Inflation Boosts Discount Cigarette Sales

U.S. smokers are switching to lower priced cigarettes in the wake of inflation, reports The Wall Street Journal. Cheaper tobacco brands increased their share of the U.S. cigarette market to 27.1 percent in the third quarter of 2022, up 1.8 percentage points from a year ago.

While the tobacco industry tends to weather economic downturns better than other sectors, smokers are sensitive to inflation because they have lower incomes than the average consumer. In the U.S., smoking prevalence among people earning less than $35,000 a year is about 21 percent compared with 7 percent for those earning more than $100,000.

The trend toward lower priced cigarettes favors smaller players like Vector Group, which reported record tobacco revenues in the third quarter of 2022. The company sold 30 percent more cigarettes during the quarter than it did the same time last year. Driven by the significant growth of its price-fighting Montego brand, Vector’s wholesale market share reached 5.7 percent in the quarter—its highest market share since 1984.

The Wall Street Journal notes that Vector’s position is strengthened by the fact that, due to the company’s relatively small market share, about one-third of its volumes are exempt from payments under the 1998 Master Settlement Agreement.

Imperial Brands, which has a big portfolio of discount cigarette brands in the U.S., has also been gaining market share as smokers look for bargains.