Tobacco in Egypt

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Overview

Discover the latest market trends and uncover sources of future market growth for the Tobacco industry in Egypt with research from Euromonitor's team of in-country analysts.

Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.

If you're in the Tobacco industry in Egypt, our research will save you time and money while empowering you to make informed, profitable decisions.

When you purchase this report, you also get the data and the content from these category reports in Egypt for free:

• Cigarettes
• Cigars
• Smokeless Tobacco
• Smoking Tobacco

The Tobacco in Egypt market research report includes:

• Analysis of key supply-side and demand trends
• Detailed segmentation of international and local products
• Historic volumes and values, company and brand market shares
• Five year forecasts of market trends and market growth
• Production, imports by origin, exports by destination
• Robust and transparent market research methodology, conducted in-country

Our market research reports answer questions such as:

• What is the market size of Tobacco in Egypt?
• What are the major brands in Egypt?
• Which sector of the tobacco products market is the largest by value sales in Egypt?
• Which sector of the tobacco products market has been growing the fastest, by volume and value, in Egypt?
• Which sector is the most heavily taxed in Egypt?
• Which companies dominate in the total tobacco market in Egypt in terms of market share?
• What is the distribution channel split for the tobacco products market in Egypt?

Why buy this report?

• Gain competitive intelligence about market leaders
• Track key industry trends, opportunities and threats
• Inform your marketing, brand, strategy and market development, sales and supply functions

This industry report originates from Passport, our Tobacco market research database.

Sample Analysis

EXECUTIVE SUMMARY

Strong volume growth for review period thanks to economic growth

There was strong volume growth across tobacco products during the review period as a whole, with this linked to good economic growth for the country. Disposable income levels rose for many households during the review period, while the country’s mid-income group continued to expand. This resulted in consumers being able to afford to smoke more. With health awareness remaining low at the end of the review period, many Egyptians consequently increased their consumption of cigarettes.

Anti-smoking legislation has little impact on volume growth

The government introduced numerous anti-smoking measures during the review period, including an extended public smoking ban, a ban on sales to minors and a ban on advertising, promotion and sponsorship in 2007. This was followed by the compulsory introduction of graphic warning images on cigarette packs in 2008 and huge tax increases across tobacco products in 2010. Despite this legislation, however, tobacco products continued to see volume growth at the end of the review period. This was partly due to poor enforcement of anti-smoking legislation, with sales to minors and public smoking remaining rife at the end of the review period. In addition, smoking is regarded as a traditional part of Egyptian culture by many, with many viewing cigarettes as necessities and having little awareness of these products’ health risks. Consequently, following tax hikes many economised elsewhere rather than relinquishing their cigarettes.

State-owned Eastern Company continues to dominate sales

The government’s reticence in enforcing the smoking ban during the review period was traced by some industry observers to its majority stake in dominant tobacco products player Eastern Company. This company dominates cigarettes, cigars and smoking tobacco and was the only producer of tobacco products in Egypt during the review period. The company is also a major contributor to the government’s revenues. The company offers a wide range, including its own brands and those of multinationals. Its portfolio spans all significant product areas, tar levels and price bands. The company’s leading economy brand Cleopatra meanwhile enjoys strong customer loyalty and alone accounted for a strong dominant share in cigarettes and thus overall tobacco products in 2010.

Differing distribution channels lead cigarettes, cigars and smoking tobacco

Newsagent-tobacconists/kiosks is the most significant distribution channel for cigarettes in Egypt, with this channel benefiting from its widespread presence, convenience and wide range of products. Street vendors and independent small grocers are also important distribution channels for cigarettes. Cigars meanwhile target high-income consumers, with this consumer group mainly targeted via forecourt retailers. Smoking tobacco in contrast sees its strongest sales via supermarkets/hypermarkets, which stock a wide range of brands and flavours and also attract consumers by offering lower prices.

Future growth likely to be shaped by political developments

Following Egypt’s revolution in January 2011, the country’s political future remained uncertain at the end of the year. Given the government’s majority stake in Eastern Company, which in turn accounted for a strong dominant share in tobacco products, the future direction of the industry also remains uncertain in many respects. Once Egypt has a stable government in place, its strategies will determine the future of Eastern Company and thus overall tobacco products. Tobacco products is however likely to see good volume growth during the forecast period, with rising income levels being expected for the majority low-income group in the country. These consumers are thus likely to increase their tobacco consumption during the forecast period.

OPERATING ENVIRONMENT

Legislative overview/ FCTC ratification

Egypt signed the World Health Organisation’s global tobacco control treaty, the Framework Convention on Tobacco Control (FCTC), in June 2003 and ratified this treaty in February 2005. In June 2007, the People’s Assembly passed new anti-smoking legislation banning the sale of tobacco products to minors and extending an existing ban on smoking in public to cover more enclosed public spaces. Legislation was also introduced at this time banning all tobacco advertising.

The legislation already in place was poorly enforced during the early part of the review period and by the end of 2007 the new anti-smoking laws introduced earlier in the year were widely ignored. Smoking continued in the majority of restaurants, bars, airports, shopping malls, hotels, youth centres, clubs and government buildings in Egypt, generally with the knowledge of the owners, those liable to penalties.

Retailers throughout the country meanwhile continued to sell tobacco products to people aged below 18-years-old, who make up a large percentage of Egypt’s total smoking population, without fear of punishment. Such sales are especially strong via newsagent-tobacconists/kiosks, the main distribution channel for cigarettes in Egypt.

It is unclear if there will be any major crackdown on retailers who sell tobacco products to minors over the forecast period. The strict enforcement of this legislation could prove problematic, as sales of tobacco products to minors are a major revenue generator for many retailers, particularly in the newsagent-tobacconists/kiosks channel.

There is no visible anti-tobacco lobby in Egypt, with this being one of the reasons why public awareness of the health risks associated with smoking is so low. The majority of NGOs and other development organisations present in Egypt are focused on the country’s pressing socioeconomic and health problems. These organisations are thus focused on serious issues such as poverty eradication, gender equality and the plight of street children as well as dealing with epidemics such as Hepatitis C, with high levels of smoking seeming a minor issue in comparison.

The government moved to introduce new anti-smoking legislation during the review period. The government also required all cigarette importers and producers to feature anti-smoking photos on cigarette packs from August 2008.Taxes on cigarettes were increased to 40% and on “other” tobacco for shisha and pipe to almost 100% in 2010. The government also announced that entire cities would be gradually made smoke-free, such as Alexandria. It remains to be seen if city-wide smoking bans will however be enforced.

In 2011, the Minister of Health announced that the smoking ban would be enforced in all public places in Egypt by 2015, with violations resulting in heavy fees. The government however has a conflict of interest when it comes to smoking. While Egypt has ratified the FCTC, the state remains the majority shareholder in Eastern Company SAE, the country’s largest tobacco producer. The state also derives considerable revenues from taxation on tobacco products. While the state continues to depend heavily on revenues from Eastern Company and tobacco products taxation, it remains uncertain if an indoor smoking ban will be strictly enforced.

Legislation: Egyptian law

In 2007, the government introduced new anti-smoking legislation. This banned the sale of tobacco products to minors and extended an existing ban on smoking in public to cover more enclosed public spaces. A ban on the promotion or advertising of cigarettes and cigarette sponsorship was also introduced.

Cigarette importers and producers were meanwhile required to feature anti-smoking photos on cigarette packs from August 2008.

In 2010, the government meanwhile increased taxes on cigarettes to 40% and on “other” tobacco for shisha and pipe to almost 100%. This legislation also gave the government the right to increase the price of tobacco.

The government also announced that entire cities would be made smoke-free, notably including Alexandria. The local authorities initially enforced a ban on smoking in government buildings and introduced an indoor smoking ban across the city from September 2010. Those caught breaking this law will be fined around US$9, a large sum given average income levels.

The Egyptian government thus sought to reduce smoking in public places during the review period. Shisha smoking or chain smoking cigarettes while sipping a cup of tea however remain common practices in Egypt’s cafés.

Minimum legal smoking age

The legal smoking age in Egypt remained unchanged in 2010 at 18-years-old. However, the majority of retailers continue to sell tobacco products to minors without requesting any identification or proof of age.

The majority of those aged 13-18-years-old smoke and indeed make up a large percentage of the smoking population in Egypt. Retailers are therefore aware that cutting back on sales to this group would greatly decrease their revenue. Newsagent-tobacconists/kiosks is the main distribution channel for tobacco products, with these outlets generally operating on low profit margins. Therefore, these outlets are less concerned with obeying the law than with maximising profits.

Tobacco control legislation is meanwhile poorly enforced in Egypt, further encouraging retailers to flout the law. The poor enforcement of anti-smoking legislation is meanwhile linked to the government's controlling stake in Eastern Company, which effectively holds a monopoly in tobacco products in Egypt. The Egyptian government relies on the vast profits generated by this tobacco monopoly, which account for a significant share of its revenue.

Smoking prevalence is high among all income groups. However, the smoking population accounts for a larger percentage of low-income groups and less-educated consumers, while being lower among mid- and high-income consumers and university graduates.

Smoking prevalence

57% of adult male Egyptians smoked in 2010, while just 5% of adult women smoked, making a total share of 31% in the overall population. These figures remained steady over the previous year. Beyond the adult population, many smokers in Egypt are below the legal age limit and are thus not counted in the overall smoking population data. This is due to a lack of public awareness of the health problems associated with smoking.

There is a large disparity between male and female smoking prevalence in Egypt. This is due to traditional and cultural norms, with many viewing smoking as unacceptable for women. Therefore, smoking prevalence data may be distorted. Many women are uncomfortable about disclosing their smoking habit out of a fear that their husbands or families may view them as dishonourable or improper. However, there was a rise in the reported female adult smoking population from 4% at the start of the review period. This occurred due to a growing interest in western lifestyle trends, with some young women regarding it as fashionable to smoke.

