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Cigarettes in Western Europe

July 2020

Rising taxation and anti-smoking provisions have put downward pressure on smoking prevalence in Western Europe. The expansion of vapour and heated products in key markets such as the UK, Germany or France also explain the decline in cigarette sales, which is expected to further stand out due to the impact of the Covid 19 crisis in cigarette sales expected over the forecast period.

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Key findings

Increasing taxation and illicit trade driving sales down in Western Europe

Strong decline in sales over the last five years in Western Europe due to growing taxation, illicit trade growth boosted by strong price differences between countries, increasing anti-smoking measures and strong growth of vapour and heated products across countries. The impact of COVID-19 on tobacco sales is expected to further deteriorate the negative trend seen over the review period.

Taxation led to large cigarette volume decline in France

France suffered the strongest decline in cigarette sales as a result of large increases in taxation and illicit trade, which hardest hit this country. Spain, Turkey and Portugal performed better than other countries in the region benefiting from economic recovery and improving disposable income, although tobacco sales in these countries is likely to be negatively affected by the impact of COVID-19 on tourist inflows in 2020 and beyond if travel restrictions persist.

Convenience is the key factor for cigarette retail distribution

The distribution landscape for cigarettes is quite fragmented in most Western European markets. Traditional retailers, in particular independent small grocers and other grocery retailers, are the main distribution channels in the region benefiting from high numbers of outlets and convenient locations, whereas modern grocery retailers such as supermarkets/hypermarkets and discounters are gaining share, favoured by modern retailing’s expansion across markets.

Cigarettes in Western Europe concentrated on top three players

PMI, Japan Tobacco and BAT are the largest companies in most Western European markets, with Imperial Brands remaining behind the top three players. Japan Tobacco declined strongly over the review period due to its heavy reliance on sales in France, whereas PMI and BAT are better diversified geographically and gained share over Japan Tobacco. No other players compete on a regional level.

Introduction

Scope
Key findings
Illicit tobacco set to remain stable over 2019-2024
Illicit trade on the rise in France

Regional Overview

Strong retail volume decline in Western Europe
Cigarette sales expected to continue its downward trend
Negative developments across markets with few exceptions
Strong declines in all price bands for France and the UK
Regular is the most dominant format across all markets
Larger pack sizes gaining popularity due to increasing taxation
Flavoured cigarettes driving innovation in Western Europe
Poor performance for all price bands in the UK and Germany
Mid and premium price bands on rise in Turkey
Decline in sales concentrated on regular cigarettes
Innovation drives demand towards other cigarette formats
Larger pack sizes becoming preferred choice in the UK
Larger pack sizes on decline in France
Flavour capsule becoming preferred choice across markets
Flavour capsule gaining popularity in the UK
Convenience is the key driver in distribution (1)
Convenience is the key driver in distribution (2)

Leading Companies and Brands

Few players dominate the Western European cigarettes market
PMI dominates region’s competitive landscape
Chesterfield climbs to third position in Western Europe
PMI sales concentrated in Turkey and Germany

Forecast Projections

Further volume decline due to increasing taxation and illicit trade (1)
Further volume decline due to increasing taxation and illicit trade (2)
Tax increases moderate retail value declines (1)
Tax increases moderate retail value declines (2)

Country Snapshots

Menthol ban brings new tobacco products in the UK
Further restrictions on tobacco approved in Belgium
Plain packaging mandatory in Turkey
Austria: market context
Austria: competitive and retail landscape
Belgium: market context
Belgium: competitive and retail landscape
Denmark: market context
Denmark: competitive and retail landscape
France: market context
France: competitive and retail landscape
Finland: market context
Finland: competitive and retail landscape
Germany: market context
Germany: competitive and retail landscape
Greece: market context
Greece: competitive and retail landscape
Ireland: market context
Ireland: competitive and retail landscape
Italy: market context
Italy: competitive and retail landscape
Netherlands: market context
Netherlands: competitive and retail landscape
Norway: market context
Norway: competitive and retail landscape
Portugal: market context
Portugal: competitive and retail landscape
Spain: market context
Spain: competitive and retail landscape
Sweden: market context
Sweden: competitive and retail landscape
Switzerland: market context
Switzerland: competitive and retail landscape
Turkey: market context
Turkey: competitive and retail landscape
UK: market context
UK: competitive and retail landscape
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