Economics of Beverage and Cigarette Markets

This assignment explores the economics of beverage and cigarette markets globally. It examines consumption patterns, supply and production factors, and highlights trends in specific regions like Asia-Pacific. The analysis delves into the complimentary relationship between smoking and beer consumption, illustrating how changes in one market affect the other. Additionally, it discusses real-world examples like the Isle of Man's experience with banning cigarettes in prisons to understand the impact of policies on individual behavior.

Running head: ALCOHOL AND TOBACO MARKET
ALCOHOL AND TOBACO MARKET
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1ALCOHOL AND TOBACO MARKET
TABLE OF CONTENT
INTRODUCTION......................................................................................................................2
MARKET CONDITIONS & DISCUSSION.............................................................................2
BEER:....................................................................................................................................2
WINE:....................................................................................................................................2
CIGARETTE:........................................................................................................................3
Impact of health warnings on cigarette packaging on beer consumption..............................4
Impact of yeast shortage on cigarette purchases....................................................................5
Impact of Isle of Man banning cigarettes on crime rates.......................................................6
CONCLUSION..........................................................................................................................6
REFERENCE.............................................................................................................................7

2ALCOHOL AND TOBACO MARKET
INTRODUCTION
The on-going generation of human comprises of addiction as one of the inseparable
component in their lifestyle. The excessive craving for drugs, alcohol and cigarettes are on ever
increasing trend pattern in the consumption that brings forth the strong and profitable existence of
the subsequent markets with increased supply over time that also stirred the health related
awareness.
This essay presents a discussion on the markets of beer, cigarettes and wine, three most
consumed product worldwide. Further it tries to capture what impact the health concerned
packaging of these products have on the consumption (Casswell, 2012). The strong correlation
between smoking and drinking beer has been found to be proven and a brief case study is analysed
in this essay followed by conclusion in the end.
MARKET CONDITIONS & DISCUSSION
BEER:
As per the overview of global market for beer, the industry has shown significant growth
over last few years. The market supply and demand of the product is combined effect of various
factors like climatic condition, imposed tax and local prices, regulations of govt. demographic
regulations and so on (Daube, 2012). The extensive advertising promotional activities and rise in
disposable income has led to hiked consumption in some specific areas of North America, Asia and
European nations. Moreover the growing investment on different kind of beers indicates the
untapped growth opportunity the industry possesses at its heart.
WINE:
Mostly concentrated in Europe and North American regions, the wine production is
composed of approximately more than 1 million producers ranging from small to big ones. France is
the manufacturing ground for most famous brands of wines. The global market for wine is largely
driven by huge consumption habit pattern, changing lifestyle and growing income (Hawkins Holden
& McCambridge, 2012). The half of the share of global trade of wine is taken care of by Europe
alone. The recent market value of global wine production is $304 billion with and predicted
estimation of reaching $380 billion by the year 2022 reflecting the opportunity of healthy investment
and return from the market.
CIGARETTE:
90% of the tobacco is sold in form of cigarettes that account for multi-billion dollar market in
the world (source: IMARC group). The market size of the product can be assessed from the revenue
the industry earns which is around $860 billion in 2016. Despite the decreasing demand in
developed countries due to the impacts the social awareness, the cigarettes tend to capture growing
market. The reason behind such is the higher prices of them that incentivize the seller, growth in

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consumption volume and pattern in developing countries, population explosion that creates more
demand with maximum share of demand comes from young generation (Thrasher et al., 2012). Asia
pacific provides largest market for cigarettes that take care of almost 60% of consumption made
globally.
From the statistics it can be said that that veer and cigarettes have existence of
complimentarity that is changes in the price of one affects the consumption of the other element.10
percent increase in the price of the cigarettes leads to 1 percent fall in the consumption of beer. This
reflects the strong relationship drinking beer and smoking cigarettes have than that of between wine
and smokes.
Impact of health warnings on cigarette packaging on beer consumption
One of the important non-price mechanisms to restrict and reduce consumption of
cigarettes is the implementation of Graphic Warning Labels (McCreanor, 2013). This has been
widespread policy implemented globally and has been found to be effective than textual warnings.
The impact in favour of the warning has been greater among adolescent smokers. There has been
cessation in induced smoking with significant reduction in tobacco intake and smoking as well. The
impact of health warning thus can have positive impact on reduction of smoking rate. At the same
price level now there would be downward shift in the demand curve in the cigarette market (Jha &
Peto, 2014). Since cigarette and beer consumption have complimentary good effects, reduction in
smoking rate will drive down the beer consumption rate also though amount of fall or shift in beer
might not be same in both the market. The reason behind this is the existence of non-smoker
consumers of beer who will keep their consumption intact.
.

