Having experienced varied but ultimately relatively moderate impact from COVID-19 disruption, as the tobacco industry begins to tentatively emerge from the pandemic, the question is to what extent pre-existing patterns of advancing secular decline in cigarettes and migration to reduced risk products will be re-established, or even accelerated.
Excluding China, the global cigarettes market experienced the largest volume decline in its modern history in 2020, at 4.2%. However, given the unprecedented conditions this was arguably a relatively robust performance with some markets significantly outperforming their secular decline run rates
Average pack price growth accelerated marginally in 2020 with the global average up by 1.8% (versus 1.4% growth in 2019) to reach USD2.8 (USD3.50, excluding China). Excluding China however, this amounts to growth of 4.1% significantly ahead of previous years and reflective of the fact pricing in China was flat and that volume loss internationally was skewed to lower price markets.
Real terms value growth, excluding China, decelerated somewhat in 2020 but remained within the realms of established value growth in the category over recent years. The relative stability of value is likely in part a function of the fact that some developed markets, such as the US and South Korea, saw strong performance through the pandemic, while volumes were lost through lower value emerging markets.
Absolute volume growth of illicit volumes contracted by almost 6% (excluding China) in 2020 to 370 billion sticks. This represents the largest single year decline in illicit volumes in decades (following the largest single year growth in 2019), driven by pandemic border closures and restrictions on movement which prevented consumer access to the product. Economic difficulty could again spur future growth however.
The heated tobacco category continued to growth through the pandemic in 20200 with 30% year-on-year volume expansion, only moderately down from the 38% recorded in 2019 as access restrictions and disruption to the face-to-face user acquisition model used in some markets was balanced by increase in e-commerce and heightened awareness of the category.
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