Why «vape-like» dark leaf tobacco will win your market
Evgeny Fedotov article
This article is based on my presentation at ShishaSummit — an international business conference focused on hookah industry. It took place in Zurich, Switzerland in March 2023.

It's no secret that Russian hookah market is ahead of many others in terms of size and innovations: if there is a trend present in Russia and CIS countries, it will likely show all over the world in the future. At the moment Russian hookah market is dominated by dark leaf tobacco. Will it conquer the rest of the hookah world in a few years then?

Let's look at dark leaf tobacco itself, global hookah market history and market's current state in Russia to find out.
About me
About Fedotov Group
First a bit about me and my team. We do many things. We arrange laboratory tests for a wide range of products. We register, return and protect trademarks, bring brands to new markets, open representative offices of companies in new countries and even supply raw materials ourselves.You can go to "Team" page to learn more about each of us.
Now let's dive into the main topic. To comprehend the global perspectives of dark leaf tobacco we will trace the main milestones in the hookah tobacco history — I will call them hookah evolutions.
Tobacco market evolutions
The history of modern hookah tobacco started in 1913, when Nakhla brought the first readymade shisha tobacco with molasses to the world. Thanks to this, Nakhla's popularity began to grow.
Decades passed and in 1988 Nakhla introduced first-ever shisha tobacco flavors to the world: they were Apricot, Strawberry and Apple and they were all a huge success. Three years later, Nakhla launched its flagship, Two Apples. These flavors made the second evolution in modern hookah tobacco history later on.
The third evolution was caused by blond leaf hookah tobacco, which was very popular for quite a long time. But not forever.
In 2000, the first dark leaf tobacco appeared and it was Tangiers from USA. But it failed to make a real revolution — it was only loved by experienced hookah enthusiasts. However, in Russia it became a bestseller and a reference for future Russian tobacco manufacturers.

Starting 2014, a new revolution has fully begun — in Russia, dark leaf hookah tobacco is being mass-produced, it starts pushing the imported products out of the home market and progressively enters the international market.
At the moment the popularity of the dark leaf tobacco is growing. The founders and legislators of this tendency are manufacturers from the CIS countries — mainly Russia.

Let's take a close look at the trends we are currently observing in Russia. It will help us understand what the global hookah market will be like in the near future.

Above you can see the main points I'll address further in this article. I'll start with main legal features.
Legal regulations
In Russian stores it is now impossible to openly show tobacco on the shelves. The buyer can take a look at tobacco range only if he directly asks to show the product. And the assortment is accessible only through the seller or through the black-and-white price list. Yeah, only black-and-white — that's what the law says.
In Russia it is also forbidden to place any fruit, food or drink images on tobacco packs. The state believes that this stimulates tobacco sales. Therefore Russian brands only use different colors that suit their flavors — red for raspberries, yellow for bananas, etc.

However, in Russia you can still use the name of any food or drink flavor on the packs. Using food-related names is not prohibited, because such ban would conflict with consumer rights — no specification of the flavor is considered as consumer's deceit. And for many smokers it is crucial to know the name of the taste — for example, because of allergies.
Track-and-trace system
Each pack of hookah tobacco in Russia and some CIS countries is necessarily marked with a special unique QR code. The code on the pack is applied by the manufacturer. Using this code, anyone can track the entire path of each pack from the factory to the consumer, which helps getting rid of contraband and fake products in the hookah tobacco market. To work with this system, businesses need electronic document management.

Ban of remote retail sales
Also, in Russia it is impossible to sell hookah tobacco and nicotine-containing non-tobacco molasses remotely through online sales with delivery. However, it is possible to sell nicotine-free and tobacco-free molasses online, and there are also no bans on the wholesale online trade of tobacco. So, you can't buy one pack in online stores, but it's easy to buy a full truck right away.

Ban of sales to minors
In Russia, the law forbids the sale of hookah tobacco to minors, and it is also forbidden for children to sell tobacco.
Hookah tobacco in Russia and some CIS countries must comply with the special technical regulations of the Customs Union сountries. To confirm this, manufacturers and importers must issue a special document — declaration of conformity with said technical regulations. It's easy to check whether the product has a declaration — all these documents are put together in a special online registry and are available on the website. You can see an example of this document above.
I have already mentioned special QR codes on every pack, as well as about the payment of excise taxes. In addition, each pack of hookah tobacco must be marked with a special excise stamp, and, of course, manufacturers and importers purchase these stamps from the state.

