High relative prices can often represent a barrier for cigarette users attempting to switch to reduced-risk alternatives, even though tax burdens for these products are significantly lower compared to cigarettes.
Using the per stick equivalent conversion, cigars and cigarillos have the highest average retail prices, followed by cigarettes, while fine cut tobacco and Western-style pipe tobacco are considerably less expensive. For reduced-risk products, non-tobacco nicotine pouches and heated tobacco are the costliest alternatives on average, cartridges are in the middle, while snus and e-liquids are the least expensive.
Moving away from cigarettes does not necessarily result in consumers saving money. Analyzing average price and consumption across 12 markets covered both by Euromonitor International’s Nicotine Survey and the index, the estimated yearly expenditure on cigarettes is often lower than that on the two most established reduced-risk alternatives – cartridges and heated tobacco.
Companies are expected to develop pricing strategies that do not limit current users from transitioning away from high-risk products.
While switching to cartridges could bring significant financial savings to consumers in six markets – Canada, France, Germany, Poland, the United Kingdom (UK), and the US – in Russia and Ukraine switching to cartridges will be more expensive for consumers. Regarding heated tobacco, in four markets – Italy, Japan, Russia, and South Korea – there is practically no difference, while in Poland, Ukraine and the US, heated tobacco is more expensive than cigarettes. It is also important to consider that necessary hardware for consuming heated tobacco and cartridges often represents a notable upfront switching cost.
‘Saving money’ might be another reason for consumers to transition to reduced-risk alternatives if they are unable to quit consumption of high-risk products. Although the index recognizes that products have different cost structures and tax regimes, companies are expected to develop pricing strategies that do not limit current users from transitioning away from high-risk products.