Smoking bans, health trends and, last but not least, high prices are causing traditional cigarette consumption to decline. Last year, turnover fell more sharply than in years. However, a 3.7 percent decline does not mean consumers are giving up nicotine completely. Alternative products are increasing significantly.
The tobacconists earned 3.8 billion euros from tobacco. However, they deliver the majority of this to the state, because 77 percent flows to the tax authorities via sales tax and tobacco excise duty. After the tax on mineral oils, the tobacco tax is the largest consumption tax. “Tax revenues on tobacco will provisionally amount to 2.081 billion euros in 2023,” said Finance Minister Magnus Brunner. Higher prices and sometimes a switch to alternatives can compensate for the decline in the number of smokers and keep turnover and tax revenues stable.
Cigarette sales are declining
After all, smokers will light up almost 11.3 billion cigarettes in 2023, and about one in five people in Austria use cigarettes regularly. The trend has been downward for a long time. More lower risk alternatives, a general health trend and smoking bans are driving more customers to quit. There was already a decline of 3.5 percent in 2022, although this was due to the earlier increase when domestic sales increased during the pandemic with closed borders. This year the decline is actually due to a clear decrease in the number of cigarette smokers.
Packs of cigarettes will become 20 cents more expensive
Last year you had to pay an average of 5.77 euros for a package, almost 30 cents more than the year before. The recent increases in cigarette prices have not yet been taken into account. Instead of 30 cents, most cigarettes received an extra 20 cents in March this year, just like in previous years. Market leader Philip Morris started in late February, JTI and BAT followed and Imperial should also rise 20 cents soon.
Hannes Hofer of the monopoly government emphasizes that “price growth is below inflation. Tobacco prices actually had a dampening effect on prices and did not further fuel inflation.”
A turnover increase of 3.2 percent to 3.8 billion euros is also solid compared to other retailers. Only the food trade was able to grow even more strongly, while fashion and electronics, for example, were hit hard by the decline in consumption.
Classic cigarettes fell more than they have in a long time
While traditional cigarettes are declining at the fastest pace in years, alternatives are gaining popularity. Sales of tobacco heaters increased by no less than 42 percent to 235 million euros. E-cigarettes and pouches, which are not subject to the monopoly, are becoming increasingly popular. Bags cost 118 million euros at the tobacconist, and Austrians spend 59 million euros on e-cigarettes.
The tobacco alternatives are taxed lower – there is no tobacco tax at all on e-cigarettes and lozenges – but they provide good margins for both the industry and the tobacconists.
Shortages made cigars more expensive
Here too, the quantity is increasing, while the increase in sales of conventional tobacco is price-driven. The strong growth of cigars is striking. Despite a decline in turnover of approximately 1 percent, turnover increased by 11 percent. The background is the global luxury trend, which also increases demand for expensive premium cigars from the Caribbean. Cuba exported more cigars in 2023 than ever before. Yet there is a shortage that drives up the price. Fine cutting also became more expensive in 2023.
Regardless of the form, Austria is not exactly one of the most expensive countries in Europe. The reason for this is not that prices in Austria were increased so cautiously, but because prices in some neighboring countries rose rapidly. Of the neighboring countries, only Slovenia and Slovakia are now slightly more than one euro cheaper each. In Italy, the Czech Republic and Hungary the level is comparable, in Germany, Switzerland and especially France cigarettes are considerably more expensive; In France a parcel now costs an average of 10.50 euros. Trips across the border and transport of the trunk are often no longer worthwhile, which obviously benefits the local tobacconists.
More than 1,200 people with disabilities run tobacco shops
55 percent of tobacco shops have a disability, which is more than 1,200 people. If a new tobacco license is granted, 100 percent of it will go to people with a disability degree of at least 50 percent. In 2023, a tobacconist would go to a person with a disability every fifth day.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
