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With Iraq still marred by political, economic and social instability, smoking prevalence continues to rise. As in many post-conflict societies, curbing smoking prevalence remains a low priority for the government and smokers generally feel that the negative health effects of tobacco use are the least of their worries. Despite a significant illicit trade and the threat posed by the ban on tobacco use in ISIS-held areas of the country, sales are set to continue rising.
This report analyses the market for tobacco in Iraq. For the purposes of the study, the market has been defined as follows:
Cigars, Cigarillos and Smoking Tobacco
Smokeless Tobacco and Vapour Products
Explanations of terminology used in this report are as follows:
GBO refers to Global Brand Owner, which is the ultimate owner of a brand.
NBO refers to National Brand Owner, which is the company licensed to distribute a brand on behalf of a GBO. The NBO may be a subsidiary of a GBO or it may be a completely separate company.
Retail refers to sales of tobacco through retail outlets including supermarkets, hypermarkets, discounters, convenience stores, internet and other store and non-store channels, as well as sales of tobacco through bar-tobacconists and hotels/restaurants/bars.
Duty-paid retail sales are legitimate sales with tax applied to the final price.
Illicit trade refers to sales of duty-not-paid (or DNP) tobacco.
Market sizes are researched at category level, lower data levels are modelled.
Although cross-border and duty-free sales are considered legitimate, they are excluded from duty-paid sales.
Illicit trade (DNP) tobacco refers to contraband, counterfeit and unbranded tobacco, as well as illicit whites.
In Iraq, attitudes towards smoking are generally ambivalent or, indeed, positive, although female smoking is still frowned upon among more conservative sections of Iraqi society. In addition to cigarettes, the smoking of traditional water pipes is widespread and is regarded as a social activity. Although the national tobacco industry was of high importance to the country’s national economy during the 1980s and 1990s, more recently, the withdrawal of State support for tobacco manufacturing has resulted in most cigarettes smoked in Iraq being imported.
Smoking prevalence among men in Iraq is quite high by international standards, standing at 33%, although smoking prevalence among women is much more modest at just 3%. This disparity is mainly because it is still considered taboo for women to smoke in many parts of Iraq.
There are plans to introduce new locally packaged cigarettes into Iraq after several decades of sales being generated exclusively by imported brands and this represents the biggest news in new product development in the category for years. Other than this, new product development in all tobacco categories is usually determined by the state of the economy, with periods of economic decline marked by the appearance of economy brands, while more prosperous periods result in the appearance of more expensive mid-priced and premium brands.
Demand for cigarettes in Iraq is based mainly on price, although brand name and the status and prestige that certain cigarette brands confer on those who smoke them also plays a role.
The forecast period is expected to see volume sales of cigarettes increase after sales declines were recorded over the review period. This improvement is expected to reflect tighter control over the illicit trade, with only minimal sales growth expected in the illicit cigarette trade over the forecast period.
Iraq’s journey towards stability and ongoing improvements in the country’s economy are also expected to support demand for cigarettes.
Demand for smoking tobacco, meanwhile, is expected to remain steady over the forecast period, with volume growth rates set to be in line with what was registered in the category over the review period, while vapour products is expected to register strong double-digit growth, rising from a low base.
Iraq remains in a state of civil war, with large areas of the country controlled by IS (Islamic State) militants. Formal retailing is no longer operational in these areas, with consumers reliant on smuggled goods, whether from the rest of Iraq or beyond. The autonomous Kurdish region in the north of the country is also a distinct political and economic area and is differentiated from the rest of Iraq in terms of culture and consumer preferences. There are also strong cultural divisions between Baghdad and the remainder of Iraq, with those living in the south of the country tending to be highly conservative and traditional in their preferences.
The Iraqi consumer landscape is thus complex and divergent, while also in a state of flux. Many young urban consumers are, for example, showing a growing preference for western styles and brands, with many in the autonomous Kurdish region viewing brands with Arabic labelling as lower in quality. However, many older consumers and those in rural areas remain loyal to the limited range of brands and products available in Iraq prior to the trade embargo being lifted in 2003.
Iraq not only saw strong birth rates but also an influx of refugees from IS occupied territories and Syria during the review period. Typically, these refugees can only afford basic products, while the country's political instability is impacting most consumers' incomes. Furthermore, there were over three million IDPs (internally displaced people) in Iraq in 2016, as a result of the country's war with IS, with this representing at least 8% of the population.
However, the smoking of cigarettes and shisha is popular among people of all income levels and socio-economic groups and there are no indications that tobacco use is connected in any way with income level or social status. Cigars are an exception; as in many countries, cigar smoking is generally limited to more affluent consumers due to the high unit prices of these products.
