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Sales of tobacco continued to rise in 2016, with cigarettes dominating the market. The industry is influenced by a slowing economy, increasing urbanisation, Westernisation, and a high smoking prevalence, particularly among men. Tobacco usage is therefore a significant challenge facing public health. Although society's attitude towards tobacco consumption is increasingly negative, smoking is particularly prevalent in urban areas, while tobacco taxes contribute heavily to government revenue.
This report analyses the market for tobacco in Oman. 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.
Oman, which has a population of 4.6 million, is an Arab country situated on the southeastern coast of the Arabian Peninsula. It borders Saudi Arabia, Yemen, and the United Arab Emirates, and boasts a long Persian Gulf coastline. It is an absolute monarchy with Sultan Qaboos bin Said al Said having been the hereditary leader of the country since 1970. Tobacco plays a major role in Oman's economy, being one of the top 10 imported products to Oman, valued at USD116.4 million in 2010, while tobacco provides the government with substantial revenue from taxes.
The economy enjoyed strong growth during periods of high oil prices. However, the government continues to work to encourage economic diversification. Reforms have mainly focused on broadening the privatisation programme, attracting foreign direct investment and accelerating the Omanisation of the labour force by modernising the education and training system. At present, Omani nationals constitute less than one fifth of private sector employment.
Oman’s economy slowed sharply in 2016 with the country reliant on financial support from neighbouring countries. Although oil production reached a near-record high despite a weak price environment, public investment slowed owing to a weakening fiscal situation. Moreover, without additional oil discoveries, oil reserves could soon be depleted. The country also has a large current account deficit while growth of real GDP is expected to average only about 1.5% per year through to 2020.
Unemployment was a high 21.2% in 2015. Of particular concern is the large number of unemployed nationals. In order to address this problem, the government has raised the minimum wage for Omani workers in the private sector, established unemployment benefits, increased the number of government jobs and boosted enrolment in higher education.
Tobacco usage remains one of the greatest challenges facing public health in Oman. However, even though society's attitude towards tobacco product consumption is becoming increasingly negative, it nevertheless has a substantial role in society, especially in urban areas. Cigarette usage, in terms of the number of cigarettes used per person, is particularly influenced by disposable income. Moreover, consumption of tobacco products is common practice during social gatherings, with shisha especially popular in rural areas. However, widespread knowledge of the dangers smoking has to health, means social acceptance towards tobacco is declining.
Nevertheless, tobacco plays a major role in Oman's economy with tobacco products providing the government with substantial revenue from tobacco taxes. For instance, in 2013, the income generated from tobacco taxes in Oman was OMR65 million. Currently, Oman levies a 100% customs duty on cigarettes and tobacco products and is expecting to introduce domestic taxes and/or health tax in order to make tobacco products less affordable. The introduction of these taxes has become even more important to the government in light of the crash of the global oil market, with the type and rate of taxes likely to be defined and charged on the basis of successful regional and global experiences.
Both the male and female smoker population is growing, with Oman having the seventh highest smoking incidence rate in the world in 2016. The prevalence of tobacco use among Omani men aged = 15 years old was estimated at 21.4% in 2015 and is predicted to reach 26.9% and 33.3% in 2020 and 2015, respectively, if tobacco control measures remain static. This represents a rise from 17.9% in 2010. The mean age for starting smoking is 18.7 years for males and 24.3 years for females, while the average daily cigarette consumption by a smoker is 33 cigarettes.
Women in Oman tend to have lower rates of smoking than men. They also start smoking later than men and smoke fewer cigarettes. This is mainly the result of sociocultural, religious or economic factors. Some still consider it to be improper or indecent for females to be seen smoking in public. Among the women who do smoke, many tend to favour slims/ultra-slims and menthol products.
