Germany’s refugee influx may add 810 million cigarettes to the country’s annual consumption this year, a rare increase in a market that has shrunk the past decade.
The country expects at least 800,000 refugees to enter its borders this year, the biggest movement of displaced people Europe has seen since World War II. Many of the refugees will be fleeing war-torn Syria, where 48 per cent of men smoke, according to the World Health Organization. The additional cigarette consumption equates to a 1 per cent increase in Europe’s largest tobacco market, according to Morningstar analyst Philip Gorham, as demographics turn in the industry’s favor for once.
That could be a boon for Philip Morris, Imperial Tobacco and British American Tobacco, who dominate the $33 billion German market. With Syrians on average smoking more than 1,000 cigarettes a year, they could boost volumes in Germany by more than 810 million, Gorham said. Cigarette sales have declined by 21 per cent over the last five years in western Europe, according to data from Euromonitor International.
“BAT and Imperial are pretty strong in roll-your-own tobacco and lower-end factory cigarettes," Erik Bloomquist, an analyst at Haitong Securities in London, said by phone. “They should benefit straight away."
The benefits seen by tobacco companies will be tempered by the limited spending power of the migrants, which would lead them to purchase smuggled or counterfeit smokes. During the Arab Spring, this illicit trade grew from about 1 or 2 per cent of the Egyptian tobacco market to about 20 per cent by 2012, according to Shane MacGuill, a Euromonitor analyst. Despite that, volumes of duty-paid cigarette sales in Germany will still receive a boost in the medium-term, he said.
Bloomberg News, edited by ESM
