BAT: Smokers can’t afford even the cheapest cigarettes as incomes go up in smoke

Snuffed out: smokers already smoking less. New 'sin tax' will hit sales even harder (pic: Philimon Bulawayo/Reuters)

Zimbabwean smokers lit up 8% fewer cigarettes this year, and the biggest drop is in the cheapest brands, as the economy snuffs out incomes.

BAT, the country’s biggest cigarette maker, saw sales of most of its brands fall in the nine months to September as the impact of COVID-19 added to depressed consumer demand.

The high-end brand, Dunhill, recorded a 962% jump compared to the same period last year. This was only because it was being reintroduced to the market after BAT had stopped importing the brand last year due to forex duty.

However, the impact of weak disposable incomes was felt among BAT’s low-income customers, reflecting the impact of the economic crisis on the poorest consumers.

The biggest fall was for Ascot, BAT’s cheapest brand, which dropped 43%.

Sales volumes of Newbury and Kingsgate, which BAT considers ‘aspirational premium brands’, fell by 33%. Madison and Everest, two value brands targeted at low-income earners, dropped by 5%.

“The trading environment continued to be challenging during the nine months ended 30 September 2020 driven by the impact of the COVID-19 pandemic, currency depreciation and rising inflation. The Company has not been spared by these challenging factors which have resulted in the slowdown of economic activity across the country and depressed consumer spending,” BAT says.

Packer at BAT’s factory. ‘Sales are down, but forex supply for raw material imports improves’

BAT: Smoke clearing, a bit

The company’s update reflects similar reports from many local retail companies, which have suffered sharp drops in sales this year as COVID-19 worsened an already dire economic situation. BAT sees the economy remaining under pressure for the rest of the year.

However, it is not all bad news. The company imports the bulk of its raw materials, such as the special paper and filters that it uses to make cigarettes. Foreign currency shortages have made these hard to import. Now, the company says it is seeing an improvement in forex supply after the introduction of the foreign currency auction system in June.

“The foreign currency auction platform has opened access to foreign currency required for raw materials imports and has brought about stabilization of the exchange rate which will alleviate some of these challenging trading conditions,” BAT says.