One of the most notable examples of this was again the Marlboro brand, which, a couple of years ago, was mainly sold in the 88mm size, while, in 2016, the majority of the newly registered brand extensions were 85mm. This allowed them to save on raw materials and maintain margins. Both local and international companies introduced shorter cigarette varieties while keeping prices the same. The Bulgarian market is no exception and has recently witnessed many launches of differently sized cigarettes.
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While focusing their attention on how to maintain the impression of stable prices, the companies also played more with cigarette lengths. Shorter and longer cigarettes – both bring benefits Phillip Morris started competing actively for market share in the mid-range price segment after lowering prices to the level of the most popular brands on the market like Karelia and Victory.
Back in 2014 a pack of Marlboro Gold cost BGN5.1, while, in 2016, Marlboro Touch has been selling for BGN4.8. The company reshuffled its brand portfolio in general and now offers more products with mid-range prices. A similar step was taken by Phillip Morris Bulgaria EOOD, when the cheaper version Marlboro Touch was launched.
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A 20-unit pack of Victory Code cigarettes is currently priced at BGN4.5, while the traditional Victory pack costs BGN4.9. For example, the biggest local player, Bulgartabac Holding Group AD, launched Victory Code, which is an extension to its best-selling brand Victory. Multinational companies with bigger budgets are in a better position to take the tax burden on their own shoulders and use it to grow their market share.Īnother strategy used by the companies was to introduce cheaper extensions to their most popular brands in order to attract consumers who used to purchase cheaper brands. The largest foreign companies offered their brands with smaller price increases than the local companies, at the expense of their own profits. No matter that the excise tax was set up to be unfavourable for international companies selling premium brands – they decided to face down the threat and to seize the initiative instead.
Consequently, the companies that increased prices before the start of 2016 lost some market share. Most of the new prices were introduced only in late winter and early spring of 2016, allowing customers to acclimatise to the changes at a slower pace. The first step taken by the majority of the companies operating in the Bulgarian cigarettes market was to postpone the price increase to the maximum term allowed. The reality was different, however, as multinational companies adopted innovative strategies to keep their market shares intact or growing. That led to the impression that multinational companies would suffer more than the local players, which produce mainly mid-priced and economy cigarettes. The taxation system was changed so that premium cigarettes would have to increase in price more than economy products. Bulgaria remains one of the last frontiers for cigarette manufacturers in the EU, as the local adult smoking prevalence still reaches one-third of the total population and is expected to remain stable in the near future.Īs Bulgarian consumers are still very price sensitive due to their relatively low incomes, the price change was viewed as a big challenge by all cigarette manufacturers.
While local tobacco players suddenly became less competitive, the international companies used the situation as a chance to strengthen their positions on the market. The new year started grimly for smokers in Bulgaria as the excise tax for cigarettes was increased in January 2016.
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