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The Impact of Coronavirus on Tobacco

April 2020

This report examines the outlook for the Coronavirus (COVID-19) global pandemic on the tobacco industry. The social, economic and health effects of the COVID-19 crisis will be felt in every global market for several years to come. While it is the case that the tobacco industry is less dramatically impacted in the near term in most (though not all) world markets, the temptation to treat the pandemic as a short period of disruption before a return to normalcy should be avoided.

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COVID-19 impact: Key findings

A global multifaceted crisis from which tobacco cannot emerge unscathed

The social, economic and health effects of the COVID-19 crisis will be felt in every global market for several years to come. While it is the case that the tobacco industry is less dramatically impacted in the near term in most (though not all) world markets, the temptation to treat the pandemic as a short period of disruption before a return to normalcy should be avoided.

“Recession proofing” is not what it used to be

Nicotine consumers are habitual in a way that largely transcends environmental turmoil. Indeed, it is well established that some consumers may increase their consumption during periods of economic distress. However, the consumption which does persist is of a markedly poorer quality, something which is a serious concern for an industry already struggling to generate revenue growth.

Increased tobacco excise will (and regulation could) follow

In most global markets, tobacco taxation increases by governments during and after the pandemic are not a question of ‘if?’, but rather ‘how soon?’ and ‘how big?’ These increases will inevitably fuel chronic consumer downtrading. A belief that tobacco use is linked to virus outcomes, as well as support for widescale societal action for health, could drive further regulatory restrictions in some markets.

The consumer will be changed in ways which tobacco and nicotine may struggle to address

Post COVID-19, the tobacco industry will be confronted with a consumer who, on average, will be more conscious of their health (particularly immune health), inhabit public space less frequently, consider their interactions with others more carefully, scrutinise the value of their consumption more zealously and (perhaps most of all) be looking for a way to escape doing all of the above.

Introduction

Scope
COVID-19 impact: Key findings
Tobacco and COVID-19
COVID-19 in context

Economic Outlook

Global GDP is likely to contract in 2020 under the baseline scenario
The COVID-19 pandemic impacts both supply and demand
In our baseline view, the pandemic peaks in June 2020
Three scenarios examine the impact of a more severe outbreak
Our view in short
Forecasts for Real GDP growth in 2020 under different scenarios
Financial markets on risk-off mode as COVID-19 entered Italy
China: An early glimpse into the economic cost of the virus
COVID-19 highlights need for supply chain diversification
Fiscal stimulus a challenge with restrictions on expenditure
What could alleviate the economic effects of the pandemic?
What could exacerbate the economic impact of the pandemic?

Industry Impact

Tobacco was already struggling with a new normal
COVID-19 impact at a glance
Routes to disruption
Tobacco’s recessionary floor is higher than those of other industries
Could COVID-19 establish a new normal for tobacco control?
Tobacco supply chain should withstand all but very lengthy shutdowns
Limited potential for offline to online shifts in tobacco distribution
The five-step consumer progression of COVID-19
The five-step consumer progression of COVID-19 for tobacco
Nicotine use is not truly discretionary … until it is
Social cigarette smoking is visible but not hugely material to volumes
Stranger things: Could tobacco use be protective against COVID-19?
Changing physical circumstances: Long-term Industry Impact
Changing values mindset: Minding myself more than ever

Geographic Impact

China: Smoking remains a part of life
Western Europe: Downtrading beckons
US: Secular decline set to ramp up
India and South Africa: Two lands where tobacco is not essential

Corporate Response

Main challenges for tobacco players
Crisis should reemphasise investment in modern oral formats
Vaccine efforts signal another alternative for tobacco players

Conclusion

COVID-19 outlook for tobacco: Old or new normal?

About Our Analytic Capabilities

About Euromonitor International’s Macro Model
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