The Cigarette Market Is Contracting, But Why?

The cigarette market is dying out across the world. Cigarettes were once commonplace in the fingers of more than 1.1 billion people globally, with people lighting up on trains, planes, and in restaurants. However, much has changed over the past thirty years, and the popularity once enjoyed by cigarettes has slowly been burning out.

It’s not accurate to discuss the number of smokers as a comparison – the global population has grown from six billion in the late 90s to eight billion in 2024. However, despite there being more people on the planet, smoking prevalence is down. 33.49% of people lit up at the turn of the century, whereas 20.53% now smoke. The tide has turned, and that’s had a serious impact on the global cigarette market.

British American Tobacco is one of the world’s biggest tobacco companies, but they’ve seen the value of certain wings of their business tumble dramatically. In December, they wrote down the value of some of their US cigarette brands by $31.5 billion, sending BAT shares into a significant decline, the steepest fall in four years.

The fall isn’t only a result of regulations set in place by governments but also the rise of tobacco alternatives. There’s no doubt bans on smoking in public places have significantly affected sales, as did the shift to plain packaging, which we previously covered in our piece titled Plain Packaging Triggered Tobacco Price Hike. However, it is not the regulation of tobacco products now driving the shift but the growth of the smokeless product industry. Indeed, BAT has swapped their mission statement; they now claim their aim is to “actively migrate smokers from cigarettes to smokeless products.” What are these smokeless alternatives, and is the market welcoming them with open arms?

The answer is mixed. Vaping was certainly popular a decade ago, but that market has gone from strength to virtual bust in double quick time. It hasn’t been helped by US regulations on Joule vaping products, amidst fears their ‘fun’ flavors were a surreptitious method of marketing the products to young people. The FDA is not the only global organization to tackle vaping – in the UK, the government banned disposable vapes to reduce their appeal to younger people, and their recent budget saw vapes taxed more heavily.

Some smokeless tobacco alternatives are going from strength to strength, one such product being nicotine pouches. Unlike vaping, the nicotine pouch market is expected to grow over the coming years – brands such as LUCY, On!, and VELO have seen the industry thrive to a value of around $1.99 billion, with an expected CAGR of 35.7% through to 2030.

These small pouches fit between the gum and lip and disperse a nicotine derivative for up to 30 minutes at a time. They are often flavored, like vapes, but are aimed at smokers seeking to give up the habit. To illustrate, LUCY nicotine pouches are available in different strengths, such as 4mg, 6mg, and 12mg, for smokers who wish to reduce their intake over time. LUCY flavors like espresso are certainly aimed at the older market, making them a viable option for smokers wishing to continue the trend of stubbing out cigarettes.

Of course, the pouch market faces certain challenges, just as nicotine products have. The global tobacco market needs more sustainable practices, both in terms of tobacco production and extraction, and pouch manufacturers are seeking methods to answer those questions. One option is synthetic nicotine, which Tobacco Reporter suggests could be one route forward within a tightly regulated market.

Ultimately, the tobacco industry’s future is still solid, but a seismic shift is occurring. Combustible products such as cigarettes, with their intrinsic health risks and heavy impact on people and the environment, are being stubbed out for good. The future is smoke-free, and that is the market worth eyeing with interest.