Tobacco industry in the Middle East and Africa is growing - Euromonitor Intl

Photo by Ernst-Günther Krause (NID) on Unsplash

Relatively low purchasing power, import challenges and illicit trade in the Middle East and Africa are limiting the growth of heated tobacco, which plays a key role in other regions’ growth.

Heated tobacco in the Middle East and Africa, only holds 36% by volume, but once some of the challenges are resolved the category offers significant growth potential.

Key trends in Africa

• Africa is predominantly a combustible tobacco market, based on the value proposition and prevalence of single stick sales, despite this being illegal in some African countries. There is also a substantial illicit market across Africa, based on several factors.

• Egypt plays a key role in cigarette growth in the region, recording a volume of 109 million stick sales in 2022 and is expected to reach 112 million in 2024. Egypt holds 14% of the region’s cigarette value and is expected to grow in strong double-digits in 2024 compared to double-digit decline in 2023, which was caused by the shortage of international cigarettes.

  In 2024, the supply of international cigarettes in Egypt is expected to stabilise, which will boost volumes and increase average price for the category

• South Africa’s gradual decline of cigarettes from 15 million sticks in 2022 to 14 million in 2023 was driven by a fall in smoking prevalence, with an increasing number of consumers attracted to e-vapour products, particularly single use formats, thus replacing cigarette smoking.

  In 2023 E-vapour products ($643m) and heated tobacco products ($302m) saw success as consumers transitioned away from cigarettes.

  While US-style moist snuff, which is also popular in South Africa, maintained its market position and continues to grow in volume. US-style moist snuff’s value growth in USD amounting to $101m was constrained by inflation in 2023. Additionally, this category remains significantly smaller compared to vapes and heated tobacco products.

• Morocco increased their taxation of e-vapour products, from 2.5%, to 40% when it comes to importing. In 2024, this may mean that consumers will shift to other offerings, such as heated tobacco products. For example, Iqos has seen strong growth, since its introduction to Morocco in 2021.

  Growth has continued to climb, as younger consumers gravitate to alternative tobacco products with better flavour profiles. Moreover, local producers are also cheaper than imported brands, resulted in healthy growth of independent brands. E-vapour product offerings, like South Africa, are highly fragmented. This results in high levels of competition for innovation.

• Nigeria’s significant inflationary pressures resulted in volume declines for alternative tobacco offerings. Due to the double-digit inflation rate, consumers shifted to cheaper tobacco products, such as cigarettes. Single-use products continued to develop, as they are the cheapest option for consumers who want to consume nicotine, but do not wish to consume combustible tobacco products.

These consumers are generally found in younger demographics, meaning there is an opportunity for long term growth. There will likely be innovations and aggressive product released for nicotine pouches in Nigeria, if South Africa is an indicator.

These products are perceived as healthier than other offerings, which further benefits the product as more African consumers become concerned with their health.

Christopher Day, research analyst at Euromonitor International, said: "Alternative tobacco offerings remain in their infant stage across Africa, except for South Africa, which has a far more mature alternative tobacco market. The strongest performing alternative tobacco offering will be e-vapour products, specifically disposable vapes, based on their value proposition. However, African governments are increasingly incorporating these devices into existing tax regimes or establishing a new tax framework for the products.

“The next likely alternative tobacco product that will gain considerable traction across Africa is nicotine pouches. Much of this has to do with continued product innovations, which have improved the flavour profile, while also providing a competitive price point. A particular success story would be Zyn (PMI), which was recently released in South Africa and saw considerable success immediately.”

Get the full report.