The head of the Tobacco Division at the Federation of Egyptian Industries, Ibrahim Embaby, said that Philip Morris’s decision to raise prices of its Marlboro and L&M brands to approximately LE102 per pack was a result of significant losses incurred by the company due to widespread smuggled cigarettes in the Egyptian market.
Embaby explained during a Sunday phone interview with Amr Adib on his show “al-Hekaya” (The Story) that the company was forced to implement what he termed “opportunity cost” measures, given the uncompetitive nature of the official product compared to smuggled cigarettes, which evade taxes and customs duties.
Smuggled cigarettes currently account for about 30 percent of the market, he noted, which has led to a noticeable decline in sales for official companies and the loss of a large part of their market share.
This has prompted them to try to compensate for the losses by raising prices.
Embaby pointed out that the smuggling is taking place into the local market and not abroad, with low-priced types coming from areas including Jebel Ali and Montenegro, and are sold at prices as low as LE25, which pushes a wide segment of consumers to turn to them instead of the more expensive official products.
‘A vicious cycle’
The cigarette market is caught in a vicious cycle, he warned, as raising the price of the official product leads to increased demand for the cheaper smuggled version, thus expanding the scope of smuggling and deepening losses for companies and the economy.
Embaby noted that the state loses billions of pounds annually in taxes and customs duties to unregulated illicit trade.
The solution does not lie in pricing decisions, he said, but rather in tightening border controls and intensifying the role of customs and supply investigations to dismantle smuggling networks at their source.
Embaby stressed that confronting smuggling is the only way to protect the industry and achieve balance in the tobacco market.
Why have cigarette prices in Egypt risen? Egypt Independent.
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