The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.
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Learn moreMay 2014
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More and more tobacco use is in “inferior volumes” (economy cigarettes, RYO and illicit trade) particularly in developed markets. Driven by restrictive regulation and regular price increases, this denotes an irreversible shift to consumption concerned primarily with function rather than pleasure. This trend clearly has substantial implications for the future of the global cigarette market, as well as emerging categories, and marks the beginning of the end of brand (and therefore pricing) power.
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Gain competitive intelligence about market leaders. Track key industry trends, opportunities and threats. Inform your marketing, brand, strategy and market development, sales and supply functions.
For many decades, the tobacco industry benefited from the central place of tobacco consumption in society, and at the heart of smokers’ lives as an affordable luxury. However, as a result of constantly increasing unit prices and ever stricter regulation, tobacco is seen more and more by its consumers simply as a grudgingly afforded necessity.
This process of “functionalisation” is leading to decreased consumption in many global markets, and, in most, significantly lower value sales. This process is characterised by disengagement with tobacco and has consequences for its future as a “lifestyle” product and for those of tobacco alternatives.
Decades of tobacco control, in the form of both tax increases and marketing and consumption bans, have created a negative feedback loop in which smoking is a less pleasant activity for which people must pay ever more, a cycle amplified by growing health awareness.
Price rises force consumers to seek out cheaper brands or alternatives to cigarette consumption, damaging previously powerful brands and thus impacting manufacturers’ capacity to continue generating profit, despite years of “pricing power”.
The industry has two sets of possible approaches to the problem of functionalisation. Negative: Challenge the introduction of “disproportionate” regulation through advocacy and legal action and manage declines through cost-cutting and portfolio adjustment. Positive: Innovate better products and develop the positive case for nicotine use.
Gain competitive intelligence about market leaders. Track key industry trends, opportunities and threats. Inform your marketing, brand, strategy and market development, sales and supply functions.