Cigars continued to record retail volume declines in 2021, due to a shrinking consumer base, logistics challenges as well as rising prices. Tobacco taxes in Australia are based on volume, making cigars a very expensive product for most local consumers.
Fine cut tobacco recorded flat retail volume growth in 2021, due to a narrowing price gap with cigarettes as well as a stable consumer base. Previously, consumers shifted to fine cut tobacco due to its lower price.
In 2021, Scandinavian Tobacco Group, the leading player in cigars and cigarillos, decided to close its sales offices in Australia and New Zealand, changing its route-to-market approach in these two countries. As such, the player will be operating via a distributor model.
Going forward, economic pressures, most notably inflation rates, combined with increasing excise taxes and declining smoking prevalence will continue to dampen overall demand for cigars, cigarillos and smoking tobacco. Categories with relatively higher unit prices, such as cigars and pipe tobacco, will be the hardest hit, especially with consumers finding it difficult to find a wide range of selection in local retailers.
Although cigars is expected to experience declining demand due to a smaller consumer base and rising prices, retailers will continue to look for ways to offer personalised experiences and premium offerings to consumers. The lack of diversity of premium handmade cigars has created opportunities for both retailers and manufacturers in Australia.
Pipe tobacco will remain a niche area of the category in Australia, favoured almost exclusively by older consumers. Despite being less dynamic compared to fine cut tobacco, cigars and cigarillos, it still enjoys a relatively loyal consumer base of older Australians, and hence does not suffer from the same level of cannibalisation or downtrading in comparison.
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Cigars, Cigarillos and Smoking Tobacco
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