How Is Tobacco Industry Profitable - Explore the Driving Factors | Tobacco Market to Reach $262.8 Bn, Globally, by 2027 at 6.7% CAGR

The practice of tobacco smoking started at Mexico back in 1800s. Since then, it has spread to Italy, Portugal, and eventually across various parts of Asia & Europe. Traditionally, all cigarettes were rolled manually, but then by 1900s, cigarette packaging machines were developed.

Tobacco is grown in two varieties i.e. wild tobacco and cultivated tobacco. The tobacco plant needs a frost free growing season of minimum 100 to 130 days. North Carolina is the leading grower in the U.S., as this region has favorable soil type and climate condition for tobacco growing. About one third of the tobacco cultivated in the U.S. is exported.

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With the continuous rise in demand for tobacco smoking in the U.S., the government and private agencies started to investigate the hazards of smoking and published a report through Environmental Protection Agency (EPA) that mentioned the harmful side effects of cigarettes. In order to deal with such concerns, the major tobacco manufacturers came up with a number of alternative cigarette varieties, such as, filter tipped cigarette, e-cigarette, menthol cigarette, low tar cigarette, and others.

Filter tipped cigarettes consist of a device that decreases the amount of dangerous substances to pass into the smoker's body. E-cigarettes do not burn tobacco and do not generate tar, thus is less harmful. It allows the smoker to inhale nicotine in a vapor rather than smoke. Menthol cigarette, on the other hand, makes smoking more pleasurable by creating a cooling sensation in the throat.

COVID-19 impact on the tobacco market: -

The outbreak of the COVID-19 pandemic led to implement the global lockdown, which in turn, resulted to temporarily halt all the tobacco production hubs across the world. Also, the pandemic caused disruptions in the global supply chain, which led to several difficulties in supplying the raw materials on time. Lack of skilled labor force in order to maintain the social distancing norms led to delay the production of final products, thereby hampered the growth of the global tobacco market to some extent. Nevertheless, the market is anticipated to recoup soon.

Current market scenario of tobacco industry: -

According to a report published by Allied Market Research, the global tobacco market size is expected to reach $262.8 billion with a considerable CAGR from 2021 to 2027. The Asia-Pacific region is currently holding the highest market share, owing to the presence of key market players in developing countries like China, India, and others. With more than 300 million smokers, China is the world's largest producer and consumer of tobacco, which is why, all big tobacco brands are aggressively seeking to increase their market share in the Chinese market.

Moreover, tobacco companies are now focusing on to expand their product portfolio for various product segments, especially e-cigarettes and smokeless tobacco. With this drift on board, the key market players are adopting new strategies such as partnerships, joint ventures, mergers, and acquisitions with an aim to achieve consolidation and enhance their offerings. For example, Imperial Brands acquired the Von Erl, Austrian vaping manufacturer, in 2018 with a goal to offer next generation products such as heated tobacco devices, electronic vapor, and so on.

Furthermore, a significant rise in number of female smokers, increase in popularity of flavored cigarettes, and the strong distribution network are driving the growth of the global tobacco market in more than one way. E-cigarettes, little cigars & cigarillos, large cigars hookah, flavored smokeless tobacco are gaining a significant momentum. Tobacco manufacturers usually get huge profits as they sell addictive products that cost less to produce and sold at high prices. With this drift on board, the global tobacco market is likely to achieve huge growth prospects in the years to come.

The cigarette segment to maintain its lead position during the forecast period

Based on product, the cigarette segment accounted for the largest market share in 2019, holding more than one-third of the global tobacco market, and is estimated to maintain its lead position during the forecast period. In addition, this segment is estimated to manifest the fastest CAGR of 8.0% from 2021 to 2027. This is attributed toproduct innovations of cigarette in terms of flavor, size, and ingredients.The report also discusses segments including cigar, kretek and others.

Asia-Pacific, followed by Europe and North America, to continue its dominant share by 2027

Based on region, Asia-Pacific, followed by Europe and North America, contributed to the highest share in 2019, accounting for nearly two-fifths of the global tobacco market, and is expected to continue its dominant share in terms of revenue by 2027. Moreover, this region is estimated to register the fastest CAGR of 7.4%during the forecast period. This is due to increase in consumption of cigarette, which is one of the prominent tobacco-based products, and provides the most consistent source of tax revenue for governments.

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Leading market players

Altria Group
Eastern Co. SAE
British American Tobacco
ITC Ltd.
Imperial Brands
KT&G
Japan Tobacco International
Scandinavian Tobacco Group
PT Gudang Garam Tbk
Swisher

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This release was published on openPR.