PESTLE Analysis of the Tobacco Industry

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Humans have consumed tobacco in various forms for thousands of years now, so you’d think the tobacco industry is here to stay. However, with growing awareness for the detrimental health effects of tobacco products, new substances and devices for smoking, and various other hurdles, the tobacco industry might be more fragile than we think. In this article, we’ll dive deep into an analysis of tobacco using the PESTLE analysis framework.


These are the Political factors affecting the tobacco industry:

Tobacco taxes

For decades, governments around the world have known that tobacco products have a detrimental effect on your health. Instead of banning them outright, many governments have opted to reduce consumption (and generate additional revenue for themselves) by applying higher tax rates to tobacco products such as cigarettes, cigars, and pipe tobacco. These decisions are largely political — decided by ruling governmental bodies — but there’s a clear trend towards governments making tobacco products harder and harder for consumers to purchase. This is definitely not a good thing for the industry itself.


These are the Economic factors affecting the tobacco industry:

Disposable income

Generally speaking, people around the world are becoming richer. This means they’re left with more disposable income than before, which they can spend on items that aren’t exactly necessary — like designer clothes, consumer electronics, and of course: tobacco products. In many developed countries, individuals already have more than enough spare cash to purchase tobacco; but in developing countries, this extra cash might cause a marked increase in the demand for tobacco.


These are the Sociocultural factors affecting the tobacco industry:

Addictive nature

It’s a well-known fact that tobacco contains the stimulant nicotine, which just so happens to be an addictive compound. As a result of this, individuals who start consuming tobacco products easily get “hooked” and are unable to stop. As time goes on, these addictions become stronger and stronger. This means that the tobacco industry has a large number of customers who are loyal by necessity. It’s definitely not something to be proud of, but this addictiveness ensures tobacco growers, processors, and distributors have a steady influx of business.

Growing awareness

As mentioned earlier, tobacco products aren’t good for our health. Although we’ve known this for many years, it’s only within the last decade or two that the general public has come to accept this. Nowadays, children are taught about the dangers of smoking and other tobacco consumption at school, and various restrictions on where tobacco can be consumed and who can consume it further grow awareness for these dangers. Growing awareness around the detrimental side effects of tobacco is undoubtedly reducing the number of people who consume it.

Popularity of cannabis

Alongside caffeine, tobacco is one of few legal, widely-available drugs. However, cannabis is growing not only in popularity but also in acceptance. Once entirely illegal, recreational cannabis use has now been legalized in a number of jurisdictions — including, notably, the Netherlands and various US states. Of note, cannabis is believed to have far fewer negative health effects than tobacco. As a result, health-conscious consumers are moving away from tobacco and towards cannabis.

Smoke pollution

While the smoke created by many tobacco products might seem like an Environmental issue, it’s more of a Sociocultural issue. Many non-smokers prefer not to inhale the second hand smoke of others, giving rise to no-smoke areas across the world. As more individuals stop smoking and begin to protest against second hand smoke, smokers will be left with nowhere to consume tobacco products.


These are the Technological factors affecting the tobacco industry:

Vaping devices

The 21st century saw the development of a new alternative to smoking, known as vaping. Vaping devices mimic the feel of smoking by emitting warm water vapor, often flavored and containing some amount of nicotine. Despite containing nicotine, the same addictive substance in tobacco products, vaping has far fewer negative health effects because it doesn’t involve inhaling any smoke. In recent years, vaping has become a hugely popular alternative to traditional smoking. What’s more, vaping can be used to wean oneself off of other tobacco products. Overall, vaping is drawing interest away from traditional tobacco.


These are the Legal factors affecting the tobacco industry:

Age restrictions

From a legal standpoint, the tobacco industry is held back by a number of laws preventing minors from consuming tobacco products. In most developed countries, it’s illegal for those under the age of 18 to both purchase and consume cigarettes. Many of these laws were brought into place due to the evidence of the side effects of smoked tobacco products, which is continuing to mount. As laws become more restrictive, aiming to reduce consumption of tobacco, it’s possible that governments around the world will increase the age threshold from which individuals can buy and use tobacco.


These are the Environmental factors affecting the tobacco industry:

Cigarette pollution

Cigarettes, which are without a doubt the most popular tobacco products, contain special chemical filters in their butts. Unfortunately, these filters contain a number of pollutants. Every time a cigarette butt is improperly discarded, another toxic chemical is released into the wild. As awareness for the environment grows — stemming from climate change awareness — we may see a push against cigarettes from a pollution standpoint.

Final Thoughts for the Tobacco Industry

Despite the widespread popularity and addictiveness of tobacco products, plus the growing disposable incomes of citizens around the world, the tobacco industry certainly isn’t in great standing. Thwarted by growing evidence against tobacco consumption, new alternatives, and various pollution concerns, it’ll be interesting to see whether tobacco users will stop their habit or switch to something else. Even if they don’t, it’s likely that tobacco taxes will continue to rise, as governments push to persuade their citizens not to consume harmful substances, thereby pricing some users out of the market. With all this in mind, it would be valuable for those currently in the tobacco industry to look at ways they could potentially pivot their business.

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