Bassam Aoun
Last updated: 18 January, 2015

Foreign vs. local tobacco in the Middle East

Tobacco consumption in the region is notoriously high. Smoking is everywhere. But who's running this powerful industry? Bassam Aoun investigates.

Local Tobacco: A National Business

One of the most prolific industries currently operating in the Middle East and North Africa is big tobacco. This market seems immune to the roller coaster that is business life in the region, hardly affected by the socio-political risks that tend to keep investors at bay. While major tobacco product importers, such as British American Tobacco, Imperial Tobacco and Philip Morris International, dominate the market, there in fact exist several competing local players vying for their share of the pie. Here is a look at some of the national Middle Eastern manufacturers, their role in the local markets they operate in and their outlook in the near term.

Cedars – Lebanon

Cedars is a locally produced Lebanese brand by the manufacturer Regie Libanaise des Tabacs et Tombacs. It is a national cigarette brand in a country where, according to sources, the annual average consumption rate of cigarettes is 119 packs per person, or about 10 packs per month. As per the UK-based ERC Group, that is almost three times the global average, making Lebanon a highly potent marketplace for tobacco producers. Furthermore, while the global consumption of cigarettes was going down by 11.7% in 2013, Lebanon’s craving for nicotine was on the rise regardless. In fact, between 1990 and 2012, the per capita consumption rate in Lebanon rose by a startling 475%.

All of this sets the stage for a highly lucrative marketplace for local and foreign producers alike, but one factor sets Cedars aside from its international competitors – its price. 

A study in 2012 by Chaaban et al. revealed this by using the ratio of consumption from the Household Expenditure Survey from 2004 to estimate the market share composition for the national tobacco industry. A pack of Cedars costs approximately $0.4, specifically $0.5 for a carton packet and $0.3 for a paper packet. To place this in perspective, that is less than half of the average price of imported brands, which on average cost $1.32. This makes Cedars particularly popular among the low-income and budget-conscious Lebanese, thus explaining its estimated 21% market share versus 79% for international producers.

“Between 1990 and 2012, the per capita consumption rate in Lebanon rose by a startling 475%”

The social effects of having such a locally produced and more affordable brand in Lebanon are significant. According to Chaaban et al., tobacco expenditure accounts for 2-3% of total spending among the poorer segments of the population, where Cedars reigns in the market. Correspondingly, for the poorest of the poor, expenditure on tobacco accounts for just one percentage point less than the share spent on education. 

The report makes a note of the numerous legislations meant to curb these noxious effects, but several of them have yet to be passed. For the time being, Cedars and its consumption implications will continue to account for over one fifth of the Lebanese tobacco market. 

Cleopatra – Egypt 

The Eastern Company S.A.E., a joint stock company from Egypt and a subsidiary to the Chemical Industries Holding Company, as per its website, is another local manufacturer of tobacco goods. Its product, Cleopatra, is part of a range of both domestic and export goods that the producer offers, including both cigarette and cigar variations. 

The numbers reveal that the market for tobacco products in Egypt is ample. According to a recent World Health Organization (WHO) report, smoking prevalence among adults is significantly high. For male adults, as of December 2012, approximately 44.3% of them smoke tobacco products on a daily basis. Relative to the total adult population, nearly a quarter is reported to consume tobacco on a daily basis – this is almost five percentage points higher than global average

This high demand has coincided as of recently with a steadily rising price of tobacco products, mainly due to inflationary pressures and raised taxes by the cash-strapped government to increase revenues flows. 


Cleopatra, while the most popular and affordable local brand in Egypt, has consequently been adversely affected by this rise in prices. The most consumed brand, Cleopatra Golden King, had its price per pack increase from 4.25 Egyptian pounds in 2010 to 5.75 Egyptian pounds by mid-2012 – the sales tax portion subsequently rose from 2.95 Egyptian pounds to 4.1 Egyptian pounds. According to local sources, Egyptians have turned away from their local favorite brand as a consequence of this price hike and have opted for purchasing illegally smuggled and counterfeit cigarettes, often from countries like China. 

Egyptian authorities have responded to this by raising the taxes levied on tobacco products. This was most recently accomplished towards the end of 2013, when the government implemented a stamp tax, which officially has no effect on consumer prices. This stamp tax, however, is meant to combat the cigarette smuggling phenomenon that has recently plagued the market. 

The Bottom Line for Locals 

The illicit market for tobacco has proven to be a bane for local tobacco product manufacturers. It is true that international tobacco powerhouses, such as Philip Morris International and British American Tobacco, are affected by this harmful market presence as well, yet the argument can be made that local producers feel more of the burn. This is due to the fact that their competitive advantage in the market, namely their lower prices, is stripped away by the ultra-low prices of smuggled goods. 

Global manufacturers like British American Tobacco have made fighting the illicit trade for cigarettes a priority, lobbying the governments of key markets to avoid further increases in tobacco taxes that fuel the black market. 

Ultimately, if local manufacturers are to remain afloat in the market, similar efforts should be organized to maintain a hold of their slowly dwindling market share. Local tobacco manufacturing may still have a role in the Middle East, but strategic economic decisions need to be considered in light of the grander scheme.

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