The public smoking ban imposed in 2007 and extended in 2010 had little impact on the smoking population, as these bans were not strictly enforced. The government is the major shareholder in Eastern Company, which is the only major tobacco company in Egypt. Consequently, any decrease in the smoking population would result in a decrease in government revenue from tobacco sales. Therefore, anti-tobacco laws have been introduced but are not adequately enforced.

The level of consumer health awareness in Egypt is extremely low, with the government making no effort to increase health awareness. It is not in the government’s interest to educate the population about the risks and dangers associated with smoking, as many people would then be likely to curb their smoking habits. Education levels in Egypt are extremely low, which further keeps the population in the dark about the health risks associated with smoking.

The social acceptance of smoking increased further in Egypt during the review period. Smoking has been popular in the country for many years and is viewed as part of the national culture, being accepted as a mainstream activity and normal habit. Among low-income groups, women who smoke continue to be shunned and ostracised, as female smoking is widely seen as improper. However, within higher-income groups many women smoke openly in bars and restaurants, with smoking viewed as fashionable in some circles.

Nicotine replacement therapy (NRT) products are available in Egypt. However, these products are not popular and their use is not widespread. NRT is obtainable OTC or via prescription in larger or upmarket chemists/pharmacies. NRT smoking cessation aids are supposed to be taken on a daily basis over a prolonged period, with a large volume thus being consumed. With high unit prices, these products are thus generally too expensive for most Egyptians. Poverty is widespread in Egypt, while awareness of the health risks of smoking is low among low-income groups. NRT smoking cessation aids are thus widely regarded as too expensive and unnecessary, while many consumers remain unaware of their existence.

Tar levels

The Egyptian government is aware of the illnesses caused by smoking and made some attempt to lower the cost of treating these illnesses by complying with international tar standards in 1997. The Ministry of Health issued a decree reducing the maximum tar content permitted in cigarettes from 20mg to 15mg. However, this level is still high when compared with EU countries, where the maximum tar level is 10mg.

High tar cigarettes accounted for 90% of cigarette retail volume sales in 2010, reflecting a preference for a strong tobacco taste among cigarette smokers in Egypt. Egyptians prefer strong tasting and full-flavoured cigarettes, as this is what they are accustomed to. In addition, local high tar brands are cheaper and are seen as more masculine to smoke. The widespread practice of smoking shisha also increases consumers’ tolerance for high tar tobacco. Smoking a shisha, which lasts approximately 45 minutes, delivers 36 times more tar than a single cigarette.

The slow and laborious legal process in Egypt makes it unlikely that further changes in tar levels will be seen during the forecast period. In 1982, the Egyptian government set maximum tar yield per stick at 20mg. It was not for another 16 years that the government lowered maximum tar yield to 15mg. This delay was partly due to the long period of time it takes to pass and enforce legislation in Egypt.

The maximum tar yield in Egypt remains much higher than levels in other Arab countries. Jordan for example has a maximum tar yield per stick set at 12mg and Oman has a maximum tar yield of 10mg per stick.

Health warnings

Egyptian law stipulates that a printed health warning must be displayed on all cigarette and tobacco packaging and this warning must cover 50% of both sides of the pack. The warning reads “tobacco seriously damages health and leads to death” and must also be printed clearly.

Graphic images were also introduced on cigarette packs in May 2008 and became compulsory from August 2008. All packs of cigarettes must show these images on both the front and back of the pack. The three most prevalent images used on Egyptian cigarette packs are of a dying man in an oxygen mask, a coughing child and a limp cigarette, which is intended to symbolise the increased risk of impotence connected with smoking.

These measures made little impact on the smoking population during the review period. This is mainly due to the high illiteracy rate in Egypt, with verbal warnings thus having little impact for much of the Egyptian population. In addition, such images and warnings are less effective when not accompanied by an increase in consumer education and public awareness campaigns focused on smoking related health risks such as cancer, emphysema and cardiovascular disease.

Advertising and sponsorship

Advertising through media (television, radio, billboards, consumer press, trade press, cinema, etc)

Egypt partially restricts tobacco companies' marketing efforts, banning the advertising of tobacco products via national and international TV and radio, national and international magazines and via newspapers and billboards. The enforcement of these restrictions is strong.

Tobacco brand sponsorship and the distribution of free samples are also prohibited by law. However, companies continue to engage in these marketing activities and to circumvent other constraints on advertising and promotion.

Some forms of tobacco products marketing are meanwhile permitted, including point-of-sale and internet advertising, promotional discounts and product placement in movies.

Egypt is a signatory of the WHO Framework Convention on Tobacco Control (FCTC) signing this treaty in 2003 and ratifying it in 2005. Egypt’s tobacco control policies however fall short of those called for by the FCTC, although they became increasingly comprehensive during the review period. The advertising ban and restrictions on tobacco promotion and sponsorship were for example introduced in 2007.

Advertising through retail point-of-sale

There is currently no legislation prohibiting point-of-sale advertising or display units for tobacco products in foodservice outlets such as bars, restaurants and nightclubs or in retail outlets.

Sponsorship of sporting/music events

Tobacco products sponsorship is banned in Egypt. However, tobacco companies attempt to circumvent this legislation through promotional activities that are not proscribed by the Egyptian government.

Philip Morris International for example sponsors music parties in Egypt, with the names of the company and its brands and logos being clearly visible on tickets and invitation cards for these events.

British American Tobacco (BAT) uses point-of-sale advertising such as inserting promotional brochures inside its cigarette packs in order to promote its other cigarette brands. BAT also sends out representatives in heavily branded Chrysler PT Cruisers to promote its Kent brand. The company also distributes free samples of its cigarettes in bars and nightclubs in upmarket districts of Cairo. BAT has also been known to set up branded fluorescent light boxes in upmarket foodservice outlets around the country, paying the operators of these outlets to sell only its Kent brand.

Distribution of tobacco branded gifts (eg cigarette branded lighters, pens, etc)

The law in Egypt is unclear regarding the distribution of tobacco branded gifts. Branded lighters or gifts given out during sponsored events and private parties are available in Egypt but these free promotional gifts are not common.

Point-of-sale display bans

There is no legislation restricting the display of any tobacco products at any point-of-sale. Special display areas are thus used for tobacco products in many retail outlets. For example, hypermarkets such as Carrefour or Spinneys feature dedicated sections for different tobacco products such as cigarettes, cigars and shisha tobacco. In convenience stores such as On the Run, the cashier meanwhile typically stands before a wall filled with a range of local and international tobacco product brands.

Smoking in public places

In 2007, the government extended its ban on smoking in public places to cover more enclosed public spaces. However, there were no official penalties set for flouting the smoking ban at the end of the review period. This makes the ban difficult to enforce among the Egyptian population. There are many cafes and restaurants in Egypt that allow smoking indoors, not only cigarettes but also shisha. These include prominent chains such as Bakery and Trianon.

A smoking ban in specific cities was however announced in 2010, with the first city to see the introduction of a smoking ban being Alexandria. A ban on smoking in government buildings was initially introduced, with an indoor smoking ban being imposed across the city from September 2010. In contrast to earlier smoking bans, this ban was widely enforced, with those caught violating the ban being fined around US$9. This is a large sum given average income levels in Alexandria.

In 2011, the Minister of Health meanwhile announced that the smoking ban would be enforced in all public places by 2015. Violations of this ban will impact not only the smoker but also the person responsible for the location, with fees such as E£1,000 (US$178) for taxi drivers and E£15,000 (US$2,600) for coffee shop owners.

Low Ignition Propensity (LIP) regulation

LIP cigarettes were nonexistent in Egypt during the review period. These products are considered by producers to be too sophisticated for the majority of the Egyptian population and are viewed as too expensive to become widely popular.

Electronic cigarettes

The Ministry of Health has not permitted the sale of electronic cigarettes in Egypt, as the World Health Organisation recommends that these cigarettes should be controlled because they contain nicotine, which is addictive and toxic. Some types of electronic cigarettes also contain propylene glycol, which can cause inflammation and allergies when inhaled, toxic substances such as diethylene glycol and carcinogens such as nitrosamines. The ministry also stated that 40-50% of the smoking habit stems from the act of opening a pack of cigarettes, igniting and inhaling. Therefore, the ministry believes that using electronic cigarettes will make smokers likely to revert to actual cigarettes.

Litigation

To date there have been no litigation cases against or between tobacco companies in Egypt, including civil action by consumers for personal injury caused by exposure to the chemicals in cigarette smoke. In addition, there are no formal anti-smoking lobby groups or agencies in the country to which people could report incidences of ill health or death caused by smoking

Death by cause

There was a decline in the number of deaths caused by smoking related diseases, both during the review period and in 2010 over the previous year. This was not however linked to a decline in smoking incidence, with the smoking population increasing by 2% in 2010 over the previous year and by 12% since 2005. Instead, the decline was due to improvements in the country’s healthcare provision and also due to economic growth earlier in the review period, which resulted in improved nutrition for many households.

The Ministry of Health’s statistics on smoking indicate that the government spent around E£3 billion annually treating smoking-related diseases at the end of the review period. This data also shows that smoking is responsible for 78% of heart clot cases, 70% of angina cases, 68% of lung cancer cases and 60% of oral cancer cases. The majority of the Egyptian population are meanwhile unaware of the existence of the link between smoking and diseases such as emphysema.

TAXATION AND PRICING

Duty paid packet marks

Duty paid packet marks are only used on imported tobacco products, which account for only a small share of sales. There is no legislation requiring products to carry duty paid marks on their packaging.

