The Tobacco Profile 2003

Introduction

This report is concerned with the tobacco consumption, tobacco taxes, economic issues related to tobacco and tobacco advertising during 2003 in Sri Lanka .

Sri Lankan Population

Population censuses were conducted in1981 and 2001. Thus, the population in 2003 is based on the 2001 population census.

Population above the age of 18 years

Tobacco consumption

Per capita consumption of tobacco

When discussing the tobacco consumption of a country it is important to consider the per capita consumption of tobacco. This gives an idea of the number of cigarettes consumed by one person in that country within a particular year.

It was difficult to calculate the per capita consumption. The reason behind this was that the number of illegally and locally produced cigarettes was not included in the calculations.

In the year 2002 per capita consumption was 251. According to the data given above, a single smoker above the age of 18 consumes 4 to 5 cigarettes per day.

For the year 2003 total consumption of cigarette sticks is given below. This is 237 million less than the total consumption in 2002.

When considering the cigarette
sales according to the brand of cigarette,
the market share in 2003 was
dominated by the brands
Gold Leaf and Bristol .

Tobacco consumption among men above the age group of 15 years

According to the chart, tobacco consumption for males in the age group 15 and above was seen to have declined marginally between 2002 and 2003.

When comparing per capita consumption of tobacco in Sri Lanka with several other countries the following chart can be displayed.

Source: Tobacco ATLAS 2002

The Tobacco Industry

The Sri Lankan tobacco industry is dominated by the Ceylon Tobacco Company (CTC). The holding company of CTC is the British American Tobacco Company (BAT). BAT is the second largest tobacco company in the world.

Annual profits of the tobacco company

The annual income of the tobacco company keeps on increasing each year, and showed considerable growth in profits between 2002 and 2003. Another issue that is worth mentioning is that there has not been any increase in the taxes relative to the increase in profits. The main reason for this is the new taxing method issued according to the length of the cigarette stick.

Therefore, the profit in 2003 increased by Rs760 million compared to the previous year. Gross revenue increased 4.2% year on year.

Tax paid to the Government

The government revenue is comprised of direct taxes issued by the government and non-taxes such as profit contributed by industry. The main source of the government revenue is from taxes.

The tax paid to the government by the tobacco industry in 2003 was Rs20,713 billion. This is represented as a percentage in the chart given below. Tax paid in the year 2002 was 20,578 billion rupees.

According to the Central Bank of Sri Lanka , tobacco taxes paid to the government accounted for 7% of the total government revenue in 2003. This was 8% in the year 2002.

Tobacco production and prices

In the year 2003 the prices of the following types of cigarettes increased by 50 cents. The altered prices of these cigarette types are given below.

Tobacco consumers and the economy

The amount spent by the consumers on legal cigarettes in the years 2002 and 2003 are given below. There was a marked increase of Rs1,268 billion in 2003 compared to the money spent in 2002. Even though money spent on illegal or locally produced cigarettes must be considered this was impossible due to the unavailability of valid data.

Following the data gathered from the total population it can be calculated that in the year 2003 a single person spent over Rs1,597.40 on cigarettes. (If illegal and locally product cigarettes were considered this value would increase further.)

The image of the tobacco company

It is a well know marketing fact that a company's image plays a vital role in marketing its products. It is well known that there are various ill effects associated with tobacco consumption. Furthermore, the tobacco industry is banned from direct promotions through various media. Therefore, it is important to such companies to find alternative ways to increase their market share. Due to this reason Ceylon Tobacco Company took the following measures in the year 2003 to enhance their public image.

•  Conducted best agro practices with the Ministry of Agriculture
•  Donated Rs2.5 billion to the Prime Minister Mr. Ranil Wikramasinghe to be used to for the benefit of the flood victims.
•  Sponsored the National Quality Awards and Productivity Awards
•  Built the ‘Warahana' holiday bungalow in the Yala National Park
•  Built Information Technology centre in the Mahiyanganaya district.

Illegal Cigarettes

Illicit cigarettes play a vital role in the black market of Sri Lanka . This is due to the low price of such cigarettes. The lack of taxes is the main reason behind the low price range. This illicit tobacco market observed to have an international link with the BAT Company.

The value of the confiscated illegal cigarettes in the year 2003 was Rs80 million.

Further more, during the months of November and December there was a considerable increase of paper articles published regarding this matter in the newspapers. We assume this to lobby a price reduction for legal cigarettes.

Cigarette use and Health

As stated by the World Health Organization, around 25,000 to 30,000 Sri Lankans die each year due to tobacco use. Among the preventable deaths in Sri Lanka , death due to tobacco consumption rates the highest. What is sad about this situation is that not only the smokers but the people around them are also affected by this due to passive smoking.

In a developing country such as Sri Lanka much of the country's revenue is spent on treating the sicknesses caused by smoking. It is a pity because this money could have been better used in a different sector in need of government attention such as urban development.

From the overall percentage of death, death cases due to tobacco consumption are as follows.