Egypt: Tobacco Market

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Egypt is home to 18Mn smokers and is the world’s 7th largest cigarette market by volume1 (~94Bn sticks a year). Only Philip Morris International (PMI) and the former monopoly, Eastern Company, own a licence to manufacture cigarettes in Egypt. Eastern Company controls more than 70% of the market and also has a ~24% stake in United Tobacco Company (UTC; majority-owned by PMI). Production & distribution of foreign brands (including those of Japan Tobacco International) are handled by Eastern Company. In August 2023, UAE’s Global Investment Holding bought a 30% stake in Eastern Company – outbidding JTI and UTC. For further details, see “Tobacco Industry: Acquisitions“.

Egypt is a battleground for volume for the tobacco majors – especially, for PMI and JTI. In the first 9 month of 2023, PMI sold 18.1Bn sticks (+19%) in Egypt – including 0.7Bn heatsticks (+31%). Accordingly, Egypt is now the 7th largest market for PMI. However, the market is in turbulence caused by the economic crisis and the implementation of the IMF loan program. Amid a shortage in supply and surge in parallel market prices, the Egyptian Parliament approved tax amendments in October 2023 – allowing cigarette companies to increase their official prices. The amendments also expanded the tax brackets by raising the minimum and maximum limits of the pack price by 12% annually for five years. Subsequently, Eastern Company hiked prices to offset the rising costs of production inputs as a result of the devaluation of the Egyptian pound. PMI followed by increasing the prices of its products by 15%-20%2. This was the third official price hike by PMI in the last 15 months (following the September 2022 and April 2023 hikes). The recommended RSP is now EGP69 ($2.25) for Marlboro and EGP27 ($0.87) for Eastern Company’s Cleopatra.

Earlier this week, further drama is added to the Egyptian market as JTI filed a complaint to the Egyptian Competition Authority alleging that the Eastern Company is employing monopolistic powers3. The compliant concerns JTI’s Gold Coast brand which competes with the low-priced cigarettes of Eastern Company. JTI is trying to shift the Gold Coast production from Turkey to Egypt (Eastern Company) following the recent tax amendments (banning the importation of low-priced cigarettes). However, JTI and Eastern Company have so far failed to reach an agreement to include the brand in their contract manufacturing agreement (set to expire in mid-2024) and, thereby, JTI is forced to stop selling Gold Coast.

Similar to the other emerging markets (such as, Pakistan, Indonesia and Philippines), Egypt is also home to many controversies – putting the squeeze on tobacco majors to deliver the hard-to-find volume growth in tobacco.

References:

  1. https://www.newarab.com/news/egyptians-smoke-100-billion-cigarettes-year-tobacco-chief ↩︎
  2. https://english.ahram.org.eg/NewsContent/3/12/512137/Business/Economy/Philip-Morris-hikes-price-of-tobacco-products-in-E.aspx ↩︎
  3. https://www.dailynewsegypt.com/2023/11/21/jti-accuses-eastern-company-of-monopoly-in-cigarette-market/ ↩︎

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