At 37.5 million, the population of Iraq is the second highest in the Middle East, after Iran, and young people comprise the bulk of the country’s population. While children aged up to 18 years account for almost half of the country’s entire population, Generation Z and millennials are the largest adult demographic groups, meaning that the country’s population is very young. This suggests strong growth prospects for sales of cigarettes in the short term as well as over the medium-to-long term.
Cigarettes are widely available in grocery retailers outlets in Iraq and there are no restrictions on the retail distribution of any tobacco products in the country. Traditional grocery retailers account for almost all sales of cigarettes in Iraq, leaving a small share for supermarkets. Independent small grocers and newsagent-tobacconists/kiosks are the leading retail distribution channels for cigarettes, followed by tobacco specialists and street vendors. Sales of cigars and cigarillos, meanwhile, are split evenly between tobacco specialists on the one hand and newsagent-tobacconists/kiosks and street vendors on the other. Smoking tobacco is distributed almost exclusively through tobacco specialists, with the remaining 10% split between independent small grocers and supermarkets.
2016 saw the illicit trade account for 24% of total cigarettes sold in Iraq, with some 8.3 billion sticks distributed through illicit channels during the year. This represents a decline, however, from 2014 and 2015, during which the illicit trade in cigarettes peaked at 11.8 billion sticks annually, and the volumes of illicit cigarettes sold in the country are expected to remain stable on around 8.3 billion sticks throughout the forecast period.
Iraq’s substantial illicit cigarette trade is mainly the result of Iraq’s geographic location in the centre of the Middle East and the relatively low prices charged for cigarettes in the country, which means that it is a staging post for international cigarette smugglers. Cigarettes are often smuggled from Iraq into Iran, Turkey and Syria. In addition, the difficulties faced by Iraq’s post-conflict society means weakened enforcement of laws which aim to limit or eliminate the illicit cigarette trade. The country’s Anti-Smoking Act No19 of 2012 mandates severe financial penalties of between IQD50 million and IQD100 million for cigarette smugglers, as well as the destruction of any smuggled tobacco products. However, due to administrative instability, these laws are rarely enforced.
Another major aspect of Iraq’s illicit cigarette trade is the smuggling of cigarettes into areas of the country occupied by ISIS, where the use of tobacco is officially prohibited.
One major concern for Iraqi smokers is that the cigarettes that they purchase through legitimate retail channels are often non-duty-paid cigarettes which have been smuggled into the country, which raises questions about the quality and safety of the cigarettes which are available in the Iraqi retail shops.
The minimum legal smoking age in Iraq is 14 years old, and it is prohibited for children under this age to use any type of tobacco products. Is also prohibited to sell cigarettes or any other tobacco products to children aged under 14.
As in many Middle Eastern countries, youth smoking remains a concern in Iraq. However, there are currently few efforts being undertaken to curb youth smoking in the country as instability during the post-conflict period means that there are more pressing concerns for Iraqi society.
Under Article 9 of the Anti-Smoking Act No19 of 2012, the maximum tar level for cigarettes in Iraq is set at 12mg per stick, with the maximum nicotine content is set at 0.8mg per stick.
The direct and indirect promotion of smoking is banned in Iraq under Article 6 of the Anti-Smoking Act No19 of 2012, which effectively bans the advertising of cigarettes and smoking tobacco and the sponsorship by tobacco brands of any event or organisation. Article 6 applies to print and broadcast media organisations, cultural and sport institutions, and publishing, advertising and media distribution companies. However, it has been reported that compliance with the advertising ban is non-existent for outdoor billboard advertising, which is not explicitly covered in the legislation.
Article 10 of the Anti-Smoking Act No19 of 2012 requires that the packaging of all locally manufactured and imported tobacco products sold in Iraq must carry text health warnings in both the Arabic and Kurdish languages as well as specifying the nicotine entire levels. However, there is no requirement for graphic or pictorial health warnings and trade sources have noted that, depending on the origin of the cigarettes, the language of the health warning can be either Arabic or English. In addition to health warnings on packs, banners displaying smoking health warnings must also be positioned in prominent places in all stores selling cigarettes and tobacco products.
The first public smoking ban was introduced into Iraq in 2009 and it was immediately unpopular among the country’s smokers, while enforcement was patchy, at best. The current smoking ban in the country is contained within Chapter II of the Anti-Smoking Act No19 of 2012, which prohibits smoking in all government buildings, educational and health institutions, airports, factories, theatres and cinemas, hotels, clubs and restaurants, meeting and event facilities, business offices and markets. However, it is permitted for separate areas for smokers to be set aside in any of these locations. In addition, under the Act, smoking is banned in all public and private means of transportation and all petrol station forecourts.
The penalty for smoking in public places is a fine of IQD10,000, while the owners of premises where smoking is prohibited who allow smoking outside of the area specially set aside for smoking risk fines of IQD250,000. Although enforcement is generally weak in the public sector, it is stronger in private sector environments.
