Global Trends in Nicotine Report December 2021

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December 2021

Introduction ____________________________________1 Executive Summary _______________________________ 2 Global Overview _________________________________ 4 Major Producers by Product Category _______________________ 14 Regional Nicotine Ecosystems __________________________ 27 Appendix ____________________________________44
Product Scope and Per Stick Equivalent Conversion Rates ____________________ 44 Abbreviations _______________________________________________________ 45 Definitions __________________________________________________________ 46 World Health Organization (WHO) Regional Breakdown ______________________ 47 List of Sources _______________________________________________________ 48

The Global Trends in Nicotine reports establish the groundwork for the Foundation for a SmokeFree World in the area of industry transformation, and represent an important component in the Foundation’s research program. Specifically, the reports identify the major players in nicotine delivery, outline their product offerings and geographic focus, and quantify their output. The first Global Trends in Nicotine report was published based on data from 2017. This report updates the record with data from 2020.
As detailed in this report, in 2020 cigarettes represented 84.1% of the total nicotine ecosystem by retail value sales, compared to 88.9% in 2017. Growing from a much smaller base, noncombustible products, including heated tobacco, vaping products, and nicotine pouches, have continued to take share from combustible products over the past three years. The major nicotine ecosystem players dominate the overall market, although manufacturers of noncombustible products, both new entrants and established players, have gained share. From a legislative perspective, plain packaging gained significant momentum since 2017, with at least 15 countries enforcing plain packaging legislation as of October 2020.
This report identifies the major players worldwide in manufacturing nicotine delivery products, although it does not evaluate the relative harm of the various products. We analyze available data for nicotine product manufacturers primarily from two vantages: product type and geographic market. We use a mixture of volume- and value-based analyses to present nicotine ecosystem market size and share by company. Where appropriate, we make a cigarette stick equivalent comparison available.
Research to date has tended to highlight the role of the publicly traded, multinational tobacco companies headquartered in Europe, Japan, and the United States. Few analyses consider the impact of the major state and semi-state tobacco monopolies in Asia and Africa. Even fewer include the role of companies that produce cleaner forms of nicotine delivery products, such as those in the pharmaceutical industry and in non-tobacco companies that produce noncombustible forms of nicotine.
In geographic terms, this report employs the World Health Organization (WHO) regional structure.
A list of acronyms and definitions used throughout this report can be found in the Appendix.
Building upon the Global Trends in Nicotine reports, the Foundation sponsored the publication of the first Tobacco Transformation Index™ in September 2020. Every two years, the Index ranks the world’s 15 largest tobacco companies on their relative progress in supporting tobacco harm reduction. Specifically, the Index assesses tobacco companies’ activities concerning phasing out high-risk tobacco products; developing and responsibly offering reduced-risk alternatives to support current users in moving away from high-risk products; preventing access and marketing of such alternatives to all non-smokers and nonusers of high-risk products, especially youth; and ensuring consistency of tobacco harm-reduction activities across all markets of operation, within regulatory guidelines.

Executive Summary
Current state of the nicotine market
Cigarettes remain the dominant global nicotine delivery vehicle, and the global nicotine ecosystem is highly concentrated. We define the nicotine ecosystem as the major players in the business of nicotine delivery through cigarettes, cigars and cigarillos, smoking tobacco, smokeless tobacco, heated tobacco products, tobacco-free oral nicotine, vaping products, and nicotine replacement therapy (NRT) smoking cessation aids. We estimate that in 2020 nicotine ecosystem global retail sales totaled approximately USD853 billion. Cigarettes made up 84.1% of the global retail nicotine ecosystem by value sales. Combustible tobacco products (cigarettes, cigars and cigarillos, and smoking tobacco) constituted 93.1% of the nicotine ecosystem by retail value sales in 2020. Vaping products made up about 2.5% of the nicotine ecosystem, followed by heated tobacco products, 2.4%; smokeless tobacco products, 1.6%; NRT smoking cessation aids, 0.3%; and tobacco-free oral nicotine, 0.1%. Retail sales figures include taxes applied to the final purchase price.
Approximately 5.2 trillion retail cigarette sticks were sold during 2020, compared to 5.4 trillion in 2017. This figure nears 5.6 trillion cigarette sticks when illicit trade is included. Of note, locally manufactured combustible tobacco products, such as bidis in India, are outside the scope of this report. Global retail cigarette unit volumes decreased at a compound annual growth rate (CAGR) of 1.4% between 2017 and 2020. Performance varies widely by country due to factors such as the effects of COVID-19 measures, local taxation changes, regulatory enforcement, consumer tastes, and more.
Increases in retail value sales of cigarettes, smoking tobacco, and smokeless tobacco are being driven by pricing rather than retail volume sales, which are generally stable to declining. The cigars and cigarillos category exhibited retail volume sales growth during recent years. Vaping and heated tobacco products are demonstrating strong value and volume sales growth. Based on 2020 data, heated tobacco is growing faster than vaping, not least because of regulatory and public pressures in the United States.
The emergence of a new category, tobacco-free oral nicotine, is one of the notable developments in the global nicotine ecosystem in recent years. However, sales of the product are still relatively insubstantial, although tobacco-free oral nicotine registered the highest growth rate among all categories for the period 2017-2020. Value sales of NRT smoking cessation aid products are modestly increasing from a small market share position.
A list of acronyms and definitions used throughout this report can be found in the Appendix.
Major players in nicotine delivery
We estimate that the six largest tobacco companies generated 86.3% of cigarette retail volume sales globally in 2020. China National Tobacco Corporation is the largest cigarette producer at 48.0% retail volume share, followed by the five publicly traded tobacco companies: British American Tobacco Plc, 12.3%; Philip Morris International Inc, 12.3%; Japan Tobacco Inc, 8.1%; Imperial Brands Plc, 3.5%; and Altria Group Inc, 2.1%. These companies also appear among the

