Tobacco in Uzbekistan

COVID-19 impact on tobacco

Demand for tobacco products in Uzbekistan is set to experience a decline in 2020 in response to COVID-19 as local consumers, concerned about their financial situation during the pandemic, are set to reduce their purchases of legitimate cigarettes and turn more towards illicit trade with the latter predicted to record stronger volume growth compared to the previous year. This will be a continuation of a trend already noted at the end of the review period when rising prices of cigarettes pushed them out of reach of lower-income consumers who increasingly switched to illicit trade due to rising excise taxes.

COVID-19 country impact

Uzbekistan was among the early adopters of strict measures to prevent the spread of the COVID-19 outbreak. On 13 March, Uzbekistan suspended flights to France, Spain and the UK.

Trading up trend noted amongst urban consumers leading to volume share gain and growth for the mid-price band, although demand for illicit trade remains amongst lower-income groups

The largest tobacco category of cigarettes continued to record a low decline in volume terms in 2019 following a series of prices hikes and rising excise tax as the Uzbekistani government continued to drive up unit prices to make this product less attractive to consumers in an attempt to reduce smoking prevalence in the country. Therefore, current value sales continued to record double-digit growth in 2019.

UZBAT retains dominance of cigarettes in 2019 but continues to slowly lose ground to more dynamic players, especially Philip Morris with its new production facilities

British American Tobacco Uzbekistan (UZBAT) retained its dominance of cigarettes in Uzbekistan in 2019 with a wide product portfolio covering all price segments which includes leading brands Kent, Pall Mall and Viceroy. Due to its local production facilities, competitive pricing has traditionally been a beneficial strategy for the leader, particularly due to a ban on promoting these products.

Monetary concerns set to influence demand for economy and illicit cigarettes from 2021, while pipe tobacco will take longer to recover due to health-related concerns over the spread of the virus through hookah pipe sharing

2021 is set to see further declines in demand for cigarettes following budgetary restrictions during lockdown in the country, while the government may also take the opportunity to further educate the public with health-related warnings linked to smoking, COVID-19 and respiratory complications to strengthen its efforts to reduce smoking prevalence amongst the adult population. Nevertheless, with the average unit price of cigarettes also set to continue rising, monetary concerns are more likely to push consumers towards illicit trade with the latter set to record double-digit volume growth in 2020; both trends are set to soften towards the end of the forecast period as consumers become more relaxed in their spending or less concerned about health warnings as lockdown measures are gradually eased.

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