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New Zealand's tobacco industry and economic contribution

We belong to one of the world’s most international businesses, and our economic contribution stretches from a local to a global level.

The New Zealand tobacco industry makes a significant contribution to the New Zealand economy in terms of government revenue, retail sales and employment.

Tobacco products make their largest financial contribution to the New Zealand economy in the form of excise taxation.

The tobacco industry in New Zealand pays over NZ$1.6 billion in total taxes each year. 

Tobacco is also an important source of revenue for about 5,000 New Zealand retailers, the vast majority of whom are small, independent retailers and dairies. 

Market size

In 2015, 1.8 billion tailor made cigarettes (TMC) and 532 tonnes of roll-your-own (RYO) tobacco was sold to the trade by the three main tobacco companies in New Zealand.

There have been a number of contributors to the transformation of the tobacco market in New Zealand.

In the late 1980s New Zealand experienced a dramatic shift from TMC to  RYO, which was driven by RYO's value proposition. As a result, RYO smoking incidence increased from six percent in 1988 to 12.4 percent in 1994. The rate of RYO growth slowed in 1995 as a result of the Government equalising RYO excise and aligning it with TMC.

In 1990 the Smoke-Free Environments Act was introduced resulting in restrictions on public and workplace smoking and on the marketing of tobacco products, including the banning of tobacco advertising in print media and the prohibition of tobacco sponsorship.

In 1999 Rothmans and W.D. & H.O. Wills merged and Imperial Tobacco entered the New Zealand market with 17 percent share of the TMC market and 29 percent of the RYO market, as a result of divested brands from the newly formed British American Tobacco (New Zealand) Limited. In spite of the tax equalisation of 1995, the RYO category has continued to grow as consumers choose to economise, exacerbated by periodic ad hoc excise increases over recent years.

The retail sector

More than NZ$2.5 billion worth of cigarette and tobacco product sales by the industry are recorded each year in New Zealand, with approximately 74 per cent of this value representing Government tobacco taxes. GST and excise paid by British American Tobacco New Zealand alone in 2015 totalled approximately NZ$1.2 billion.

The New Zealand retail market for tobacco products can be segmented into five major channels:

  1. Convenience Independent Channel - Dairies and independently owned petrol stations
  2. Convenience Organised Channel - Petrol Stations (BP, Caltex, Z Energy, Mobil)
  3. Grocery Channel - Supermarkets
  4. HORECA Channel - Bars, nightclubs, hotels, cafes, restaurants
  5. Duty Free Channel

Sales of  tobacco products are important to a significant number of retailers,  especially dairies, mini marts, newsagents, service stations and metropolitan convenience stores.

For some stores, tobacco products account for up to 46%* of retail revenues.

Other categories that are important to retailers in this retail segment are:

  • Beverages
  • Snack foods and confectionery
  • Dairy products
  • Grocery and general merchandise
  • Newspapers and magazines

To find out more about the global tobacco market, visit our British American Tobacco Group website .

Source: State of The Industry Survey New Zealand Year 2014 by New Zealand Association of Convenience Stores.