Tobacco in Ukraine

Tobacco in 2024: The big picture

Following a turbulent 2022, global tobacco players in Ukraine spent 2023 and 2024 adapting to ongoing conflict-related disruptions, returning to new product launches primarily in cigarettes, heated tobacco and nicotine pouches. Traditional categories such as cigars, cigarillos and smoking tobacco experienced a sharp contraction, with availability declining significantly due to both supply issues and shifting consumer preferences. While illicit trade saw a temporary decrease in 2024, it began to rise again in early 2025, driven by falling household incomes and the growing appeal of economy segment cigarettes. Market recovery continues to be constrained by the realities of war, including the displacement of Ukrainians abroad, the occupation of certain territories, and general economic uncertainty.

2024 key trends

Cigarettes continued to dominate the tobacco landscape in Ukraine in 2024, retaining the largest share of volume sales despite a persistent downward trajectory over the long term. This decline has been marginally softened by war-related factors, including heightened stress levels and ongoing uncertainty, which have reinforced smoking habits among some consumers. Moreover, improved product availability in regions affected by logistical disruptions near the front line provided temporary support to sales. A notable development supporting affordability during the ongoing economic crisis has been the expansion of larger pack formats, such as 30- and 40-stick options, which offer greater value for money and have helped sustain demand in a price-sensitive environment. However, the structural decline in cigarette consumption is expected to persist in the long run.

Competitive landscape

Philip Morris International retained its position as the leading company in Ukraine’s tobacco market in 2024, driven by its broad portfolio and continued expansion into reduced-risk products. A major milestone was the opening of a new factory in the Lviv region in May 2024, which became fully operational by January 2025. The facility, which replaced the company’s previous manufacturing partner in Ukraine, represents a USD30 million investment and includes five production lines with a combined annual capacity of 10 billion cigarettes. The plant also created 250 new jobs, largely filled by staff relocated from PMI’s previous facility in Kharkiv. This strategic move reinforces PMI’s long-term commitment to the Ukrainian market despite ongoing instability.

Retail developments

Small local grocers remained the leading distribution channel for tobacco products in Ukraine in 2024, supported primarily by their continued role in cigarette sales. These outlets include kiosks located near transport hubs, densely populated urban residential areas, and open-air markets. Their appeal lies in their convenience and proximity, making them well-suited to the impulsive nature of tobacco purchasing. Despite long-term stagnation, the channel retained a relatively high share, especially in regions where traditional trade formats still meet everyday consumer needs. However, there is a gradual shift underway, as modern trade channels — particularly supermarkets and convenience stores — gain traction, supported by evolving consumer behaviour and the growing importance of heated tobacco products.

What next for tobacco?

Over the forecast period, tobacco sales in Ukraine are expected to follow a mixed trajectory, with modern alternatives continuing to gain ground while traditional categories such as cigars and cigarillos remain stagnant. The shift away from conventional cigarettes is likely to persist as consumers adopt perceived lower-risk products, such as heated tobacco and oral nicotine pouches. That said, several structural challenges will temper growth. High inflation, declining disposable incomes, and the prolonged impact of the war — including population displacement, military mobilisation, and the occupation of certain regions — will limit overall consumption. Nonetheless, some signs of market recovery are expected. As territories are gradually reintegrated and economic stability improves, retail activity is likely to rebound. A partial return to pre-war habits, particularly impulse purchases of tobacco, could also support moderate volume recovery in the medium term.