Tobacco in Brazil

Unstable economic scenario continues to pressure tobacco market in Brazil

While there had been timid signs of recovery for the economic scenario in Brazil by the end of 2018, little impact has been perceived in consumers’ confidence and their level to spend. The unemployment rate remains steady at a high level, while available income continues to be committed with increasing product prices and rising costs of living.

Brazil might become the leading country for illicit cigarettes

In a situation worsened by the unstable economic situation, illicit cigarettes remained the fastest growing category by volume in the tobacco market in Brazil. With double-digit volume growth in 2018, more than half of cigarettes total volume sales in the country is now accounted for by illicit products.

Souza Cruz continues to lead tobacco in Brazil

Accounting for more than half the volume share of licit cigarettes in Brazil, Souza Cruz - the local subsidiary of British American Tobacco - continues to lead the tobacco market in the country. Together with the other two most important manufacturers, Philip Morris Brasil and JT International, the company also felt the pressure from the economic scenario and the growing illicit segment but managed to sustain its leadership through a wide portfolio of brands, ranging from economy to more premium ones.

Instability in distribution channels due to lower profit margins

Although independent small grocers and tobacco specialists remain the most important distribution channels for cigarettes, and cigars and cigarillos, respectively, instability has surrounded the market in the beginning of 2019. The Bakeries Trade Union of São Paulo State (in Portuguese, Sampapão), has been through a strike in sales of cigarettes, claiming the profit margins are not attractive, while the availability of such products at points of sale is also a target for robberies.

Smoking tobacco expected to be the only licit category to grow in volume until 2023

While licit cigarettes, cigars and cigarillos continue to decline in volume sales in the country, smoking tobacco - driven by fine cut tobacco - is expected to be the only licit category to register a positive CAGR in volume sales until 2023. This is in line with the trend of “back to basics for status”, in which consumers are moving away from mass and industrialised products, towards those with a craft or hand-made positioning.

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