It’s super high-speeddevelopment forChina’s superhigh-end cigarettes.
In 2020, the trend in Chinese cigarette sales moved towards the high-end segment with prices going higher, even though the Covid-19 pandemic has not changed the overall upward trend of cigarette consumption over the past year. Data from China’s tobacco industry revealed that the sales volume of super high-end cigarettes in 2020 exceeded 360,000 master cases, with a year-on-year growth of nearly 40,000 cases, up over 7.5%. The segment is the engine leading the high-quality development of the tobacco industry, once again proving the strong market demand for high-end cigarettes and the vitality of this market segment.
Super high-end products retail at RMB800-1,000 (US$122-154) per carton. This category is undoubtedly the pinnacle of the existing tobacco product structure. In the past, China’s tobacco industry limited the price of super high-end cigarettes. In 2010, the State Tobacco Monopoly Administration (STMA) clarified that the price of each pack of cigarettes should not exceed RMB100, each carton not more than RMB1,000. This “price limit order” locked the vitality and potential of super high-end brands.
However, this price limit was unlocked by the end of 2020 due to strong market demand. Four styles of super high-end cigarette products in the market that retail at more than RMB1,000 per carton are Jiaozi (Kuanzhai Guobao) from China Tobacco (Sichuan) Industrial Limited Corporation, Yellow Crane Tower (1916 medium-sized) from China Tobacco (Hubei), Huangjinye (Tianye medium-sized) from China Tobacco (Henan), and Baisha (Hetianxia Zunxiang 84) from China Tobacco (Hunan). These four new products are approved by the State Tobacco Monopoly Administration of China.
Kuanzhai Guobao comes as the epitome of the innovative technology achievements of China Tobacco (Sichuan). On the outer package of this cigarette is a panda, the representative animal of Sichuan province, and also the famous “national treasure” of China. In terms of quality, the main ingredients coming from tobacco leaf of Kuanzhai Estate located in Liangshan, Sichuan province are selected and customized with a top-level leaf formula, and sophora flower is innovatively integrated to stimulate the original aroma of tobacco to achieve full aroma, an elegant smoke, a sweet and comfortable taste, and a warm and mellow throat-hit.
Yellow Crane Tower (1916 medium-sized) inherits the product formula of the 1916 series of high-end classic cigarettes. It uses supercritical carbon dioxide extraction, dynamic countercurrent extraction, membrane separation, molecular distillation, and other technologies to treat chrysanthemum (dendranthema indicum) raw materials to ensure that the content of aroma components reaches more than 90%, offering consumers a more simple and elegant consumption experience.
For Huangjinye (Tianye medium-sized), the tobacco leaf is collected and selected by hand in the whole process. Only a few leaves can be selected out of a hundreds, therefore, it is very precious.
Baisha (Hetianxia Zunxiang 84) opened the domestic high-end market and became one of the top selling high-priced cigarette brands in China. It always enjoyed a very good reputation.
According to statistics, in the past five years, the super high-end market maintained a stable growth of high double digits for most of the time. Due to the impact of the pandemic, the super high-end cigarette market went through a continuous downturn in February, March, and April 2020, but the category showed a certain potential to improve in May 2020, and maintained a double-digit growth rate from May to the end of last year. Although the absolute sales volume of these super high-end cigarettes was not large, the contribution of tax and profit was considerable and it plays an important role in improving brand structure.
Before the 2020 Spring Festival, a Guotai Junan research institute released the Special Report on High End Consumer Goods in 2020. The report revealed that as the trend of high-end products and brand concentration in the tobacco industry is increasingly obvious, high-end cigarettes may usher in a period of rapid development. This indicates that the high-end cigarette market will embrace a broader development opportunity.
In addition to bringing real sales volume and revenue to the industry, super high-end cigarette products also carry the hope that China’s cigarette products will improve in value and image, which will play a key role in promoting the overall value upgrading of China’s tobacco brands.
At present, many new changes occurred in the functions and scenes of China’s super high-end cigarette market. Etiquette and conspicuous consumption is shrinking continuously. Consumers’ choice of products shifted from the pursuit of high-end and scarcity to the pursuit of quality, brand, experience, etc., which means that super high-end cigarette products must be deeply connected with consumer mentality to win their trust. Meanwhile, it also puts forward new challenges to super high-end cigarettes in terms of sense of value and necessity. Better quality, better aesthetics, and higher value are consumers’ demands for super high-end cigarettes, and so they need to be innovative in terms of technology and culture shaping.
It seems that these four products received special attention from the industry because they broke the “ceiling” of the RMB1,000 price limit. But, it is in fact only the first step for China’s tobacco industry to enhance its overall sense of value. What’s more important is how to build new values, a new system, and a new framework with a new price.
These new products that broke through the price limit undertake the task of exploring the higher price and new value of China’s tobacco industry. There is still a long way to go before they are fully recognized by consumers.