Retail volume sales of tobacco in Hong Kong continued to decline in 2024. Hong Kong is taking significant steps towards stringent tobacco control to reduce the smoking rate, and the government is committed to tobacco control, aiming for a smoke-free environment. The new strategy includes short-, medium-, and long-term measures, such as banning alternative smoking products, prohibiting smoking in queues, and expanding no-smoking areas with a phased approach to manage public acceptance. The fine for smoking violations will increase to HKD3,000.
Soaring tobacco taxes have directly fuelled a massive black market for cigarettes. Customs data reveals a dramatic surge in illegal cigarette cases, more than tripling from 4,312 in 2021 to 13,500 in 2023. This explosion in smuggling, coupled with increased arrests, demonstrates that high taxes are driving smokers towards illicit sources, resulting in significant lost tax revenue for the government.
The Hong Kong cigarette market remains a highly concentrated oligopoly, with Philip Morris Asia Ltd, British American Tobacco Co (Hong Kong) Ltd, and Japan Tobacco (Hong Kong) Ltd collectively controlling a vast majority of the retail volume. This indicates a high barrier to entry for new players, and the players’ dominance is built on established brand recognition, extensive distribution networks and significant marketing resources.
In 2024, Hong Kong’s cigarette market remained dominated by convenience stores due to their widespread network and convenience. Convenience stores are the primary points of cigarette distribution, capitalising on their extensive network, long hours and high customer volume. While these stores offer easy access, they rigorously follow regulations, including keeping cigarettes out of direct view behind counters and displaying mandatory health warnings. As Hong Kong tightens tobacco control with measures like flavour bans and plain packaging, convenience stores will be central to the implementation of these new rules.
After the government increased tobacco tax in 2023 and 2024, the smoking rate only dropped slightly. Hong Kong's recent tobacco tax increases, intended to curb smoking and boost revenue, have instead resulted in minimal reductions in smoking rates, a significant drop in government tax revenue, and a surge in the illicit cigarette market, exacerbating the city's fiscal deficit and creating social problems.
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Tobacco
Passport Tobacco covers the seven major tobacco categories: Cigarettes, Cigars & Cigarillos, Smoking tobacco (made up of Pipe tobacco and RYO tobacco), Smokeless Tobacco (snuff and chewing tobacco), E-Vapour Products (closed and open); Heated Tobacco; and Tobacco Free Oral Nicotine. Smoking paraphernalia such as pipes, rolling papers, lighters or matches, etc., are not included, nor are nicotine replacement therapy (NRT) products, which are part of Euromonitor's Passport Consumer Healthcare database.
See all of our definitionsThis report originates from Passport, our Tobacco research and analysis database.
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