Cigarettes in Germany

PROSPECTS

Healthy living megatrend to negatively impact cigarettes sales

Cigarettes sales are negatively affected by the increased public awareness of health-related issues, as the smoking prevalence rate in Germany further declined in 2018. One of the eight global megatrends identified by Euromonitor International affecting consumer behaviour over the next 15 years is Healthy Living, a trend for increased personal wellbeing, which is affecting a range of consumer product categories.

Track and Trace system to put cost pressure on manufacturers

According to industry players, the new Track and Trace system, which came into effect in May 2019, will put cost pressure mainly on small- and mid-sized tobacco manufacturers, because costs and benefits are not in reasonable proportions. The TDP2 (Tobacco Products Directive 2), furthermore, is a complex system, which requires a technical upgrade in order to record all the data and, besides the cost factor, is also a big burden on cigarettes manufacturer with regard to resources and time.

Consumers will continue to look for value-for-money options and large pack sizes

The main trend expected to continue to shape cigarettes sales over the forecast period is the demand for large packs. Due to the EU TPD2 legislation, price has become one of the key influencing factors affecting consumers’ purchasing decisions.

COMPETITIVE LANDSCAPE

Philip Morris continues to lead cigarettes

Philip Morris remained the leading player in cigarettes in Germany in 2018, followed by Reemstma (Imperial Tobacco), BAT and JTI. Philip Morris’ position can be attributed largely to its well-known brands Marlboro and L&M, which are the two leading cigarettes brands in terms of retail volume sales.

Small and medium-sized players to lose out

Tobacco regulations over the review period proved challenging for smaller businesses as implementation usually involves heavy investment, with multinationals like Philip Morris and BAT tending to benefit from economies of scale. Small and medium-sized German companies faced high implementation costs in 2016, for example, when the minimum pack size was changed to 20 sticks.

Additive-free brands continue to grow

Another growth driver, which is expected to continue to impact cigarettes over the forecast period, is additive-free tobacco. This trend is expected to continue over the forecast period, with cigarettes players addressing this demand, which is likely to continue to be of benefit.

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