Cigarettes are set to decrease over the forecast period due to increasing regulatory and socioeconomic pressures. Consumers are increasingly trading down or preferring the illicit market. International brands are well placed to capture growth via innovations and flavouring. Coronavirus impact will be more severe in countries where distribution and supply have been impacted. In-home consumption and non-social occasions may increase because of stress and anxiety.
The impact of COVID-19 will be more severe in countries where distribution and supply have been impacted such as Chile, Argentina and Peru. Consumers will adapt to in-home consumption and non-social occasions and may increasingly smoke because of stress and anxiety. However, the region had already seen a review period of mainly negative growth.
Across the region consumers are looking to more affordable products to sustain their smoking habits. With few exceptions this has resulted in a general down-trade in the market. However, the price band benefiting from this varies from country to country and includes the illicit market. This trend is set to accelerate after the COVID-19 pandemic.
One important pocket of growth for cigarettes in the region is flavour capsules. In Chile, this market segment proves to be resilient and continues to increase in volume and value terms. We should expect even more innovation in flavours and delivery of nicotine over the forecast period.
Independent small grocers are increasingly relevant for consumers in Latin America, especially during the COVID-19 pandemic, as consumers seek an affordable and convenient channel to make their purchases. This channel is also key competing against illicit markets.
Price increases, often fuelled by higher taxes coupled with greater availability via informal channels, contribute to the rapid growth of illicit cigarettes in the region, specifically in Ecuador and Peru. This will strengthen the tobacco lobby’s hand in conversations regarding the amount the category can feasibly be taxed.
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