Since 2015, the Brazilian cigarette market has been plagued by strong and consistent growth of the illegal sector, creating a difficult position for regular brands and offering consumers cheaper products with wide availability. This created an exodus towards illegal brands and pushed the regular market to offer more economy brands, which now hold most of the shares.
Under ANVISA resolution 15 on 17 January 2003, cigarettes are not allowed to be sold online via e-commerce. However, the market is currently exploring a grey area of delivery apps.
COVID-19 for several categories in alcoholic drinks showed the strength of premium products, with growth in high-price categories such as whiskies. This trend did not translate to cigarettes.
Although the scenario has been positive for legal brands in 2020, this is not expected to continue, as the illegal market tends to search for new options and is highly flexible in terms of distribution. There are several new brands coming into the Brazilian market, such as Korean illegal cigarette brands as well as national illegal brands.
Since 2015, one of the main concerns of the industry has been the level of taxation on the category, which consistently increases costs and final prices, allowing for illegal brands to be more competitive and gain space. After the severity of the COVID-19 impact on public expenditure, the government resurrected talks about increasing taxation on tobacco, alcoholic drinks and added-sugar products, as part of a reformulation of the Brazilian tax system.
The growing consumption of alcoholic drinks during 2020 for wellness reasons showed that Brazilians are willing to spend in indulgence products and this trend is likely to continue as the macroeconomic scenario deteriorates and the repressed demand for social occasions bounces back, making the cigarette market an option in the future. This trend is directly aligned with what was seen in 2019, with growth of cigarette consumption in spite of increasing health concerns and lower prevalence.
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This report originates from Passport, our Cigarettes research and analysis database.
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