New market study, "Cigarettes in Dominican Republic", has been published

A draconian fiscal austerity package implemented by the government since 1 January 2013 led to increases in absolutely all types of taxes collected by the government, including the elimination of valued added tax exemptions to many staple food items. Value added taxes, which are charged to cigarettes as well, grew by 13%, while the specific excise tax for cigarettes increased by 12%. The austerity package also included government spending cuts. As a result, the economy suffered the worst economic slowdown in ten years and worried consumers tried to cut or optimise their spending across all consumer goods categories. In that consumer mood, cigarettes was a top target for saving. That was reflected in the substantial drop in average daily consumption (-6%) and the massive push for downtrading in its two forms: for illicit cigarettes, and for cheaper licit cigarettes.

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Competitive Landscape

The cigarette category in the Dominican Republic could be characterised as a duopoly with a dominant player. The two multinational companies in the category, Philip Morris Dominicana and BAT Republica Dominicana, hold a combined volume share of 95% (even higher in terms of value). However, Philip Morris by itself commands 84% of the market in volume terms, so its dominance is clear. What makes the category not a de facto monopoly is the strength of BAT in the economy segment, which has been growing and is set to grow even more. Philip Morris has maintained its leadership since it acquired the then leader, Industria del Tabaco Leon Jimenes, in 2006. La Tabacalera has undergone a process of privatisation and at this point in time, only 50% of its shares remain in the hands of the government. It is not clear if the government will continue selling its shares in the company or if the process will stop where it is. Only if another multinational player takes control of La Tabacalera will this privatisation process have any impact on the category. If private investors only take shares and leave the management of the company (and its brand portfolio), it is not likely that La Tabacalera will turn around its long-term decline.

Industry Prospects

Cigarettes is expected to have a flat CAGR in value terms at constant 2013 prices over the forecast period. The only tax-driven price increases are expected to come over the forecast period from the specific excise tax. This would exert less pressure on prices when compared with years like 2013 in which that increase came together with VAT increase.

Report Overview

Discover the latest market trends and uncover sources of future market growth for the Cigarettes industry in Dominican Republic with research from Euromonitor's team of in-country analysts.

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