Brands such as Mayfair, Dorchester and Sterling sold significantly more than in 2001, helping the group push volume share in what it calls the value sector past the 50% mark.
Gallaher chief executive Nigel Northridge said: "Value brands are the growth sector and we now command 53% of that."
Gallaher said the June launch of Mayfair Superkings had added to the growth of the Mayfair brand. In January, the performance of low-price brands, plus shallower falls in volume sales of premium brands, enabled the group to reverse its decline in volume share of the overall market.
Northridge added: "We're pleased the fall in premium brand volumes has slowed down, but because of the dynamics of the market, it is difficult to see how the sector will not continue to decline."
The group's UK pre-tax profit fell from £299m at the end of 2001 to £283m by the close of 2002, hit by marketing costs in the lead up to restrictions imposed by the Tobacco Advertising and Promotion Act in February. UK sales rose from £3.69bn to £3.72bn, reflecting rises in price and tobacco duty.
Globally, Gallaher's sales grew by almost half in the year to December 31 2002, from £5.72bn to £8.42bn. Pretax profit climbed 14.9% to £378m.