Taxation rates

A 5% sales tax was introduced in 1991, which transformed the taxation system in Egypt. In accordance with conditions set by the International Monetary Fund, this tax was subsequently increased to reach 10% in 2004. Cigarettes are however exempt from this tax due to being classified as necessities, alongside products such as sugar and flour.

Further taxation on cigarettes was divided into seven tiers prior to July 2010, with rates varying by ex-factory price. These ranged from E£1.08 per pack on the lowest-priced cigarettes to E£3.25 on the highest-priced cigarettes, with the most popular brands generally being taxed at E£1.25-1.75 per pack at the start of 2010. Imports also faced a modest import duty. This complicated system made it difficult to assess overall taxation rates.

Previous attempts were to increase the taxation levied on domestic cigarettes were rejected by the government, ostensibly due to fears that, rather than cutting down on smoking, Egyptian smokers would merely reduce family budgets for other necessities such as food.

The Egypt’s Ministry of Finance however submitted a new tax proposal in June 2010 and the government agreed to:

Change Egypt’s tier tax system to a system based on a mixture of ad valorem and specific taxes;

Introduce a uniform rate so that all cigarettes and cigars would be subject to the same rate of tax;

Introduce a 40% ad valorem rate on the retail price of cigarettes and cigars plus E£1.25 (US$0.22) per pack specific excise on cigarettes and cigars;

Extend the tax on loose tobacco to 100%.

In addition to the 40% tax levied on domestic cigarettes, the customs duty for imported tobacco is equal to E£6 per kg. In addition, dominant tobacco products player Eastern Company, which is majority-owned by the Egyptian government, pays 32% of its net profits derived from the sale of tobacco in tax.

According to the World Health Organisation, the new tax system is estimated to increase the average retail price of cigarettes by 44%. The highest increase is expected to be seen for mid-priced cigarettes at 49% and for low-priced cigarettes at 45%.

A further 10% increase in taxes in tobacco was introduced in June 2011 by the country’s temporary military government. This budget meanwhile introduced subsidies for consumer goods and fuel and an increase in the national minimum wage, with the government clearly focused on reducing distress caused by income disparity.

Average cigarette pack price breakdown

Tobacco in Egypt is completely controlled by the government through its controlling stake in Eastern Company SAE. The state therefore controls the retail unit price of cigarettes.

Taxes on locally produced cigarettes in Egypt were increased in 2010, increasing the price of many brands. However, the WHO feels that taxes could well be increased further in order to reduce the consumption of cigarettes. The lower taxation imposed on locally manufactured cigarettes is linked to the fact that cigarettes are viewed as necessities. They are therefore exempted from the 10% ad valorem tax imposed on the majority of fast-moving consumer goods in Egypt.

The government imposes higher taxes on premium brands in actual currency terms, although as a percentage of retail selling price the share of tax is lower for premium brands. In addition to excise tax, imported products are also subject to import duties of E£6/kg.

Further price increases are expected at the start of the forecast period. Following the January 2011 revolution, the country’s new military rulers added a further 10% to the tax on cigarettes in its June 2011 budget.

PRODUCTION/IMPORTS/EXPORTS

Tobacco cultivation is illegal in Egypt and all tobacco leaf used for the domestic production of cigarettes is imported from overseas. Tobacco leaf is predominantly imported from China, India and Southeast Asia, Italy, Greece and Brazil. At the end of the review period, Egypt was the ninth largest net raw tobacco importer in the world.

Raw tobacco imports increased by 2% in 2010 over the previous year and by 17% since 2006. This was partly due to growing domestic demand and partly due to Egypt increasingly acting as a trade hub for Arab countries, with exports rising by over 260% during the review period. The bulk of imports continue to be used for the production of cigarettes for domestic sale, however.

Imports of manufactured cigarettes are meanwhile very low due to the high unit prices of these products and consumers’ traditional preference for local brands. In 2010, Egypt imported almost 80,000 tonnes of raw tobacco. This was used for the domestic production of around 82 billion cigarette sticks and 27,000 tonnes of pipe tobacco for use in the traditional shisha water pipes.

Egypt is not a major exporter of finished tobacco products. In 2010, cigarette exports stood at a steady 1.6 billion sticks. The majority of these cigarette exports were to other Arab countries, where they are mainly purchased by Egyptian expatriates.

British American Tobacco (BAT) Kenya announced plans in 2010 to start exports of semi-processed tobacco into Egypt for the production of cigarettes. The company plans to ship about 50 containers of cut rag tobacco to Egypt each month, having invested Sh350 million in these plans. Egypt offers low production costs, with the company planning to sell the cigarettes produced in the country across Africa. Cigarette production is thus expected to increase in Egypt during the forecast period.

Illicit trade in cigarettes

The illicit trade in contraband cigarettes remains low, due to the low unit price charged for domestic cigarette brands. Contraband cigarettes are usually premium brands and are passed off as bona fide imports and are sold to customers who are unaware that what they are buying is a counterfeit or contraband.

Sales of contraband cigarettes increased from 211 billion sticks in 2009 to 213 billion sticks in 2010 with a rise of 1%. Growth in contraband sales was thus outpaced by growth in retail volume in the year, despite the introduction of considerably higher taxes on legally-sold cigarettes.

The new taxation system resulted in the introduction of unknown contraband brands via nearby countries such as Turkey. However, domestic brands such as Cleopatra continue to be priced at a low level, with contraband traders thus struggling to undercut their prices while maintaining profits. Consequently, contraband traders continued to focus on offering premium brands to tourists and mid- and high-income consumers. The percentage of contraband cigarettes thus remained below half a percentage point of total consumption in 2010.

MARKET INDICATORS

MARKET DATA

DEFINITIONS

Explanations of words and/or terminology used in this report are as follows:

• Haraam: Arabic term meaning “forbidden” and used to refer to practices forbidden by Allah;

• Shisha: Syrupy tobacco mixture smoked using a hookah or water-pipe.

This report analyses the market for tobacco in Egypt. For the purposes of the study, the market has been defined as follows:

• Cigarettes

• Cigars

• Smoking tobacco

• Smokeless tobacco

Sources used during the research included the following:

STRATEGIC DIRECTION

• Eastern Company faces a period of uncertainty during the forecast period. The company is majority-owned by the Egyptian government. However, the Egyptian government faced upheaval in 2011 due to the January revolution, with President Mubarak being overthrown and replaced by a military junta. Egypt will see new presidential elections in April 2012, with much of the company’s future being shaped by the results of these elections. Whether the company’s plan to establish its own tobacco production in Ethiopia will be achieved thus remains to be seen.

• There were indications of Islamic parties gaining support in Egypt towards the end of 2011. If the new Egyptian government has an Islamic stance, this could result in the company being privatised or broken up, due to smoking being considered haraam under Islamic law. However, Eastern Company is a major revenue generator for the Egyptian government and the new rulers of the company may well be reluctant to relinquish the revenue stream that the company’s profits provide.

KEY FACTS

COMPANY BACKGROUND

• Eastern Company was incorporated in Egypt by Sultan Ahmad Fou'ad's decree in 1920. The company was subsequently nationalised in 1963 and granted a full monopoly for sales of tobacco products in Egypt.

• The Egyptian government began a privatisation process for the company in 1997. In the first half of the review period, there was speculation that the company would be privatised, with rumoured interest from British American Tobacco, Philip Morris International and Altadis.

• However, this privatisation did not materialise by the end of the review period, with 55% of the company’s shares owned by the state in 2010. 5% of the company’s shares are meanwhile owned by a shareholder association, while the remaining 40% are owned by a number of shareholders. These include public and private companies, individuals and banks, especially investment funds.

• Since 2006, the company focused on expanding its domestic production for both cigarettes and cigars. This enabled the company to keep costs low and thus to keep prices low and profit margins high. The company notably expanded domestic production for global brands such as Philip Morris’ Marlboro.

• The company has a wide range of business interests. In addition to tobacco products and accessories, the company is also present in investments, finance, retail, industrial and agricultural production real estate and services. The company also produces its own packaging.

• In January 2010, Eastern Company announced plans to establish a company producing and process raw tobacco in neighbouring Ethiopia, with these plans being formed in collaboration with a number of international companies. This move aims to reduce the company’s vulnerability to global tobacco price and supply fluctuations. The company subsequently held negotiations with the Ethiopian government as it prepared to buy land suitable for tobacco cultivation.

PRODUCTION

• Eastern Company operates 26 production plants in Egypt, with the company’s production taking place entirely within the country.

• The company operates eight main plants, which are located in Giza, Talbia and Alexandria. These are all responsible for the production of cigarettes, pipe tobacco and cigars. Filter rods are meanwhile manufactured at another three plants in the same locations. The company’s Alzomor Warehouse in Giza is meanwhile responsible for the company’s printing and carton box manufacturing. Moassel Salloum tobacco is meanwhile produced at six plants located in Giza, Alexandria, Menouf, Tanta and Abu Teeg. A further three plants in Giza, Talbia and Alexandria are responsible for the production of homogenised tobacco.

• The company imports its raw tobacco from China, India, Turkey and Zimbabwe. The company uses these countries as its suppliers based on their lower logistics costs.

• The company invested in new production facilities towards the end of the review period, in response to traffic issues at its current sites. The development of large residential areas in the vicinity of its site resulted in considerable traffic problems. This was particularly true of its head office in Giza, which is surrounded by the Al Ahram Tunnel and the El Malek Faysal Bridge and buildings. The company’s new facilities will be within the 6th Industrial Zone on the Oases Road, with 80% of the site’s interior buildings finished by the end of the review period. The site is expected to be fully completed by the end of 2012.

