Cigars, Cigarillos and Smoking Tobacco in Azerbaijan

2021 DEVELOPMENTS

Cigars shows improved performance in volume terms but remains a niche area

Cigars is something of a minor tobacco category in Azerbaijan, with relatively high unit prices and the absence of a strong tradition of cigar smoking in the country limiting the appeal of these products. Moreover, even consumers who do enjoy cigars tend to smoke them infrequently rather than on a regular basis, mainly while socialising or on celebratory occasions.

Cigarillos remain much more popular than cigars due to lower unit prices

The performance of cigarillos in 2021 mirrored that of cigars, with retail volume sales rebounding from a steep contraction the previous year as epidemiological and economic conditions in Azerbaijan improved in line with the progression of the national COVID-19 vaccination programme. Cigarillos expanded at a faster pace, however, and remained by far the larger of the two categories in volume and value terms.

Demand for pipe tobacco rebounds in line with increased levels of socialising

Smoking tobacco also saw volume sales return to positive territory in 2021 after a dramatic decline in 2020. Recovery was driven by pipe tobacco, the dominant category, where demand for shisha products picked up as Azerbaijanis began socialising more frequently following the rollout of vaccines and the easing of public health restrictions.

PROSPECTS AND OPPORTUNITIES

Cigarillos set to grow fastest in retail volume sales terms

Cigarillos looks set to be the most dynamic of the main categories within cigars, cigarillos and smoking tobacco in retail volume growth terms over the forecast period. These products should continue to gain popularity as an alternative to cigarettes among smokers seeking to reduce the financial cost of their habit, though their competitiveness in this regard is likely to be eroded by further hikes in excise duty.

Pipe tobacco will continue to benefit from increasing popularity of shisha smoking

Pipe tobacco is expected to post robust growth in retail volume terms throughout the forecast period. The category will continue to benefit from the increasing popularity of shisha smoking as a social activity, primarily among young adults.

Increasing consumer sophistication should help to drive demand in cigars

The outlook for cigars over the forecast period is also reasonably favourable, with retail volume sales projected to increase consistently from 2022. Given that many consumers only smoke cigars when socialising or on celebratory occasions, in the short term demand should be bolstered as more Azerbaijanis start regularly spending time with friends and family outside the home again in line with the further easing of the pandemic.