African anthology

| June 1, 2017

New data underscores the diversity of Africa’s tobacco markets.

By Shane MacGuill

This month, Euromonitor International is adding 20 markets to its direct research coverage, bringing the number of markets under its scope to 100, representing 98 percent of global cigarette volumes.

In this article, the market intelligence company offers a preview of its research findings from Angola, Ivory Coast, Ethiopia, Ghana and Tanzania. These markets share no single unifying constant other than that they have recently been added to Euromonitor’s coverage. In fact, their diversity in traditions and outlooks indicates that the prospects for tobacco are far from homogenous across the African region.

Angola: Tobacco losing relevance but not volume

Angola, the largest market by value of the five, is one where tobacco has played a substantial role in the past but where smoking is becoming increasingly denormalized. As is the case in other regional markets, traditionally tobacco has been of economic importance in Angola as an employer and revenue generator. But as other sectors expand and government regulations—such as a 2017 law banning tobacco advertising—began to bite, the industry’s importance has declined.

Angola has an estimated smoking prevalence rate of around 17 percent, though this is believed to be decreasing among both males and females (slightly more rapidly among the latter than the former). Nonetheless, with overall population growth, the outlook for cigarette volumes is broadly stable, with the total market expected to remain around 4.5 billion sticks between 2016 and 2021. Widespread availability through kiosks of affordable cigarette brands such as SL, Aspen and Yes is contributing to this volume stability.

The manufacturer of SL and Yes, British American Tobacco (BAT), controls some 65 percent of the market, with Japan Tobacco International (JTI) accounting for a further 20 percent through its Aspen brand. Illicit cigarette volumes represent about 20 percent of total consumption in Angola, with most illicit products being sourced from China.

Unlike some other markets in the region, Angola is home to an active anti-tobacco lobby. Health advocates argue for enforcement of existing tobacco control legislation, as well as the imposition of further restrictions. This means that Angola’s growing population is likely to be balanced by lower prevalence in the short to medium term.

Ivory Coast: Price-conscious smokers fuel growth

In contrast to Angola, use and acceptance of tobacco in Ivory Coast has increased in the past decades and appears to be still growing. Smoking prevalence among males, around 25 percent, far surpasses that of females (less than 1 percent) but is growing in both cohorts. Female smoking is becoming more socially acceptable, and female prevalence is much higher in younger generations than it is in the population as a whole.

Cigarette volumes stood at an estimated 4.7 billion sticks in 2016, and the market is forecast to grow to 5.5 billion by 2021. Despite a rapidly declining share, Imperial Brands still leads the market, with its Fine brand accounting for about a half of all consumption. Smokers in Ivory Coast are price conscious, with more than three quarters of volumes shared between Fine and Craven A, BAT’s low-priced brand.

Between 2002 and 2011, the country went through a severe internal political crisis, with the New Forces controlling the country’s northern region for large parts of this time. During this period, illicit sales of cigarettes grew immensely, especially in the northern part of the country, reaching 30–35 percent of the total cigarette volume sales. Following the country’s reunification in 2011, the illicit trade started declining. Today, it accounts for between 5 percent and 10 percent of total cigarette sales.

The government is doing little to inform consumers about the risks of tobacco or to discourage people from taking up the habit, and this is reflected in growing smoking rates. There is currently little to no domestic civic anti-tobacco organization activity in the country.

Ethiopia: Significant scope for growth

The largest by volume of Euromonitor’s five new markets, the Ethiopian tobacco market is exhibiting strong signs of growth. Historically, tobacco has played a small role in society, being consumed primarily by elders in a traditional manner. However, in recent years the prevalence of tobacco smoking, especially cigarettes, has increased within the country’s towns and cities. Even though tobacco was—and, to some extent, still is—considered taboo by a majority of the society, the social acceptability of smoking has clearly increased in the past decade or so. Prevalence remains relatively low in Ethiopia; according to a 2015 study by the World Health Organization (WHO), 8 percent of males and 1 percent of females were smokers. However, there is reason to expect this rate to continue to grow—at least in the short term—particularly in the absence of concerted government or civic anti-tobacco activity.