• In addition to producing its own brands, the company also produces a number of brands under license for global cigarette players. These include British American Tobacco’s Viceroy, Rothmans and Kent; Philip Morris’ L&M, Marlboro, Next and Merit; Japan Tobacco’s Silk Cut and Winston. Altogether, these brands accounted for almost 20% of the company’s retail volume sales in cigarettes in 2010. While these brands are produced by Eastern Company, however, their respective GBOs are responsible for all of their marketing.

COMPETITIVE POSITIONING

• Eastern Company was the clear leader in tobacco products in 2010. The company accounted for 98% retail volume share in cigarettes, with 98% share in high tar cigarettes, 99% in low tar and ultra low tar cigarettes and close to 100% share in mid tar cigarettes. The company also accounted for 58% value share in cigars and 67% share in smoking tobacco, where it accounted for 67% in pipe tobacco and was the only significant player in RYO tobacco with 37% share.

• The company however lost share slightly in 2010 over the previous year, dropping by almost a percentage point in dominant product area cigarettes. This was due to the introduction of higher taxes for cigarettes in 2010, which boosted sales of economy import brands.

• The company is the only producer of tobacco products in Egypt and produces its own brands and also brands under license for global players. Due to its monopolistic position in the production of tobacco, Eastern Company’s main focus is not on increasing volume sales but rather on ensuring that production remains high enough to meet consumer demand. The company also focuses on protecting its tobacco products from price fluctuations, with the company thus controlling the prices of local and international brands. The company and the Egyptian government, at least that in place during the review period, believe that maintaining a sufficient supply of affordable cigarettes is essential in order to maintain economic, social and political stability in Egypt.

• The company’s main consumer base consists of low-income Egyptians, who make up 80% of the total Egyptian population. The brands produced by Eastern Company under licence, such as Philip Morris’ Marlboro, are much too expensive for these consumers. This group however shows strong consumer loyalty for Eastern Company’s own lower-priced brands such as Cleopatra. Cleopatra alone dominated sales of cigarettes in 2010 with a retail volume share of 73%.

• The company offers a wide product range, including around 20 different brands of cigarettes. The company has a presence in high, mid and low tar cigarettes and in economy, mid-priced and premium products. The company also has a presence in cigars and in both pipe and RYO tobacco.

STRATEGIC DIRECTION

• Nakhla Tobacco is expected to focus on new product development during the forecast period. The company notably launched innovative flavour Ice Lemon Mint for its eponymous Nakhla brand in 2011, with further distinctive launches likely to follow. The company will thus seek to compete with dominant smoking tobacco player Eastern Company. Nakhla is also expected to focus on expanding exports during the forecast period, with its products being widely popular among Egyptian expatriates around the world.

KEY FACTS

COMPANY BACKGROUND

• Nakhla Tobacco was established in Shebin El-Kom in Egypt in 1913, being founded by Saleh Mohamed El-Ibiary as a factory producing shisha tobacco. The company continues to be family-owned by descendents of its founder.

• The company is solely focused on pipe tobacco.

• The company has national distribution, operating its own large transportation fleet.

PRODUCTION

• Nakhla Tobacco entirely produces its products within Egypt.

• The company exports its range globally, with agents in Australia, the US and Canada and many countries across South America, Africa, Europe, Asia and the Middle East. Overall, the company sells its range in over 85 countries worldwide.

COMPETITIVE POSITIONING

• Nakhla Tobacco ranked second in smoking tobacco in 2010 with a steady 30% volume share. The company ranks second to dominant player Eastern Tobacco, which accounted for 67% volume share. The company’s share is derived from its presence in pipe tobacco, where it also accounted for 30% volume share in the year.

• The company maintained a steady volume share in pipe tobacco and overall smoking tobacco in 2010, benefiting from its wide range and strong reputation for quality.

• The company offers an extremely wide range of products, including a number of flavour variants for many of its brands. Fakhfakhina is for example offered in rose, orange, coffee, lemon, pistachio, mango and mixed fruits variants.

• The company has a mid-priced positioning within pipe tobacco.

HEADLINES

• 4% volume and 46% current value growth from 2009 to reach 80.3 billion sticks and E£28.5 billion in 2010

• Anti-tobacco legislation and higher taxes introduced in 2010

• Ultra low tar cigarettes sees highest volume growth of 7% in 2010

• Eastern Company loses almost a percentage point in retail volume share from 2009 but continues to dominate with 98% in 2010

• 25% volume growth and 6% constant value decline expected for forecast period overall

TRENDS

• The government restructured its tobacco products taxation in 2010, with this resulting in the introduction of 40% ad valorem tax based on retail price and a further E£1.25 tax per pack for cigarettes. This replaced a confusing seven-tier system, which imposed tax rates of around 24-28%, and thus resulted in a marked increase in per-pack price in the year. The government also gained the right to further increase the price of cigarettes and other tobacco products. The government also announced that entire cities would see the enforcement of a smoking ban in public places. This raft of legislation followed on from the introduction of a more comprehensive smoking ban and a ban on sales of cigarettes to those aged below 18-years-old in 2007. 2007 also saw the government ban the promotion, advertising and sponsorship of cigarettes. Meanwhile, compulsory anti-smoking graphic images were introduced on cigarette packs in 2008.

• However, the government’s anti-smoking measures had little impact on sales of cigarettes, with retail volume seeing marginally stronger growth in comparison to the review period CAGR at 4% in 2010. This good performance was linked to ongoing economic growth throughout the review period, even during the global economic downturn, enabling consumers to smoke a larger quantity of cigarettes.

• Smoking bans and a ban on sales of cigarettes to minors had little impact on sales, meanwhile, due to this legislation being poorly enforced. Cigarette sales remained one of the Egyptian government’s major revenue streams at the end of the review period. Tax increases primarily increased government revenues, meanwhile, rather than decreasing the number of smokers. The government is hesitant to strictly enforce anti-smoking legislation for fear of compromising the significant share of its annual revenue generated through cigarette sales and tax. The government is also aware that cigarette sales to minors comprise a large share of the profits achieved by newsagent-tobacconists/kiosks and that the imposition of a strict smoking ban would probably lead to unrest and damage tourism.

• The ban on tobacco advertising and the requirement for cigarette packs to carry graphic anti-smoking images also had little effect on consumers’ attitudes to cigarettes at the end of the review period. There is little consumer concern about the long-term adverse health effects of smoking, with consumers typically opting to ignore these warnings. Many smokers indeed began to use attractive metal containers to hide these photos, with these containers becoming fashionable among all income groups.

• The high tax rates imposed on cigarettes in 2010 encouraged illicit trade in cigarettes to an extent, with new contraband brands for example emerging from Turkey. However, illicit volume sales rose by just 1% in 2010 over the previous year and were thus outpaced by retail volume growth. Domestic cigarettes continue to be low-priced despite tax increases, with smugglers thus struggling to make profits while offering lower prices. Smugglers consequently mainly focus on offering premium brands, whether contraband or counterfeit, where they can undercut prices and still achieve attractive profits.

• Cigarettes saw a striking 40% rise in current value unit price in 2010 over the previous year, with this representing 26% constant value growth. This was due to the introduction of higher tax rates in the year. Some retailers also took advantage of these tax increases to further increase mark-ups and thus maximise profits.

• Ultra low tar cigarettes witnessed the fastest volume growth in 2010 at 7%, in line with the review period volume CAGR. The ultra low tar cigarettes don't have price difference from the high tar cigarettes. Growth was strong from a low sales base, as a result of widening health awareness among educated mid- and high-income consumers, particularly in the country’s largest cities. This trend was also behind the above-average 6% volume growth seen for low tar cigarettes in 2010.

• Most consumers however continued to have little awareness of the health risks associated with high tar cigarettes. High tar cigarettes also benefit from offering the lowest unit price within cigarettes, with most domestic brands being high tar. These products are consequently affordable to a wider range of consumers in comparison to mid, low or ultra low tar cigarettes. High tar cigarettes consequently accounted for 90% of overall volume sales in 2010 and saw the strongest absolute volume increase, rising by almost 2.8 billion sticks to reach 72.3 billion. In contrast, low tar cigarettes accounted for just 1.6 billion sticks in 2010 and ultra low tar cigarettes for 187 million sticks.

• Flavoured cigarettes are available in Egypt but have a very limited distribution presence in only high-income districts. Menthol cigarettes dominate sales, with these products mainly targeting upper-mid- and high-income women. Flavoured cigarettes tend to be more expensive and therefore are unaffordable for most Egyptian smokers, who are from low-income groups. In addition, Egyptians tend to like the heavy tobacco flavour of strong cigarettes, as is shown by a preference for high tar cigarettes.

COMPETITIVE LANDSCAPE

• Tobacco in Egypt is currently monopolised by Eastern Company, a state-controlled company in which the government holds a majority stake. A privatisation programme for Eastern Company was initiated in 1997. However, this process has not yet been completed and the Egyptian government thus still holds a majority stake. Eastern Company accounted for 98% volume share in cigarette sales in NBO terms in 2010. The company accounted for 98% share in high tar cigarettes in the year, 99% in low tar and ultra low tar cigarettes and close to 100% share in mid tar cigarettes.

• Multinational tobacco companies are present at a GBO level, meanwhile. Philip Morris for example accounted for 12% volume share in GBO terms in overall cigarettes in 2010, while British American Tobacco accounted for 7% volume share. These players are responsible for the marketing and distribution of the cigarettes manufactured for them under licence by Eastern Company.

• Phillip Morris and British American Tobacco gained share dramatically during the review period as a whole, rising from 10% and 3% volume share respectively in 2005. This was due to with an emerging mid-income group boosting sales for their higher-priced brands, which benefit from being viewed as high in quality and as having a fashionable Western image. However, the company lost share slightly in 2010 over the previous year, as higher taxes on cigarettes encouraged some consumers to economise by trading down.

