Despite the disruption of the COVID-19 pandemic in 2020, there was little change to the domestic consumption of cigarettes in Saudi Arabia in 2020. Despite the fact that COVID-19 is a respiratory illness, the prevalence of smoking remained the same in 2020.
In 2017, Saudi authorities introduced excise taxes on cigarettes which prompted many consumers to trade down to the lower price segment. This trend was then intensified in 2020 by the increase of VAT from 5% to 15% which drove an increase in prices of cigarettes in the Kingdom.
Following legislation passed by the Saudi Food and Drug Authority (SFDA), all cigarettes sold in the country must now come in standardised packs and sticks with no branding or packaging design allowed as from 23 August 2019. Following this, no branded packs were to be imported into Saudi Arabia after this date and no branded packs were to be sold in the country after 31 December 2019.
Over the forecast period, sales of cigarettes are expected to gradually recover as the COVID-19 pandemic comes to an end. The implementation of a vaccination programme and the gradual easing of the epidemiological crisis will stimulate social activities and will also lead to the gradual easing of travel restrictions in Saudi Arabia.
Over the forecast period, the VAT rise is expected to have a dramatic impact on the spending habits of domestic consumers in Saudi Arabia. The cost of living will rise considerably in the Kingdom, making consumers more price sensitive, especially when it comes to non-essential categories such as cigarettes.
The recent launch of heated tobacco and e-vapour products in Saudi Arabia is expected to attract some consumer attention in the Kingdom over the forecast period, but these new products are not expected to pose any serious threat to cigarettes. Smoking is still expected to remain prevalent in the Saudi population.
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This report originates from Passport, our Cigarettes research and analysis database.
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