Just under 7 billion cigarettes were consumed by Ethiopian smokers in 2016, according to Euromonitor estimates, and this figure is forecast to grow by more than one-third in absolute terms up to 2021. The value of the cigarette market is expected to almost double to $600 million in the same period.

Data points such as these perhaps go some way to explaining why JTI was willing to part with $510 million for a 40 percent stake of the state-controlled National Tobacco Enterprise, which dominates the market, selling four in every five cigarettes consumed there. BAT and Philip Morris International share the remainder of volumes.

Illicit penetration, estimated at above 30 percent of total consumption, is much higher in Ethiopia than in any of Euromonitor’s other five new African markets. Indeed, it is elevated even at a regional level. Driven by demand for lower-priced products among consumers, illicit brands are often sold through formal distribution channels, particularly outside major urban areas.

Ghana: A tale of two (or more) regions

The smallest by volume of Euromonitor’s new African markets, Ghana has a relatively low engagement with smoking, even though there has been a multinational presence in the country since the 1950s, when BAT Ghana was incorporated.

Sales boomed in the 20 years after the country gained independence in 1957, but this growth was not as sustained as it was in other markets. Contributing factors include (eventual) state-ownership of tobacco companies, unfavorable economic conditions (which made products unaffordable and difficult to manufacture) and relatively restrictive regulation.

Best estimates of smoking prevalence in Ghana indicate that the rate is below 10 percent among males and around 1 percent among females, though national estimates are complicated by significant regional variations. Smoking is concentrated in Ghana’s three northern regions, where more than a third of adults smoke—in comparison to the capital, Accra, where around one in 20 do. In areas with lower rates of smoking, tobacco consumption remains relatively socially unacceptable and often publicly invisible.

After a decade or more of volume growth, cigarette consumption in Ghana appears to have peaked in 2012 at just under 1 billion cigarettes. In 2016, an estimated 850 million cigarettes were consumed, and this is expected to decline further up to 2021. Despite ceasing local production in 2006, BAT continues to dominate the market and is the only official importer of cigarette products. Leading brands include Rothmans, Pall Mall and London.

Tanzania: A substantial but declining role for tobacco

Tobacco is of substantial importance to the Tanzanian economy. In 2016, according to the Bank of Tanzania, the country exported $312.7 million worth of tobacco, representing nearly a third of exports including cashew nuts, coffee, cotton, tea, cloves and sisal. The industry still employs thousands of people and is among the top revenue contributors to the government, with annual contributions of about $40 million. Historically, this has impacted attitudes to tobacco and tobacco consumption in Tanzania. In recent years, however, anti-tobacco activism has begun to influence public and government thinking, which, in turn, is becoming increasingly opposed to the product. During the past decade, smoking has become much less socially acceptable, particularly in public spaces.

According to 2013 WHO data, an estimated 16.3 percent of the population aged 15 and older in Tanzania is made up of tobacco smokers, though this rate is higher for male adults aged 25–64, of whom more than a quarter are regular smokers. It is still socially acceptable for men to smoke in Tanzania, albeit increasingly less so. In contrast, it is socially unacceptable for women to smoke, something reflected in an estimated prevalence rate of 2–3 percent. Heightened anti-tobacco and health awareness campaigning, such as that conducted by the Tanzania Tobacco Control Forum, along with enhanced government restrictions are expected to drive prevalence down in the short to medium term.

As a result, there appears to be a secular decline of about 1–2 percent in Tanzanian cigarette volumes, with a market size of about 5.5 billion sticks in 2016 forecast to decline by about 300 million cigarettes by 2021. However, in contrast to other markets in the region, illicit trade penetration is relatively low (around 5 percent), and the value of the legal cigarette segment (a little more than $300 million) is set to grow despite volume losses. The Tanzania Cigarette Company (owned by JTI) will be the major beneficiary of this value growth. It dominated the market in 2016 with more than 80 percent of sales. Portsman, Sweet Menthol, Club and Safari are among the most popular brands.

Shane MacGuill is head of tobacco research at Euromonitor International.

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