• Eastern Company’s Cleopatra brand continues to be Egypt's top selling cigarette brand and accounted for 73% of all cigarette volume sales in Egypt in 2010. Cleopatra is extremely popular amongst Egyptians, particularly the low-income group that makes up the majority of the population. This is not only because Cleopatra is the cheapest cigarette brand available in Egypt but also because it has a strong flavour, which Egyptians tend to prefer. The brand also offers a wide range, including Cleopatra Golden, Cleopatra Box, Cleopatra Super and Cleopatra Special Blend in high tar cigarettes. The brand also offers mid and low tar cigarettes. In 2010, the brand accounted for 77% volume share in high tar cigarettes, 36% share in mid tar cigarettes and 69% share in low tar cigarettes. Cleopatra has been present in Egypt for many years and enjoys high levels of brand recognition and brand loyalty.

• Eastern Company lost almost a percentage point in volume share in 2010 over the previous year. This was due to the introduction of higher cigarette taxes in the year, which greatly increased pack prices. This in turn made room for economy brands to gain share, thus almost doubling the share of “others.” These smaller players represent a tiny niche, however, with “others” accounting for less than 2% volume share in overall cigarettes in 2010.

NEW PRODUCT DEVELOPMENTS

• Egyptian cigarettes did not see the introduction of numerous new products in 2010, due largely to the new taxes being imposed in the year. Players were aware that these tax increases would be introduced and thus generally postponed the introduction of new brands or variants until they had fully assessed the impact of tax increases and price fluctuations.

• The main new products launched in 2010 targeted mid- and high-income consumers, who were less likely to be impacted by higher prices. There was a focus on female consumers, with the launch of Karelia Slims in menthol and standard variants and Imperial Tobacco’s Davidoff Slims. Both launches target mid- and high-income consumers and are premium-priced.

DISTRIBUTION

• Newsagent-tobacconists/kiosks is the most prominent channel for the distribution of cigarettes, accounting for 35% volume share in 2010. This channel is the most convenient for purchases, with cigarette kiosks located on almost every corner within Egypt’s larger cities. This makes it easy for smokers to stop in their cars and purchase a pack of cigarettes, generally without having to leave their vehicles. These outlets also sell gum, carbonates, bottled water and impulse food and beverages, making kiosks a quick and easy way to buy refreshments and cigarettes on-the-go without having to find parking. This channel is followed by independent small grocers with 18% volume share and street vendors with 13% share.

• The distribution of cigarettes is not monitored by the Egyptian government. However, tobacco retailers require special licences under Egyptian law, with these licenses being monitored very carefully by the government. In addition, the wholesale warehouses that supply retailers with cigarettes maintain a certain level of control over the distribution of these products.

• In-store promotion and point-of-sale advertising remained legal for cigarettes at the end of the review period. Cigarette players thus focus much of their marketing resources on these areas in order to maximise exposure for their products in the absence of media advertising. This form of advertising is particularly evident in forecourt retailers and newsagent-tobacconists/kiosks.

• There are very few cigarette vending machines present in Egypt. Those that are present are found mainly in hotels. However, there is no law banning minors from using these machines, nor are they regulated in any way.

• Internet sales of cigarettes are virtually nonexistent in Egypt. Cigarettes are widely available at fairly low prices in store-based retailing outlets, rendering the online channel redundant for sales of cigarettes.

PROSPECTS

• The January 2011 revolution is expected to have both positive and negative implications for cigarettes during the forecast period. In the short-term, the revolution impacted imports of cigarettes, with fewer imports thus being available. In addition, Eastern Company’s struggled to maintain production as a result of curfews and unrest, while distribution networks were also impacted, with supplies thus running short for many retailers in the first quarter of 2011.

• In addition, the revolution resulted in a change in the government, with the country’s President Mubarak being deposed in February 2011 and a military junta taking control. With ongoing civil protest throughout 2011, the temporary government had little time to focus on enforcing anti-smoking legislation. Consequently, consumers, retailers, consumer foodservice operators and taxi drivers became more relaxed about smoking in enclosed public places in the year.

• However, the new regime penalised smokers with its June 2011 budget. This budget sought to reduce income disparity by increasing the national minimum wage and introducing subsidies for fuel and other essentials. However, it also further increased tax on cigarettes by 10%, which will push up prices further at the start of the forecast period. Further legislation is difficult to predict and is likely to be shaped by the presidential elections set to take place in April 2012. Early signs are that Islamist factions are gaining ground. This could prove problematic for cigarettes, with Islam viewing smoking as harmful and sinful.

• Higher taxes are not expected to result in a rise in constant value unit price, however. Indeed, cigarettes is expected to see constant value unit price decline of 25% during the forecast period. This will be due to rising disposable income levels for low-income groups, enabling these consumers to smoke a larger quantity of economy cigarettes. In addition British American Tobacco’s plans to begin production in Egypt is likely to result in growing price competition, with this posing a challenge to Eastern Company’s dominance.

• The 2011 revolution could also pose challenging for dominant cigarette player Eastern Company. This company was majority owned by the Egyptian government, which has now changed dramatically and is set to change further. The company’s future plans to establish tobacco cultivation in Ethiopia are now consequently uncertain. If an Islamic government is established, it may wish to cut the ties between the state and Eastern Company, with such a move likely to threaten the company’s monopoly status or even existence. Eastern Company and other players in cigarettes are thus likely to further postpone expansion and new product development plans in 2011.

• Given Egypt’s uncertain future, it is difficult to predict the performance of cigarettes during the forecast period. However, the forecast period could well see a slightly stronger volume growth in comparison to the review period, with a volume CAGR of 5% and 4% respectively. Stronger growth is likely to be supported by rising disposable income levels, once political stability has been restored.

• Ultra low tar cigarettes is expected to witness the highest volume growth over the forecast period, rising by 7% CAGR. This growth will be distorted by a low sales base, with these products set to account for less than half a percentage point of overall cigarette volume in 2015. Growth will be due to mid- and high-income consumers becoming more aware of the health problems caused by high tar cigarettes and will also be linked to a rise in the number of women smokers. A growing number of young urban women regard smoking as fashionable, although many do not like the strong tobacco flavour of high tar cigarettes. These consumers are however likely to support strong growth for ultra low and low tar cigarettes, with the latter product area also expected to see above-average volume growth at 6% CAGR during the forecast period.

SECTOR BACKGROUND

Cigarettes: price bands

• The majority of the Egyptian population fall below the poverty line, with price thus being an extremely important factor when buying cigarettes in Egypt. The majority of Egyptian consumers lack disposable income, with only an estimated 11% of the population being above subsistence level. However, cigarette smoking is strongly ingrained in the culture and tradition of Egypt, with many consumers regarding cigarettes as a necessity rather than a luxury.

• Economy brands consequently dominate cigarette sales, accounting for 79% retail volume share in 2010. However, this price band lost almost half a percentage point in share in the year and dropped from 85% share in 2005. This was due to economic growth during the review period as a whole and the emergence of a larger mid-income group.

• Mid-priced and premium cigarettes both gained share in 2010 over the previous year, thanks to volume growth of 6% in each product area. These products thus slightly outpaced the volume growth of 4% seen for overall cigarettes. The disparity was greater for the review period as a whole, with mid-priced and premium cigarettes seeing a volume CAGR of 17% and 7% respectively in comparison to 4% volume CAGR for overall cigarettes. These products benefited from rising disposable income levels and a larger mid-income group. They also benefited from increasingly aspirational attitudes among mid- and high-income consumers and a growing interest in western brands.

• Cigarette unit prices increased dramatically in 2010 due to higher taxes, with the tax percentage being higher on economy brands. The resultant price increases for these products further encouraged consumers to shift to mid-priced and premium brands as the price differential reduced.

• There is expected to be a further shift towards mid-priced and premium cigarettes during the forecast period, with volume CAGR of 9% and 6% expected for these products areas. Overall cigarettes is meanwhile expected to see 5% volume CAGR. By 2015, mid-priced cigarettes is expected to account for 14% of overall volume and premium cigarettes for 10%.

• Economy cigarettes is however expected to continue to dominate overall sales with an estimated volume share of 76% in 2015. Most Egyptian consumers will continue to be in low-income groups, with price thus being a major determinant in their purchasing decisions. In addition, the dominance of economy cigarettes will continue to be underpinned by the popularity of dominant brand Cleopatra, which is not only preferred due to its low price but also due to its strong flavour.

Cigarettes: menthol/standard

• Standard cigarettes accounted for close to 100% of volume sales of cigarettes in 2010, with menthol cigarette sales accounting for a negligible share. There is little tradition for flavoured cigarettes and Egyptians are often reluctant to try new products.

• Sales of menthol cigarettes are limited mainly to high-income professional women. These Egyptians however account for only a very small share of the population. Sales of menthol cigarettes are also constrained by these products being more expensive than standard cigarettes. Consequently, the majority of Egyptians are unable to afford menthol cigarettes.

• Menthol cigarettes are unlikely to become popular in Egypt over the forecast period due to their higher prices and Egyptian smokers’ traditional preference. These products are likely to continue to appeal mainly to aspirational mid- and high-income women in urban areas. However, these consumers will generally buy cigarettes via duty free outlets and while travelling abroad, as it is well known that these cigarettes are not widely available in Egypt. Consequently, overall sales are expected to remain negligible during the forecast period.

Cigarettes: filter/non-filter

• Filtered cigarettes accounted for all cigarette sales in Egypt during the review period. Eastern Company does not produce unfiltered cigarettes and is reluctant to do so. The company recognises that there is no tradition for unfiltered cigarettes in Egypt and also that Egyptians tend to be traditional in their purchasing habits for cigarettes.