The tobacco market in Oman recorded 21% growth in value sales in 2016. Cigarettes is by far the largest category, accounting for a 92% value share, with cigars, cigarillos and smoking tobacco holding the remaining 8% share. However, the sale of e-cigarettes or vapour products is illegal in the country with Oman’s Public Authority for Consumer Protection (PACP) banning electronic cigarettes and electronic shisha in December 2015.
Several government bodies and the WHO embody the anti-tobacco lobby in Oman, including the Ministry of Health, the Oman Cancer Association and the office of the World Health Organization in Muscat. These organisations mostly influence the government on anti-tobacco law enforcement policies but do not focus on educating consumers and rehabilitation.
Although there are few new product developments in tobacco in Oman, consumers are nevertheless receptive to new launches in the mid and lower price segments but less so for the premium segment.
One of the main motivators behind product innovation is that consumers are moving towards cheaper brands. Much of this stems from the high unemployment in the country, especially among nationals. Industry players are also endeavouring to appeal more to female smokers, focusing much of their developments on menthol, and mint-flavoured cigarettes.
Over the 2016-2021 forecast period, tobacco sales are expected to rise at a CAGR of 1% in value terms at constant 2016 prices. Cigarettes is also set to record positive growth, achieving a CAGR of 1%. However, cigars, cigarillos and smoking tobacco, is likely to contract at a CAGR of 1%. Although globally, smoking prevalence has decreased, the number of daily cigarette smokers in the Middle East and other parts of the world has increased due to population growth. Substantial population growth between 1980 and 2012 contributed to a 41% increase in the number of male daily smokers and a 7% increase for females over this period in the region. As the Omani population is set to rise further to approximately 6.3 million by 2021, the number of smokers is also set to increase, despite rising awareness of the damage smoking does to the health, bans on smoking in public places, and the application of health warnings to tobacco packaging.
Oman is currently undergoing rapid population growth. For instance, some 70% of the population are in the 15-64 year old bracket, which grew at a rate of 7% between 2005 and 2010. Around 50% of the population lives in Muscat and to the northwest of Muscat, in the Batinah coastal plain.
Oman is ethnically diverse with at least 12 spoken languages, which is a throwback from its imperial past. Many Omani are from Baluchistan and the Swahili coast, while the country also hosts around 600,000 foreigners, mostly guest workers from Egypt, Pakistan, India, Bangladesh, and the Philippines.
Oman is composed of Arabs, ethnic Balochis, ethnic Lurs, Swahilis, Hindus and Mehri, while the Balochi, which is the largest non-Arab ethnicity, is Iranian.
Tobacco products in Oman and other GCC countries are among the most affordable in the world. The percentage of gross domestic product (GDP) per capita required to purchase 100 packs of the most sold brand is only 1.08% in Oman, compared to 2.53% in Australia, 2.9% in the UK, 3.35% in Egypt, 3.6% in Turkey, and 7.87% in Yemen. Cigarette purchases are highly influenced by disposable income. As such, the choice of tobacco product and smoking incident rate are affected by price hikes. Smokers of premium cigarettes tend to have considerable disposable income, compared to lower income demographics who are not in a position to afford premium products. However, while cigarettes and other tobacco-related products are usually affordable in GCC countries, the current economic situation in Oman in which salaries are not keeping pace with inflation, and higher taxation levies on tobacco mean tobacco products are becoming much less affordable.
Some people consider smoking as aspirational. For instance, lower level smokers aspire to move up to mid and premium products and from mid to premium. This trend is particularly visible in offices, where workers often buy the brand of cigarette favoured by their bosses in order to make a favourable impression.
Smokers usually buy tobacco products from traditional grocery retailers, such as small corner shops and forecourt retailers, with such players accounting for a 70% volume share. As a result, tobacco products, especially cigarettes, are highly accessible and can be bought whenever the need arises. Purchases from such outlets are much more convenient for smokers, with this factor in itself having a positive impact on the tobacco trade. Purchases from modern grocery retailers, such as hypermarkets, account for the remaining share. For cigars and cigarillos, consumers prefer food/drink/tobacco specialists to obtain their favourite brands, with such retailers also offering a wider selection of products not normally stocked in other grocery formats.
