Although cigarillos recorded dynamic volume growth from 2016 to 2020, the boost to sales ended in 2021, with the category starting to shrink. The rapid growth of cigarillos was supported by the preferential tax rate given to cigarillos compared with cigarettes, because cigarillos were taxed by weight due to their classification as cigars.
COVID-19-related disruption to imports of cigars from the Dominican Republic continued in 2021. Production was interrupted by the spread of COVID-19, as because of lockdown measures cigar factories were closed.
Fine cut tobacco continued to see volume growth in 2021, as some smokers migrated from cigarettes. Fine cut tobacco sees growth in sales every time the tax on cigarettes is increased, and 2021 was no exception, due to the significant increase in the price of cigarettes.
Since the price advantage of cigarillos has been lost along with the tax adjustment enforced in October 2021, sales in the category are expected to record a sharp decline from 2022 onwards. As one of the advantages of cigarillos is that they emit a less unpleasant smell when burned compared with cigarettes, because of the use of tobacco leaf as rolling paper, some consumers will continue to choose cigarillos if they like the taste even after 2022.
Fine cut tobacco is expected to maintain its positive performance in the forecast period, as a cheaper alternative to cigarettes. With global inflation, the prices of commodities are expected to keep rising in 2022 and beyond, which will encourage consumers to look for cheaper alternatives, and this will continue to have a positive impact on fine cut tobacco.
While pipe tobacco is set to see a continuous decline in the forecast period, due to its old-fashioned image and the ageing consumer base, there is low but slowly growing popularity of water pipe tobacco, or shisha. Shisha bars and cafés are currently found mainly in urban areas such as Tokyo, Osaka and Nagoya, but the spread to mid-sized cities is set to continue.
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Cigars, Cigarillos and Smoking Tobacco
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