Modelling and Simulation of Demand Elasticity and Consumer Behaviour in Russian Tobacco Industry

This paper provides multistage analysis of consumer demand in Russian tobacco industry. It uses Nielsen data and the internal PMI* consumer research to uncover both quantitative and qualitative factors affecting the consumer demand. The investigation was made at several levels, and it assesses overall industry dynamics, companies’ performance, split of the market by the price segments and performance of particular brands. Depending on the level assessed, the paper uses various econometrical approaches, including time series, cross-sectional and panel data analysis. The econometrical analysis provides the evidence that the factors affecting the consumer demand are primarily non-financial. Moreover, the paper provides insights about some aspects of competition in the tobacco industry and highlights the importance of brand differentiation and proliferation as tools allowing the tobacco companies to maintain high profitability