Illicit product penetration in Oman is believed to equate to around 10% of the tobacco market. However, it is difficult to fully assess, as demand for illicit products has grown since the recent trend in tobacco price increases. The mountainous terrain in Oman makes it more difficult to halt smuggling activities, as smugglers operate a complex network of land and sea routes.
Among the main driving factors behind consumption of illicit products in Oman are high taxes on legal cigarettes and poor boarder enforcements.
Oman does not produce any type of cigarette in-house, therefore it is not a source market for illicit trade. Smuggled and illegal imports are the key sources of illicit trade in Oman.
In addition to tobacco, illicit trade also plays a role in other categories, such as alcoholic beverages and petroleum products in the country.
The minimum legal smoking age in Oman is 18.
The mean age for starting smoking is 18.7 years for males and 24.3 years for females. However, a considerable number of teenagers currently smoke in Oman, which is of great concern to the government.
There is no limitation in terms of tar level in the country and to date no such limits are planned.
Smokers in Oman prefer mild cigarettes and when it comes to mass brands, they opt for Marlboro Gold over Marlboro Red, with the former being milder and lighter than the latter, which is full-flavoured.
In April 2016, the regulations governing the Law of Printing and Publishing were amended to include a ban on placing advertisements for tobacco products in all forms of media, including electronic media. It is hoped that this development will lead to the implementation of a comprehensive tobacco advertisement ban including point of sale activation (POSA). However, tobacco companies are permitted to engage in customer activities.
Oman is a member country of the Gulf Cooperation Council (GCC). On 9 August 2012, the GCC Standardization Organization (GSO) adopted a standard, Labelling of Tobacco Product Packages. This standard includes a requirement for picture-based health warnings to cover 50% of the package front and back, with an Arabic warning on the front and an English warning on the back. The size of the text has to be 40% within 50% of the pack surface area. Tobacco companies in Oman are now expecting and getting ready for a complete ban on branding/advertising in the pack space.
Oman became a Party to the WHO Framework Convention on Tobacco Control on 7 June 2005. Under this law, smoking in indoor public places and workplaces is restricted to designated smoking rooms except in “places of worship, educational institutions, government departments, health facilities and sports settings”, which must be completely smoke free. Smoking is prohibited in all means of public transport.
Under the law, sub-national jurisdictions are permitted to enact smoke free laws that are more stringent than the national law. As a result, from 2 April 2010 under municipality decision no 2/2009 a smoking ban in closed public areas was imposed in Muscat municipality. Closed public places include shopping malls, restaurants, coffee shops, and industrial and commercial establishments, which effectively became “no-smoking zones” under Muscat Municipality's crackdown on tobacco use. Those who violate the law are subject to a fine of OMR100-OMR300. Establishment owners are also fined OMR100 (USD260) to OMR300 (USD780), if they fail to enforce the smoking ban. If caught smoking in restricted areas, a fine of OMR100 is applied. Repeat violations are liable to fines as high as OMR200 for a second offence, while third-time offenders face a fine of up to OMR300. The ban also extends to chewing and sniffing of all tobacco products.
There is a ban on most forms of direct tobacco advertising in the country as well as many forms of promotion. However, some forms of tobacco advertising and promotion, such as point-of-sale product display and retailer incentive programmes, may escape the ban. Although sponsorship by the tobacco industry is not completely prohibited, publicity of the sponsorship is not allowed.
