Tobacco Industry Country Profile – Sri Lanka
- 1 Sri Lanka
- 2 Tobacco Industry in Sri Lanka
- 3 TobaccoUnmasked Resources
- 4 External Resources
- 5 Notes
Sri Lanka is an island in the Indian Ocean with a population of 20.2 million. A country with a predominantly rural population distribution (77.4%), the average Life Expectancy at Birth is 74.9 years. With a literacy rate of 93.2% and universal free health and education, the country reports a Human Development Index of 0.757. It is a Lower Middle Income Country with a GDP Per Capita of USD 3,924. Known as an agriculture based country in the past, Sri Lanka is currently showing a downward trend in agricultural activities, with only 7.9% contribution to the country’s GDP. As of 2016, 56.6% of the GDP was generated via services, with ‘Industry’ following second, contributing 26.2%. From 1977, Sri Lanka has taken an ‘open economy’ approach, generating a conducive environment for foreign investors and industries.
In the period from 1505 to 1948, Sri Lanka was consecutively invaded by Portuguese, Dutch and the British. Tobacco cultivation was first introduced by the Portuguese and it is speculated that they also introduced the habit of tobacco smoking. British American Tobacco (BAT) first established its branch in Sri Lanka in 1906 and the Ceylon Tobacco Company PLC (CTC) was incorporated in 1932. ’Ceylon’, the term British used as the name of the country continues to be the name of the tobacco company (Ceylon Tobacco Company), established in the British colonial era.
Tobacco Smoking in Sri Lanka
According to the 2015 STEPWise approach to Surveillance (STEPs) Non-Communicable Disease risk factor survey results by the World Health Organization and the Sri Lankan Ministry of Health, proportion of current smokers among those aged between 18 and 69 years was 15.0%. The daily smoking prevalence rate was 10.2%. The current tobacco smoking prevalence among men was 29.4% and 0.1% among women.
Spot Survey, conducted biannually by the Alcohol and Drug Information Centre (ADIC), on tobacco smoking trends of males over the age of 15 years, reports a steady decrease of smoking prevalence from the beginning of the 1990s to 2015 (Image 1).
According to the same survey, main tobacco product smoked was manufactured cigarettes with a proportion of 91%. Bidi (or Beedi), the home industry based hand-rolled smoking product, was consumed by only 8%. Even though the CTC claims that 40-45% of tobacco smoking market is comprised of bidi smokers during the year 2009 to 2015 period, many local studies conducted in the same period reported prevalence rates lower than 10%. More details can be found in Industry Arguments: Increase of Beedi Consumption.
Burden of Tobacco Use
The death toll of tobacco in Sri Lanka estimated in the year 2015, is 222 deaths per week. Thus, 1 in every 10 Sri Lankan adult deaths is caused by tobacco. The reported annual revenue of the CTC in 2015, Sri Lankan Rupees (LKR) 106.5 Billion, (the equivalent of approximately 722 Million US dollars) indicates the economic burden of tobacco on Sri Lankan households. Local evidence suggests some rural low income households spend around 40% of their income on tobacco. According to the Tobacco Atlas, “a smoker in Sri Lanka would have to spend 15.2% the of national median income to purchase 10 of the cheapest cigarettes to smoke each day!”.
Tobacco Industry in Sri Lanka
The CTC has a monopoly over the cigarette market in Sri Lanka. CTC is also directly involved in the complete process of production of cigarettes to the local market; namely, tobacco cultivation, manufacturing of cigarettes and distribution to retailers. It remains a subsidiary of BAT, operating via its local counterpart British American Tobacco Holdings (Sri Lanka). According to the 2015 Annual Report of the CTC, BAT owns 84.13% of shares of CTC. According to a report from World Bank in 2003, CTC owns 99% of the manufactured cigarette market in Sri Lanka with the remaining 1% comprising of imported cigarettes. According to a report by the John Keells Stock Brokers (Pvt) Ltd quoting the CTC in 2008, CTC owns 96% of the cigarette market, the remaining 4% comprising of illicit cigarettes According to the same report;
- “The Sri Lankan cigarette market is on a decline, with the pace of decline escalating because of the implementation of the National Alcohol and Tobacco Act in December 2006 which prohibits smoking and drinking in enclosed public places such as restaurants and social clubs and in public transport and as well as continuous excise led price increases.”
A report by the Amba Research Private Limited in 2013 also reports a decline in the cigarette market in Sri Lanka. According to them, the main reasons for the observed decline are the rising cost of cigarettes driven by increased tax and growing health awareness about the adverse health effects of smoking. The report also explains the increased sales volumes in 2010-2011 period was due to the opening of country’s Northern and Eastern Market after the ending of the war.
Tobacco Cultivation & Manufacturing
Almost 100% of the tobacco used for cigarette manufacturing in Sri Lanka is cultivated in the country, which accounted for approximately 3000 tons of tobacco in 2014. Even though CTC includes tobacco farmers to the livelihoods it generates, tobacco farmers are not directly employed by the CTC.
