Cigarettes in the United Arab Emirates

PROSPECTS

Rising tax burden continues to suppress sales category growth

The review period saw the introduction of various taxes on tobacco and this has been identified as a major reason for the declining volume sales being seen in cigarettes. Excise taxes were first introduced in 2012 and were set at AED50 per 1,000 sticks, rising to AED100 the following year.

The illicit trade roars back into life as smokers seek to mitigate high tax burdens

Unfortunately, the implementation of higher taxes on tobacco products has also had an impact in terms of supporting the very strong increase seen in the illicit trade in the country in 2019. With the cost of cigarettes through licit channels having increased substantially in recent years, consumers are now shifting towards lower-priced options.

Falling sales, changing consumer tastes lead to the realignment of product portfolios

Faced with strong declines in demand for their products towards the end of the review period, the leading players in cigarettes sought to offset rising operating costs by realigning their product portfolios and actively looking to develop their operations in new, potentially high-growth product segments. The category’s leading players Philip Morris, British American Tobacco and Imperial Tobacco International are revising their product portfolios, which are currently skewed towards premium offerings, in a bid to introduce numerous brands across several price tiers and offset the widespread downtrading which has defined the category in recent years.

COMPETITIVE LANDSCAPE

Philip Morris loses significant volume share as British American Tobacco assumes leadership

2018 saw Philip Morris register a substantial decline in its volume share in cigarettes. This serious erosion of its sales can be attributed to the predominance of premium brands within its portfolio.

Imperial Tobacco International reduces prices in an effort to push volume sales

Imperial Tobacco International and its parent company Imperial Brands is actively engaged in efforts to promote volume sales and move stock at a time when demand for cigarettes continues to decline significantly. During 2018, this led to increases in the value shares of its iconic brands Gauloises and Gitanes.

KT&G generates positive growth due to the female-friendly positioning of its brands

South Korea’s leading tobacco company KT&G Corp was a major winner in cigarettes during 2018 as strong growth was registered in demand for its brands Pine Super Slims and Pine Blue. This was primarily due to rising smoking prevalence among young women, who also form the core target audience for many of KT&G’s brands.

Files are delivered directly into your account within a few minutes of purchase.