Sales of cigarillos have doubled in Russia

#industry news

Cigarillos turned out to be the fastest growing direction of the tobacco market in the third quarter of 2023. Their sales during this period increased by 105.7% in physical terms relative to the third quarter of 2022, follows from a joint review of the tobacco market by the Center for the Development of Advanced Technologies (CRPT; operator of the Honest Mark labeling system) and the National Scientific Competence Center in the Field of Combating Illicit Trafficking in Industrial Products (NSCC).

The dynamics of sales in other categories is much more modest. Thus, sales of cigarettes and cigarettes increased by only 4.1% during the reporting period (99.96% of sales in this category were cigarettes), hookah tobacco — by 6.2%.

At the same time, prices have increased for all these types of tobacco products, with the exception of cigarillos. Thus, cigarettes and cigarettes have risen in price by 10.1% year-on-year, hookah tobacco — by 6.2%. The average cost of packaging cigarettes and cigarettes was 168 and 211 rubles, respectively, tobacco for hookah — 204 rubles. Cigarillos, on the contrary, fell in price by 13.5% — on average to 260 rubles. for the packaging.

In addition, nicotine-containing products have also risen in price. The cost of packaging heated tobacco (sticks) increased in the third quarter of 2023 by 5.5% year-on-year, to 173 rubles. The dynamics of sales of this category is not given, since its labeling became mandatory only on March 1, 2022, whereas cigarettes are labeled from July 1, 2019, alternative tobacco products, which include cigarillos, from July 1, 2020.

Why did they buy cigarillos more often

The popularity of cigarillos has been growing since the second half of 2022, according to a study by the CRPT and the NSCC. The SNC Group of companies, one of the country's largest distributors of consumer goods, confirmed this trend to RBC. The company explained this by the fact that cigarillos have a number of advantages over traditional cigarettes. "Cigarillos, in particular, are made from more natural ingredients, for example, the cover sheet is reconstituted tobacco, not cigarette paper," the SNA explained.

The growing popularity of cigarillos is also confirmed by the owner of the tobacco consulting agency Fedotov Group Evgeny Fedotov. Smokers who have decided what exactly they continue to consume — tobacco or nicotine—containing products - tend to purchase the most natural and considered less harmful product, he explains. Cigarillos really benefit in this regard, since in addition to using a tobacco leaf instead of paper, they contain fewer impurities than cigarettes, the expert says.

At the same time, the legal requirements for cigarillos are not as strict as for cigarettes, which are allowed to be sold only in packs of 20 pieces each, Fedotov continues. Cigarillos can be purchased individually — 10, 20 or more pieces. In terms of one check, they are cheaper than cigarettes.

The excise tax rate on cigarillos is higher — 3.9 thousand rubles for 1 thousand pieces, while for cigarettes it is 3.5 thousand rubles. But at the same time, the share of excise duty in the price of a pack of cigarillos, if it costs more than 200 rubles, turns out to be less than the share of excise duty in the price of a pack of cigarettes, explained a source of RBC in the tobacco market.

According to Fedotov Group, sales of cigarillos in 2022 amounted to 671 million units — 14% more than a year earlier. In 2023, according to a Fedotov Group survey, cigarillos were consumed by 1.8% of the adult population — up to 2 million people.

What cigarillos do Russians smoke

According to a study by the CRPT and the NSCC, 80% of the cigarillos put into circulation in the third quarter of this year were produced domestically. The volume of output of these products by Russian enterprises increased by more than 58%, to 17.9 million packages. This year, for example, SNC localized the production of MarcoPolo cigarillos at a contract site in Russia, the company told RBC. This brand belongs to the distributor itself, but it was previously produced on a contract site in the USA. Due to the geopolitical changes in the country in 2022, the American company stopped shipping this brand to Russia, and the SNC localized production at the site of the Pogar Tobacco Factory. This also affected the reduction in the cost of cigarillos — currency fluctuations and the rise in the cost of logistics affect final prices to a lesser extent than with imports, the SNA noted.

At the same time, the import of cigarillos is also growing. According to the study, during the reporting period it increased more than 13 times, to 4.6 million packages.

In general, according to Fedotov Group, among the most popular brands of cigarillos are Capitan Black from Scandinavian Tobacco Group, Corsar of the Queen of the Swiss tobacco Factory and Handelsgold of the German Arnold Andre.

Which regions smoke the most

According to a study by the CRPT and the NSCC, most cigarettes are consumed in the Magadan region. The average monthly consumption of packages of these products for 1 thousand people older than 15 years there is 12.4 thousand. Then there are the Kamchatka Territory and the Sakhalin Region — 11.1 thousand and 10.4 thousand packages, respectively.

Heated tobacco is smoked the most in the Yamalo-Nenets Autonomous Okrug — 1.5 thousand per 1 thousand people older than 15 years. After him are the Murmansk and Magadan regions — 1,4 thousand and 1,1 thousand, respectively.

And the largest consumption of cigarillos is observed in Sevastopol, St. Petersburg and the Belgorod region - 111.6, 38.3 and 25.3 packages per 1 thousand people over 15 years, respectively.