Key factors affecting the industry in recent times have included: the phasing out of quotas on local crop production from the late 1980s; the August 1997 abolition of State licence fees on tobacco; the September 1999 merger of Rothmans and W.D & H.O. Wills and the subsequent entry of Imperial Tobacco Australia (resulting from a 16 per cent divestment of market share by sale of trademarks required of BATA by the Australian Competition and Consumer Commission to facilitate the merger); and, finally, the November 1999 changes to the tobacco excise regime1. 

This paper describes recent developments in tobacco growing, manufacturing and retailing, and some of the major effects associated with changes in cigarette packaging and pricing. 

The Tobacco Research & Development Corporation lists the following major factors as affecting trends: 

1. A continuing decline in Australian tobacco consumption coupled with manufacturing companies’ reductions in local sourcing. The effects have been to consolidate tobacco leaf production in northern Victoria, and to bring about a substantial reduction in north Queensland production. 

2. The deregulated tobacco leaf market place allows manufacturers to source leaf globally with the consequence that domestic leaf prices are strongly influenced by world global price trends, subject to grade differentials. The extent to which full exposure to international competition impacts on short term purchasing decisions is influenced by such variables as global prices, exchange rate movements, leaf quality and stock holdings in Australia. The level of the Australian dollar and the improvement in leaf quality has assisted the competitive position of Australian growers in recent years. However, recent increases in the value of the Australian dollar may partly reverse these gains. 

3. Rationalisation is occurring at an accelerated rate in the growing industry, and has occurred among manufacturers. There are now only two Australian manufacturers operating in Australia, Philip Morris and British American Tobacco Australasia. 

4. Ongoing need to provide manufacturers with high quality tobacco. Manufacturers continue to require growers to ensure tobacco leaf meets exacting quality requirements to avoid any problems with potential contaminants6.