Smokers light up sales of cigarette firms in March quarter

Smokers are lighting up more, helping cigarette sales in the country surpass pre-Covid levels for the first time in the quarter ended March amid improved consumer mobility, reopening of offices, and increasing social events.
Overall cigarette sales volume in the last quarter is estimated to be almost 2% more than the sales in pre-Covid fourth quarter of 2018-19, and 8-10% higher than a year earlier, going by latest reports by over half a dozen brokerages.

Cigarette sales had fallen year-on-year in the quarter ended March 2020 as Covid-related restrictions had started in March.

As per the reports, lower priced sub-64 mm cigarettes sales have surpassed pre-Covid levels, while the premium king size cigarettes are showing good growth.

Industry executives said cigarette demand trajectory will continue to improve in the current fiscal due to stable taxation, which will rule out any massive price hike and help the legal cigarette industry claw back share from the illegal and illicit segment that holds one-fourth of the total market.

The government has not increased taxes on cigarettes for two consecutive years. It has also ended all pandemic-related restrictions.

ICICI Direct Research in a last week report said it expects cigarette companies ITC Ltd and VST Industries to see 7% and 10% volume growth, respectively, "with volumes surpassing pre-Covid levels, given offices, restaurants, pubs are completely open after lifting of all mobility restrictions".

Companies have been pushing multiple new products and variants into the market to revive sales after a slump due to pandemic-induced lockdowns and restrictions.

Role of Excise Duties, Tax Stability
ITC, which accounts for three out of every four cigarettes sold in the white market in the country, has launched packs of five cigarettes of its bestselling brands such as Gold Flake and Capstan.

After the fall in 2020-21, cigarette sales had started to improve July 2021 onwards, after the second wave of the pandemic, when restrictions started to ease progressively. While sales had improved substantially in the October-December quarter, still it was below pre-Covid levels. The Omicron wave impacted cigarette sales in January, but withdrawal of all restrictions due to all-time low Covid-19 infection rates from February boosted demand.



ICICI Direct analyst Sanjay Manyal said stable taxation and excise duties on cigarettes would aid volume growth for cigarette companies, which have been one of most unsettled industries from Covid-related disruptions.

Market leader ITC has grown its cigarettes sales on a year-on-year basis in the last four quarters, although on a lower base.

Brokerages like Nirmal Bang and Axis Capital have estimated that ITC's three years' cigarette volume growth will be a CAGR of 1.5-2%.

An email sent to ITC remained unanswered as of press time Wednesday.