State continues to cash in

“Tschick” alternatives dampen cigarette sales

Austrians smoked 11.3 billion cigarettes, a decline.

(Bild: APA/Helmut Fohringer)

Smoking bans, health trends and, not least, high prices are causing traditional cigarette consumption to decline. In the previous year, sales fell more sharply than they have for years. However, a decline of 3.7 percent does not mean that consumers have completely given up nicotine. Alternative products are growing strongly.

Tobacconists earned 3.8 billion euros with tobacco. However, they deliver the largest share of this to the state, as 77 percent goes to the tax authorities via VAT and tobacco tax. After mineral oil tax, tobacco tax is the largest consumption tax. "Tobacco tax revenue is expected to amount to 2.081 billion euros in 2023," says Finance Minister Magnus Brunner. Higher prices and sometimes a switch to alternatives can compensate for the decline in smokers and keep sales and tax revenue stable.

Cigarette sales are falling
Smokers lit up almost 11.3 billion cigarettes in 2023, with around one in five people in Austria regularly taking up a cigarette. The trend has been declining for some time. More low-risk alternatives, a general health trend and smoking bans are causing more customers to quit. In 2022, there was already a decline of 3.5 percent, although this was due to the previous increase, when sales in Austria rose during the pandemic when borders were closed. This year, the decline is likely to be due to a clear decrease in cigarette smokers.

(Bild: stock.adobe.com, Krone KREATIV)

Pack of cigarettes will be 20 cents more expensive
Last year, you had to pay an average of 5.77 euros for a pack, almost 30 cents more than in the previous year. This does not yet include the recent increases in cigarette prices. This spring, as in previous years, most cigarettes will see an increase of 20 cents instead of 30 cents. The first announcements were made at the end of February by market leader Philip Morris, which announced price increases of 20 cents from April 2. The other manufacturers are likely to follow suit soon.

Hannes Hofer from the monopoly administration emphasizes "that the price growth is below inflation. Tobacco prices have actually had a dampening effect on prices and have not additionally fueled inflation."

Tobacconists made over 3.8 billion euros in turnover with tobacco in 2023, but a large part goes to the state.

(Bild: P. Huber)

An increase in turnover of 3.2 percent to 3.8 billion euros is also solid compared to other retailers. Only the food retail sector was able to grow even more strongly, while fashion and electronics, for example, were hit hard by the consumer slump.

Classic cigarettes fell more sharply than for a long time
While traditional cigarettes are declining more sharply than they have for years, alternatives are gaining in popularity. Sales of tobacco heaters rose by a whopping 42 percent to 235 million euros. E-cigarettes and pouches, which are not covered by the monopoly, are becoming more popular. Pouches sell for 118 million euros, while Austrians spend 59 million euros on e-cigarettes.

Although the tobacco alternatives are taxed at a lower rate - e-cigarettes and lozenges are not subject to tobacco tax at all - they generate good margins for both the industry and tobacconists.

Cigars became more expensive due to scarcity
Volumes are also increasing here, while sales of conventional tobacco are driven by price. The strong growth in cigars is striking. Despite a decline in sales of around 1 percent, turnover rose by 11 percent. This is due to the global luxury trend, which is also making expensive premium cigars from the Caribbean increasingly popular. Cuba exported more cigars in 2023 than ever before. Nevertheless, there is a shortage, which is driving up prices. Fine cigars also became more expensive in 2023.

No matter what form it takes, Austria is not exactly one of the most expensive countries in Europe. However, the reason is not that prices in Austria have been raised so gently, but because prices have risen rapidly in some neighboring countries. Among the neighboring countries, only Slovenia and Slovakia are now a good one euro cheaper. The level is similar in Italy, the Czech Republic and Hungary, while cigarettes are significantly more expensive in Germany, Switzerland and especially France, where a pack now costs an average of 10.50 euros. In many cases, trips across the border and trunk transports no longer pay off - which naturally helps local tobacconists.

Over 1200 people with disabilities run a tobacconist's shop
55 percent of tobacconists have a disability, that is over 1200 people. When a new tobacconist is awarded a contract, 100 percent of them go to people with a degree of disability of at least 50 percent. In 2023, a tobacconist's shop went to a person with a disability every fifth day.