LONDON
Ratings for US and EMEA tobacco companies have been stable during the pandemic, Fitch Ratings said, driven by continued strong pricing power, along with consumer demand being stable, or even increasing in selective markets, often supported by government subsidies.
However, the medium-term post-pandemic outlook, characterised by higher inflation affecting the cost of living and by reduced direct subsidies for households, presents a risk to volumes and market share as consumers may curtail consumption or trade down to cheaper brands, Fitch Ratings said on Wednesday.
Fitch views this as a particular possible feature in emerging markets, and expects this could lead to some near-term market share volatility amongst the dominant companies.
Against these structural pressures on the traditional combustible products, Fitch views the business risk profiles for rated tobacco companies as increasingly differentiated by the development of reduced-harm, next-generation products (NGPs), which offer growth potential for the industry. However, these require a careful strategic execution to reflect differing and developing consumer tastes and preferences.
