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While Kuwait remains among the most stable countries in the Middle East, the slump in global oil prices has led to an economic slowdown and subsidy cuts, which have suppressed consumer spending and placed limits on growth in sales of tobacco products, especially cigars. Nevertheless, above-average income and spending levels for the region and strong population growth are set to continue supporting growth in tobacco sales.
This report analyses the market for tobacco in Kuwait. 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.
Attitudes towards smoking in Kuwait are generally quite relaxed. As an Arab country, Kuwait has a strong tradition of social smoking, particularly the smoking of water pipes, known locally as shisha. Despite the official ban on smoking in restaurants, cafes, pubs and bars, is still very common to see Kuwaitis lighting up in on-trade outlets. Nevertheless, attitudes seem to be changing due to greater knowledge of the health problems which can be caused by tobacco use, although it is worth noting that Kuwait still has a significant youth smoking prevalence, which is indicative of the mostly positive attitudes towards cigarettes and tobacco products in general.
According to the latest World Health Organisation survey, 38.3% of men and 2.3% of women in Kuwait are tobacco smokers, with daily cigarette smoking prevalence of 24.5% among men and 1.1% among women. As in many Middle Eastern countries, attitudes to women smoking are often negative in Kuwait, which is the main reason for the much lower prevalence of smoking among women than among men. Moreover, smoking prevalence appears to be rising steadily among men, whilst remaining virtually static among women.
The leading anti-smoking campaign group in the country is the Kuwait Society for Smoking and Cancer Prevention. The Society is based in the city of Safat and is primarily involved in promoting public awareness of the dangers of tobacco smoking and the protection of Kuwait’s citizens, especially children and elderly people, from exposure to tobacco smoke. The Society also lobbies the government to make changes to the law, with the aim of influencing public policy to promote general public health through reductions in smoking prevalence.
Innovation remains an important aspect of the operations of Kuwait’s tobacco companies and much of the competition in cigarettes stems from distinguishing brands through the launch of new packaging and flavours. Innovation often focuses on offering new packaging formats which can keep cigarettes fresher for longer as many smokers remain loyal to the brands and types of cigarettes that they have been smoking for years and are thus unlikely to want to try new types of cigarettes. Product innovation in cigarettes usually focuses on new flavours and new types of filters which offer a more pleasant smoking experience, while slim cigarettes have also been the focus of new product launches in recent years.
Premiumisation is another driver of innovation in cigarettes as many Kuwaiti smokers use their cigarette brands as a marker of status and thus they tend to purchase the most expensive cigarettes that they can afford.
The forecast period is expected to see further growth in sales in all tobacco categories, although volume sales in smoking tobacco are set to increase a considerably slower pace while cigarettes than what was recorded over the review period. Slow but steady volume growth is expected to continue in cigars, while cigarettes is expected to register the strongest retail volume growth at a CAGR of 2%, slower than the 3% CAGR recorded over the review period. This is set to be partially due to the declines expected in the illicit cigarette trade. In addition, Kuwait’s favourable economic situation and the country’s rising population are set to support rising demand for all tobacco products, with positive growth set to be seen across the industry despite rising taxes and falling incomes.
Average disposable income levels in Kuwait are among the highest in the Middle East and North Africa region and the country is home to many foreign expatriates, including a high proportion of high-income earners. As Kuwait is a highly aspirational and status-focused society, many smokers use their preferred choice of cigarette brand as a marker of social and economic status, which has led to premiumisation being a strong driver of innovation in recent years
Nevertheless, cigarettes remain affordable in Kuwait, as does smoking tobacco, not least due to the absence of VAT/GST in Kuwait and the low levels of excise duty that tobacco products attract. However, this is set to change as the Kuwaiti government is expected to levy a 100% excise tax on all tobacco products by the end of 2017.
Kuwait is experiencing strong population growth, and the income segments set to register the strongest growth over the forecast period are the highest and lowest-income segments, which are also the two largest income groups. Furthermore, the country’s population is relatively young and heavily weighted towards young adults aged between 20 and 45, which suggests strong ground for further growth in sales of tobacco products during the forecast period.
Kuwait is a small country in which the population is concentrated in densely populated urban settlements along the Gulf coast. Moreover, the country’s infrastructure is extremely well-developed, while its retailing industry is dominated by modern retail outlets, located mostly in shopping centres. This means that tobacco products are very accessible to all residents of Kuwait.
Modern grocery retailers remained the leading distribution channel for cigarettes in 2016, with hypermarkets and supermarkets combined accounting for 69% of total volume sales in the category. Traditional grocery retailers, specifically independent small grocers and tobacco specialists, accounted for the remaining 31%.
Sales of cigars and cigarillos, meanwhile, are dominated by tobacco specialists, with hypermarkets and supermarkets accounting for the remaining one-third of volume sales. Tobacco specialists is also the dominant distribution channel for smoking tobacco, with hypermarkets, supermarkets and independent small grocers accounting for approximately one quarter of sales in the category.
The illicit trade in cigarettes in Kuwait is very small and negative growth has been recorded in illicit cigarette sales volumes in the country for a long period of time, the spike in sales seen in 2012 notwithstanding. Kuwait is a country in which the government maintains tight control over the borders, while the low prices charged for cigarettes in the country mean that there is little incentive for smugglers to risk the severe penalties for clandestinely importing tobacco products.
