Tobacco in China

Tobacco in 2024: The big picture

In 2024, tobacco in China registered a modest increase in retail sales value, driven by rising unit price and a shift towards premium cigarette brands. Stricter regulatory measures and evolving consumer preferences in favour of reduced harm products are gradually re-shaping the tobacco market in China. Smoking prevalence continued its downward trajectory in 2024, reflecting rising health awareness and changing social perceptions, dropping to 24% of the adult population in 2024 from 26% in 2019. Male prevalence decreased from 49.5% to 45.6% over the same timeframe. Cigarette use in China is increasingly viewed as less socially acceptable, particularly among younger demographics, contributing to the stagnation in tobacco volume sales. Meanwhile, cigars and cigarillos saw a slight increase in retail volumes, driven by the premiumisation trend. E-vapour products continued to lose ground in China following a ban on flavoured vapes. Vaping prevalence is already very limited and consumers have responded to the ban by transitioning back to traditional tobacco.

2024 key trends

China has a vast smoker base and entrenched smoking culture, though growth is tempered by declining smoking prevalence. Cigarettes continue to dominate the tobacco landscape, although there is a trend towards reduced-risk products and premium offerings. Rising disposable incomes are drawing consumers towards premium lines, whilst affluent consumers seek status-driven products. In cigars, volume sales are rising due to the increasing social acceptance of cigars as luxury items, in stark contrast to the declining perception of cigarettes.

Competitive landscape

China National Tobacco Corp’s dominance in tobacco stems from its entrenched distribution network, covering 97.4% of retail channels, and its ability to cater to diverse price segments amid economic pressures. In 2024, CNTC’s share grew slightly in retail value terms due to the premiumisation trend, reflecting its strategic focus on higher-margin products like flavour capsules. Plans for 2024 included the expansion of its premium cigarette offerings and strengthening offline retail presence, with partnerships to bolster cigar production. RELX Technology Co Ltd was the most dynamic company within tobacco overall in 2024, leading e-vapour products. Its position was driven by swift adaptation to the post-2021 regulations, banning flavours and online sales. Its compliant RELX Classic and Infinity devices helped the company retain a 60% share. Targeting urban vapers, RELX’s premium branding and distribution via specialists sustained demand amid the declining prevalence of vaping. Modest innovations, like compact rechargeables, outpaced rival vaping products, although the contraction in overall sales limited growth potential.

Retail developments

Within cigarettes, the retail landscape remained largely unchanged, primarily due to the state-led monopoly control. Grocery channels, such as small local grocers and convenience stores, continued to gain share, driven by demand for hyper-convenience. Meanwhile, e-commerce is still banned for cigarettes to prevent underage smoking. Within e-vapour products, tobacco specialists is the dominant retail channel. It is a legal requirement for retailers to distribute either traditional tobacco or e-vapour products on their premises. In 2024, most retailers chose to exclusively distribute traditional products such as cigarettes, given the smoking population in China is significantly larger than the vaping population.

What next for tobacco?

Modest value growth is expected in China’s tobacco market over the forecast period. Whilst the number of smokers is shrinking, the average spend on cigarettes is set to rise. Smoking prevalence will continue to fall amid rising health awareness and a reduction in illicit trade from stricter enforcement. Growth opportunities lie in premium cigarettes, fuelled by rising disposable incomes among affluent consumers. The cigarettes category will remain the cornerstone of China’s tobacco industry, with flavour capsule cigarettes driving incremental growth due to their appeal among flavour-seeking consumers. Challenges include regulatory tightening, youth smoking prevention, and competition from cessation aids.