How the Tobacco Industry is Profitable – Explore the Drivers | Tobacco Market to Reach $262.8 Billion Globally by 2027 at a CAGR of 6.7%

The practice of smoking began in Mexico in the 1800s. Since then, it has spread to Italy, Portugal, and eventually to various parts of Asia and Europe. Traditionally, all cigarettes were rolled by hand, but in the 1900s cigarette wrapping machines were developed.

Tobacco is grown in two varieties, namely wild tobacco and cultivated tobacco. The tobacco plant needs a frost-free growing season of at least 100 to 130 days. North Carolina is the top producer in the United States, as this region has favorable soil type and climatic conditions for growing tobacco. About one-third of tobacco grown in the United States is exported.

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With the continued increase in demand for tobacco in the United States, government and private agencies began to investigate the dangers of smoking and released a report through the Environmental Protection Agency (EPA) which mentioned the harmful side effects of cigarettes. In order to address these concerns, major tobacco companies have come up with a number of alternative cigarette varieties, such as filter tipped cigarette, electronic cigarette, menthol cigarette, low tar cigarette, etc.

Filter-tipped cigarettes consist of a device that decreases the amount of dangerous substances to pass through the smoker’s body. Electronic cigarettes do not burn tobacco and do not generate tar, so they are less harmful. It allows the smoker to inhale the nicotine in vapor form rather than smoking. The menthol cigarette, on the other hand, makes smoking more pleasant by creating a feeling of freshness in the throat.

Impact of COVID-19 on the tobacco market: –

The outbreak of the COVID-19 pandemic led to the implementation of the global lockdown, which in turn led to the temporary shutdown of all tobacco production centers around the world. Additionally, the pandemic has caused disruptions in the global supply chain, leading to several difficulties in delivering raw materials on time. Lack of skilled labor to maintain social distancing norms has led to delayed production of end products, which has hampered the growth of the global tobacco market to some extent. Nevertheless, the market should recover soon.

Current Tobacco Industry Market Scenario:-

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

Additionally, tobacco companies are now focusing on expanding their product portfolio for various product segments, especially e-cigarettes and smokeless tobacco. With this drift on board, major market players are adopting new strategies such as partnerships, joint ventures, mergers and acquisitions with the aim of achieving consolidation and improving their offerings. For example, Imperial Brands acquired Austrian vaping maker Von Erl in 2018 with the aim of offering next-gen products such as heated tobacco devices, e-vapor, and more.

Furthermore, a significant increase in the number of female smokers, rise in the 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 hookah cigars, flavored smokeless tobacco are experiencing significant growth. Tobacco companies usually make huge profits by selling addictive products that cost less to produce and sell for high prices. With this drift on board, the global tobacco market is likely to attain huge growth prospects in the coming years.

The Cigarettes Segment to Maintain Its Leading 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 expected to maintain its leading position during the forecast period. Furthermore, this segment is estimated to manifest the fastest CAGR of 8.0% from 2021 to 2027. This is attributed to innovations of cigarette products in terms of flavor, size, and ingredients. The report also discusses segments such as cigar, kretek, snuff and others.

Asia-Pacific, followed by Europe and North America, will retain its dominant share by 2027

Based on region, Asia-Pacific, followed by Europe and North America, contributed the highest share in 2019, accounting for nearly two-fifths of the global tobacco market, and is expected to retain 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 the increase in the consumption of cigarettes, which is one of the major tobacco products and the most consistent source of tax revenue for governments.

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Main market players

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

About Allied Market Research:

Allied Market Research (AMR) is a full-service market research and business consulting division of Allied Analytics LLP based in Portland, Oregon. Allied Market Research provides global corporations as well as small and medium enterprises with unparalleled quality of “Market Research Reports” and “Business Intelligence Solutions”. AMR has a focused vision to provide business insights and advice to help its clients make strategic business decisions and achieve sustainable growth in their respective market areas. AMR offers its services in 11 industry sectors, including Life Sciences, Consumer Goods, Materials & Chemicals, Construction & Manufacturing, Food & Beverage, Energy & Power, semiconductors and electronics, automotive and transport, ICT and media, aerospace and defense and BFSI.

We maintain professional relationships with various companies which helps us to extract market data which helps us to generate accurate research data tables and confirm the utmost accuracy of our market predictions. All data presented in the reports we publish are drawn from primary interviews with senior managers of large companies in the relevant field. Our secondary data sourcing methodology includes extensive online and offline research and discussions with knowledgeable industry professionals and analysts.

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