Just as Consumers Want Cheap Pot, They Also Want Cheap Smokes
(Bloomberg) -- Just as the economic impact of the pandemic has been pushing consumers toward cheaper cannabis, it’s also boosting sales of discount cigarettes.
Cigarette consumers have been flocking to the deep-discount category, with sales volumes growing for the past 40 four-week periods, according to an analysis by Cowen & Co.’s Vivien Azer. That segment averaged 4.2% year-over-year growth compared to a 1.6% decline in premium and a 4.7% drop in branded-discount volumes.
The economic fallout from the Covid-19 pandemic is expected to result in further down-trading, “particularly for the low-income consumer who over-indexes to the category,” Azer wrote in a note.
This mirrors what’s been happening in the pot sector. Canopy Growth Corp., the largest cannabis company by market value, said last week that consumers made a rapid shift to cheaper marijuana during the pandemic. Canopy “missed opportunities” and lost market share as a result, according to Chief Executive Officer David Klein.
Cheap cigarettes have captured 240 basis points of market share over the past three years, with Altria Group Inc. losing the most ground among major manufacturers, Azer said. In the deep-discount category, Vector Group Ltd. has improved its share modestly, with private label/other “taking the lion’s share of segment gains.”
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