Taxation and duty levies
Prior to 1 August 2015, only minimal taxation was levied on imported cigarettes in Iraq and this comprised an import duty of 19.24%, with locally manufactured cigarettes attracting no tax due to the country’s 0% VAT/GST rate. However, Iraq’s 2015 Federal Budget imposed a tax rate of 300% on all imported and locally produced cigarettes. For imported cigarettes, this duty is payable upon products reaching the border crossing point into Iraq, while the duty on locally produced cigarettes is payable by the manufacturer within the first two weeks following the end of the relevant tax quarter.
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Chart 1 Tobacco in Iraq in 2016 Chart 2 Iraq Socioeconomic Trends
Taxation and duty levies
Table 1 Sales of Tobacco by Category: Volume 2011-2016 Table 2 Sales of Tobacco by Category: Value 2011-2016 Table 3 Sales of Tobacco by Category: % Volume Growth 2011-2016 Table 4 Sales of Tobacco by Category: % Value Growth 2011-2016 Table 5 Forecast Sales of Tobacco by Category: Volume 2016-2021 Table 6 Forecast Sales of Tobacco by Category: Volume 2016-2021 Table 7 Forecast Sales of Tobacco by Category: Value 2016-2021 Table 8 Forecast Sales of Tobacco by Category: % Volume Growth 2016-2021 Table 9 Forecast Sales of Tobacco by Category: % Value Growth 2016-2021
Chart 3 Cigarettes: Traditional Retailer Chart 4 Cigarettes: Traditional Retailer Chart 5 Cigarettes: Traditional Retailer
Table 10 Sales of Cigarettes: Volume 2011-2016 Table 11 Sales of Cigarettes by Category: Value 2011-2016 Table 12 Sales of Cigarettes: % Volume Growth 2011-2016 Table 13 Sales of Cigarettes by Category: % Value Growth 2011-2016 Table 14 Forecast Sales of Cigarettes: Volume 2016-2021 Table 15 Forecast Sales of Cigarettes by Category: Value 2016-2021 Table 16 Forecast Sales of Cigarettes: % Volume Growth 2016-2021 Table 17 Forecast Sales of Cigarettes by Category: % Value Growth 2016-2021 Table 18 NBO Company Shares of Cigarettes: % Volume 2012-2016 Table 19 LBN Brand Shares of Cigarettes: % Volume 2013-2016 Table 20 Sales of Cigarettes by Distribution Format: % Volume 2011-2016 Summary 1 Cigarettes Pricing
CIGARS, CIGARILLOS AND SMOKING TOBACCO
Chart 6 Cigarillos: Traditional Retailer
Table 21 Sales of Cigars, Cigarillos and Smoking Tobacco by Category: Volume 2011-2016 Table 22 Sales of Cigars, Cigarillos and Smoking Tobacco by Category: Value 2011-2016 Table 23 Sales of Cigars, Cigarillos and Smoking Tobacco by Category: % Volume Growth 2011-2016 Table 24 Sales of Cigars, Cigarillos and Smoking Tobacco by Category: % Value Growth 2011-2016 Table 25 Forecast Sales of Cigars, Cigarillos and Smoking Tobacco by Category: Volume 2016-2021 Table 26 Forecast Sales of Cigars, Cigarillos and Smoking Tobacco by Category: Value 2016-2021 Table 27 Forecast Sales of Cigars, Cigarillos and Smoking Tobacco by Category: % Volume Growth 2016-2021 Table 28 Forecast Sales of Cigars, Cigarillos and Smoking Tobacco by Category: % Value Growth 2016-2021 Table 29 NBO Company Shares of Smoking Tobacco: % Volume 2012-2016 Table 30 LBN Brand Shares of Smoking Tobacco: % Volume 2013-2016 Table 31 Distribution of Cigars and Cigarillos by Format: % Volume 2011-2016 Table 32 Distribution of Smoking Tobacco by Format: % Volume 2011-2016 Summary 2 Cigars, Cigarillos and Smoking Tobacco Pricing
SMOKELESS TOBACCO AND VAPOUR PRODUCTS
Chart 7 Smokeless Tobacco and Vapour Products: Traditional Retailer Chart 8 Smokeless Tobacco and Vapour Products: Traditional Retailer Chart 9 Smokeless Tobacco and Vapour Products: Traditional Retailer
Table 33 Sales of Vapour Products by Category: Value 2011-2016 Table 34 Sales of Vapour Products by Category: % Value Growth 2013-2016 Table 35 Forecast Sales of Vapour Products by Category: Value 2016-2021 Table 36 Forecast Sales of Vapour Products by Category: % Value Growth 2016-2021 Summary 3 Smokeless Tobacco and Vapour Products Pricing
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