Tobacco in Paraguay

Tobacco in 2024: The big picture

The economy in Paraguay in 2024 was even better than it was in 2023. With stable inflation, Paraguay is emerging as one of the best performing countries in Latin America. Following the Paraguayan central bank estimation for 2024, GDP grew 4.1%, while inflation reached 3.8%, remaining relatively stable since the 3.7% recorded in 2023. Annual growth was driven by strong investment and robust household consumption, a result of government efforts to increase disposable income.

2024 key trends

Sales of tobacco decreased again in 2024 driven by a moderate decline in cigarettes sales, a category that accounts for the majority of tobacco sales. This decline represents a continuation of the previous 15 years. The increased awareness of the harmful effects of cigarettes and the strong migration to e-vapour products were the two main drivers forcing this strong decline. However, demand for cigars, cigarillos and smoking tobacco showed positive growth driven by a better economic scenario with an increase in the purchasing power of middle and high income social economic groups. Furthermore, consumption of these products is less affected by the public smoking ban and higher taxes in comparison to cigarettes, with these products generally purchased by cigar aficionados or shisha pipe enthusiasts, many of whom have mid to high incomes.

Competitive landscape

Tabacalera del Este SA (Tabesa) led the tobacco industry thanks to its strong position in cigarettes sales. The company offers Paraguay’s leading cigarette brand Kentucky, and it also owns the popular Palermo brand. In terms of player marketing strategies for its Kentucky brand, price is the weapon of choice of Tabacalera del Este. Kentucky remained the leading brand as it is considered a good quality economy domestic cigarette brand. As for 2024, Tabesa repositioned Palermo's price upwards, taking its price to nearer that of Chesterfield, a fact that led to a decline in its category share. It is important to note that Palermo is also available in flavoured capsule versions, with the aim of competing against British American Tobacco and Phillip Morris portfolio.

Retail developments

Tobacco sales are mostly driven by small grocers as cigarettes are often bought for on-the-go consumption. The majority of these sales are compiled by despensas (independent small local grocers) with a wide distribution in urban cities as well in the interior of the country, while those consumers buying cigarettes in convenience stores usually acquire mid-price or premium brands. The second most important channel is tobacco specialists which characterise cigars, cigarillos and smoking tobacco sales, with such stores also having an important role in e-vapour product sales in Paraguay.

What next for tobacco?

The country’s GDP is expected to climb 3.6% in 2025, placing it among the strongest economies in the region. In this regard, the World Bank (WB) updated its global economic projections and placed Paraguay as the second-fastest-growing economy in 2025, behind Argentina. Consequently, income levels will rise and living standards will improve once more, resulting in the further expansion of the middle class and a further erosion of poverty. Nonetheless, the tobacco industry is predicted to decline over the forecast period. In the long and medium term, smoking prevalence is expected to continue falling in Paraguay. Ongoing anti-tobacco policies and increased awareness among consumers of the harmful effects of smoking will continue hampering category sales over the forecast period.