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UPDATE - Hungary tobacco industry expands to HUF 500bn in 2011

Hungary’s tobacco industry grew almost 10% to HUF 500bn last year, industry insiders said at a press conference organised by the Hungarian Association of Tobacco Industry Investors (DBMSZ) on Thursday.

Hungarian tobacco companies BAT Pecsi Dohanygyar, Continental Dohanyipari, Imperial Tobacco Magyarorszag and Universal Leaf Tobacco Magyarorszag established DBMSZ at the beginning of last December.

This year tobacco sales are expected to fall because of the economy, the higher excise tax, expected stricter rule on tobacco sales and the expansion of the no-smoking policy in public places, they said. Making more public establishments smoke-free has resulted in as much as a 5% reduction in sales, judging from experience abroad, they added.

An increase in the excise tax on tobacco products from the middle of this year is expected to raise retail prices by 20%, the association estimates.

The association is pressing for a loosening of planned additional regulation of retail tobacco sales.

MPs of governing Fidesz submitted a bill to Parliament in December that would require a concession from the state for retail tobacco sales and limit the number of retail outlets to one per 2,000 residents from 2013 .

The association believes this number ought to be reduced to one shop per 1,100-1,200 residents, which would cut the total number of tobacco retailers from 43,000 to 10,000, instead of to 6,000-7,000.

The association warned the changes to retail tobacco sales could raise the market share of illegal tobacco sales from 3-6% to as much as 15%, which would result in an HUF 80bn drop in taxes for the state.

The association agrees with proposals that would make it more difficult for Hungarians under the age of 18 to get tobacco products as well as to create more jobs.