• May 26, 2024

Cigarette Market Poised for Disruption

 Cigarette Market Poised for Disruption
Photo: Cheryl Holt from Pixabay

The cigarette industry is likely to suffer disruption in 2020 with high single-digit volume declines expected and intensifying commoditization up to 2024, according to a new report.

Last year was a relatively strong year for the business. Volume decline, excluding China, of 1.9 percent was the best performance since 2016 and made 2019 the third best year in the past decade. However, 2020 is expected to be considerably worse as global cigarette sales face the impact of the coronavirus.

Average pack price growth accelerated marginally in 2019, with the global average up by 1.5 percent (versus 1.1 percent growth in 2018) to reach $2.6 ($3.30, excluding China). However, this uptick still represents the second-slowest unit price growth on record since 2008, and despite some short-term respite in 2020, year-on-year unit price expansion is expected to slow to just over 1 percent by 2024.

At 2.7 percent, cigarette value decelerated slightly in 2019, with more sluggish growth in developed markets such as Western Europe and North America balanced by quicker expansion in China, the rest of Asia-Pacific and Eastern Europe. In constant terms, revenue remains challenging for the industry to deliver—particularly in the context of the disposable income pressures that will follow the Covid-19 pandemic, according to the report’s authors.

Absolute volume growth of illicit volumes surged by almost 7 percent (excluding China) in 2019 to reach 400 billion sticks globally. This represents the largest single-year growth in illicit volumes in decades, even ahead of the upcoming Covid-19 effect and was driven by a significant shift in the Russian market, which accounted for 45 percent of the additional volumes.