4ALCOHOL AND TOBACO MARKET
Impact of yeast shortage on cigarette purchases
Alcoholic beverages are product of fermentation by yeast. In wine and beer production beer
is widely used. Availability of yeast is not directly related to cigarettes consumption or purchase but
have impact through the complimentary effect of beverage consumption (Hubbard et al., 2015). The
trend reveals that drinking and smoking are closely related but the beer has more strong relation
with smoke than wine. The trend of smoking while drinking beer is high than that of with wine
(Hawkins Holden & McCambridge, 2012). Now if there appears shortage of yeast, less beer and wine
will be produced. At same price level now beer supply will fall showing a upward shift in supply curve
and as result. If we analyze the situation just in terms of compliment goods then cigarette purchase
might fall shifting demand curve downward but again this fall would be small as there are many
smokers who are addicted and smoke irrespective of the drinks they intake.
Impact of Isle of Man banning cigarettes on crime rates
The ban of cigarettes in the prisons of Isle of Man resulted in significant drop (almost 14%) in
the crime rate in the region. The commitment of crime in terms of burglary, stealing cards and
personal assaults which were pretty high in the region has declined sharply evoking much of
curiosity in the society as whole (Mays et al., 2014). The very idea of no smokes available in the
prison could stop criminals from committing crime and avoid going to jail. This is example of huge
craving for smokes and how this drives the consumption decision of the people. People having
higher addiction toward smoking can forgo the motives or satisfaction they derived from committing
crimes. This can be highly interpreted in terms of higher taste and preference as the factor of
demand driving the higher craving that stops them in order to avoid detainment. Individual taste and
preference give birth to certain kind of intense demand decisions that shifts the demand in the

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market. The prison authority successfully detected and applied this factor in order create
disincentive for committing crime and become imprisoned.
CONCLUSION
The discussion reveals the current scenario and prospects in markets for beverage and
cigarettes with subsequent trends in consumption, supply and production factors. The young
population all over the world are more prone to smoking and drinking beer with growth in the
markets of Asia pacific regions. Wine has large scale of consumers concentrated in western
countries. The analysis of complimentary effect found between smoking and drinking beer reveals
that in absence of price change, fall in the demand or supply of any good will also cause significant
shift in the demand or supply of complimentary goods. Moreover the taste and preference for
smoking is so high that it could drop the crime rate of Isle of Man indicating higher craze for
addiction over crime.

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REFERENCE
Casswell, S. (2012). Current status of alcohol marketing policy—an urgent challenge for global
governance. Addiction, 107(3), 478-485.
Daube, M. (2012). Alcohol and tobacco. Australian and New Zealand journal of public health, 36(2),
108-110.
Hawkins, B., Holden, C., & McCambridge, J. (2012). Alcohol industry influence on UK alcohol policy: a
new research agenda for public health. Critical public health, 22(3), 297-305.
Hubbard, G., Garnett, A., Lewis, P., & O'Brien, T. (2015). Essentials of Economics 3e.
Jha, P., & Peto, R. (2014). Global effects of smoking, of quitting, and of taxing tobacco. New England
Journal of Medicine, 370(1), 60-68.
Mays, D., Niaura, R. S., Evans, W. D., Hammond, D., Luta, G., & Tercyak, K. P. (2014). Cigarette
packaging and health warnings: the impact of plain packaging and message framing on
young smokers. Tobacco control, tobaccocontrol-2013.
McCreanor, T., Lyons, A., Griffin, C., Goodwin, I., Moewaka Barnes, H., & Hutton, F. (2013). Youth
drinking cultures, social networking and alcohol marketing: Implications for public
health. Critical public health, 23(1), 110-120.
Thrasher, J. F., Carpenter, M. J., Andrews, J. O., Gray, K. M., Alberg, A. J., Navarro, A., ... & Cummings,
K. M. (2012). Cigarette warning label policy alternatives and smoking-related health
disparities. American journal of preventive medicine, 43(6), 590-600.