Cigarettes in Serbia

2020 IMPACT

Pandemic has little effect on demand for cigarettes in 2020 but border closures helps sales

Volume and retail value sales of cigarettes were not strongly influenced by COVID-19 in Serbia in 2020 as the category continued declining in volume terms, with the category having been on a downward trajectory for several years. However, the decline was slower in 2020 compared to 2019 due to border closures for part of the year which had a negative effect on illicit trade of cigarettes and illicit fine cut tobacco.

Consumers shift from premium to mid-priced brands in 2020 due to increase in unemployment

The COVID-19 pandemic had one important impact on the cigarettes category in 2020; the retail volume share of premium priced cigarettes declined during the year and shifted to mid-priced cigarettes. This shift was mainly as a result of the economic downturn that Serbia suffered as a result of the pandemic, with consumer confidence and disposable income levels declining as many Serbians lost their jobs during the year, motivating some consumers to switch from premium to mid-priced cigarettes.

Pall Mall and L&M Loft increases share as consumers look for value with few launches in 2020

COVID-19 forced most cigarette producers to refrain from new product investments and launches during 2020. Consequently, there were only a few new product launches in 2020 and they included the redesigning of existing brands, like in the case of Philip Morris Operations ad’s L&M Loft XL.

RECOVERY AND OPPORTUNITIES

Mid-priced cigarette demand set to decline while sales of premium brands expected to increase during the forecast period

Demand for premium priced cigarettes was hit in 2020 due to COVID-19 and its negative impact on the economy, but these cigarette brands are expected to bounce back and see their volume share growing over the entire forecast period as a result. This is mainly as a result of consumers who traded down to mid-priced cigarettes in 2020 that are expected to return to their favourite premium brands during the forecast period, with mid-priced cigarettes volume share decreasing in the short and medium term.

Manufacturers expected to be more active during the forecast period

Cigarette manufacturers are expected to be much more active in terms of new product launches in 2021 as the successful roll out of COVID-19 vaccinations allows the crisis surrounding COVID-19 to diminish. In addition, promotional activities which are often limited to POS promotions, and which were largely prevented by anti-pandemic measures in 2020, are likely to resume its important marketing roll of cigarettes in the country.

Increases in taxes set to boost sales over the forecast period

Serbia’s smoking prevalence is set to continue decreasing over the forecast period resulting in further declines of retail volume sales growth of cigarettes, albeit at a slower rate. However, increasing taxes will allow constant retail value sales to see positive, but slow, growth rates during the forecast period.