top producers across the various non-cigarette categories, where they are joined by a range of others, including major state and semi-state tobacco monopolies in Asia and Africa, smaller privately held and publicly traded companies from across the globe, e-cigarette manufacturers centered primarily in China, and several global pharmaceutical companies present in NRT smoking cessation aids.
Regional characteristics
Regionally, the nicotine ecosystem offers some variations, but the basic patterns remain: Cigarettes are the primary nicotine delivery mechanism, and production is dominated by the large global tobacco companies and, in some cases, the regional and/or state-owned tobacco companies. Nevertheless, the underlying dynamics are in flux due to technological innovation, notably in heated tobacco and vaping products.
We organize by the WHO regional structure. Based on our analysis, the respective nicotine ecosystems in Europe, Western Pacific, and the Americas remain relatively large compared to their underlying populations. This is not surprising, given that the regions are home to some of the largest nicotine markets in the world—China, the United States, and Western Europe. Conversely, the nicotine ecosystems in South-East Asia, Africa, and the Eastern Mediterranean are relatively small compared to their underlying populations. This result is caused, in part, by the nature of the data: Retail sales data do not capture illicit trade, nor do they cover locally manufactured, nonmachine–manufactured products such as bidis/beedis (India) and papirosy (Russia).
For total world population percentage share and retail value nicotine ecosystem percentage share in USD for 2020, we estimate the following respective share positions by region: Africa, 14%/1%; the Americas, 13%/19%; Eastern Mediterranean, 9%/4%; Europe, 12%/29%; South-East Asia, 26%/6%; and Western Pacific, 25%/41%. That said, regarding 2020 cigarette volume sales, Africa, the Americas, Europe, and South-East Asia are shrinking. Western Pacific and Eastern Mediterranean are demonstrating cigarette volume characteristics that are relatively stable to increasing. Eastern Mediterranean is one of the few remaining regions where cigarettes demonstrated both value and volume growth on a yearly basis in 2020 and in 2017-2020 CAGR terms. This is driven by the stable market in Egypt and growth in countries such as Iraq. Notably, in 2021, Egypt started the process of opening up its market to foreign manufacturers, a decision that could change the future dynamics of the category in the region.

Global Overview
Leading nicotine companies
The leading global nicotine companies are present in multiple categories Given that cigarettes constitute the largest category in the global nicotine ecosystem by far, it is natural that the leading cigarette manufacturers are also the biggest players overall. In fact, the five top-ranked companies in cigarettes, China National Tobacco Corporation, British American Tobacco, Philip Morris International, Japan Tobacco, and Imperial Brands have a combined volume share of 84.2%. China National Tobacco Corporation derives the overwhelming majority of its sales from cigarettes, while the others in the top five are all multicategory players. While China National Tobacco Corporation is a state-owned, single-country operator which dominates the biggest market in the world, China, the other companies are publicly traded, multinational corporations with a presence in multiple regions. Cigars and cigarillos is the category with the smallest differences in retail volume share between the five leading companies, with Japan Tobacco on top at 16.0% and British American Tobacco coming in fifth at 9.1%. In smoking tobacco, the number one position is also held by Japan Tobacco, while three of the other global leaders in cigarettes are also in the top five. Smokeless tobacco is led by Altria Group, which operates mainly in the United States, and to a lesser extent in Canada. Vaping products is the most fragmented category, with the top five leading companies accounting for just 51.3% of total retail value sales, and with major cigarette manufacturers accounting for just three of the top ten companies by value share. While JUUL

