Years of cigarette price increases have pushed US consumers toward more affordable alternatives, says JTI. Photo credit: Marco Verch, CC2.0.
Japan Tobacco International (JTI) anticipates that lower-cost cigarette brands will capture over 40% of the US market by 2027, according to its finance chief in an interview with Reuters.
Faced with rising inflation and high interest rates, American smokers have been moving away from premium brands such as Marlboro, owned by Altria, and Newport, a product of British American Tobacco (BAT). Years of price increases have pushed consumers toward more affordable alternatives.
This shift has significantly impacted major tobacco companies. BAT reported a 10.1% decline in US cigarette sales last year, attributing part of the drop to the growing preference for cheaper options. Similarly, Altria has experienced a reduction in market share.
While these companies anticipate that economic relief could reverse the trend JTI holds a different perspective. Finance chief Vassilis Vovos told Reuters that premium brands are likely to continue losing market share even if affordability improves, adding that steep price increases will continue to push consumers to trade down—a trend visible in many markets where big price gaps emerge.
JTI expects the value and super value segment to account for 42% of the market by 2027, up from around 32% in 2022.
Meanwhile, JTI’s parent company, Japan Tobacco Group (JT), announced a 9.7% rise in annual adjusted operating profit from its tobacco division, driven by increased sales of higher-priced tobacco products and the acquisition of US.-based Vector Group.
Despite a decline in cigarette volumes of up to 2% due to falling smoking rates in certain markets, JT has focused on expanding its portfolio of alternative products to sustain revenue growth. The company's adaptability was particularly evident in the last quarter, where adjusted operating profit surged 56.1% at constant currency.
JT expects continued growth in 2025, forecasting a 6.9% increase in tobacco-related revenue and an 8.1% rise in operating profit. The company's tobacco division posted a 14.5% increase in core revenue at constant currency, with volumes up 3% in the last quarter. On an annual basis, core revenue and volume rose by 9.1% and 2.4%, respectively.