The impact of COVID-19 on cigars, cigarillos and smoking tobacco was mostly related to price sensitivity, as in all three categories demand rose for products that balanced good quality with affordable prices. The price factor was particularly relevant in smoking tobacco, which benefitted strongly from consumers shifting from the more expensive cigarettes category to smoking tobacco, especially to fine cut tobacco.
Cigars and cigarillos recorded slightly faster volume growth in 2020 than in the previous year. This is because items in the category tend to be smoked by higher-income consumers, who have more resilient incomes and were less negatively impacted by the financial impact of COVID-19 in 2020.
The competitive landscape remained unchanged in smoking tobacco in 2020, with the top three manufacturers, Philip Morris Italia, Imperial Tobacco Italy, and British American Tobacco Italia, together accounting for a dominant share of volume sales. However, innovation was limited this year, with Philip Morris Italia, for instance, focused predominantly on heated tobacco.
One of the main focuses for cigars and cigarillos manufacturers for 2021-2022 will be distribution. As restrictions are anticipated to remain in place, at least for the first half of 2021, it will be important for manufacturers to identify where to distribute their products.
Premiumisation will continue to be strongly relevant in cigars, as demand for high-quality, exclusive products is increasing. Consumers of such products are in a better financial position, will be less affected by the negative economic impact of COVID-19, and willing to continue spending on unusual and exotic products.
Demand for smoking tobacco is set to keep growing, mostly as consumers shift from cigarettes to the more affordable fine cut tobacco. However, the rapid development in other categories, especially heated tobacco, is set to become a big threat for fine cut tobacco, with an increasing number of consumers likely to switch from traditional cigarettes and smoking tobacco to heated tobacco over the forecast period.
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