Cheap Cigarettes Gaining Ground in US Market, JTI Predicts
Japan Tobacco International (JTI) anticipates that the preference for lower-priced cigarette brands in the United States will surpass 40% of the market by 2027. This shift is driven by consumers prioritizing affordability amidst rising inflation and interest rates.
US smokers have been transitioning from premium brands like Altria's Marlboro and British American Tobacco's (BAT) Newport to budget-friendly options. As a result, BAT witnessed a 10.1% decline in its US cigarette sales last year. Altria has also witnessed a loss in market share.
Despite hopes that the trend is transient, JTI believes higher-priced brands will continue to face challenges. "This is a significant trend that we expect to persist," said Vassilis Vovos, JTI's finance chief.
Tobacco manufacturers like Altria and BAT have relied on price increases to bolster revenue in markets like the US. However, declining smoking rates have led to a structural decline in industry volumes.
JTI, a subsidiary of Japan Tobacco, expects the combined value and super value segment to comprise 42% of the US market by 2027, up from approximately 32% in 2022. This estimate is based on the company's full-year results and its recent acquisition of Vector Group, which significantly increased its presence in the super value segment.