Omani authorities also announced tighter regulations on shisha cafés in the country. Under the new rules, shisha cafés must be at least 200 metres away from residential areas as well as governmental, education, health and religious buildings. Only hotels with three stars or more are allowed to obtain a shisha permit, although their restaurants which serve the product must not be located at the main entrance and should have a separate entrance from outside the hotel. The restaurant must be fully enclosed, with a proper ventilation system and not be visible to visitors. Individuals under the age of 18 are not allowed to smoke shisha and the restaurant should display signs indicating this rule. Moreover, shisha cafés near residential areas have been ordered to relocate. The new regulations are expected to dramatically reduce the number of shisha smokers as most users prefer high-end shisha cafés in the capital and try to avoid having to drive out to industrial areas to indulge in their habit.
Taxation and duty levies
In November 2015, Oman agreed to a long-awaited 100% increase in tobacco product taxes, which was finally implemented in September 2016. This was the first time in 17 years that the government had raised taxes on tobacco products. This led to the imposition of a 100% “selective tax” on tobacco and related products that is equal to the customs duties of these products. This rise is in addition to a 100% import tax that was already in place. As a result of the latest rise, the tax on a packet of 20 cigarettes rose from 200bz to 400bz.
Work is also underway to have some kind of domestic tax in place of the current import tax, with the domestic tax potentially becoming reality in 2017. Oman is planning to do away with customs duty on tobacco products and instead introduce alternative local taxes. The move is aimed at regulating the tobacco market and more precisely, the Free Trade Agreement (FTA) with the US, which provides for a complete duty phase-out by 1 January 2018.
Although Oman currently levies a 100% customs duty on cigarettes and tobacco products, due to FTA rules, all products, including tobacco, can be brought into Oman duty-free from 2018 onwards.
Oman amended its customs provisions to levy a 100% service charge on tobacco and alcohol products on sale at duty-free outlets at arrivals. ROP decision 38/2017, issued in February 2017 by Lt Gen Hassan bin Mohsen al Shuraiqi, IG of Police and Customs, outlined changes in the customs provisions, including the levying of a 100% service charge on such products. This new service charge is applicable at point of sale at the arrival counters of duty-free outlets. The WHO’s Framework Convention on Tobacco Control (FCTC) calls for banning or restricting duty-free sale of tobacco products in member countries. Article 6 of the WHO Convention, encourages parties to adopt tax and price policies including restricting sales and importations of tax- and duty-free tobacco products to control use. For instance, it has been suggested that the GCC should adopt similar measures to Europe, where a person flying within the Eurozone cannot buy tobacco products from duty-free stores, with the same applying to those flying with the GCC.
The price of cigarettes is very low in Oman and the GCC compared to developed countries and this difference is more apparent when it comes to duty-free prices. For instance, a pack of Marlboro Red 100s cigarettes carton, which cost USD49.39 at Frankfurt airport in 2016, was almost half the price (OMR9.40 or USD24.63) at duty free outlets in Oman. While a Rothman KS Blue 200s carton was priced at OMR5.60 (USD14.67) in Oman, it cost USD38.90 at Frankfurt airport.
Oman’s tobacco imports increased from USD48.9 million in 2008 to USD116.4 million in 2010. Cigarettes are one of the top ten imported products and tobacco exports have more than tripled in recent years, from USD21 million in 2008 to USD78 million in 2010. Moreover, the tax on tobacco products is still very low in Oman even after the new excise tax (100% increase) was imposed in September 2016. Despite what appear to be “high duty rates”, customs duties when measured as a percentage of the retail price (PRP), are in fact very low in Oman and account for less than 44% of the PRP, compared to WHO recommendations that taxes be no less than 70% of the retail price.
The high affordability of tobacco products in Oman and other GCC states is largely due to the low levels of customs duties levied and the total absence of any domestic taxes on tobacco products compared to taxes exceeding 82% of the retail price in Turkey and the UK.
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Chart 1 Tobacco in Oman in 2016 Chart 2 Oman 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
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
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 Summary 2 Cigars, Cigarillos and Smoking Tobacco Pricing
SMOKELESS TOBACCO AND VAPOUR PRODUCTS
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