Cigarettes in the United Arab Emirates

2020 IMPACT

COVID-19 sees a rise in cigarettes consumption as consumers stockpile their favourite brands

Following the outbreak of COVID-19 in 2020, consumers faced considerably uncertainty with regards to how the year ahead would play out. Faced with unknown periods of home seclusion and lockdown as well as reduced movement and the fear of infection during an unprecedented health crisis, consumers turned to stockpiling.

Tax rises continue to drive down trading in UAE cigarettes

The introduction of excise tax on tobacco in October 2017 was the first step towards the United Arab Emirates adopting a comprehensive anti-smoking platform. Excise tax is seen as representing an incentive for consumers looking to quit by raising the cost of smoking to the point where consumers think twice about the cost of the habit.

Supermarkets outpace hypermarkets as grocery retailers adopt omnichannel approach

In 2020, supermarkets registered faster retail volume growth when it came to sales of cigarettes than hypermarkets due to the more convenient location of outlets. Supermarkets are usually located closer to residential areas than hypermarkets and, with the home seclusion of the COVID-19 pandemic, these outlets were considered more convenient than hypermarkets.

RECOVERY AND OPPORTUNITIES

Health awareness campaigns constrain cigarettes sales

In addition to the measures mentioned above that were taken by the government of the United Arab Emirates towards the end of the review period to curb smoking prevalence in the country, the Ministry of Health and Prevention has also undertaken significant measures to improve consumer awareness of the dangers of smoking. There are provisions in recently passed anti-smoking laws for the government to take responsibility for information and education campaigns to discourage people from smoking.

Price sensitive consumers will continue to down trade to cheaper variants

Over the forecast period, the shifting consumer patterns observed during the review period are expected to continue. Price rises, a higher rate of VAT and price sensitivity as a result of the COVID-19 pandemic will drive price conscious consumer behaviour over the forecast period as more consumers are expected to trade down from premium to mid-priced cigarettes.

Government efforts to reduce smoking prevalence to have a gradual effect

Over the forecast period, the total number of smokers in the UAE is expected to rise, but the percentage of the population classed as a smoker is expected to decline. This suggests that the effects of the government mandate to reduce smoking prevalence in the UAE will be gradual.