There are two separate kinds of stamps for imported and local products. However, it is not necessary to apply such stamps to non-tobacco hookah molasses. This, by the way, is one of the main reasons for the popularity of non-tobacco products — you don't have to pay excise tax for them, you do not need to glue stamps on packs, so non-tobacco products are simply cheaper. And the quality of product is no different for consumer.
In Russia, the tobacco tax for hookah is assigned for 1 kg of the finished product. But manufacturers who indicate the mass of tobacco raw materials on packs can pay taxes only for this mass. Here is the calculation formula on the slide.

Thus, manufacturers can pay as little as 20% of the usual tax rate. Belarus and Uzbekistan have already applied this calculation. Perhaps other countries will join in soon, because this system is extremely beneficial to manufacturers and importers.
Minimum retail price
In Russia, the state appoints a minimum retail price, but it only applies to cigarettes, and cigarette manufacturers pay taxes based on this MRP.

Fortunately, it does not apply to hookah tobacco yet, so manufacturers set the price for their product freely — but naturally they still should think about the market and the consumer.
Russian hookah market: retail and HoReCa
Next, we will look at Russian hookah market in numbers.

It is divided in two major segments — retail and HoReCa. Because of this we will look at shops and lounges separately, where applicable.
In 2021, the volume of the hookah market in Russia reached 5 181 tons including non-tobacco molasses, contraband and fake products. Is it a big market or a small one? Let's compare.

As we can see, Russia is the largest non-Arab market in the world, which is developing faster than others and sets consumption trends. It's bigger than Germany, USA, Brazil, Spain and South Africa.
Now let's look at people's capacity to purchase tobacco in different countries. The Adalya Index compiled by Fedotov Group will help us do this.

The index is the ratio of the average country salary and the Adalya 50 gram pack average cost. Above you see part of the data from it. Simply put, this Index answers one question: how many 50 gram packs of Adalya can people buy in different countries?

Thanks to such an index, even a person with basic economy knowledge is able to roughly estimate the difference in the cost of goods or services. And here we see that Russia is on the same level with France, not even in the middle of the rating. However, there are enough opportunities for tobacco consumption in Russia to bypass even Germany in terms of the total market volume. It seems that Russians really like to smoke hookah.
Speaking of tobacco consumption. By 2021, the retail segment covers 52% of the hookah tobacco market in Russia. That's 2 681 tons. Obviously, it is retail that provides the main consumption of hookah tobacco in Russia. During and after the pandemic people started smoking at home much more, and therefore buy more tobacco in stores. Now this has not changed much — retail is still confidently the dominant segment of the market.

The HoReCa segment occupies remaining 48%, and it is these 48% that bring all the new products to Russian hookah lovers. It's there where people try new tobacco brands and flavors, which they later buy for home use and recommend to their friends.

It is also worth mentioning that people who make hookahs in lounges are called hookah masters, and it's not just an occupation — it is an established community. In Russia there are many experienced hookah masters who arrange competitions among themselves, know and tell apart hundreds of flavors, and perfectly work with customers' wishes. There is even a massive Telegram chat, where hundreds of hookah masters share their experience with each other every day, and an award, which is also called Master's.
Today in Russia the percentage of contraband and fake products in the hookah market is very low. This became possible thanks to the track-and-trace system, which I have already mentioned — it is simply very difficult for an illegal product to get into such a transparent market, where every pack of tobacco is tracked.
Now we can surely say that Russian hookah tobacco has defeated imported products on the local market. Imported products make up only 7% of the market, and Russian brands actually do not compete with them, but with each other. Since they have nothing left to achieve at home, they look at foreign markets and even successfully export to them.
Now let's look at 10 largest hookah tobacco brands in Russia and their shares in the local market.

Only two of them are imported, Adalya and Al Fakher. And, as you can see, two major brands stand out — Darkside and Must Have. It is these two brands that are most interested in exporting abroad because they are already very strong in Russia.
Here you can see the general scope of Russian tobacco export as of 2021.Note that most part of the exported tobacco goes to countries outside of Custom Union.
Now we move back to local market.

