Cigarettes in Estonia

PROSPECTS

Lower social acceptance and tighter legislation reduce smoking prevalence further

The cigarettes category is shrinking as a result of a significant number of people either quitting smoking or not even starting to smoke. Every year a 7-10% drop in volume sales is expected.

Rise in illicit border trade poses another challenge to cigarettes

Illicit border trade with Latvia is influencing black market sales of cigarettes, contributing a significant percentage of overall illicit cigarettes. This illegal border activity is due to softer tobacco regulation policies and lower excise rates.

New product development is mainly limited to brand extensions

Regular Estonian smokers tend to be loyal to their preferred brands. Moreover, graphic health warnings on cigarette packs and advertising restrictions have made it very difficult for manufacturers to attract consumers of rival brands.

COMPETITIVE LANDSCAPE

Players utilise their established brands to compete in an ever-more restrictive environment

Philip Morris Eesti OÜ and Japan Tobacco International retained the leading positions in cigarettes sales in 2018. They remained in first and second respectively by consolidating the brands they produce and releasing new products that serve as brand extensions.

Heated tobacco products and governmental changes make the future of cigarettes uncertain

Company and brand activities in Estonia remained very frugal in 2018-2019. Despite a few new launches, mainly brand extensions, cigarette manufacturers have refrained from investing more in the Estonian market as in global terms they are shifting their focus from cigarettes to heated tobacco products, which are not available in the country yet because of law restrictions.

Retailers focus on stocking up, while channel shares are migrating

Pre-purchasing and pre-stocking has been adopted by retailers since the 2016 excise hike policy, and every year in December retailers buy cigarettes in bulk to last a month. This allows them to adopt a smoother pricing transition and lets consumers better adapt to the price shock.

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