Cigar smokers in South Africa are showing increasing interest in longer and thicker cigars, hence this is likely to be a key area for innovation over the forecast period. Given that they typically command higher unit prices, the launch of such products will help manufacturers to offset further excise duty hikes.
Retail volume sales of cigarillos look set to continue declining rapidly over the forecast period. Aside from rising health-consciousness in South Africa, demand will be negatively affected by further hikes in excise duty, which will stimulate illicit trade.
Fine cut tobacco is expected to remain the most dynamic performer in volume and current value growth terms over the forecast period. This is partly due to the category’s growing appeal among urban millennials, though it should also continue to attract older smokers seeking a more economical alternative to cigarettes.
As retail unit prices rose in line with another hike in excise duty, illicit trade continued to undermine demand for legal cigars and cigarillos in South Africa in 2018. The impact of price increases was compounded by worsening economic conditions, which made many smokers more budget-conscious.
Due in part to its comparatively low tax burden, fine cut tobacco is increasingly perceived as a more economical alternative to cigarettes among smokers in South Africa. Together with the growing popularity of fine cut tobacco among young adults in urban areas, this should continue to attract new entrants into the category over the forecast period.
Many smokers in South Africa perceive fine cut tobacco as less harmful to health than cigarettes, despite the fact that there is no scientific evidence to support this belief. In recent years, this perception has been strengthened by the growing availability of products that are positioned as organic or free from additives, including extensions of well-known imported brands such as Colts and Golden Virginia.
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