Like every other CPG industry, the recent history and short-term future evolution of the global cigarettes industry will be dominated by the ongoing fallout of from the Coronavirus pandemic. Coming out of a moderately improved volume and value performance in 2019, the industry is likely to suffer disruption in 2020 with high single-digit volume declines expected and intensifying commoditisation up to 2024.
2019 represented a strong year in relative terms for the global cigarettes industry. Volume decline, excluding China, of 1.9% was the best performance since 2016 and made 2019 the third best year in the last decade. However, 2020 is expected to be considerably worse as global cigarettes faces the impact of Coronavirus (COVID-19).
Average pack price growth accelerated marginally in 2019 with the global average up by 1.5% (versus 1.1% growth in 2018) to reach USD2.6 (USD3.30, excluding China). However, this uptick still represents the second slowest unit price growth on record since 2008 and despite some short-term respite in 2020 year-on-year unit price expansion is expected to slow to just over 1% by 2024.
At 2.7%, cigarettes value decelerated slightly in 2019 with more sluggish growth in developed markets such as Western Europe and North America balanced by quicker expansion in China, rest of Asia Pacific and Eastern Europe. In constant terms, revenue remains challenging for the industry to deliver - particularly in the context of the disposable income pressures that will follow the COVID-19 pandemic.
Absolute volume growth of illicit volumes surged by almost 7% (excluding China) in 2019 to reach 400 billion sticks globally. This represents the largest single year growth in illicit volumes in decades, even ahead of the upcoming COVID-19 effect and was driven by a significant shift in the Russian market which accounted for 45% of the additional volumes
E-vapour value growth decelerated in 2019 (albeit relatively marginally from 2018) as regulatory action and the EVALI crisis in the world’s biggest e-vapour market, the US dented consumer confidence there and internationally. While existing users largely appear to have stuck with the category, the lingering impact of the crisis (and reduced access through COVID-19) may constrain new outswitching from cigarettes.
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