The Near East: A Difficult But Important Market

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Features

The Levant, and by extension also Iraq, is quite a rollercoaster ride when it comes to cigarette marketing;  but a ride that suppliers are willing to take. Tobacco Asia talked to active players in the region.

By Thomas Schmid

The Near East countries of Syria, Lebanon, and Jordan*, collectively known as the Levant, and – by geographical extension – also Iraq is a troubled region. Wars, civil strife and unrest, political upheaval: all of that and more is keeping the area in a seemingly perpetual grip, sometimes to a larger, sometimes to a lesser degree. But whatever the highs and lows, life and commerce go on somehow. Stores must be stocked, commodities must be traded; and yes, tobacco continues to be consumed.

Although the mentioned countries’ individual populations are comparatively small, they nevertheless constitute important markets for cigarette suppliers, from the multinationals through to a slew of independent foreign companies and local manufacturers. While the situation in some of the nations is presently docile and stable enough to conduct business in peace and sustain a smooth distribution network, others are on and off the map, becoming accessible and then inaccessible again as dictated by domestic or international developments. It can indeed be a veritable rollercoaster ride, yet one the industry players are willing to accept.

Covering an entire region’s tobacco market within the restricted space of a single article is a daunting task that needs to be handled systematically. The best-suited approach might be if we present each country in turn, outlining their basic market conditions. To accomplish that, Tobacco Asia talked to one of the main multinational enterprises currently active in the region. JTI (Japan Tobacco International) is well known for its global presence, distributing a broad range of iconic cigarette brands in this region. To prevent bias, we are listing the covered countries in alphabetical order and regardless of their actual rankings in terms of market size or annual sales volume or value. Although Egypt also is closely associated with the Levant proper, its domestic tobacco market is of such large proportion that we reserve the country for a dedicated article in a forthcoming issue of Tobacco Asia.

Iraq

Although the security situation in Iraq has been gradually improving over the past couple of years, it remains far from stable. Several regions remain no-go areas and many cigarette manufacturers out of safety concerns simply won’t risk dispatching staff to the country or establishing local subsidiaries, instead relying on local distributors, at least for the time being.

“While a selection of JTI brands is available in Iraq, all [our] sales in the market are undertaken by our appointed distributor partner,” explained Hadi Sleiman, corporate affairs and communications director for the GCC and Levant. All JTI brands sold in the country are exclusively imported. The company’s currently best-selling brand is Aspen, while the premium brand is Winston.

Jordan 

While JTI resorts to exclusively importing its brands into Iraq, the company’s situation in Jordan is completely reversed, detailed Alaa Al Maaytah, corporate affairs and communications director of local JTI subsidiary, JT International (Jordan) Limited.

JTI presently is Jordan’s market leader with brands such as Gold Coast, Winston (JTI acquired the brand with its takeover of RJ Reynolds in 1999), and LD, the company’s largest competitors being PMI, BAT, and Imperial. Although it may seem as if Jordan’s cigarette market were a relatively easy “walk in the park”, that superficial impression is deceiving due to the country’s tough tobacco laws. For instance, an absolute advertising ban on tobacco products is in place, promotional events are restricted and smoking in public places is prohibited under threat of stiff penalties. Steep taxes (see table) have affected sales to a certain extent, explained Al Maaytah. In addition, all tobacco industry players in the country are subject to an extensive approval and licensing process. “We have to apply for approval from the Jordan Standard and Metrology Organization as well as the ISTD [Income and Sales Tax Department] before we can launch any product, or change it or begin manufacturing it,” Al Maaytah said.

Lebanon

JTI has maintained a representative office in Lebanon since 2002, but it was only in 2014 that the company established a fully-fledged subsidiary, JT Intl Lebanon SARL, according to Fadi El Hage, country manager and director of the operation. The subsidiary is foremost providing communication and merchandising services. “Then and now, our business [in Lebanon] has always been borne solely on product imports and we are not manufacturing locally,” said El Hage.

“All tobacco product distribution is done via the RLTT to licensed wholesalers, who then pass the merchandise on to semi-wholesalers, who in turn supply retailers,” El Hage elaborated. “However, when we launch new brands all we can do is support their distribution efforts by having sufficient product quantities at the ready. We also handle all merchandising activities and communication programs for our brands,” said El Hage. “Most of what we are allowed to do is carried out at retail outlet level,” with RLTT regulations stipulating that such communication “shouldn’t be visible to passers-by.”

Syria     

With the situation in Iraq somewhat – if only marginally - improving, Syria, ravaged both by an ongoing civil war and the not quite yet quelled ISIS insurgency, both of which have laid entire areas of the country to utter waste, certainly is the region’s most challenging market in our entire line-up. According to Hadi, “JTI ceased all supplies to Syria in early 2012”. Other multinational companies have implemented similar measures. But, a number of foreign manufacturers have reportedly taken advantage of the vacuum, distributing their products in the country through local distributors and entrepreneurs.