Cigarette industry volumes expected to dip 3.4% in fiscal year 2017.
Wells Fargo reported that cigarette dollar sales dipped as volume decelerated significantly and pricing held steady at the end of 2016.
Cigarette dollar sales decreased -1.9% during the recent four-week period ending Dec. 31, 2016 (+0.2% for 12-weeks; +1.2% for 52-weeks) driven by a strong deceleration in volume -5.3% (vs -3.1% equal unit volume for 12-weeks), despite solid +3.6% pricing.
“We estimate total cig industry volumes declined around -2.5% in FY16 and should decelerate further in FY17, down -3.4%,” said Bonnie Herzog, senior analyst for Wells Fargo.
Meanwhile, smokeless tobacco dollar sales were a bright spot. Wells Fargo noted that consumers continue to respond positively to brand expansions in the segment. Smokeless tobacco dollar sales grew +2.6% this period (vs. +4.3% 12-weeks), reflecting consumer acceptance of recent line extensions.
“We believe the total e-cig/vapor category reached $4 billion in 2016 and expect it to grow a modest +5% in 2017 reaching $4.4 billion,” noted Herzog.
“E-cig category dollar sales reached $850MM across measured channels in 2016, up 9% year-over-year. Our outlook for 2017 is more cautious for the total vapor category (+5%) given stifled innovation due to FDA deeming regs as well as expected increased competition from iQOS given its superior heat-not-burn technology,” she added.
