Heated Tobacco Products Market Size, Share & Trends Analysis Report By Product (Stick, Leaf), By Distribution Channel (Online, Offline), By Region, And Segment Forecasts, 2019 - 2025

Report Overview

The global heated tobacco products market size to be valued at USD 77.61 billion by 2025 and is expected to grow at a compound annual growth rate (CAGR) of 52.56% during the forecast period. It is driven by the steady decrease in cigarette sales with rising demand for potentially reduced-risks products. Presence of low level of nicotine and chemicals Heat-Not-Burn (HNB) products is anticipated to further fuel the demand. HNB tobacco devices do not produce smoke and can be used multiple times. The health risks associated with cigarettes and chewing tobacco are anticipated to drive the adoption of Heated Tobacco Products (HTPs), especially by young population.

The low risks and high demand is expected to encourage global manufacturers to invest in the market. Moreover, easy approval from the U.S. Food and Drug Administration (FDA) and equivalent regulatory bodies from Europe and Asia are anticipated to bode well for the growth of the market. For instance, in 2018, Philip Morris International Inc. received FDA approval for its heated tobacco products to be sold in the U.S. Rising bans on cigarettes and manufacturing unites across different countries along with awareness regarding the dangerous effects of tobacco consumption is driving the market growth. However, rising popularity of e-cigarettes is anticipated to hamper the market growth. These cigarettes are considered less harmful as they do not contain tobacco, which is anticipated to drive their demand, and in turn restrain the demand for HTPs to an extent.

Having said that, rising online sales and media campaigns by the global manufacturers are projected to drive product sales in the forthcoming years. For instance, campaigning of HTPs by the Philip Morris International Inc. in South Africa was done through TV programs.

Heated Tobacco Products Market Trends

The growing restriction on cigarettes and related products in several countries, as well as increasing awareness of the harmful side effects of tobacco smoking, is driving the expansion of this industry. For instance, as per the CDC, about 40 million adults in the U.S. smoke cigarettes, and approximately 2.55 million teenagers use at least one tobacco product, including e-cigarettes.

Furthermore, rising tobacco product demand and improved understanding of the usage of no-smoke cigarettes are propelling the industry. The increased marketing and promotion by companies are driving market demand. Additionally, rising expenditure on research & development activities is expected to present new opportunities for industry players. However, concerns about the regulatory measures and varied legislations, as well as the absence of scientific proof regarding the benefits of heated tobacco products, are projected to slow down the market expansion and act as a challenge for industry players.

Product Insights

Stick segment held the largest market share of about 74.23% in 2018, attributed to high adoption of HTPs as a premium product. Moreover, its high price and rising demand due to ease of use is anticipated to drive the revenue growth in near future. Philips Morris International and Japan Tobacco International are some of the leading manufacturers operating in this segment. Availability of flavors and additives other than combustible cigarettes products is anticipated to further fuel the demand.

Leaf product segment is projected to register the fastest CAGR of around 56% from 2019 to 2025. Rising demand of loose leaf due to its low and effective pricing is anticipated to drive the growth. The market is also driven by easy manufacturing of leaf products as compared to the stick variants in expected to boost the demand. Moreover, availability of options such as tobacco leaves and marijuana among others is also anticipated to impel the demand.

Distribution Channel Insights

Offline channel held the largest heated tobacco products market share of around 91.62% in 2018, easy availability, and convenience of buying the products. Provision of separate smoking zones and stores by private organizations and clubs is anticipated to positively influence the growth. Availability of variety of flavors and attractive packaging are projected to contribute to offline sales.

Online segment is expected to expand at the fastest CAGR of around 58% from 2019 to 2025. The growth is driven by rise in sales by manufacturers through their own online channels offering a wide range of products. Availability of deals and offers, discounted items offered through online stores along with rising number of online distributors, especially in developed countries such as U.S. and Canada is projected to bode well for the growth of the segment.

Regional Insights

Asia Pacific held the largest heated tobacco products (HTPs) market share of about 73% 2018. It is driven by rise in consumption of iQOS brand heated tobacco products in countries such as Japan and Korea. However, stern regulations regarding the use of e-cigarettes may hinder the regional growth.

Europe is anticipated to register the fastest CAGR of around 57% over the forecast period. Higher penetration of leading manufacturers such as Philips Morris International, Japan Tobacco International, and British American Tobacco in countries such as Italy, Russia, Poland, Croatia, and Germany is projected to drive the regional growth. In January 2018, British American Tobacco invested around USD 400 million to expand its area of operation in Croatia.

Key Companies & Market Share Insights

Rising demand for reduced-risk products from Asian and European countries is projected to encourage product innovations and advancements by the key manufacturers. This factor is projected to further fuel growth. The market players engage in business strategies such as product innovations, endorsements, marketing campaigns, capacity expansions, and acquisitions, initiated by the key players, such Philips Morris International, Japan Tobacco International, and British American Tobacco. For instance, in April 2019, Philips Morris International entered the U.S. market with its iQOS heated tobacco products.

Recent Developments

• In December 2021, Philip Morris Products S.A collaborated with various data scientists based in Africa for a project that aims to study those regions of the continent where tobacco grows, using a satellite mapping technology

• In August 2021, Japan Tobacco, Inc. launched the ‘Ploom X’, which is a next-gen heated tobacco stick device

• In March 2021, British American Tobacco (BAT) collaborated with Organigram, Inc., a licensed cannabis producer in Canada. This partnership will help BAT expand its ‘beyond nicotine’ portfolio in Manchester, U.K.

Heated Tobacco Products Market Report Scope

Global Heated Tobacco Products Market Segmentation

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2015 to 2025. For the purpose of this study, Grand View Research has segmented the global heated tobacco products market report on the basis of product, distribution channel, and region:

• Product Outlook (Revenue, USD Billion, 2015 - 2025)

  • Stick

  • Leaf

• Distribution Channel Outlook (Revenue, USD Billion, 2015 - 2025)

  • Online

  • Offline

• Regional Outlook (Revenue, USD Billion, 2015 - 2025)

  • North America

    • The U.S.

    • Canada

  • Europe

    • Italy

    • Russia

  • Asia Pacific

    • Japan

    • South Korea

  • Rest of the World