Cigarettes in Brazil

PRE-COVID-19 PERFORMANCE

Retail volume rises unexpectedly in 2019, but illicit sales of cigarettes keep growing

After many years of recording declining retail volume sales, cigarettes recorded strong retail volume growth in 2019, although illicit sales of cigarettes also continued to see dynamic growth in this year. While there is no overall industry consensus, one of the main potential drivers of retail volume sales might have been the increasing accessibility of lower-priced cigarettes as industry players look to fight illicit sales with economy brands.

Very strong growth for economy brands in 2019

The growth in retail volume sales of cigarettes in 2019 was driven by economy brands, which could be seen in the fact that retail sales of overall cigarettes declined in current value terms in 2019 after two years of strong growth. These brands are seen as being best able to compete with the illicit products, as it makes it easier for consumers to choose licit products if they are economy brands due to having the closest possible prices to the illicit products.

Leading player Souza Cruz restructuring its operations to maintain its competitiveness

Souza Cruz, British American Tobacco’s Brazilian subsidiary, decided to close its factory in Blumenau, Santa Catarina, as part of a reorganisation of its operations in order to improve competitiveness and, with the rise of illegal brands, improve operational logistics and cut costs.

2020 AND BEYOND

COVID-19 impact

In 2020, sales of cigarettes are expected to grow marginally in constant 2019 value terms. This compares to a marginal decline forecast in our 2019 edition of tobacco.

Recovery and opportunities

Economy brands of cigarettes were continuing to gain share in 2020, mostly at the expense of mid-price products, but also premium brands. The success of economy brands, already a firm trend in the years leading up to 2020, will only be increased by the economic problems – eg job losses – coming in the wake of measures to slow the spread of COVID-19.

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