Syria Today | Smoking Profits

Smoking Profits

Words Waseem Abdo
Photos Manaf Hassan

Syrians are among the world’s heaviest smokers. Around 60 percent of men and a quarter of women smoke, averaging 21 cigarettes per day. That, according to a recent estimate, means Syrians collectively puff away on some 75 million cigarettes every day. And the number of smokers is on the rise. All of which makes tobacco big business in Syria.

Controlled via a tight government monopoly, the sale of tobacco has yielded the treasury a rich and growing source of revenue in recent years. Last year, the General Organization of Tobacco (GOT), the country’s sole manufacturer and importer of tobacco products, sold 12,500 tonnes of locally manufactured tobacco for SYP 12.6bn (USD 252m), in addition to 4,168 tonnes of imported cigarettes at SYP 10.2bn (USD 201m), netting it a SYP 5bn (USD 100m) profit. This figure also fails to include government revenues from the 100 percent excise tax it levies on the imports of foreign cigarettes, a process also controlled by the GOT.

Syria’s heavy smoking habit has ensured the GOT is one of the country’s few profitable state-run industries. So successful has the organisation been in recent years, the government recently took the extraordinary step of singling out its workforce for a special pay rise. The depth of the market is also attracting growing numbers of the world’s largest tobacco firms into the sector, with the GOT recently cementing a working partnership with British American Tobacco (BAT), the world’s second largest cigarette manufacturer, to produce internationally branded cigarettes locally.

The deal, struck two months ago, will see the GOT manufacture the Lucky Strike cigarette brand under licence. In the first stage of the agreement, the GOT will manufacture 800 million Lucky Strike Soft Cup cigarettes annually using imported tobacco. The GOT will provide the required working space for BAT within its factory, while BAT will provide the machinery and technical expertise.

“We feel that the Syrian market offers a good opportunity for our international brands,” Jihane el-Murr, head of corporate and regulatory affairs at BAT, said.

The UK-listed multinational boasts a 17 percent share of the global tobacco market and produces a portfolio of around 300 cigarette brands including KENT, Dunhill and Rothmans. Its partnership with the GOT is being heralded as a useful way to introduce modern cigarette manufacturing technologies to Syria and increase the technical capabilities of GOT staff.

“Manufacturing under licence will double our profits from the brands manufactured, not to mention the valuable experience our workers will acquire through their work on the new machinery and from the training provided by BAT,” Salman Abbas, deputy director general of GOT, said.

BAT’s move to manufacture its brands under licence in Syria follows a similar deal struck with the GOT and the French-owned Altadis Group in 2006 to manufacture the Gitanes cigarette brand popular with Syrian smokers. According to statements by GOT officials at the time, making Gitanes locally was three times more profitable than importing the brand.

Demand and supply

Syria’s growing role as a tobacco manufacturer is being driven by basic demand and supply fundamentals – the country has one of the world’s highest smoking rates and has long produced high-quality tobacco. A 2006 report by the Syrian Centre for Tobacco Studies, the most comprehensive survey of tobacco use ever carried out in Syria, revealed 56.9 percent of men and 12.8 percent of women smoke cigarettes. Another report published by the local Black and While magazine claims that Syria’s 5 million smokers consume some 75 million cigarettes every day. What’s more, these figures fail to include water pipe users and irregular smokers.

Syrian farmers have also long farmed tobacco and there are presently more than 19,000 hectares – 0.45 percent of the country’s total farming land – under tobacco cultivation. The crop is grown under GOT supervision and the government buys the country’s entire yield, which now stands at 15,300 tonnes annually. Syria also exports part of its annual tobacco yield.

While the new interest in Syria from a number of international tobacco giants has been welcomed by the government, others take a more cynical view. Nabil Khouri, a Syrian economist, said Western tobacco companies are increasingly looking at developing markets like Syria because tight restrictions and heavy anti-smoking campaigns are hampering business in their home countries. “Those companies are seeking their own welfare,” Khouri said. “They are being restricted in their regions and the only way for them to sustain business is by targeting developing markets.”

BAT officials point out their products have long been available to Syrian consumers. They say the first to benefit from the new licencing deals will be Syrian smokers and the government. “Lucky Strike is a very popular brand with the Syrian adult consumer and has been present in the Syrian market for decades,” Murr said. “Syrian adult consumers who choose to smoke our locally manufactured products will have the opportunity to buy an international brand with international standards at a local price.”

Strong competition

The possibility of international cigarette brands being sold for local prices has some asking whether the nine locally produced brands will be able to stand up against the competition. Presently, prices of legally imported cigarettes start from SYP 50 per pack. The price of local brands ranges from SYP 15 to SYP 35 per pack, making them a popular choice among budget-conscious Syrians.

Abbas, however, doesn’t expect a fall in sales following the move by large foreign companies. He says Syrian cigarettes are popular with local smokers because they contain fewer chemicals than other imported brands. “All tobacco damages people’s health, of course,” he said. “But the level of harm differs from one tobacco product to another. Our tobacco is grown, manufactured and marketed under the supervision of a governmental body. Therefore, it is the least harmful as no other poisonous substances or mixtures are added to it.”

It’s a view echoed by many smokers. “At least they contain pure tobacco with no other substances added to it,” Mahmoud Ghazi, 46, who has been smoking the Alhamra brand of cigarettes for 14 years, said. “You can’t always trust imported cigarettes.”

Abbas said the quality of Syrian cigarettes has also increased in recent years. “We have started paying more attention to the quality of our products and more than 90 percent of our machinery has been recently updated,” he said.

Another major challenge facing the industry is a rampant trade in smuggled cigarettes, which significantly cuts into government revenues. Government officials estimate some 2,500 tonnes of illegal cigarettes are smuggled into Syria every year, representing 9 percent of the country’s cigarette market. The volume of illegal cigarettes entering Syria has almost doubled since the war in Iraq began in Abdo2003. The GOT further estimates around SYP 3.25bn (USD 65m) flows out of Syria in foreign currency every year as a result of the illegal trade. The GOT is presently prosecuting a number of suspects for manufacturing and importing counterfeit cigarettes.

The lucrative black market trade also poses deadly health risks above and beyond those ordinarily faced by smokers. Smuggled cigarettes are often counterfeit and as such contain higher levels of narcotic and carcinogenic substances. “Much more than the economy, the health of consumers is hard hit by smuggled cigarettes,” Dr. Bassam Abu al-Dahab, director of the National Anti-Smoking Programme, said. “Even the level of tar in smuggled cigarettes exceeds the Syrian standards.”