To combat decreasing volumes, many cigarette companies are forced to increase prices to keep the needed revenue margins. That, combined with continuously rising federal and state taxes, has made buying a pack of cigarettes in the United States quite expensive. As a result, many smokers are leaving traditional premium name brands and trading down to the value and super-vale segment of the market.
Japan Tobacco International’s finance chief Vassilis Vovos said he expects pricier brands to continue losing ground even as affordability improves, and that the shift toward cheaper cigarette brands in the U.S. will top 42% of the market by 2027.
JTI completed the acquisition of U.S. tobacco company Vector Group last year, which pushed its share of the super-value segment to 40% by the fourth quarter of 2024.
“This is a hard trend and we see it continuing over time,” Vovos said, adding steep price increases will continue to push consumers to trade down, a trend visible in many markets where big price gaps emerge.
Industry giants such as Altria and BAT hope the trend away from premium brands is temporary and will recede as economic pressures ease. BAT, which does not produce a product for either of the value markets, saw its U.S. volume fall 10.1% last year.