After cigarettes saw a particularly strong retail volume decline in 2019, the fall in sales slowed down in 2020. Local tourism increased due to the closure of borders as a result of COVID-19, whilst some return of the workforce was seen from the EU because of the pandemic.
The economy price band in cigarettes remained the largest in 2020, as a large proportion of the population remained price-conscious. However, the economy segment lost share to the premium segment in 2020, as not all consumers were equally affected by the economic impact of the pandemic.
Distribution channel shifts were seen as a result of the implementation of restrictions to stop the spread of COVID-19. Modern trade channels such as supermarkets, hypermarkets and convenience stores, as well as to a lesser extent e-commerce, saw rising shares of sales.
Despite the expectation of current value growth for cigarettes throughout the forecast period, retail volume sales are set to continue to decline. Although some of this will be due to concern about health, this is not expected to be the most significant factor.
Further migration is expected to illicit trade throughout the forecast period, which will also be pushed mostly by consumers’ price sensitivity due to the economic impact of COVID-19. Although the economy price band is projected to continue to lead in terms of share of retail volume sales, more consumers are likely to switch from the economy price band to cheaper illegal cigarettes.
There are various legal issues which are being discussed by the government which could negatively impact volume sales of cigarettes during the forecast period if they are made law. These include a ban on the visible placement of cigarettes in stores; restrictions on taste and aroma; an increase in the size of medical warnings on packages (to 65%); new pack format (huge investment needed from manufacturers to change production); and an increase in the legal age from 18 to 21 for both selling and buying.
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RETAIL SALES OF DUTY PAID CIGARETTES The definition of cigarettes for the purposes of this study is duty-paid, machine manufactured white-stick products. This does not exclude brands of cigarettes that do not use white paper but it is designed to exclude the volume of non-machine manufactured products such as bidis/beedis (India) and papirosy (Russia), and other smoking products made with tobacco but that either do not resemble cigarettes as recognised in the US or Europe, or those that are not machine manufactured. The exclusion of these products is intended to give a more accurate picture of the "true" market for cigarettes and cigars which has been distorted in official statistics and published reports because of the inclusion of hybrid products. NB Please note that due to its central importance and integration into the industry mainstream, Indonesia’s market data does include hand-rolled kreteks DUTY-FREE sales are excluded from retail sales, as are herbal cigarettes. ILLICIT TRADE CIGARETTES Not included in retail sales, but split out separately in volume terms only. Defined as non-duty paid cigarettes (includes smuggled & counterfeit/fake products combined). Legitimate cross-border sales are considered duty-paid. Sales arising from a foreign national purchasing cheaper cigarettes in bulk in a neighbouring country for personal use and exported back are attributed to the country where the purchase is made (e.g. bulk cigarette sales by British nationals in France are attributed to France).See All of Our Definitions
This report originates from Passport, our Cigarettes research and analysis database.
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