Tobacco in the US

Tobacco in 2024: The big picture

Tobacco in the US continued its structural decline in 2024, with a strong drop in overall retail volume sales, as multiple headwinds converged. Traditional combustible products bore the brunt of this contraction, with cigarettes, still accounting for the bulk of total tobacco retail volume sales, seeing fast declines. This downward trajectory reflects not a single factor but rather the culmination of long-term societal shifts, economic pressures and product innovation in alternative nicotine delivery.

2024 key trends

Traditional cigarettes ceded ground as alternative nicotine products reshaped consumer behaviour. Cigarettes remained the largest tobacco category in 2024, albeit seeing a small drop in retail current value sales, amidst a strong fall in retail volume sales. Fast decline reflects both external pressures and category dynamics. Premium brands like Marlboro, Newport and Camel held over one half of retail volume sales of cigarettes in 2024, but faced intensifying price resistance as successive increases pushed many consumers to consider alternatives. The economy segment, with brands like L&M and Pall Mall, captured much of this downtrading activity, to grow retail volume share in 2023-2024.

Competitive landscape

Big tobacco continued to see consolidation as regulatory compliance created barriers to entry. The top three GBOs, Altria Group (NBOs like Philip Morris USA, US Smokeless Tobacco and Helix Innovations), British American Tobacco (NBOs like RJ Reynolds Tobacco, Reynolds American and American Snuff) and Imperial Brands (NBOs like Commonwealth Brands, Tabacalera USA and Altadis USA) dominated the landscape. Altria Group led, leveraging its diversified portfolio spanning premium cigarettes (Marlboro) and economy cigarettes (L&M), both under the NBO Philip Morris USA, smokeless tobacco options Copenhagen (NBO US Smokeless Tobacco) and On! (NBO Helix Innovations) and tobacco free oral nicotine (through its distribution agreement for Zyn). The company's strategic pivot toward a "total nicotine" approach yielded mixed results. Cigarette retail volume sales declined strongly, but its non-combustible portfolio grew fast in retail value terms.

Retail developments

Convenience retailers dominated distribution despite mounting pressures from illicit and online sources. Forecourt retailers held over one half of retail volume sales of cigarettes in 2024, with convenience stores making a significant contribution to convenience retailers’ dominance. Convenience retailers also dominated the distribution of smokeless tobacco and led smoking tobacco, while only marginally following tobacco specialists in cigars and cigarillos. This leadership in tobacco distribution reflects both the impulse nature of purchases and these convenience retailers' unmatched geographic coverage, with over 150,000 locations nationwide offering tobacco products. The owners of leading chains like 7-Eleven, Circle K and QuikTrip have responded to declining cigarette retail volume sales by expanding their alternative offerings, with dedicated display units for nicotine pouches and authorised e-vapour products, which are standard items across their networks.

What next for tobacco?

Category fragmentation is set to accelerate as traditional tobacco yields to diversified nicotine portfolios. Overall, tobacco in the US is projected to continue its retail volume sales decline over the forecast period. However, this masks dramatic variations across categories and formats. Cigarettes is expected to experience strong retail volume sales declines, to reach a historic low. This decline is likely to be partially offset by continued robust growth in alternative formats, particularly nicotine pouches, but also authorised e-vapour products (assuming effective enforcement against unauthorised competitors). The impending menthol ban, although delayed, remains a significant wild card, potentially accelerating retail volume declines for cigarettes by an additional 1-2 percentage points annually, if implemented. Growth opportunities are increasingly anticipated from category adjacencies rather than core tobacco. Cannabis-tobacco hybrid products, wellness-positioned nicotine formats and functional alternatives represent the most promising innovation spaces, particularly as regulatory frameworks for novel products continue to evolve. Companies with diversified portfolios spanning multiple nicotine delivery formats will be best positioned to navigate this fragmented outlook, while cigarette-dependent players facing growing structural challenges.