Gf Securities Co., Ltd. has released a research report indicating that global cigarette demand is contracting over the long term, with smokeless products emerging as the second growth engine for multinational tobacco companies. Global HNB sales are projected to reach approximately 204.1 billion sticks in 2025, representing a compound annual growth rate of about 16.9% from 2020 to 2025. The legal classification of domestic HNB as cigarette products has been clarified, and policy is now transitioning into the phase of mandatory national standards and industrialization system development. According to the report, tobacco rod consumables and system technology represent the more sustainable and defensible value segments within the HNB industry chain.
Global cigarette demand contracts long-term, smokeless products become second growth curve for multinational tobacco firms
WHO data shows global tobacco users declined from approximately 1.38 billion in 2000 to about 1.2 billion in 2024. Global HNB sales are estimated at 204.1 billion sticks in 2025, with a CAGR of roughly 16.9% during 2020-2025. PMI's smokeless business revenue now accounts for 41.5% of total revenue, while BAT's share has risen to 18.2%. Industry competition has shifted from single cigarette brands to a broader landscape encompassing product platforms, regulatory approvals, heating technology, tobacco rod materials, and user ecosystems. Markets in Japan, Europe, and the US have established regulatory frameworks combining tobacco management, market authorization reviews, and differentiated tax systems.
Domestic HNB legal classification confirmed; policy enters mandatory national standard and industrialization system phase
The 2026 draft of the Heating Tobacco Product standard covers tobacco rods, heating devices, and aerosols, establishing measurable safety baselines for heating element surface temperature, lip contact temperature, nicotine release, battery performance, and startup protection. The standard accommodates center, peripheral, and induction heating routes, defines the scope of tobacco substrates, and preserves room for product differentiation in flavors, flavoring agents, and user experience. The licensing, trading, traceability, and minor protection mechanisms developed for aerosol cigarettes can be extended to HNB regulatory oversight.
Slowing cigarette growth, stable tax revenues, smuggling reversal, tobacco control progress, and industry globalization jointly push HNB from policy preparation toward product and supply chain readiness
National cigarette production growth slowed to 0.2% in 2025, while China Tobacco International's HNB consumable exports declined approximately 51% year-over-year. Meanwhile, China's smoking rate reduction has lagged behind several developed countries, and compliant supply carries policy value in absorbing existing demand, stabilizing the tax base, and enhancing international competitiveness. Industrialization will progress along the sequence of national standard release, product review, production planning, channel pricing and taxation, and order fulfillment. Provincial tobacco industrial companies, including those in Jiangsu, have already locked in supply chain positions through procurement of heating devices, flavorings, sealants, and processing technologies. Winning bids, order volumes, and revenue recognition serve as core indicators for assessing industry progress.
Tobacco rod consumables and system technology represent the more sustainable and defensible value segments of the HNB industry chain
HNB requires significantly higher unit usage of reconstituted tobacco leaf and flavorings compared to traditional cigarettes, with material-side demand recurring alongside rod volume. Heating device revenue, by contrast, primarily reflects initial purchases, device replacement cycles, and China Tobacco's autonomous sourcing decisions. Huabao International holds foundations in flavorings, slurry-process sheets, and overseas customer relationships, with its HNB incremental growth determined by China Tobacco supply qualifications, project share, and capacity utilization. Smoore has developed capabilities in tobacco substrates, infrared center heating, devices, and system solutions, and has established two project foundations: overseas glo Hilo distribution and domestic device bidding shortlist candidacy.
Risk warnings include policy and pilot rollout pace falling short of expectations, insufficient product strength and consumer acceptance, lower-than-expected participation by external companies, and overseas regulatory and customer concentration risks.