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Cigarettes in Eastern Europe

July 2021

Smoking prevalence continues to decline in Eastern Europe, with retail volume sales of cigarettes also falling. Some consumers continue to try and cut down on their smoking or quit altogether for health reasons, brought into even greater focus by Coronavirus (COVID-19), as a virus that attacks the respiratory system, or due to reasons of cost, with the pandemic’s economic impact adding to the pressure on household budgets that tobacco tax rises had already been affecting.

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Key Findings

Sales still declining in 2020

Sales of cigarettes continued declining in Eastern Europe in 2020, with most countries in the region recording falling unit volumes. Rising tax levels continue negatively impacting sales of cigarettes, as have the economic consequences of the measures implemented to try and contain the spread of the COVID-19 virus.

Closed borders impact illicit trade

It was not all bad news for cigarettes players in Eastern Europe, with some countries seeing a marked decline in illicit trade, with cross-border imports and smuggling in some countries hit by the forced closure of national borders as an anti-COVID-19 measure. However, in some countries, eg Poland, illicit trade saw an improved performance in 2020 due to the financial impact on households of the pandemic, while, even in those countries in which a strong decline was seen, eg Russia, a strong rebound is expected in 2021.

Flavoured cigarette EU ban comes into force

Flavour capsules are expected to enjoy further growth in Russia and Ukraine, the region’s two biggest markets. New products developments continued to be seen in this area in Russia in 2020, where the trend is moving ahead in line with the increasing popularity of compact cigarettes. However, sales of flavoured cigarettes are now banned in all the EU’s Eastern European markets.

Sales will continue to decline in the forecast period

Sales of cigarettes are expected to continue declining in unit volume terms in Eastern Europe. Rising tax rates and health considerations will still be exerting downward pressure on smoking prevalence and sales, while increasing competition is being seen from new products like heated tobacco, with major industry players increasingly focusing on such new product areas. Illicit trade will also continue to be a thorn in the side of the tobacco industry.

Introduction

Scope
Key findings

Regional Overview

Eastern Europe has the highest per capita consumption
Annual sales declines to continue in Eastern Europe over 2020-2025
Health concerns, tax hikes and illicit trade hit Russian sales
All price bands declining in most countries in 2020
Regular remains the dominant format across all markets
20-stick packs the dominant format
EU ban on flavoured cigarettes comes into force
Declines across the board in all price bands in Ukraine and Russia
Consumers want best value for money amidst pandemic and tax hikes
Superslim makes major gains in Poland over 2015-2020
Slim format accounting for almost half of retail volume in Russia
After Hungary moves away from small pack sizes in the historic period…
…North Macedonia becomes the next country to outlaw smaller packs
EU ban on flavoured cigarettes comes into force…
…but flavoured cigarettes gaining popularity in Russia and Ukraine
Convenience is an important factor in the distribution of cigarettes…
…but supermarkets channel picks up share during the pandemic in 2020

Leading Companies and Brands

Highly concentrated competitive landscape in Eastern Europe
Japan Tobacco holds on to its recently acquired leading position
Russia still the main market for Eastern Europe’s leading players
Philip Morris and Pall Mall move up the rankings in 2020

Forecast Projections

Volumes to decline across all Eastern European markets
Eastern Europe to lose more sales than any other region in 2020-2025
Ukraine to see positive value growth over 2020-2025…
…albeit driven, in part, by strong annual tax rises

Country Snapshots

Belarus: Market Context
Belarus: Competitive and Retail Landscape
Bosnia and Herzegovina: Market Context
Bosnia and Herzegovina: Competitive and Retail Landscape
Bulgaria: Market Context
Bulgaria: Competitive and Retail Landscape
Croatia: Market Context
Croatia: Competitive and Retail Landscape
Czech Republic: Market Context
Czech Republic: Competitive and Retail Landscape
Estonia: Market Context
Estonia: Competitive and Retail Landscape
Georgia: Market Context
Georgia: Competitive and Retail Landscape
Hungary: Market Context
Hungary: Competitive and Retail Landscape
Latvia: Market Context
Latvia: Competitive and Retail Landscape
Lithuania: Market Context
Lithuania: Competitive and Retail Landscape
North Macedonia: Market Context
North Macedonia: Competitive and Retail Landscape
Poland: Market Context
Poland: Competitive and Retail Landscape
Romania: Market Context
Romania: Competitive and Retail Landscape
Russia: Market Context
Russia: Competitive and Retail Landscape
Serbia: Market Context
Serbia: Competitive and Retail Landscape
Slovakia: Market Context
Slovakia: Competitive and Retail Landscape
Slovenia: Market Context
Slovenia: Competitive and Retail Landscape
Ukraine: Market Context
Ukraine: Competitive and Retail Landscape
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