Value Recap – The Butt That Never Dies

tobacco

 

The cigarette industry is one of the most regulated industries. It is constantly under pressure from health groups and the government. Yet it continues to prosper year after year. Why is that the case?

World Top Tobacco Companies

 

The whole industry has consolidated to only a few major players now around the world. The top tobacco company in the world is the China National Tobacco Corp. It is the cigarette company owned by the Chinese government

and has a complete monopoly in the local market. Since the Chinese market is the largest tobacco market in the world, its monopoly in China has earned it the largest tobacco company in the world.

 

Globally, the market is dominated by 4 other companies; Altria (MO: US) and Phillip Morris International (PM: US), British American Tobacco (BATS: LN), Imperial Tobacco (IMT: LN) and Japan Tobacco International (2914: JP).

 

Malaysia top 3

The Malaysian cigarette industry is a very typical example of the domination of the large tobacco companies. In Malaysia, the market is controlled by BAT (M) Bhd (ROTH: MK), Philip Morris and JT International (RJR: MK).

 

Why Tobacco Just Won’t Die?

Whether you like it or not, due to the high profit margins of the companies and a high duty imposed on cigarettes, Tobacco is a major tax contributor in many countries. As long as that is the case, the governments around the world will lack the will power to completely kill off the Tobacco industry.

However, the more important reason is there is real demand! Demand for tobacco is huge, simply because it is high additive and it takes many years to educate someone that tobacco is bad for them. Even if there is an outright ban on them, cigarettes can be easily smuggled around. Combine that with easy accessibility and usability, tobacco industry might be here for the long term.

 

If You Can’t Beat Them, Join Them?

Tobacco companies are the most stable of companies with their constant margins and predictable profitability. Some might suggest since it is almost fruitless to go against these companies and try to shut them down, why not profit from them instead?

 

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