com/article/SB120156034185223519.html?mod=hpp_us_pageone
7. Philip Morris International and China National Tobacco Corporation. The China National Tobacco Corporation and Philip Morris International announce the establishment of a long-term strategic cooperative partnership. Joint Press Release from Philip Morris International and China National Tobacco Corporation, 21 December 2005., 2005, Philip Morris International and China National Tobacco Corporation: Beijing. Available from: http://www.philipmorrisinternational.com/pmintl/pages/eng/press/pr_20051221.asp.
8. Geller. UK's Imperial Brands teams up in joint venture with China Tobacco. Reuters, 2017. Available from: https://www.reuters.com/article/us-imperial-brands-jv-china-idUSKBN14V28V
9. Reuters. Marlboro company buys 35% stake in Juul e-cigarette maker for $12.8bn The Guardian, 2018. Available from: https://www.theguardian.com/society/2018/dec/20/juul-e-cigarette-marlboro-company-buys-stak
10. Philip Morris International. Annual Report 2018. 2019. Available from: http://media.corporate-ir.net/media_files/IROL/14/146476/PMI-FINALFILES/index.html.
11. British American Tobacco. Corporate Website. London: British American Tobacco, 2008. Last update: Viewed Available from: http://www.bat.com/group/sites/uk__3mnfen.nsf/vwPagesWebLive/DO52AD6H?opendocument&SKN=1&TMP=1.
12. British American Tobacco. Transforming tobacco: Annual Report and Form 20-F 2018. 2018. Available from: https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOAWWGJT/$file/Annual_Report_and_Form_20-F_2018.pdf.
13. Euromonitor International. Meeting the new challenges – corporate strategy in tobacco. London: Euromonitor International, 2011. Last update: Viewed Available from: http://www.euromonitor.com/tobacco.
14. Imperial Tobacco Group. Corporate website. Bristol, UK: Imperial Tobacco Group, 2008. Last update: Viewed Available from: http://www.imperial-tobacco.com/index.asp.
15. Hafez N and Ling PM. How Philip Morris built Marlboro into a global brand for young adults: implications for international tobacco control. Tobacco Control, 2005; 14(4):262–71. Available from: http://tobaccocontrol.bmj.com/cgi/reprint/14/4/262.pdf
16. Yach D and Bettcher D. Globalisation of tobacco industry influence and new global responses. Tobacco Control, 2000; 9(2):206–16. Available from: http://tobaccocontrol.bmj.com/cgi/content/abstract/9/2/206
17. Callard C. Follow the money: how the billions of dollars that flow from smokers in poor nations to companies in rich nations greatly exceed funding for global tobacco control and what might be done about it. Tobacco Control, 2010; 19(4):285–90. Available from: http://tobaccocontrol.bmj.com/content/19/4/285.full
18. Stanford’s Global Tobacco Prevention Research Initiative. Pinpointing the factories: where are all those 'cancer sticks' produced? Stanford, California: Stanford University, 2011. Last update: Viewed Available from: https://www.stanford.edu/group/tobaccoprv/cgi-bin/wordpress/.