British American Tobacco Egypt (BAT) plans to increase its market share in Egypt from 8% to 10%. Stephen Harvey, general manager of BAT Egypt, said that his company aims to reach its target market share soon after its last success in increasing it from 5% to 8%.
He pointed out consumers’ reaction to the price hikes determines the size of consumption in each segment, especially as high prices often force consumers to buy lower-priced products.
Harvey added that BAT does not aim to add new products in Egypt currently. There are five products manufactured locally by the Eastern Company, including Kent, Lucky Strike, Vesseroy, Pall Mall, and Rothman, while only one product of the company, Dunhill, is imported.
He added that the company’s current capacity in Egypt reached 8bn cigarettes annually and they are looking forward to increasing it to 10bn cigarettes. Also, BAT seeks to develop Rothman and Viceroy products in the coming period, while Kent and Dunhill can be developed later.
The company offered a wide variety of products in different price segments, which increases its competitiveness with other products in the Egyptian market, Harvey said, and noted that the Egyptian market is characterised by open cigarette pricing, which ensures competition among different products.
Additionally, Harvey said that the recent spread of the e-cigarette in Egypt was limited and did not affect the sales of the company’s products.
He noted that BAT actually manufactures e-cigarettes worldwide, but currently they do not plan to sell it in the Egyptian market as local consumers still prefer regular cigarettes.
“We have a strong presence in the Egyptian market for years. It is the best time for introducing new technologies in the market after the recent developments witnessed in the country in terms of economy, investments, and high growth rates,” Harvey said, adding, “I think we have a market share of 8-8.5% in Egypt, and we are working to strengthen our presence in the market through boosting cooperation with the Eastern Company, with which we currently have a strong relationship.”
Moreover, he said that the partnership between the two companies extends for 16 years, including manufacturing and partnership agreements, and it recently resulted in the production of Pall Mall.
Additionally, BAT has a plan to invest £30m over the next 12 months in Egypt, whereby the company plans to focus on marketing the Pall Mall brand in the coming period, as well as developing other products. It will also establish a new head office in New Cairo.
Harvey asserted that the recent price hikes had a little effect on the demand because people do not merely stop smoking, but they usually reduce their daily consumption, or turns to cheaper products, noting that their products fit all price segments.
He explained that his company witnessed a decline in its expensive products’ sales during the last two years in Egypt because of the rapid price increases caused by taxes, prompting consumers to buy cheaper brands.
In regard with the current taxation—based on three segments—Harvey described it as a fair system for social justice and gives the consumer multiple options. However, it increased the gap between the middle and low cigarettes segments. He warned that consumers’ tendency to lower cigarette segments due to tax-driven price hikes in the past two years, can end in turning to illegal products, which can cause a significant loss for government and private companies.
Harvey added that this price hike pushed the smuggling rate by 100% within the last six months, and the only solution is introducing international products at reasonable prices.
“We can say that the economic reform started to bear fruit and the worst stage is over. We have experienced a difficult time since the flotation in November 2016, but the situation is improving now. The political administration is willing to complete what it started,” Harvey said.
The tobacco industry has a promising future largely due to the economic reforms and studies conducted by government agencies on the feasibility of tobacco cultivation in Egypt, which will reduce the country’s dependence on imported raw materials, Harvey added.