Cigarette sales in GCC down 12% due to smoking ban

Total sales in the region are about 60 billion cigarettes a year. (KHAMEIS AL HEFAITY)

Ban on smoking in public places and selling tobacco to people under 20 have cut sales of cigarettes in the GCC by 12 per cent, according to industry experts.

Total sales across the region are about 60 billion cigarettes a year – and Saudi Arabia is the largest market with an annual total of 12 billion. Small- and medium-sized tobacco manufacturers expect their business volume to decline further due to increased taxes and restrictions in regional markets.

But global giants such as British American Tobacco and Philip Morris International (PMI), which dominate the market, recorded an increased sales in the first quarter of 2008 – mainly due to higher turnover in East Europe, the Middle East and Africa (Eema).

"The tobacco business has been declining in value over the last 13 months and exports are down due to increased taxes and customs duty imposed in importing countries," said Khalid Mohammed, Finance Manager of a leading tobacco manufacturing company in Dubai.

"Tobacco companies worldwide are facing increased production costs due to high tobacco prices, inflation and dearer transport. Campaigns against smoking are bringing down sales in the region," he said.

Tobacco is imported mainly from Europe and the strengthening of the euro has increased prices. Cigarette exporters pay a tax of Dh1,000 per carton of 10,000 cigarettes in the consuming country.

Mohammed said sales in the region were down because of smoking bans introduced in many Middle East countries, including the UAE and Iran.

"We don't sell much in the UAE domestic market but the total volume of cigarette sales is down by at least 12 per cent'" he said.

The 10 leading manufacturers in the UAE concentrate on exporting cigarettes to the Middle East and North Africa (Mena).

Iran and Iraq are also large markets for cigarettes in the Middle East. Sales to Iran has been affected by new government restrictions on smoking introduced for religious reasons. In the GCC bans on supplying cigarettes to youngsters are expected to affect the volume of sales – but the growing number of female smokers in the region is creating a new market.

The East European, Russian and Iraqi markets are also growing.

"Every company is trying to keep its market share," said another manufacturer who preferred to remain anonymous. "We produce about 350 million cigarettes per month. Big companies are making profits from poor smokers in Africa."

PMI is the market leader in the GCC. Chairman and CEO Louis Camilleri said the company's PMI cigarette shipment volume in the first quarter of 2008 rose by 2.2 per cent.