At an overall level, the global tobacco industry has experienced relative stability so far in 2020 resulting in marginal downgrading of forecasts in the main category, cigarettes. However, this obscures variation across markets with some, such as the US, witnessing the strongest volumes for several years while others, suffered severe COVID-related disruption. In coming years, the economic impact of the pandemic will exert the most significant lingering impact as consumer increasingly trade down.
While most tobacco markets experienced a measure of stability through 2020, driver mixes – consumer behaviour and perception, government reactions, immediacy of economic impact – have varied across markets. With notable exceptions, consumers and governments have broadly prioritised tobacco access through the year.
While the largest cigarette market in the world, China, along with other major markets, like the US and South Korea, performed less poorly than expected in 2020, the overall global (excluding China) outlook has worsened from an expected 4% decline to what is now anticipated to be a 6% drop for the full year.
It is clear that near-term responses to the crisis from consumers and governments have had a substantial impact on performance. Whether reliance on cigarettes as stress or boredom relievers, or authorities disrupting markets through supply restrictions or border closures, these drivers will unwind quickly, while the pressure on financial health and the downtrading and moderation it brings will persist.
Looking forward, it will be important to discount the short-term pandemic drivers and consider the extent to which consumers will once again reflect on their tobacco and nicotine use. It may well be that the cigarette bull run continues into summer 2021 in some markets, as smokers “celebrate freedom”, but a longer term trend away from tobacco use is likely to strengthen further.
One of the prompters of this re-evaluation will be interest in and access to a wider range of natural functional actives which have the authenticity credentials and, in many cases, the flexibility to service specific consumer needs post-pandemic, such as anxiety and stress relief. This presents nicotine companies with the challenge of meeting their consumers along the post-COVID path they are travelling.
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