Transformation remains the industry priority, driving growth in total nicotine units, despite a decline in cigarette volumes. The evolving and intricate nicotine landscape will continue to drive consumers to multiple product formats, and expand the significance of nicotine beyond combustion. Here are the main trends in the nicotine and tobacco industry.
Decreasing smoking prevalence and visibility of the industry
Cigarette smoking rates are declining steadily worldwide. As smoking becomes less visible, the societal and economic importance of tobacco continues to diminish, further reducing consumer demand for tobacco products. This trend is predicted to persist, and may lead to a more positive perception of nicotine as a functional product, especially when it is considered separately from tobacco and combustion products.
The cigarette market is anticipated to experience minimal organic volume growth. Nevertheless, companies have opportunities to help consumers shift towards lower risk alternatives. Forecasts suggest a 40% rise in heated tobacco users over the next five years, spurred by increased accessibility and smokers looking for options to decrease their cigarette consumption. The main objective for the industry should be to expedite this transition.
Quest for value and polarisation
The nicotine sector is facing considerable challenges, due to restricted volume growth, lower disposable incomes and increased regulatory pressures, which could lead to a decline in revenue, driven by volume declines and a shift towards affordability in core categories.
Cross-format nicotine consumption
Consumers are progressively turning to alternative nicotine delivery methods that pose lower risks, with the dual use of cigarettes and products such as e-cigarettes increasing in multiple countries, although the overall changes in consumption trends are occurring only slowly.
Given the current trends in other consumer products, it is possible for society to start re-evaluating the role of nicotine when it is separated from tobacco and combustion products
Source: Euromonitor International
The idea of nicotine being viewed as just another stimulant or even as an acceptable drug could lead to significant changes in the industry. There is already some evidence of this shift, particularly with the rise of synthetic nicotine and products that highlight the absence of tobacco in their ingredients. Some consumers are quick to draw conclusions about the safety of a product once it is marketed as tobacco-free.
The role of regulation and the state of illicit markets
From generational restrictions to category-specific prohibitions, the industry must contend with regulatory hurdles that reshape the make-up of vital strategic markets worldwide. Tougher nicotine legislation has created significant challenges for the legal industry. As of 2024, the illicit market made up over 76% of global e-vapour sales.
Strict and inconsistent regulations on e-vapour flavours and features have led to growth in the illicit market, which offers cheaper products with more variety in flavours, sizes and nicotine levels. Industry stakeholders and regulators must collaborate to ensure a fair marketplace, with safe, legal products. Focusing on total consumption – both legal and illicit – will help develop strategies to combat the illicit market, while aiding consumers in transitioning to reduced-risk options.
Consumers are increasingly prioritising functionality over substance, disrupting traditional ingredients and categories. This shift is creating demand for a wider range of stimulants beyond nicotine. To succeed, brands must align their mission and practices with these evolving consumer preferences.
There is an opportunity for product innovation and revenue growth in the industry through the development of herbal and functional products. Consumer demand will focus on need states rather than ingredients. Nicotine companies can target needs such as relaxation, concentration and mood, and shift to ingredients offering these functions. The cannabis industry provides a pathway for nicotine firms to diversify and meet demand for adult functional products.
For more insight on the top trend shaping the future of the nicotine industry, read the full report here: Top Five Trends in Nicotine. And for more information on our research on the illicit market for nicotine products, read the article, Navigating the E-Vapour Market and the Growth of Illicit Products.
This article was first published in March 2025, and has been updated.