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Overview of Vietnam’s tobacco industry

Overview of Vietnam’s tobacco industry

Monday 11, 10 2021
Vietnamese people spend an average of about 31 trillion VND per year on tobacco products, and the total cost of loss to society is 54 trillion VND a year.

Vietnam’s tobacco market overview

Like other countries in the world, Vietnam’s tobacco industry has been on heated debate. In Vietnam, every year more than 134,300 people die from diseases caused by tobacco. According to the Global Adult Tobacco Survey (GATS 2015), Vietnam is among the 15 countries with the largest number of smokers in the world. The smoking rate among males is 45.3%.

Vietnam’s tobacco industry

Vietnamese people spend an average of about 31 trillion VND per year on tobacco products, and the total cost of loss to society is 54 trillion VND a year. However, Vietnam's Tobacco Industry is still an important sector in the economy, creating 15,000 jobs each year; at the same time contributing nearly 14 trillion VND to the state budget a year.

Vietnam tobacco market ranks 32nd in the world in terms of market volume. In 2020, revenue from Vietnam’s tobacco products market was estimated to reach 2,937 million USD (approximately 68 trillion VND) with a compound annual growth rate (CAGR) for the period 2020-2023 of 2,4%. In particular, smoking tobacco is the product with the highest growth potential with a CAGR of 10.2%, followed by e-cigarettes with a CAGR of 6.1%.

In 2019, Vietnam exported 142 million USD of cigarettes (approximately 3.3 trillion VND), to markets including Singapore, China, and the Philippines.

Vietnam tobacco market

The State monopolizes the production of tobacco products in Vietnam. Currently, there are 16 Vietnamese enterprises producing tobacco, under the management of different state agencies, and the state holds a controlling proportion in the charter capital of these enterprises.

Vietnam National Tobacco Corporation (Vinataba) under the Ministry of Industry and Trade dominates the industry with a market share of 67%, leading the whole industry in the mid-end product segment. Vinataba's revenue has continuously increased over the years. In 2017, its revenue was 25,681 billion VND, 2018 was 26,200 billion VND, and 2019 was 25,257 VND.

In addition, the Vietnamese tobacco market also has the participation of 2 foreign-invested enterprises which are Vinasa Can Tho (a joint venture between Philip Morris Inc and Vinataba) and British American Tobacco.

Industry forecast

Vietnam’s tobacco industry is expected to continue to grow due to rising prices as the government increases the excise tax while the production cost may stay unchanged. In addition, sales of the industry was estimated to be larger than in 2019 when the Ministry of Industry and Trade issued Circular No. 01/2020/TT – BCT. According, import taxes on  raw tobacco would increase by 5.2%.

Besides, the tobacco industry still has certain advantages thanks to Vietnam's active international integration process in recent years including reduced import tax on auxiliary products, the MFN tax rate on exports as a member of the WTO, and access to new production technologies and higher management levels from other countries in the context of investment easing.

At the same time, the tobacco industry of Vietnam also faces many challenges. With the deepening of international integration, the competitive pressure in the industry will increase in the domestic market and the export market. The problem of cigarette smuggling is difficult to handle when the smuggled profit is up to 400%. With the emergence of E-Cigarettes, it is more difficult to control smuggling because of the increasing demand for e-cigarettes and more sophisticated e-cigarette smuggling tricks.

tobacco industry

Currently, lax regulations and light sanctions have led to uncontrolled tobacco use and trade. The price of a pack of cigarettes in Vietnam is ranging from 6,000 VND to 20,000 VND. This makes Vietnam belong to the group of 15 countries with the cheapest tobacco prices in the world according to WHO.

The reason behind this could be the fact that the tobacco tax in Vietnam is only 35% of the retail price, much lower than the world average at 56%. The law also has provisions on banning tobacco advertising and promotion at retail points, but there are still many violations that are difficult to sanction.

Besides, according to the law, smoking in public places can be fined from 100,000 VND to 300,000 VND. However, the above fine level is not satisfactory and the inspection activities are still sporadic, making this violation still happen regularly.

Source: Vietnam’s tobacco industry report - VietnamCredit

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