Cigarette sales in independent off-licences dropped by £9.7 million in the
past year, but rose in independent convenience stores.
The figures from Imperial Tobacco's latest tobacco category overview show sales in some 3,400 independents that sell cigarettes fell from £246.7 million in 2007 to £237 million for the year to October 2008.
In contrast 43,650 independent convenience stores took £4.3 billion of the UK's £11.7 billion cigarette sales - increasing their market share from 37.4% to 37.5%.
Total cigar sales remained flat in independent off-licences, with sales sitting at £4.6 million, and independent convenience stores registered a drop from £108.6 million in 2007, to £99.8 million.
Overall the tobacco category grew 0.3%, with value sales hitting £13.3 billion.
Economy brands such as JPS Silver, Windsor Blue and Sterling increased their share of the market, up from 9.6% in 2007 to 11.2%. Imperial predicts this trend will continue and could reach 17.5% by 2011.
Adults living in the south east smoked the most cigarettes in 2008 compared to other regions in the UK, according to the report.
A total of 8.63 billion cigarettes were smoked in the south east, compared to 5.12 billion in the second-biggest smoking region, the north west, and 4.98 billion in Scotland.
Scotland has the highest proportion of smokers with 29.2% of adults smoking,
followed by Yorkshire and Humberside (28.8%) and the north west (27.5%).
Imperial Tobacco's corporate affairs manager Steve Stotesbury labelled the tobacco category as "challenging for manufacturers, wholesalers and retailers".
He added that Imperial is committed to opposing government plans for a tobacco display ban, describing the proposals as "unnecessary and ill-conceived".
no evidence from other markets that consumption has declined as result of such legislation. As the Heath Bill makes its way through Parliament we will continue to urge to government to allow the tobacco provisions in the Bill to receive a proper debate," he said.