Demand for illicit tobacco is limited to low-income consumers, a minority of people inclined to purchase illicitly imported cigarettes at very low prices. In addition, it is possible that there is demand for some tobacco products which are not available through regular retail channels in Kuwait, including cigars and smoking tobacco.
There is no local production of illicit cigarettes or smoking tobacco in the country and it is very unlikely that illegal cigarettes are being re-exported from Kuwait.
Although there is no minimum legal smoking age in Kuwait, the sale or supply of tobacco is forbidden to anyone under the age of 21. However, it has been reported that this law is widely ignored and it is considered normal for teenagers to be given cigarettes or be allowed to smoke shisha.
Youth smoking is a growing concern in Kuwait and it has been reported that 23.7% of underage boys and 7.5% of underage girls in the country use tobacco daily. The results of academic research suggest that the association between smoking with maturity, entering adulthood and coming of age among Arab youth is the main reason for Kuwait’s high youth smoking prevalence. In particular, cigarette smoking and shisha smoking are regarded as mainly and masculine pursuits, encouraging teenage boys to emulate older family members in an attempt to project a more mature and “grown-up” image.
The only recent major changes made to Kuwait’s tobacco control legislation were the implantation of a ban on smoking in all shopping centres in the country and the announcement that 100% excise tax would be levied on all tobacco products at some point during 2017, to bring the country in line with the June 2016 decision of the GCC to implement a 100% excise tax on tobacco and alcoholic drinks.
There are no official limits placed on tar levels for cigarettes in Kuwait, and there are no indications that any such limits will be put in place in the near future.
Kuwaiti smokers tend to prefer cigarettes with lower tar levels. As most smokers are aware of the health concerns relating to tobacco use, they prefer low-tar cigarettes in the belief that this will mitigate the negative health aspects of their smoking habits.
The advertising of all tobacco products is banned in Kuwait, as is the sponsorship of sports and cultural events and sports teams by tobacco companies and brands.
The packaging of all tobacco products sold in Kuwait must carry a graphic health warning covering 50% of the pack. In addition, text warnings are also compulsory and these must be in Arabic language on the front and in English on the back. There is also a specific ban on the use of misleading terms such as “light”, “mild”, “low tar” and “extra light”. These requirements are standard across all GCC countries.
Kuwait’s public smoking ban came into effect in 2012 and covers all educational and health care facilities as well as all public transport and other government facilities, all as well as all restaurants, cafés and hotels, although on-trade outlets specialising in shisha smoking are exempted. Private workplaces such as offices are not covered by the smoking ban.
In addition to the standard prohibition on smoking in public, in Kuwait it is illegal to smoke whilst in command of a motor vehicle and those violating this law risk fines of KWD30 per offence. This is because smoking whilst driving is considered a major cause of road traffic accidents in the country.
February 2016 saw a major change in the law as smoking was banned in shopping centres, locations which are considered to be the primary sites of leisure and entertainment activities in the country. Those lighting up in prohibited locations risk fines of KWD50 for a first offence and KWD100 for subsequent offences, while the owners of restaurants and cafes who allow smoking on their premises face fines of KWD5,000. Enforcement of Kuwait’s smoking ban is relatively strict in comparison with other Middle Eastern countries, especially in shopping centres, where officers of the environmental police force can often be seen on patrol and on the lookout for smokers flouting the ban.
Taxation and duty levies
As in all GCC countries, there is no VAT charged on any products in Kuwait, including tobacco products. In addition, excise duty on cigarettes in Kuwait is currently very low, at just KWD8 per 1,000 sticks.
However, the government of Kuwait is in the process of implementing a 100% excise tax regime on all tobacco products, in line with the decision of the GCC in June 2016 to implement higher excise taxes on tobacco, alcoholic drinks and various other products to compensate for declining state revenues due to the slumping global oil price. It is expected that the implementation of tobacco excise tax will result in the retail selling price of a pack of cigarettes in Kuwait potentially doubling at some point in the future.
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Chart 1 Tobacco in Kuwait in 2016 Chart 2 Kuwait Socioeconomic Trends
Taxation and duty levies
Chart 3 Tobacco: Modern Retailer: Supermarket Chart 4 Tobacco: Modern Retailer: Supermarket
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 5 Cigarettes: Modern Retailer: Supermarket Chart 6 Cigarettes: Modern Retailer: Supermarket Chart 7 Cigarettes: Modern Retailer: Supermarket
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 8 Cigars: Modern Retailer: Tobacco Specialist Chart 9 Smoking Tobacco: Modern Retailer: Tobacco Specialist Chart 10 Smoking Tobacco: Modern Retailer: Tobacco Specialist
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 Cigars and Cigarillos: % Volume 2012-2016: Table 30 LBN Brand Shares of Cigars and Cigarillos: % Volume 2013-2016: Table 31 NBO Company Shares of Smoking Tobacco: % Volume 2012-2016: Table 32 LBN Brand Shares of Smoking Tobacco: % Volume 2013-2016: Table 33 Distribution of Cigars and Cigarillos by Format: % Volume 2011-2016 Table 34 Distribution of Smoking Tobacco by Format: % Volume 2011-2016 Summary 2 Cigars, Cigarillos and Smoking Tobacco Pricing
SMOKELESS TOBACCO AND VAPOUR PRODUCTS
Summary 3 Smokeless Tobacco and Vapour Products Pricing
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