Cigarettes in Serbia

PROSPECTS

Cigarette volume sales continue to fall due to rising prices and switch to illicit fine cut tobacco

In 2018, retail volume sales of cigarettes continued to decline, with the category having been on a downward trajectory for several years. However, the category’s volume contraction in 2018 was stronger than the decline in smoking prevalence, which suggests that other factors are at play.

Cigarette production and exports set to increase following Philip Morris and JT International’s investment in new manufacturing lines

Cigarette manufacturing in Serbia increased early in the review period as multinational producers made the country one of their most important regional hubs due to its relatively low taxes. However, production and exports declined in 2018.

Modern grocery retailers slowly gain share as consumers change their shopping habits and Lidl arrives on the scene

Although the cigarette distribution landscape saw no major changes in 2018, over the course of the review period, the leading traditional retailers in the category, such as independent small grocers and newsagents-tobacconists/kiosks, suffered a slow decline in volume share, mainly in favour of discounters and supermarkets. This can be attributed to the ongoing modernisation of retailing in Serbia.

COMPETITIVE LANDSCAPE

Philip Morris continues to benefit from the launch of low-priced L&M Loft

Philip Morris continued to rank first in cigarettes in 2018, commanding a clear lead over British American Tobacco, which itself overtook JT International to claim second position. The category remained largely in the hands of multinationals, with only a few local players present, with the most prominent being Monus.

British American Tobacco invests in Pall Mall marketing activities to gain share

The best performing cigarette manufacturer in 2018, however, was British American Tobacco, which registered an even stronger increase in retail volume share than Philip Morris thanks to its Pall Mall brand achieving a double-digit increase in sales. In fact, Pall Mall became the leading cigarette brand in Serbia in 2018, overtaking Marlboro, largely as a result of British American Tobacco’s heavy investment in marketing, primarily point-of-sale promotions, with these appealing to consumers looking to save money, especially in light of rising cigarette prices as a result of ongoing tax hikes.

Manufacturers continue to rationalise their product portfolios

Various brands have disappeared from the Serbian marketplace in recent years, with this likely to continue over the forecast period as multinationals look to replace traditional brands with international ones. Brands which were no longer available in 2018 included Best (Philip Morris), Opposite (Monus), MC, Walter Wolf and York (Rovita), Memphis (JT International) and Vision (British American Tobacco).

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