India’s cigarette industry has witnessed a sharp slowdown in sales following a steep excise duty hike implemented earlier this year, with overall cigarette volumes estimated to have fallen by nearly 20% in April, according to dealer checks conducted in Maharashtra. The decline comes after the government raised excise duties by 30–40% effective February 1, 2026, triggering widespread price increases across all cigarette categories.

The impact has been most severe in the premium “king size” segment, which has traditionally been a high-margin category for manufacturers. Prices in this segment have surged from around ₹20 per stick to ₹25–₹28, prompting consumers to shift toward cheaper alternatives. Dealers report that while the overall number of smokers has remained relatively stable, many are now “downtrading” to lower-priced products due to the sudden price shock.

The king-size category includes popular brands such as ITC’s Classic and Gold Flake Kings, along with Godfrey Phillips India’s Marlboro portfolio. This segment alone is estimated to contribute over 30% of revenue for major players, making the volume contraction particularly significant for industry earnings. The sharp decline in this premium mix is expected to weigh heavily on profitability in the coming quarters.

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The broader industry has also been watching closely as listed players, including ITC Limited, face potential margin pressure. Analysts tracking the sector estimate that cigarette operating margins—already as high as 70% for some companies—could contract by as much as 800 basis points in Q1 FY27, depending on the extent of continued volume erosion and shifts toward lower-priced segments.

Market participants say the premium segment’s sensitivity to price increases is now becoming more visible, with king-size cigarettes bearing the brunt of the slowdown. The combination of higher taxes and reduced consumption in this category has raised concerns about near-term revenue stability for key manufacturers. Both ITC and Godfrey Phillips have not officially commented on the latest dealer estimates, with responses still awaited from the companies. However, the data underscores how policy-driven price changes are reshaping consumption patterns in one of India’s most stable consumer goods segments.

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