Cigarettes: carbon/standard filter

• Non-carbon filters accounted for almost 99% of total cigarette volume sales in 2010 and throughout the review period. Egyptian consumers are not generally aware of the benefits of carbon filter cigarettes, which are also priced at considerably higher levels in comparison to many non-carbon filter brands. These products are thus also unaffordable to the majority of Egyptian consumers.

• Prior to the review period, the Kent brand launched a charcoal filter cigarette in Egypt and promoted it as a healthier cigarette. This product was promoted in upmarket bars and nightclubs in Egypt’s larger cities and aimed at attracting higher-income consumers. However, carbon filters did not prove a widespread success, with most Egyptians having a low level of health awareness and also a preference for a strong flavour, which Kent’s carbon filtered variant does not offer. Consequently, sales and distribution for these products remained limited at the end of the review period, with carbon filter cigarettes being available only in upmarket areas of the country’s larger cities.

Cigarettes: filter length

• King size/regular cigarettes accounted for almost 88% of cigarette volume sales in 2010. This dominance is due to the widespread popularity of Cleopatra, a king size/regular cigarette brand that alone accounted for 73% volume share in cigarettes in the year.

• King size/regular however lost half a percentage point in volume share in 2010 over the previous year and dropped from 91% share in 2008. This was due to the increasing popularity of superking/long cigarettes, which benefit from a fashionable Western image.

Cigarettes: slims/superslims vs regular

• Regular cigarettes accounted for close to 100% of cigarette volume sales in 2010, with slim/superslim cigarettes having sales of just 80 million sticks in the year. Slim/superslim products are consumed only by a very small share of the population. This is partly due to their higher price in comparison to regular cigarettes. In addition, Egyptian consumers tend to be traditional in their cigarette preferences and also prefer a heavier flavour such as that offered by regular cigarette brand Cleopatra. A similar flavour could not be found in slim/superslim cigarettes by the end of the review period.

Cigarettes: pack size

• Cigarettes are only available in packs of 20 sticks in Egypt and this pack size consequently accounted for all cigarette sales in 2010. Dominant player Eastern Company was reluctant to launch 10-stick packs, reasoning that Egyptians would be unwilling to pay a higher unit price for a smaller pack size. Egyptians tend to be heavy smokers, especially those who have smoked for many years. Consequently, they prefer to buy in bulk and most prefer to buy at the lowest possible unit price.

Cigarettes: pack type

• Soft pack (paper-based) packaging accounted for 64% of total cigarette volume sales in 2010 while flip-top (folding cartons) packaging accounted for the remaining 37% share. The dominance of soft pack (paper-based) packaging is due to its lower cost, which enables producers to keep prices down. Price is meanwhile the main purchasing determinant for consumers in Egypt, due to widespread poverty.

• Flip-top (folding cartons) packaging however gained share during the review period, gaining half a percentage point in volume share in 2010 over the previous year and rising form 28% share in 2005. Imported brands are mainly sold in flip-top (folding cartons) packaging. This packaging format thus benefited from these brands’ increasingly fashionable image as disposable income levels rose during the review period and the mid-income group continued to expand.

CATEGORY DATA

HEADLINES

• 4% volume and 36% current value growth from 2009 to reach 1.1 million units and E£16 million in 2010

• Current value growth boosted by introduction of higher tax rates in 2010

• Standard cigars records highest volume growth of 5% in 2010

• Eastern Company extends dominance by almost three percentage points from 2009 to reach 58% volume share in 2010

• 23% volume growth and 14% constant value sales decline expected for overall forecast period

TRENDS

• From mid-2010, higher taxes were levied on cigars in Egypt, with this resulting in a marked increase in unit price. However, this increase did not dramatically affect growth in volume sales as cigars are purchased mainly by affluent consumers. Sales are almost exclusively limited to high-income men, who are thus fairly unconcerned about unit price rises.

• Volume growth however slowed to 4% in 2010 over the previous year, in comparison to a higher review period CAGR of 5%. Stronger growth earlier in the review period was due to the emergence of a larger mid-income group and an increasingly aspirational attitude among mid- and high-income consumers, with cigars often regarded as status symbols. Higher prices as a result of tax increases in 2010 however checked sales growth among aspirational mid-income consumers to an extent. Current value sales meanwhile rose by a dramatic 46% in 2010 over the previous year as a result of price increases, up from a review period current value CAGR of 17%.

• Cigars remains a small niche in Egypt compared to cigarettes, with retail volume sales of just over a million units in 2010. In contrast, cigarettes reached sales of 80.3 billion sticks in the year. Cigars are expensive in Egypt and are therefore only affordable to high-income consumers. Even within high-income groups, only a limited number of men smoke cigars, while the majority of smokers choose to smoke cigarettes. Women in Egypt do not generally smoke cigars, as cigar smoking is seen as a manly habit and the heavy flavour of cigars would be likely to be too strong for most Egyptian women. Furthermore, Egyptian cigar sales are constrained by many cigar smokers stocking up when travelling overseas, particularly in duty free outlets in airports. Cigar smokers can find a wider range of cigars in these outlets and often also find lower prices for their favourite brands.

• Egyptians who do smoke cigars generally prefer standard cigars to small cigars, with the former being regarded as more of a status symbol. Standard cigars accounted for 73% of unit volume in cigars in 2010 and a higher volume share of 87%, due to these products’ higher price in comparison to small cigars. Cigarillos and large cigars meanwhile remained negligible, with little distribution for these products in the country.

• Cigar smoking clubs are extremely rare in Egypt. However, the very few that do exist were not affected by Egypt’s public smoking ban during the review period, as this legislation was not strongly enforced in the country. The men that frequent cigar smoking clubs also wield a lot of power in the country, being generally important in business or the government. Consequently, it is unlikely that the authorities would strictly enforce the smoking ban at these cigar clubs.

HAND-MADE VERSUS MACHINE MANUFACTURED SPLITS

• Hand-made cigars accounted for 16% retail volume share in overall cigars in 2010 and a stronger 20% share in standard cigars. Hand-made cigars are seen as being premium luxury products and are thus attractive to affluent businessmen who regard these cigars as status symbols. Consequently, increasingly aspirational consumer attitudes resulted in hand-made cigars gaining share, with a rise of over half a percentage point in retail volume share since 2005.

• However, machine-manufactured cigars continued to dominate sales, accounting for 80% of standard cigar retail volume in 2010 and close to 100% share in small cigars. Leading brands Verona and José Bartolo from Eastern Company are machine-manufactured, with these brands alone accounting for 48% retail volume share in 2010. Most other products on offer are also machine-manufactured, although hand-made cigars gained a wider distribution presence and benefited from an expanding range of brands being offered during the review period.

COMPETITIVE LANDSCAPE

• Eastern Company remained the dominant player in cigars in Egypt during 2010, with a share of 58% in retail volume terms. The company has the widest distribution in cigars and also offers lower prices thanks to its use of domestic production facilities. The company’s two main brands are José Bartolo, which accounted for 21% retail volume share in 2010, and Verona at 27% share.

• Eastern Company gained almost three percentage points in share in 2010 over the previous year, and rose from just 45% share at the start of the review period. This was partly due to the company expanding production volume for its cigars during the review period. In addition, the company benefited from tax changes in 2010, with higher taxes encouraging many to opt for its more affordable domestically-produced cigars.

• Apart from Eastern Company’s two leading brands, all other cigar brands are imported. These products are consequently considerably higher in price, not only due to transportation costs but also due to import duty of E£6/kg on finished tobacco products. “Others” accounted for 42% retail volume share in 2010, dropping from 55% share at the start of the review period due to growing competition from Eastern Company’s range.

NEW PRODUCT DEVELOPMENTS

• Cigarillos saw strong new product development in 2010, with the entry of Villiger Söhne’s Villiger Slims and flavoured products such as Swisher’s Blackstone Cherry and Lane’s Captain Black Sweets. These launches sought to offer a more affordable alternative to cigars in response to higher cigar taxes and price increases in 2010. These launches also sought to attract female smokers. Smoking was regarded as increasingly fashionable among urban mid- and high-income young women during the review period. The lighter flavour, smaller size and use of flavouring for these launches consequently sought to attract a new female consumer base and to thus encourage significant sales of cigarillos.

• No new products were launched in cigars in Egypt during 2010, however. Cigars lacks a wide consumer appeal and targets only a tiny proportion of the Egyptian population, specifically affluent men. Most Egyptians fall below the poverty line and are unlikely to start smoking cigars, as cigars are expensive and are also a product with an acquired taste. Cigar companies also recognise that many cigar smokers in Egypt stock up while travelling. They are thus reluctant to import new brands or different types of cigars into Egypt towards the end of the review period.

DISTRIBUTION

• Forecourt retailers is the dominant distribution channel for cigars, accounting for 62% retail volume share in 2919. Forecourt retailers are frequented by a large proportion of Egypt’s high-income earners as they drive around Egypt. Consequently, the channel offers a good means of reaching high-income consumers and is targeted by Eastern Company and other players in cigars. Forecourt retailers gained a further percentage point in retail volume share in cigars in 2010 over the previous year, with this due to these outlets stocking a wider range.

• Cigar distribution is not monitored by the Egyptian government. However, the wholesale warehouses that supply retailers exercise a degree of control over the distribution of cigars. Eastern Company also sells its cigars directly to many retailers. Retailers must obtain a licence to sell tobacco products before they can sell cigars, with this licensing being carefully regulated and monitored by the authorities.

