From the point of view of consumer preferences it is quite conservative and stable, on the other hand it is characterised by the high level of competitiveness both globally and nationally.

For centuries tobacco has been considered an ideal consumer product for taxation. It is not goods of prime necessity, which are stable with regard to under-elastic demand, that is why it is reliable source of easy collectable state profit.

According to the World Health Organization one of every three adults older than 15 in the world or about 1.1 billion people smoke. Such a sales volume makes for the significance of tobacco industry for the world economy.

• The total consumption of tobacco products in the world is estimated as 5,5 trillion cigarettes.

According to the World Health Organization analysts' forecasts because of the increase of adult population and increase of consumption in the developing countries the total amount of smokers is expected to be in 2025 approximately 1,6 billion people, in such a case even if the consumption of tobacco products per one smoker decreases the total consumption will increase up to 7 trillion cigarettes.

The Russian tobacco market is one of the biggest markets in the world. Russia occupies the 4^th place (after China, USA and Japan) in the world consumption (about 350 billion cigarettes), which makes about 6% of the world tobacco market volume, moreover in the territory of Russia there live 2% of all population of the planet (including 10 million of immigrants).

According to the latest data about 30% of the country population are smokers. By various estimates in Russia 45 million people in Russia aged 18 — 65 are consumers of tobacco products.

The surveys show that 72% of men and 21% women are either smokers, or used to smoke (more than 60% of man and 17% of women are active smokers).

At the moment the cigarette market in Russia is in stagnation. The market volume increase in natural terms in 2006 if compared to 2005 was lower than 1%. The decrease of the number of smokers in Russia because of the demographic situation is compensated by the increase of immigrants (by estimates 10-12 million people), which makes a key fact of the demographic increase in Russia.

• The Russian tobacco market occupies about 2,3-2,4% of all retail market of foodstuffs and non-foods (400 billion dollars).

The price rate of growth for tobacco products remain behind the prices for other consumer goods. It is caused by the high level of competitiveness in every price segment.

The market volume in the cost volume in retail sales in 2006 was about 245 billion rubles (9,4 billion dollars). The market increase by 2005 in the cost value was more than 12%.

Annual market growth in the first place is related to the compensation through increase of the selling price in annual indexation of tobacco excise and structural market change (growth of demand for cigarettes from the high-cost segments).

In todays market there are seven principal players, sharing 96% of the Russian tobacco market. Among the biggest participants of the tobacco market the only tobacco producer with the Russian share capital is JSC «Donskoy Tabak».

The total production capacities of the Russian tobacco enterprises are estimated more than 470 billion cigarettes per year.

Tobacco goods production dynamics   Period Billion of mouthpiece cigarettes and cigarettes 1995 141,1 1996 141,9 1997 170,3 1998 210,7 1999 281,5 2000 347,5 2001 374,3 2002 388,2 2003 374 2004 382 2005 405,0 2006 413,9