UNITED KINGDOM 



The United Kingdom is the world's largest tobacco 

 importer and is traditionally the largest importer of 

 U.S. tobacco. Imports from the United States in- 

 creased substantially after' the 1965 embargo on trade 

 with Rlrodesia, but the U.S. share of the U.K. market 

 has dechned since 1968. This decline reflects: (1) In- 

 creased competition from low-cost producers such as 

 South Korea, Tanzania, and Brazil which have 

 stepped up production in order to fill the gap left by 

 Rhodesia; (2) a Commonwealth preference of 18 U.S. 

 cents per pound provided to a number of major 

 suppliers; (3) high hopes, in 1971, that trade would 

 be resumed with Rhodesia; (4) anticipation that the 

 United Kingdom might enter the EC and consequent 

 uncertainty as to what effect this miglit have in 

 shifting to other sources of supply; and, (5) a 

 smoking and health campaign. 



The U.S. share of the U.K. tobacco market was 32 

 percent in 1965. It jumped to 51 percent in 1966 and' 

 stayed at about that level for the next 2 years. It 

 dropped to 44 percent in 1969, 41 percent in 1970, 

 and 36 percent in 1971. 



The traditional U.K. cigarette is made with all 

 flue-cured tobacco containing no additives. About 95 

 percent of the United Kingdom's total tobacco 

 imports are of the flue-cured type. Because of the 

 no-additive rule, the flue-cured tobacco used must be 

 of high quality. The average value of 1971 total 

 imports of all types was 89 U.S. cents per pound. The 

 average value of imports from the United States was 

 SI. 10. 



One reason for the especially high value of imports 

 from the United States is that a high proportion of 

 the U.S. leaf is stemmed. U.S. exports of stemmed 

 leaf ("lamina") accounted for 77 percent of total 

 U.S. exports to the United Kingdom in 1971. The 

 average value of these lamina exports was $1.27 per 

 pound. Unstemmed leaf accounted for 4 percent of 

 these exports with an average value of US$1.11 per 

 pound. The balance was made up of stems, trim- 

 mings, and scraps with an average value of 9 U.S. 

 cents per pound. 



Consumption 



The United Kingdom is the second largest user of 

 leaf tobacco in the EC-9. Utilization averaged 302.6 

 million pounds during the past 5 years, compared 

 with 321.4 milhon pounds for West Germany 

 (Table 3, Appendix C). On a per capita basis, for 

 persons 15 years and over, utilization in 1970 was 8.1 

 pounds, below the 9.2 pounds for the United States, 

 but well above the 6.6-pound average for the nine 

 countries of the enlarged EC (Table 4, Appendix C). 



Utilization in 1971 dropped 5 percent from the 

 1970 ievel. The decUne was mostly the result of a 



smoking and health campaign" which brought about a 

 4.5 percent drop in the number of cigarettes smoked. 

 But it was also partly the result of a continuation of 

 the trend toward utiHzation of less leaf per 1,000 

 cigarettes. U.K. cigarettes are generally smaller than 

 those of other countries and require only an average 

 of 1.67 pounds of redried tobacco per 1,000 ciga- 

 rettes, compared with 1.92 pounds per 1,000 in the 

 United States, and over 2 pounds in many countries. 



Partly as a result of this small size, average U.K. 

 cigarette consumption for persons 15 years old and 

 above is 3,400, the highest level in the enlarged EC. 

 Cigar consumption,' at 26 pieces per person 15 years 

 and over, is only about half the average for the 

 enlarged EC (Table 4, Appendix C). 



Cigarettes account for about 90 percent of total 

 U.K. tobacco utOization. Virtually all of this is 

 flue-cured tobacco, traditionally the type used for 

 British cigarettes. About 20 bilhon (16 percent) of 

 the some 140 bilhon cigarettes produced in the 

 United Kingdom are exported. About 1 billion are 

 imported (Table 5, Appendix C). 



No additives are now permitted in U.K. cigarettes 

 except on an experimental basis. This means that all 

 of the flavor must come from the tobacco itself. As a 

 consequence, the U.K. industry buys primarily ex- 

 pensive, flavorful tobacco. The EC likely will insist 

 that the no-additive rule, be defined as a nontariff 

 barrier and be eliminated after the United Kingdom 

 enters the EC. 



Cigarette Retail Prices 



The most popular brand of cigarette in the United 

 Kingdom retails for the equivalent of 51 U.S. cents 

 per pack of 20. This cigarette is 65 mm. long 

 including the filter. An 83 mm. (including filter) 

 cigarette retails for 78 U.S. cents per pack of 20. 



The components of the retail price of a package of 

 20 cigarettes are: Fiscal charge 66 percent, trade 

 margin 1 1 percent, and manufacturer's cost and 

 profit 23 percent. 



There are no retail price controls on cigarettes in 

 the United Kingdom. Manufacturers suggest retail 

 prices which are adopted by most retailers. 



U.K. Tax Structure 



The U.K. tax on leaf tobacco is largely a revenue 

 duty or fiscal charge. It is £5.041 (US$12. 10)^ for 

 stemmed or unstemmed leaf containing 10 percent or 

 more moisture from MFN countries and £4.964 (US 

 $11.92) for the same categories of Commonwealth 



'At the mid-October 1972 rate of US $2.40 per pound. 