• Cigar sales via vending remained nonexistent at the end of the review period. Store-based retailing outlets selling cigars can be found throughout the country, with there thus being little need for vending machines offering cigars. In addition to forecourt retailers, newsagent-tobacconists/kiosks and convenience stores also typically offer a range of cigars.

• Internet retailing sales of cigars remained insignificant at the end of the review period. This is partly due to the underdeveloped nature of cigar sales in general. In addition, only a very small percentage of the Egyptian population are interested in purchasing cigars, further constraining sales. Meanwhile these consumers typically stock up in bulk on duty free packs while travelling abroad.

PROSPECTS

• Egypt’s future remained uncertain at the end of 2011, following the January 2011 revolution. A military junta ruled the country for the majority of the year, with presidential elections being scheduled for April 2012. There are signs of Islamist parties gaining power, which could prove problematic for tobacco products in general, as smoking is considered to be haraam.

• In addition, higher taxes were imposed on cigars in June 2011 and also on high-income groups’ incomes. If future government attempts to reduce income disparity make Egypt less appealing to high-income groups, cigars could see a reduction in their potential customer base during the forecast period. Cigars are expensive and are thus generally purchased solely by upper-mid- and high-income consumers.

• If Egypt however returns swiftly to political stability, cigars is expected to see 4% volume CAGR during the forecast period. Growth is expected to be supported by growth in the country’s mid-income group. Growth is also expected to be driven by increasingly aspirational consumer attitudes, with many regarding cigars as status symbols.

• Standard cigars is thus expected to see the strongest volume growth during the forecast period at 5% CAGR, with small cigars lacking the associations with high status enjoyed by standard cigars. Consequently, small cigars will see just 2% volume CAGR and will account for only around 15% retail volume share by 2015.

• In constant value terms, cigars is however expected to see 14% decline during the forecast period, in comparison to the 27% growth seen during the review period. This will be due to a growing number of aspirational mid-income consumers smoking cigars, due to these products’ high status image. These consumers however cannot generally afford higher-priced cigars and are thus likely to opt for Eastern Company’s more affordable domestically-produced cigars, thus eroding constant value unit prices.

• Cigarillos may gain significant sales during the forecast period, following a trio of strong launches at the end of the review period. However, sales of these products are likely to remain even more limited than those of cigars. While cigars are viewed as high status products for affluent men, cigarillos are viewed as fashionable products for affluent women. The number of affluent female smokers is low, however, with a limited consumer base thus constraining sales.

CATEGORY DATA

TRENDS

• Sales of smokeless tobacco remained negligible in Egypt during the review period. Egyptians have no familiarity with smokeless tobacco and players are reluctant to launch such products due to consumers’ traditional preferences when it comes to buying tobacco products. These products are thus unlikely to be introduced during the forecast period.

HEADLINES

• 5% volume and 110% current value growth from 2009 to reach almost 27,000 tonnes and E£2 billion in 2010

• Current value growth exaggerated by dramatic tax increase in 2010

• Pipe tobacco posts highest volume growth of 5% growth in 2010

• Eastern Company marginally extends dominance to account for 67% volume share in 2010

• 5% volume CAGR and 1% constant value CAGR expected for forecast period

TRENDS

• There was a sharp rise in current value sales in 2010 over the previous year, with this linked to the introduction of considerably higher prices. The government imposed a 100% ad valorem tax for loose tobacco. This was considerably higher in comparison to the 40% ad valorem tax imposed on cigarettes and cigars, with the government recognising that low prices contribute the widespread popularity of shisha smoking.

• 2010 also saw government initiatives to free the major cities from smoking. The first city to be targeted in under this new initiative was Alexandria, with its local authorities imposing a ban on the smoking of shisha in September 2010. In contrast to previous public smoking bans, this ban was actively enforced, with those failing to comply being fined US$9. This represented a large fine to most Alexandrians, with the ban thus proving highly unpopular. The ban also damaged tourism in the city, as most tourists are used to smoking shisha during their summer vacations.

• Pipe tobacco remains an extremely popular product in Egypt due to the widespread use of shisha, the country’s traditional water pipe. Smoking shisha is deeply embedded in Egyptian culture. Pipe tobacco for smoking in a shisha is available in many flavours, thus appealing to a large percentage of the Egyptian population.

• 2010 saw volume growth of 5% over the previous year in comparison to a review period CAGR of 3%. This growth was driven by pipe tobacco for use in shisha, with these products accounting for close to 100% of sales in smoking tobacco. The reason for this stronger growth in 2010 is that the numbers of shisha outlets increased rapidly over the review period. New shisha smoking establishments opened in suburban areas, in response to a major shift from urban to suburban living.

• Another major social change affecting sales of pipe tobacco is that Egyptian women are smoking more shisha. Flavours such as banana, cherry, apple and grape were introduced in pipe tobacco in order to appeal to female consumers and capitalise on growing female interest. Women also became more interested in smoking shisha as they became more liberated and were also encouraged by the sight of female tourists smoking shisha. Women’s growing interest of women in smoking shisha also helped to support stronger volume growth towards the end of the review period.

• RYO tobacco remains an extremely small product category in Egypt due to the low price of cigarettes. This removes the main advantage that RYO tobacco has in many countries, namely its lower price when compared to cigarettes. RYO tobacco retail sales thus reached less than six tonnes in 2010, while value sales reached almost E£2 million. While RYO tobacco could have benefited from higher taxes being imposed on cigarettes, it was prevented from doing so by the even sharper taxes imposed on loose tobacco.

• Shisha is popular among all income groups in Egypt due to its low cost. Low-income consumers are able to enjoy a smoke for as little as E£5 per shisha, whilst higher-income earners frequenting more upmarket outlets typically pay E£20-50 per shisha in upmarket areas of Cairo such as Zamalek, Maadi or Mohanidseen.

The Role and Effect of Cannabis/Marijuana

• The International Narcotics Control Strategy report in 2009 stated that Egypt is not a major producer, supplier or consumer of narcotics or precursor chemicals.

• The two predominant drugs in the country are both forms of marijuana, with these known as bango and hasheesh. Bango is dried marijuana leaves and buds and is perceived as being more detrimental to health than hasheesh, which is produced from cannabis resin. However, Bango is cheaper and therefore more widely consumed by low-income groups. An estimated 38% of Egyptian males aged over 21-years-old consume bango or hasheesh.

• Bango and hasheesh are generally made into a cigarette by being mixed with tobacco in rolling paper. However, marijuana use does not directly affect RYO tobacco in Egypt, as Egyptian users tend to use the tobacco from crushed cigarettes rather than RYO tobacco. In many places, hasheesh is also placed in a shisha water pipe, however, which supports sales of pipe tobacco.

DISTRIBUTION

• Newsagent-tobacconists/kiosks accounts for a lower share of smoking tobacco sales at 18% of retail volume in 2010, in comparison to the 35% share enjoyed by the channel in cigarettes. This is due to the bulkier pack size and wide range of flavours available in pipe tobacco, with newsagent-tobacconists/kiosks generally only having room to offer the most popular flavours.

• Supermarkets/hypermarkets is meanwhile the most significant channel for sales of smoking tobacco, accounting for 43% volume share in 2010. This channel offers the widest range of flavours and brands and thus attracts many consumers. In addition, supermarkets/hypermarkets offers lower price in comparison to other channels. The channel thus gained a further percentage point in retail volume share in 2010 over the previous year, as higher taxes on smoking tobacco encouraged consumers to shop around in search of the best price.

• Vending and internet retailing sales of smoking tobacco remained insignificant in Egypt at the end of the review period. Low-income groups are the main consumers of smoking tobacco, with these consumers generally not frequenting areas in which vending machines are present, such as expensive hotels and other exclusive locations. Low-income consumers also generally do not have access to computers or the internet.

COMPETITIVE LANDSCAPE

• Eastern Company continued to dominate smoking tobacco in Egypt in 2010 with 67% retail volume share. Benefiting from majority ownership by the Egyptian government, Eastern Company has dominate tobacco sales in Egypt for a long time and represents significant revenues for the government in the form of profits. The close ties between Eastern Company and the government make it extremely difficult for other tobacco companies to compete.

• Moassel Salloum is Eastern Company’s sole pipe tobacco brand in Egypt, with this brand thus also dominating sales in 2010. Moassel Salloum has been present in smoking tobacco in Egypt for many years. The brand also benefits from an excellent reputation among shisha smokers and the owners of foodservice outlets where shisha is smoked.

• Eastern Company meanwhile also owns the brand Captain, which is the only significant brand in the miniscule niche of RYO tobacco in Egypt. This brand accounted for 37% retail volume share in RYO tobacco in 2010, although it remained insignificant in terms of overall smoking tobacco share.

• Nakhla Tobacco is the only other company active within smoking tobacco, with this player accounting for a steady 30% of retail volume sales in 2009 and 2010. This company offers a wider range of brands, including zaghloul, Nakhla, Fakhfakhina, El Basha and Batta. Of these, its leading brand is zaghloul, which accounted for 9% volume share in 2010. However, the company’s range lacks the strong brand equity enjoyed by Moassel Salloum.

NEW PRODUCT DEVELOPMENTS

• There was no significant new product development in smoking tobacco in 2010. This was due to the introduction of considerably higher tax on smoking tobacco in the year. Consequently, smoking tobacco players postponed any planned new product development until they could assess the impact of the tax increases on consumer demand.

PROSPECTS

• In the aftermath of the January 2011 revolution, the country remained in turmoil for the remainder of the year. Consequently, smoking bans were neglected, as Egypt sought to regain political stability and to address issues such as income disparity and corruption. Alexandria’s ban on smoking shisha in public areas was thus relaxed, with the proposed bans for other cities now viewed as unlikely to be introduced.