The most popular tobacco packaging sizes today are 30 to 60 grams and up to 25 grams. There is an abundant variety of brands on the market to choose from, so people want to try more of the new products and flavors, but do not want to buy large packs of tobacco. First, they are expensive, and second, smoking one flavor for a long time quickly gets boring. It is much better to take 10 small packs with different flavors.
And here is a list of Russian regions, where the most hookah tobacco is sold. Moscow is clearly far ahead, apart from that the percentages are distributed pretty evenly. In short, there are hookah tobacco shops and hookah lounges almost all over the country — that explains why Russia is such a big market.
We also defined the bestseller flavors of the top ten brands. In addition we included top tastes from Adalya and Al Fakher for comparison. Among the flavors there are a lot of fruits and berries, naturally — everyone loves them. But there are also unusual flavors — herbs, desserts and drinks.
Now let's look at a small piece of market research that we did in 2022. The last time we made a portrait of a hookah tobacco consumer it was slightly unusual: we interviewed retail stores about their clientele. Some of the results are in the pictures above.

In Russia, hookah tobacco is bought by people who are 25-30 years old, most stores say that consumers are mostly men, and about 4% believe that the same number of men and women buy tobacco from them.
In 2022, my team also researched Russian HoReCa market that included a survey of about 600 hookah lounges. From this study we learned how lounges are distributed today by regions of the country, what trends are currently developing in this market, how many lounges have survived the pandemic, as well as a lot more data on money and consumers. Let's get to the details.
Russia is a big country, so there are almost 12 thousand hookah lounges in it despite the consequences of the pandemic and hard laws.

The average price of a regular hookah in a lounge at today's rate is $15. Pay attention to the water in the bulb — in Russia you can find hookahs on milk, tea, wine and whatever else a hookah master will find in the refrigerator. And this most often costs extra. So this is an ordinary hookah, an ordinary bowl and water in a bulb.

You probably know what I mean. Fruits are used instead of a clay bowl: tobacco is put in grapefruits, pineapples, apples, pomegranates and the entire fruit market. Of course, it costs almost twice as much — and this is for a regular hookah on grapefruit. If you want to have two bowls of tobacco made for you at once on one pineapple, it's much more expensive.

So-called "signature hookahs" are for people who want something special or really wish to impress someone. This category is divided in two: we have signature mixes — the tobacco is put in a bowl using a special technique, or, more often, the mix is a unique blend of certain brands and flavors, and cocktail hookahs — the bulb is filled with fruit, syrups, ice or even flowers, so it becomes a form of art on its own. Naturally, such hookahs cost more than a basic one — one might even double the price.

Next there are top-10 of the tobacco brands used in lounges. No imported brands even made it to the top-10, so we can safely say that Russian tobacco dominates the lounges just as much as wholesale and retail trade.

But pay attention — the lounges top brands and top brands of the market are different. In hookah lounges, products for hookah gourmets are more common, but they are less interesting for the ordinary consumer.
A bit about the customers. Most of the venues we have asked consider the genders' share almost equal with a bit more men and a bit less women. Major part of both male and female customers are aged 25 to 30, so overall we have a mixed young crowd. Most hookahs in HoReCa are shared between two or three people. The occasions when there's a single smoker or a whole lot of them are extremely rare.
Dark leaf tobacco is stronger than blonde leaf: true or false?
Now to the main subject — the dark leaf tobacco itself. Many people believe that dark leaf tobacco is stronger than blond leaf tobacco. Let's see if that's the case. We made a joint study with one of our clients, a major Russian hookah goods distributor. Using laboratory tests, we measured the actual nicotine content in 17 popular tobacco brands.
Basically, the hypothesis is confirmed: most of the leaders in nicotine content are dark leaf tobacco, and light leaf tobacco is mostly at the bottom of the list. But there are important nuances.

First, there are non-tobacco molasses with nicotine in which nicotine content is higher than in many dark leaf tobaccos. Even higher than in Tangiers. And this study is only 17 brands, while there are hundreds of tobacco brands on the market today.

Second, the difference in the nicotine content of most brands is very small — the numbers are almost the same in many places.

Finally, those who work with tobacco raw materials know that there are, for example, light Virginia varieties that are stronger than almost any dark leaf.

So I can't say that dark leaf tobacco is necessarily the strongest tobacco. Yes, if you take dark tobacco, it is quite likely strong. But each product needs to be considered individually.

In this article I've reviewed many different topics that will help you understand the Russian and international hookah market. I'm sure a lot of this will be useful to you, specifically the tendencies of market development: which brands can enter the international market, which tastes are popular, what modern consumers choose in shops and hookah lounges.

Knowing the trends you know the future in which we will all have to work.
Until next time.