The Future of the Tobacco Industry: Innovations and New Products

Many industries struggled in 2020 due to the impact of the pandemic on buyer behavior and on the supply chain, with some businesses still feeling the impact today. However, the tobacco industry was one of a handful of sectors that flourished globally during this time, benefitting from consumers spending zmuch more time at hope and having more opportunity — and perhaps desire — to smoke or otherwise consume tobacco products than they used to. Some buyers were also stocking up on tobacco products for fear of a potential shortage, contributing to the tobacco industry’s higher-than-average revenue during that time. While initially lockdowns and factory closures did hit the industry hard, within half a year or so tobacco product sales began to recover and to even exceed pre-pandemic levels.

The Impact of COVID-19 on the Tobacco Industry

According to Statista, every segment of the global tobacco industry saw a surge in revenue growth between 2020 and 2022. Cigarettes received only a modest bump in growth rate during this time, staying mostly steady over the past 6 years, but cigars experienced a substantial spike within the first two years of COVID-19. Revenue growth in the e-cigarette market had been slowing down in the years leading up to the pandemic, but it rose significantly during 2020 and has since declined more slowly than other segments of the industry.

Aside from the temporary boost due to the pandemic, tobacco companies have needed to get creative in order to drive sales. Cigarette sales have been lagging in recent years, and in many countries, advertising tobacco products is restricted or banned. There are often rules around what must or must not be put on product packaging as well as how these products can be displayed and sold. While customers tend not to be price-sensitive due to the addictive nature of tobacco products, raising prices alone can only do so much to bolster sales revenue. Because of this, businesses in the industry are finding other ways to capture interest and boost sales.

Alternatives to Cigarette Advertising

As restrictions on the tobacco have industry increased, so too have product and packaging innovations. New product launches can attract attention even without the availability of conventional advertising, by creating products with new features, new benefits, or targeting a new market niche. “Slim” cigarettes targeted at women offer not only a different appearance but the impression of being healthier because of their lower tobacco content. Products with words such as “light” in the name also imply lower tobacco content and therefore less health risk, attracting people who want less risky products without having to give them up entirely.

Manufacturers also introduce flavors and other chemicals to improve the taste and reduce the harshness of cigarette smoke, though these flavored products are now banned in some countries. Aside from a more pleasant smoking experience, some consumers perceive flavored cigarettes to be less risky than unflavored products, and their popularity has been growing in many countries, particularly in ones with fewer regulations around advertising and promotion.

Market Innovations Helping to Boost Sales

While the growth of e-cigarettes has slowed over the past few years, their popularity continues to rise and tobacco companies continue to innovate. For example, companies are introducing disposable vape pens that make it easy for cigarette smokers to test the waters and make the switch to vaping, as the market segment offers much greater growth potential than conventional cigarettes. Smoke-free products present lower risk and are therefore increasing in popularity among health-conscious consumers.

Similarly, companies are launching vape “starter kits,” low price-point products that include everything needed to get started with e-cigarettes. With the large variety of vape pens and refills available on the market, a starter kit can make it less intimidating to try out the product.

Some companies are even introducing vape vending machines. While the UK has banned cigarette vending machines, e-cigarettes are a separate matter. In the country early last year, digital ID company 1account began a trial of a vape dispenser at a Ecigwizard store. Age is verified using an app, allowing consumers to make purchases faster and more conveniently. 1account also provides a simplified age verification process for online retailers, a valuable feature over the past few years with high demand for online and contactless shopping options.

As demand for cigarette wanes and consumers become increasingly health-conscious, innovative products and packaging will be key to tobacco companies maintaining their positions in the market and ensuring a strong revenue flow.

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