Labs, Inc and British American Tobacco register a combined value share of 41.4%, the next biggest player, RELX Technology, has only 4.5%. In heated tobacco, only five companies are present in total, with Philip Morris International on top with 78.9% volume share, due to the performance of IQOS in multiple countries around the world. In the most rapidly growing category, tobacco-free oral nicotine, the leader is Swedish Match AB, a traditional manufacturer of oral products with a presence in the United States and Scandinavia. Finally, in NRT smoking cessation aids, at only 0.3% of the nicotine ecosystem by retail value, tobacco manufacturers are not present in the top five as pharmaceutical companies shape the category. British American Tobacco, with its Zonnic brand available in Scandinavia, ranks sixth in the category globally, although its global value share is less than 1%.
Global category market size
The share of cigarettes in the global nicotine ecosystem is decreasing In 2020, cigarettes remained by far the largest product category in the global nicotine ecosystem in terms of both volume and value. The 84.1% value share corresponds to over USD717 billion, or around 5.2 trillion sticks. Retail sales figures include taxes applied to the final purchase price but do not capture illicit trade or locally manufactured combustible tobacco products, such as bidis in India. Although retail volume sales declined with a 2017-2020 CAGR of 1.4%, the category performed better in value terms, mainly due to regular price increases. As a reference, in 2017, the value share of cigarettes in the global nicotine ecosystem was just over 89.0%. The other major combustible categories (cigars and cigarillos, smoking tobacco) account for 4.9% and 4.0%, respectively, while smokeless tobacco accounts for 1.6%. Vaping and heated tobacco products have shares of 2.5% and 2.4%, respectively, but are categories that represent a significant investment focus among the leading international manufacturers. At less than 1.0% each, tobacco-free oral nicotine and NRT

smoking cessation aids are the smallest categories, with their shares dwarfed by the other, much larger categories.
Global category growth

Tobacco-free oral nicotine, heated tobacco, and cigars and cigarillos are the prominent growth categories
Overall, value sales registered growth across all categories, both in the short term (2020 versus 2019) as well as over the longer three-year review period (2017-2020 CAGR). Value sales of traditional combustible products, cigarettes and smoking tobacco, which collectively account for 88.1% of the global nicotine ecosystem in value terms, were driven largely by pricing increases, while volume sales performance is stable to declining. Cigars and cigarillos, the other major combustible category, showed double-digit growth in both value and volume terms. The primary drivers of volume growth for the category are two-fold. Cigarillo volume sales were positively affected by category dynamics in Japan, where price-conscious consumers switched from cigarettes to price-fighter cigarillos. These products are marketed solely to attract price-conscious cigarette smokers, and so in this sense the trend does not represent a true switch to cigarillos. Incoming regulatory changes in October 2021 eliminating the existing tax differential are likely to put a halt to this trend. Cigar volume sales were primarily affected by growth in China where the category distribution channels, mainly tobacco specialists, were less affected by COVID-19 amid the product’s increasing popularity.
Smokeless tobacco, which comprises both the US-style moist snuff (“dip”) and chewing tobacco, and the reduced-risk Swedish-style snus, experienced moderate growth performance, driven primarily by the moist snuff categories, although these products are prevalent in only a small number of markets.
Vaping and heated tobacco products, the two leading noncombustible categories, grew in terms of both value and volume. While the two categories are currently almost equal in size, their trajectories in the past year have taken different paths. On the one hand, heated tobacco continued its double-digit growth, driven by increases in several regions, mainly Europe. On the other hand, major regulatory hurdles, partially driven by youth vaping concerns in the United States, as well as COVID-19-related closures and broad public uncertainty, have slowed the scale of growth for vaping products.
Finally, the largest sales increase of all products was generated by tobacco-free oral nicotine, a product that was not widely available prior to 2017. Although starting from a significantly lower base, it is now on course to overtake NRT smoking cessation aids, which experienced low singledigit value and volume growth.

In terms of retail volume changes, cigarettes decreased by 1.8% from 2019 to 2020. A total of 5.2 trillion sticks were sold in 2020, compared to 5.4 trillion in 2017. This figure nears 5.6 trillion sticks if illicit trade is accounted for. Unit growth for other categories varied from slightly positive to slightly negative, with regional variations highly dependent on country-specific factors such as taxation changes, regulatory enforcement, and consumer tastes. There are three major outliers in terms of volume growth trends. The highest performer is tobacco-free oral nicotine (starting virtually from zero in 2017), cigars and cigarillos in combustibles, and heated tobacco in noncombustibles.

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Global Trends in Nicotine Report December 2021