What is the difference between combustible tobacco and new tobacco?

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1 month 16 hours ago #18 by Tobacco machine
Euromonitor International, headquartered in London, UK, is a well-known market research company with researchers and data analysts around the world.

Euromonitor International has always provided important reference information for many industries. Rafael Moro is a consultant at Euromonitor International, responsible for analyzing the latest developments in the global tobacco market.

Moro recently accepted an interview with "Asia Tobacco" and analyzed the development trends of combustible tobacco products and new tobacco products.

Global development of combustible tobacco

"Asia Tobacco": In recent years, the sales of combustible tobacco products have been declining globally, with different declines in local markets. At the same time, the sales of new tobacco products have achieved growth in many places. Please introduce the recent situation of combustible tobacco products in the global market.

Moro: In 2022, cigarette sales in developed countries showed a very obvious decline. Western European cigarette sales saw the largest drop in a decade, and North American cigarette sales saw the largest drop on record. Since last year, the proportion of consumers who smoke every day has continued to decline. In contrast, cigarette sales in the Asia-Pacific region have increased. In the five years from 2017 to 2022, global cigarette sales fell by about 3%. Among the world's major cigarette markets, Japan saw the largest decline in cigarette sales, at 39%, largely as a result of the growth in heated tobacco product sales.

Tobacco Asia: Although combustible tobacco product sales have declined, they still maintain a fairly high market share compared to new tobacco products.

Morrow: Globally, despite the gradual decline in sales of combustible tobacco products, they still occupy the largest market share in the tobacco market, and this is true in all countries. In 2022, global cigarette sales accounted for more than 82% of the total sales of all tobacco products, a decrease from 88% in 2017. The development of new tobacco products is highly uncertain and may be affected by sudden changes in factors such as market regulation, technological development and consumer preferences. Compared with new tobacco products, the development trend of combustible tobacco products can usually be predicted. For example, in terms of market regulation, the development trend of combustible tobacco products is predictable, that is, gradually facing more restrictions. I believe that in most markets, the main reason for the decline in cigarette sales is not that consumers switch to new tobacco products, but that they are more affected by regulatory policies, consumption tax increases and other socio-economic factors.

New tobacco as a substitute for combustible tobacco

Tobacco Asia: Some people believe that new tobacco products are substitutes for combustible tobacco products, and most users of new tobacco products are converted from consumers of combustible tobacco products. Do you think so? Or are most users of new tobacco products not combustible tobacco products at the beginning, but new users attracted by new tobacco products?

Moro: I think that new tobacco products will largely attract smokers who would otherwise continue to consume combustible tobacco products, as we have seen in Japan. In Japan, the increase in the market share of heated cigarettes has led to a sharp decline in cigarette sales, and this has also occurred in other developed countries including New Zealand.

Global market situation of new tobacco

Tobacco Asia: New tobacco products mainly include three categories, namely e-cigarettes, heated cigarettes and nicotine bags. How are these categories developing in the global tobacco market?

Moro: Since last year, many e-cigarettes, heated cigarettes and nicotine bags have appeared on the market. Among them, the market performance of disposable e-cigarettes is impressive. In 2022, global sales of disposable e-cigarette products increased by 91% year-on-year. Consumers are attracted to these products because of their low price, convenience and variety of flavors. The highest sales of new tobacco products are heated cigarettes. In 2022, global sales of heated cigarettes will be about $32 billion, and sales of e-cigarette products will be about $19 billion. Last year, sales of heated cigarettes achieved double-digit growth, with strong market performance in Western Europe, the Middle East and Africa. In the United States, an important tobacco market in the world, e-cigarette products are affected by issues such as marketing authorization, and disposable e-cigarettes have caused great controversy.

Let's talk about nicotine pouch products. In 2022, global sales of nicotine pouches increased by 51% year-on-year, of which sales of nicotine pouches in the US market accounted for about 85% of global nicotine pouch sales. Currently, this product category is working hard to enter markets outside the United States.

E-cigarette regulation

"Asian Tobacco": Some government departments seem to intend to introduce measures to strengthen control over disposable e-cigarettes.

Morrow: Disposable e-cigarettes will be firmly targeted by legislators. It attracts many young consumers, including teenagers, which has attracted the attention of health departments. Due to the use of lithium batteries, electronic components and plastic casings, the environmental protection of disposable e-cigarettes has also become a focus of attention. The EU's proposal to ban the use of non-rechargeable batteries may make disposable e-cigarettes no longer meet EU regulatory requirements.

"Asia Tobacco": Will e-cigarettes follow a similar path as combustible tobacco products and eventually be strictly regulated?

Moro: In countries around the world, the legal provisions on e-cigarettes vary, and it is not clear what kind of regulation e-cigarettes will eventually face. Many countries have introduced regulations to restrict e-cigarettes, although some may be difficult to implement. More and more governments tend to impose stricter restrictions on e-cigarettes, or even ban them completely. For example, the Australian government recently announced that e-cigarette products can only be packaged and sold in pharmacies according to drug requirements, and the nicotine content of e-cigarettes allowed for sale has been restricted.

Will combustible tobacco disappear?

"Asia Tobacco": How is the development of heated cigarettes? What are the restrictions on the road to development?

Moro: Heated cigarette products are usually launched for existing cigarette consumers, and this product may arouse strong interest among consumers. In the future, heated cigarettes may face some legal restrictions. Among the major global markets, heated cigarettes in the Japanese market continue to grow rapidly, and heated cigarettes in the European market also have great growth potential. Some tobacco companies have recently launched more affordable heated cigarette devices, which may attract more consumers. For example, Philip Morris International launched the more affordable IQOS Iluma One in Switzerland last year, and this year they will sell this product to more European countries. At the end of 2022, Philip Morris International launched a low-priced heated cigarette product BONDS by IQOS in the Philippines. The launch of these products will help Philip Morris International achieve its goal of more than 50% of its revenue from smoke-free products by 2025.

"Asian Tobacco": Do you think combustible tobacco products will eventually disappear completely?

Morrow: New Zealand will implement a ban from 2025 to keep young people away from cigarettes. Countries such as Malaysia and Singapore are also considering similar measures. However, it may be difficult for many countries to implement a New Zealand-style ban because it may lead to a surge in illegal cigarette trade. Many countries may prefer to use taxes to reduce cigarette sales. From an industry perspective, if combustible tobacco products become too niche to be profitable, multinational tobacco companies may exit the field. A more realistic scenario may be that multinational tobacco companies will gradually withdraw combustible tobacco products from the increasingly restrictive developed countries and explore other emerging markets. The withdrawal of combustible tobacco products from the market may bring opportunities to companies such as cigar companies.

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