Myanmar’s tobacco market is set for a shakeup following the return this year of the world’s second largest cigarette manufacturer, British American Tobacco, which entered into a joint partnership to locally manufacture its once ubiquitous London brand of cigarettes.
However, BAT’s return to the country is not going to be an easy task as it faces an uneasy coexistence among players in a thriving black market of duty-free cigarettes and renewed efforts by the Ministry of Health to enforce existing anti-tobacco laws while bringing new ones into effect.
Smoking rates in Myanmar are relatively high, among men at least. According to 2012 data from Myanmar Survey Research (MSR), 30% of males in the two largest cities, Yangon and Mandalay, are occasional or regular smokers. An additional 15% of urban males smoke the traditional, hand-rolled cigars known as cheroots.
But global players not only have local and handmade cigarettes as competitors but also the age-old tradition of chewing betel nut, especially in the rural areas.
A walk around even Yangon shows small shops selling everything from betel nuts to handmade cigarettes to any passerby.
The research said that the chewing of betel nut is far more prevalent in rural areas — where 70% of Myanmar’s population of 60 million resides — than any other form of tobacco because of its low cost.
The study also found that only 1% to 2% of urban women smoke tobacco on a regular basis. However, this may be starting to change.
According to a Yangon tobacco retailer, 10% of his customers are young Myanmar women.
“I’ve noticed a big increase [in the numbers of women buying cigarettes] lately, which may be due to the emergence of a nightclub scene in Yangon,” said the retailer, who declined to be named as he sells both legal and illegally imported cigarettes.
The retailer stocks more than 100 brands of cigarettes, which he buys from pilots and cabin crew flying in from countries such as Thailand, the Philippines, Vietnam, Singapore and Indonesia. He sells major brands such as Marlboro and Benson and Hedges for less than $2 a pack because each carton was purchased duty-free.
“Supermarkets are also involved in the black-market trade of duty-free cigarettes,” he told Asia Focus.
Whether cigarettes are smuggled across Myanmar’s porous borders or flown in on duty-free allowances, the likes of BAT are well aware of how the illicit trade damages their chances of success among price-conscious consumers in Myanmar.
“Duty-free cigarettes are meant to be sold through the travel trade channel [but] they are sold in the domestic market through illicit channels. BAT is willing to work closely with government and industry stakeholders such as law enforcement agencies, customs officials and international organisations, such as the World Customs Organisation, to counter illicit trade,” Rehan Baig, BAT’s managing director in Myanmar, told Asia Focus.
The retailer said that cigarettes from Singapore were by far the most popular because the packets don’t contain graphic warnings about the effects of smoking. It seems BAT has done its homework well: its London brand cigarettes, which are already being manufactured in Yangon, contain a small written warning in Burmese along the side of its packets, which also states that a person must be over 18 to buy cigarettes.
Yangon resident Khin Thanda, 30, who has been smoking since she was in her mid-20s, told Asia Focus, “I’ve never once heard of anyone being asked to prove that they’re 18 when buying cigarettes.”
The Ministry of Health is starting to get tough on the blase attitude toward the dangers of smoking. Anti-smoking seminars are being planned to take place in schools and a new bylaw to regulate tobacco is being drafted. There is even talk of a ban on smoking in public areas, such as bars and restaurants.
An expatriate hotelier from one of Yangon’s busiest hotels told Asia Focus: “There have been rumours for some time that a smoking ban in public indoor areas will come into effect in the next six months or so. Expats in Yangon seem to be the heavy smoker types, but we get a lot of complaints from tourists — particularly Americans — who resent others smoking around them.”
Another hotelier said that although he’d not received any information via government channels, a report in a Burmese-language newspaper two weeks ago stated that preparations to enforce a smoking ban in public areas were under way.
“Sure, it will hurt business, but we’ll all be in the same boat,” added the hotelier.
In theory at least, BAT would endorse such a move. Mr Baig said: “We support sensible regulations which are based on sound evidence. We believe, by working together, we can develop effective regulations which meet public health objectives, but do not damage the livelihoods of farmers and people who are related to the tobacco business.”
However, he stressed the need for stakeholders to be consulted before any new regulations come into effect.
The introduction of a smoking ban — in addition to the ban on advertising tobacco products already in place — would be in accordance with the World Health Organisation’s Framework Convention on Tobacco Control, which Myanmar signed several years ago.
Until recently, implementing such laws was problematic, if not impossible, because tobacco production was monopolised by two military-run companies, Union of Myanmar Economic Holdings (UMEHL) and Myanmar Economic Corporation (MEC). According to Marita Schimpl, head of marketing research at MSR, “It wasn’t until 2010 that other companies had the right to manufacture and distribute cigarettes.”
BAT’s links to UMEHL caused its downfall a decade ago: the company was forced to leave Myanmar at the request of the British government, following an investigation by Burma Campaign UK establishing that it was linked to the military-backed enterprise.
Mr Baig said that BAT selected its new local partner, I.M.U. Enterprise Ltd (which is part of the Sein Wut Hmon Group) because it “brings considerable experience and expertise in distribution and trade marketing of consumer goods across Myanmar, and provides the infrastructure and capabilities required to build a sustainable business”.
Indeed, London cigarettes are already saturating the market and BAT may soon achieve its goal to knock the local brand Red Ruby out of top spot in mid-range cigarette sales.
According to the editor-in-chief of Myanma Freedom Daily, Thiha Saw, who is also deputy chief of the Myanmar Journalists Association, “The real money has always been in mid-range brands. That’s still true today, although mid-range cigarette companies are no longer in the hands of drug lords.”
In Myanmar, a mid-range brand costs less than a dollar, while low-end brands can cost as little as 25 cents.
Unfortunately for BAT, it seems that despite its “exhaustive consumer research” to “understand the preferences of adult consumers” in Myanmar, the London brand hasn’t struck the right chord among Myanmar’s smokers, who have a strong leaning toward stronger cigarettes.
“London’s not selling well — customers are telling me they’re too light,” the retailer said.