Tobacco experienced decline in both volume and value terms in Chile in 2024. 2024 was a year of economic contrasts for the country. With a GDP growth rate of 2.6% and an Inflation rate of 4.5%, the economic context continued to put pressure on household budgets. The unemployment rate reached 8.5% in the same period, reflecting ongoing labour market challenges. Additionally, the government's fiscal balance shifted to a 2.8% deficit, limiting public investment. For these reasons, consumer confidence remained relatively low at 41.9 points, one of the worst indices amongst Latin American countries, signalling cautious spending behaviours. Chilean consumers were more selective in their purchases, posing challenges for companies looking to expand their market presence.
Tobacco volumes showed variable performances depending on the category in 2024. In the case of cigarettes, legal sales declined for another consecutive year due in part to increased penetration of the illicit market, which is causing more and more consumers to abandon legal products. Moreover, consumers displayed an increasing tendency to trade down in cigarettes, causing the mid-priced segment to lose ground to economy brands, whose market share increased. The premium segment proved more resilient, as its core consumers were still able to afford such products. Overall, factors such as the low prices of smuggled and counterfeit products led consumers to opt for the cheapest options, with little concern for the safety of the products. Furthermore, the excise tax increases every year, making the purchase of regular cigarettes increasingly expensive, a factor even more relevant in the context of a slow economic recovery that makes consumers, on average, more conscious of their spending.
The competitive landscape in cigarettes is comprised of two companies: British American Tobacco and Philip Morris International, which account for nearly 100% of the industry. The industry faces a considerable challenge from the illicit market, which is growing year after year in Chile due to the fact that it offers significantly lower prices than the retail market, in which packs can cost USD5.00 to USD5.50, while an illegal pack costs between USD1 and USD2 on average. In terms of market share, British American Tobacco remains the dominant market player thanks to a diversified brand portfolio that includes Pall Mall in the economy segment and Lucky Strike and Kent in the premium segment. For its part, Philip Morris only competes with Marlboro and Marlboro Crafted, in the premium and economy segments, respectively.
Small local grocers, including ferias and warehouses, remained the main sales channel for tobacco in Chile in 2024. The channel is particularly important in cigarettes, a position that it has maintained despite the rise of modern formats in recent years. Small local grocers benefits from the convenience of proximity, being present in almost every urban area in Chile, as well as more personal customer service and perceived lower prices. However, the channel’s importance varies across categories.
The tobacco industry faces significant short-term challenges. Regarding cigarettes, the inroads made by the illicit market (which is dominated by smuggling) in domestic trade are notable. Control actions by the police seem to be insufficient in a market that moves millions of Chilean pesos daily, especially in an economic situation in which consumers are looking for products at more affordable prices. Thus, companies are likely to consider exercising considerable caution in their forecasts and preparing for promotions and new packaging launches and line extensions that allow them to meet different budgets.
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Tobacco
Passport Tobacco covers the seven major tobacco categories: Cigarettes, Cigars & Cigarillos, Smoking tobacco (made up of Pipe tobacco and RYO tobacco), Smokeless Tobacco (snuff and chewing tobacco), E-Vapour Products (closed and open); Heated Tobacco; and Tobacco Free Oral Nicotine. Smoking paraphernalia such as pipes, rolling papers, lighters or matches, etc., are not included, nor are nicotine replacement therapy (NRT) products, which are part of Euromonitor's Passport Consumer Healthcare database.
See all of our definitionsThis report originates from Passport, our Tobacco research and analysis database.
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