Tobacco companies could see sales of premium cigarettes slow next year as smokers adopt thriftier habits amid a worsening economic climate, according to the head of Japan Tobacco's overseas business.
"I don't have a crystal ball but I think it's kind of obvious that consumers' purchasing power is going to be [affected]," said Pierre de Labouchere, chief executive of Japan Tobacco International.
"Our industry is very resilient but it's not immune."
In his first interview since JT completed its £7.5bn ($11.9bn) acquisition of UK rival Gallaher last April, Mr de Labouchere said the industry was unlikely to see a substantial decline in overall sales volumes next year.
Instead, cigarette companies could see an acceleration of customers switching to cheaper brands in mature European markets and a slowdown in the numbers of smokers in emerging markets who were trading up to higher-value brands.
"It would be a function of how severe the recession turns out to be," he said. "But there could be more movement from one brand to another. [That] could have an effect on value."
In spite of signs in other sectors that people were reining in discretionary spending, JT, the world's third-largest listed tobacco company, said it had not seen any softening of demand to date.
Mr de Labouchere's comments, which echoed those of Paul Adams, chief executive of British American Tobacco, in South Africa this month, could unsettle some investors.
In the past, the tobacco sector has been better positioned to ride out a slump because smokers still light up during a recession.
But with cigarette sales in the UK and other developed countries in decline, the success of tobacco companies will rest in large part upon their ability to identify emerging markets and to shift customers there to higher-priced brands.
It is unclear how that strategy would work if smokers were to begin to economise. Analysts, for their part, remain bullish about the sector's prospects.
They say the big tobacco companies, following the unprecedented consolidation in recent years, are even better positioned to weather a downturn now because they are more geographically diversified and they sell at a wider range of price points.
The industry is also perceived to have an advantage, compared with other consumer staples, in that it does not have to compete with other sectors for its main input.
