Cigarettes Declines Accelerate
Cigarette volume declines accelerated in the third quarter, and retailers and wholesalers expect them to continue to decline in 2023, Herzog said. Goldman Sachs expects cigarette volumes to decline 7% by the end of 2022, and to be down 5% in 2023.
These declines reflect ongoing pressure on the consumer from broader inflation and frequent manufacturer price hikes, driving reduced tobacco purchase frequency and downtrading, or a shift to alternative products, Herzog said. High gas prices also remain a concern for the tobacco industry given the disproportionate drag higher gas prices have on disposable incomes of price-sensitive tobacco consumers, she said.
These factors are causing a negative affect on cigarette volumes, according to about 40% of survey respondents. More than 70% of retailers are seeing downtrading within cigarettes, and about 60% said they were seeing downtrading away from the cigarette category to more non-combustible options.
Customers also made less cigarette purchases per trip in the third quarter, according to 39% of survey respondents.