• Smoking tobacco is expected to see 5% volume CAGR during the forecast period, with this representing a marked improvement in comparison to the 3% CAGR seen during the review period. Growth will continue to be driven by the widening uptake of shisha. This growth will be underpinned by two main trends. Firstly, there is expected to be growing popularity for shisha among women, with this trend increasing the consumer base for shisha. In addition, growth will be supported by the ongoing expansion of shisha cafés in suburban areas.

• In constant value terms, however, growth rates are expected to drop. Constant value sales saw 13% CAGR during the review period, with this largely due to tax increases in 2010. Further tax increases may be seen for smoking tobacco during the forecast period but they are unlikely to reach similar heights. Meanwhile, with rising disposable income levels expected for low- and mid-income consumers, there will be growing volume sales for affordable pipe tobacco brands during the forecast period. There is thus expected to be a strong focus on price competition amongst retailers and producers as they seek to attract these consumers. Consequently, constant value unit price is expected to drop by 18% during the forecast period and constant value sales are expected to see just 1% CAGR.

• The women’s liberation movement is expected to continue growing in influence in Egypt over the forecast period. This will encourage a growing number of women to smoke shisha and other tobacco products without fear of being shunned, ostracised or condemned for behaving in an improper manner. However, this trend is likely to be limited to mid- and high-income groups. Low-income consumers are expected to remain more traditional in their attitudes, with women who smoke any type of tobacco continuing to be seen as behaving improperly.

• Pipe tobacco will continue to be the main driver of growth during the forecast period. RYO tobacco is expected to see below-average volume growth with a CAGR of 1% and will remain a tiny niche. RYO tobacco will continue to be constrained by the low unit price of economy cigarettes in Egypt. There is thus little incentive for consumers to opt for RYO tobacco in order to save money.

CATEGORY DATA

For each category and subcategory you will receive the following data in Excel format:

From Passport

• Market sizes
• Company shares
• Brand shares
• Distribution
• Analysis by type
• Cigarettes by blend
• Cigarettes by carbon filter/non-carbon filter
• Cigarettes by filtered/unfiltered
• Cigarettes by length
• Cigarettes by pack size
• Cigarettes by pack type
• Cigarettes by price band
• Cigarettes by regular/slim
• Cigarettes by standard/menthol
• Illicit trade penetration
• Pricing
• Products by ingredient
• Products by ingredient
• Smoking population - number of adult smokers
• Smoking prevalence - % of adult population
• Taxation
• Trade statistics - volume

Market size details:

• Retail volume
• Retail volume % growth
• Retail volume per capita
• Retail value retail selling price % growth
• Retail value retail selling price local currency, USD, EUR, GBP, CHF, JPY
• Retail value retail selling price per capita local currency, USD, EUR, GBP, CHF, JPY
• Retail value retail selling price real (constant 2008) prices % growth
• Retail value retail selling price real (constant 2008) prices local currency, USD, EUR, GBP, CHF, JPY
• Retail value retail selling price real (constant 2008) prices per capita local currency, USD, EUR, GBP, CHF, JPY
• Illicit trade volume
• Illicit trade volume % growth
• Illicit trade volume per capita
• Retail volume (sticks)
• Retail volume (sticks) % growth
• Retail volume (sticks) per capita
• Retail value retail selling price nominal (current) prices % growth
• Retail value retail selling price nominal (current) prices local currency, USD, EUR, GBP, CHF, JPY
• Retail value retail selling price nominal (current) prices per capita local currency, USD, EUR, GBP, CHF, JPY
• Retail plus illicit trade
• Retail plus illicit trade % growth
• Retail plus illicit trade per capita

Global insight and local knowledge

With 40 years’ experience of developed and emerging markets, Euromonitor International’s research method is built on a unique combination of specialist industry knowledge and in-country research expertise.

This approach is what enables us to achieve our goal of building a market consensus view of size, shape and trends across the full distribution universe of each category. We factor in whichever channels are relevant, from large-scale grocery to direct sellers, from discount stores to local mom-and-pop outlets.

Industry specialists

Each industry we cover is managed by an Industry Manager and team of Industry Analysts who research and report on their specialist categories all year round.

Our collaborative approach to research means that these industry teams are in constant dialogue with industry players and opinion formers. The planning of our research programmes reflects latest market trends and industry events. In completing each update project, this provides invaluable input to the testing, review and finalisation of our data.

The specialist in-house teams bring together findings from all stages of the annual research process. They work closely with in-country analysts, assess and challenge data and exercise final editorial control over the publication of new data and analysis.

Country and regional analysts

Our in-country analyst network is managed by country and regional analysts in our offices around the world. Working closely with each in-country team, the regional research management team ensures that all country researchers are well schooled in best practices, from the information collected in store checks, to the dialogue we build in trade surveys. Our country analysts ensure that national reports explain the data trends and provide clear insights into the local market’s dynamics.

In-country research network

To deliver fresh insights every year in countries all around the world, we believe the strongest approach is to use analysts on the ground. They bring fluency in local language, physical proximity to the best sources, an ability to engage directly with local industry contacts, and an awareness of how the products and services we study are advertised, sold and consumed. These are essential parts of our ability to report incisively on these markets.

Our research methods

Each Euromonitor International industry report is based on a core set of research techniques:

Desk research

With industry events, corporate activity, trends and new product introductions tracked year round by our industry team, desk research provides a starting point for the in-country research programme. Our in-country researchers will access the following sources:

• National statistics offices governmental and official sources
• National and international trade press
• National and international trade associations
• Industry study groups and other semi-official sources
• Company financials and annual reports
• Broker reports
• Online databases
• The financial, business and mainstream press

Accessing sources is only the first step. The ability to interpret and reconcile often conflicting information across multiple sources is a key aspect of the added value we provide.

Store checks

Store checks are an integral part of our methods for product industries. Carried out on the ground across a relevant mix of channels, the information gained provides first-hand insights into the products we are researching, specifically:

• Place: We track products in all relevant channels, selective and mass, store and non-store
• Product: What are innovations in products, pack sizes and formats?
• Price: What are brand price variations across channels, how do private label’s prices compare to those of branded goods?
• Promotion: What are marketing and merchandising trends, offers, discounts and tie-ins?

Findings are cross-referenced with brand share data analysis. The results, combined with the findings of desk research, provide a strong basis for identifying key areas of questioning to take forward into our trade survey.

Trade survey

Interaction with global players at corporate HQ and regional levels is complemented by unique local data and insights from our in-country trade surveys around the world. Through the high profile of the Euromonitor International brand, we are able to talk directly to a wide range of sources and therefore inform our analysis with the knowledge and opinions of the leading operators in the market.

Trade surveys allow us to:

• Fill gaps in available published data per company
• Generate a consensus view of the size, structure and strategic direction of the category
• Access year-in-progress data where published sources are out of date
• Evaluate the experts’ views on current trends and market developments

In building our composite industry view, we engage with a variety of personnel in key players at all points of the supply chain: materials suppliers, manufacturers, distributors, retailers and service operators. We also interview desk research sources: industry associations; study groups; and third party observers from the trade and financial press.

Our objective is to engage in conversation with trade sources in which we exchange ideas and views on the industry, sharing our work-in-progress findings on supply/demand dynamics and potential. This dialogue enhances both parties’ understanding of the local market. The scope and reach of our trade survey also serves to eliminate bias (intentional and unintentional) from any single source.

Company analysis

At a global level, our company research combines our mix of industry interaction and use of secondary sources such as annual accounts, broker reports, financial press and databases. From a data perspective, the aim is to build “top-down” estimates of major players’ total global and regional sales.

At a country level, in line with local reporting requirements, we access annual accounts, national-specific company databases and local company websites. These are all invaluable sources as we build a view of each domestic player’s size and position within very specific categories of the industry.

Forecasts

Data projections and future performance analysis are key elements of Euromonitor International’s market intelligence. Working with historic trends of 15 years or more, a key aspect of our trade survey is to engage industry insider views of the next five years. Will volumes maintain their historic trend? Will price increases or falls of recent years continue, accelerate or slow down? Will increasing demand for one product cannibalise sales of another?

Forecasts represent many of the essential conclusions we have reached about the current state of the market, how it works and how it behaves under different macro and micro conditions. Our written analysis will state the assumptions and the trade opinion behind whether our predictions are optimistic or pessimistic, so that clients can use our statistical forecasts with confidence.

Data validation

All data is subjected to an exhaustive review process, at country, regional and global levels.

The interpretation and review of sources and data inputs forms a central part of the collaboration between industry teams and country researchers. Numbers are delivered to regional and global offices with an audit trail of sources and calculations to allow for a thorough evaluation of data sense and integrity.

Upon completion of the country review phase, data is then reviewed on a comparative basis at regional and then at a global level. Comparative checks are carried out on per capita consumption and spending levels, growth rates, patterns of category and subcategory breakdowns and distribution of sales by channel. Top-down estimates are reviewed against bottom-up regional and global market and company sales totals.

Where marked differences are seen between proximate country markets or ones at similar developmental levels, supplementary research is conducted in the relevant countries to confirm and/or amend those findings. This process ensures international comparability across the database, that consistent category and subcategory definitions have been used and that all data has been correctly tested. We make sure that possible discrepancies between different published sources have been reconciled and that our interpretation of opinion and expectation from each country’s trade sources has been applied to form a coherent international pattern.

Market analysis

Another integral part of all our research programmes is that all Euromonitor International data is accompanied by clear written analysis. From a research perspective, this explains and substantiates data findings. From a client perspective, this offers unique insights into local consumption trends, routes to market, brand preferences, channel dynamics and future trends.

Our country level analysis also provides invaluable input into the ability of our central industry specialist teams to marry local insights with strategic conclusions on the direction of the market regionally and globally.