CTC operates via two factories; the Colombo Factory and the Green Leaf Threshing Plant in Kandy. According to the Sri Lanka Directory of Exporters, there are three other tobacco manufacturing companies in Sri Lanka;
- United Tobacco Processing Pvt Ltd
- Thansher and Company
- Agio Tobacco Processing Company Pvt Ltd
Distribution, Sales & Profits
According to the CTC, its cigarettes are distributed via 16 ‘exclusive distributors’. The network of retailers is reportedly 72,000. CTC implements a trade loyalty programme named Abhisheka to reward retailers selling high numbers of cigarettes. CTC’s reported profits (after tax deductions) in the year 2015 was slightly more than LKR 10.5 Billion (10,550,913,000), which approximately amounts for USD 69 Million.
Role in the Economy - Tax, Exports & Employment
The contribution to the government tax revenue by the CTC in 2015 was 7%. The details on tobacco tax and related issues can be found under the key topic.
CTC exports cigarettes, which contributes approximately 1% to its overall annual revenue. According to the Sri Lanka Export Development Board, CTC also exports unmanufactured tobacco. Sri Lanka Directory of Exporters, also lists the following as exporters of tobacco products; 
- United Tobacco Processing Pvt Ltd – exports cigarettes and tobacco cuts
- Thansher and Company – exports cigars
- Agio Tobacco Processing Company Pvt Ltd – exports semi-manufactured tobacco
Even though CTC claims they are generating more than 181,000 livelihoods, as of 2015, the number of permanent employees in CTC was 238 and only 55 others were under direct contract. The number of employees in the other tobacco companies operating in Sri Lanka are;
- United Tobacco Processing Pvt Ltd - 1875.
- Thansher and Company - between 250-499.
- Agio Tobacco Processing Company Pvt Ltd – 1800
CTC operates its social investments under a subsidiary named Outreach Projects (Guarantee) Limited. The reported social investments of the CTC in the year 2015 is LKR 47 Million. For further details on social investments of CTC please visit the pages under; Sustainable Agriculture Development Programme (SADP) | SADP Plus | SADP Lite | Gangaramaya Temple Wesak Zone | Na Sevana Community Development Project.
Other relevant TobaccoUnmasked entries:
- Alcohol and Drug Information Centre
- Ceylon Tobacco Company
- United Tobacco Processors
- Sri Lanka Country Profile – Tobacco Tactics
- Department of Census and Statistics, Census of Population and Housing, 2012, 2012, accessed November 2016
- Central Bank of Sri Lanka. Sri Lanka Socio-economic data 2016, June 2016, accessed March 2017
- World Bank. Sri Lanka Development Policy Review, 08 December 2004, accessed March 2017
- C.G.Uragoda, A History of Medicine in Sri Lanka. Colombo: Sri Lanka Medical Association, 1987
- Amba Research Private Limited. Ceylon Tobacco Company PLC, 31st October 2013, accessed March 2017
- Ceylon Tobacco Company, Ceylon Tobacco Company Annual Report 2015, 2016, accessed November 2016
- Alcohol and Drug Information Centre, ADIC Spot Survey July 2015, 2016, accessed November 2016
- Ministry of Health, Nutrition and Indigenous Medicine, Sri Lanka. Non-communicable Disease Risk Factor Survey, Sri Lanka 2015, Colombo: Ministry of Health/World Health Organization, 2016, accessed November 2016
- M.Eriksen, J.Mackay, N.Schulger, et.al.The Tobacco Atlas. Fifth Ed., Atlanta: American Cancer Society, 2015, accessed November 2016
- V.De Silva, D.Samarasinghe, R.Hanvella. Association between concurrent alcohol and tobacco use and poverty. Drug and Alcohol Review. 2011,30:69–73
- N.Arunathilake, M.Opatha, The Economics of Tobacco in Sri Lanka., Economics of Tobacco Control Paper No. 12, Tobacco Free Initiative, World Health Organization, 2003, accessed November 2016
- S Rajasekaran. Ceylon Tobacco Company (CTC): Corporate Update, September 2008, accessed March 2017
- Sri Lanka Excise Department, Sri Lanka Excise Department Performance Report 2014, Colombo: Sri Lanka Excise Department, 2015, accessed November 2016
- Sri Lanka Export Development Board. Sri Lanka Directory of Exporters, 2017, accessed March 2017
- Royal Agio Cigars. The Organisation: Agio Cigars in Sri Lanka, undated, accessed March 2017
- United Tobacco Processing Pvt Ltd. Factories, undated, accessed March 2017
- Kompass International. the Thansher and Company, undated, accessed March 2017
- European Chamber of Commerce of Sri Lanka. Agio Tobacco Processing Co. (Pvt) Ltd., undated, accessed March 2017