Cigarettes in the Czech Republic

2020 IMPACT

The closure of the country’s borders has a strong dampening effect on cigarette consumption in 2020

Consumption of cigarettes declined in 2020 in volume terms. Sales were most affected by the closure of the country’s borders, which were fully closed in the spring and partially closed in the autumn and winter of 2020.

Ban on menthol in cigarettes stimulates switches to e-vapour products, heated tobacco and cigarillos

Menthol flavoured cigarettes and menthol capsules were banned under EU regulation from May 2020. As a result, cigarette smokers who strongly prefer menthol flavour over tobacco flavour switched to e-vapour products and heated tobacco.

Mild contraction in value sales of cigarettes as tax hikes and lower disposable incomes discourage smoking

The value sales of cigarettes experienced a mild contraction in 2020. In addition to diminished purchasing power since the onset of the pandemic, the taxation factor was especially significant given the continual hikes in cigarette excise tax in the review period, with a further one implemented from March 2020.

RECOVERY AND OPPORTUNITIES

Annual tax rises cause further contraction in volume sales over the forecast period

Retail volume sales of cigarettes are expected to continue declining in 2021 and throughout the remainder of the forecast period. The excise tax on tobacco products increased again in 2021 with the government planning to increase this further in 2022 and 2023.

Return of illicit trade to normal levels by 2022 once the pandemic recedes and borders reopen

The number of illicit cigarettes dropped in 2020 as the closure of the country’s borders designed to halt virus transmission also brought an end to smuggling. As the pandemic, recedes and vaccines are rolled out, the opening of the borders is expected to lead to a gradual return of Illicit trade.

Diminishing popularity of premium brands due to declining disposable income and regular tax increases

In response to a combination of regular tax increases and projected weaker purchasing power in the Czech Republic, economy brands such as RGD by Philip Morris and Moon and West by Imperial Tobacco and mid-priced brands such as Rothmans by British American Tobacco, Benson & Hedges and Winston by JTI are expected to gain ground. This will be to the detriment of premium brands such as Marlboro Gold by Philip Morris and Davidoff by Imperial Tobacco.