The Shift to the Functional: Has the Pleasure Gone Out of Tobacco?

Tobacco: from pillar to pariah

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.

Functional instead of lifestyle positioning

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.

Caused by taxation and regulation

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.

Impact on the power of brands

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”.

Options for the industry

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.

What this report includes

• Top-level strategic analysis of how major consumer trends will influence global markets
• Consumer insight
• Impact across all relevant consumer markets
• Unique graphics and case studies
• Key market snapshots
• Accompanying presentation to synthesise main findings

Why buy this report

• Identify factors driving change now and in the future
• Understand motivation
• Forward-looking outlook
• Briefings and presentation should provoke lively discussion at senior level
• Take a step back from micro trends
• Get up to date estimates and comment