Saudi Arabia Tobacco Market Outlook to 2030

Saudi Arabia Tobacco Market Overview

• The Saudi Arabia tobacco market is valued at USD 1.61 billion based on a comprehensive analysis of the industry over the past five years. This market is primarily driven by the high consumption rate of tobacco products such as cigarettes, cigars, and shisha, coupled with the cultural acceptance of these products. In addition, increased disposable income among the population, especially in urban regions, has contributed to consistent demand for premium tobacco products, sustaining the markets growth trajectory.
• Dominant regions in the Saudi Arabian tobacco market include Riyadh, Jeddah, and the Eastern Province. These cities account for a significant portion of the market due to their large population densities, thriving retail sectors, and greater disposable income. The popularity of shisha cafes and the higher demand for premium tobacco brands in these regions further reinforce their dominance. The strategic geographical positioning of these cities also enhances the distribution networks for both local and international tobacco companies.
• Saudi Arabias National Tobacco Control Program, implemented by the Ministry of Health, is one of the strictest in the region. In 2022, the government introduced new policies to reduce smoking prevalence, including raising taxes on tobacco products and launching cessation programs. These initiatives are expected to reduce smoking rates among adults by 15% by 2030, in line with the countrys public health objectives. However, these stringent measures also place pressure on tobacco companies to comply with regulatory standards.

Saudi Arabia Tobacco Market Segmentation

By Product Type: The market is segmented by product type into cigarettes, cigars, smokeless tobacco, and e-cigarettes. Cigarettes hold the dominant share under the product type segmentation, as they are deeply ingrained in the lifestyle of a significant portion of the population. The relatively low cost, ease of availability, and variety of flavors in both traditional and menthol cigarettes contribute to their continued popularity, despite growing awareness of health risks.

By Distribution Channel: The market is also segmented by distribution channels into online retail, supermarkets/hypermarkets, tobacco specialty stores, and convenience stores. Tobacco specialty stores dominate this segment, with a 40% share of the market. These stores offer a wide variety of products, including premium and niche tobacco items, catering to the preferences of consumers who seek personalized experiences and product variety. Additionally, these specialty stores often serve as social hubs, which helps maintain their relevance in the market.

Saudi Arabia Tobacco Market Competitive Landscape

The Saudi Arabia tobacco market is dominated by a mix of international and local players, all competing to maintain market share through product differentiation, distribution reach, and innovation. The competitive landscape is marked by brand loyalty, with leading companies focusing on expanding their premium product lines to cater to evolving consumer preferences.

Saudi Arabia Tobacco Industry Analysis

Market Growth Drivers

• High Consumer Demand: Tobacco consumption in Saudi Arabia remains high due to strong cultural and social preferences. In 2023, 26.7% of Saudi adult males were regular tobacco users, driven by traditional habits such as smoking shisha and cigarettes. Economic stability, alongside high consumer demand, supports the growth of the tobacco market. Despite global efforts to curb tobacco use, the demand for tobacco products remains resilient due to deep-rooted cultural practices, especially among males in urban and rural areas alike. These trends underline the importance of understanding local consumption patterns.
• Increased Disposable Income: Saudi Arabia's economy has grown steadily, with GDP per capita reaching $24,600 in 2023, according to the IMF. Increased disposable income, especially among the younger population, has resulted in greater consumer spending on leisure products, including tobacco. This income boost has been a crucial factor in sustaining demand for premium tobacco products, including flavored and luxury tobacco, driving market expansion in urban areas such as Riyadh and Jeddah. The growth of disposable income is also tied to job creation in the private sector, boosting overall spending power.
• Influence of Cultural and Social Norms: Tobacco consumption, particularly shisha smoking, is deeply embedded in Saudi culture. Cultural gatherings and social norms significantly influence tobacco consumption, with nearly 35% of adult men regularly engaging in smoking during social activities, according to data from 2022. This social acceptance and the public nature of gatherings make tobacco products a staple for many, thus driving sustained demand. These cultural drivers are pivotal in understanding the steady market demand for both traditional tobacco and emerging alternatives.

Market Challenges

• Stringent Government Regulations: Saudi Arabia has introduced strict regulations under the National Tobacco Control Program to limit tobacco consumption, including high excise duties, import restrictions, and comprehensive advertising bans. In 2022, excise duties on tobacco products increased to $24 per kilogram, significantly impacting pricing and sales volumes. Additionally, the Ministry of Health's active anti-smoking campaigns aim to reduce the smoking rate to below 5% by 2030. These regulatory measures pose a significant challenge for tobacco companies trying to maintain or grow their market share.
• Public Health Campaigns and Awareness: Public health initiatives, such as the Saudi Anti-Smoking Societys campaigns, have raised awareness about the dangers of smoking. According to a 2023 survey by the Saudi Health Council, 78% of adults are now aware of the health risks associated with tobacco consumption, leading to reduced smoking rates, especially among the younger population. The governments goal is to reduce smoking prevalence through education and cessation programs, which could challenge future growth in the tobacco market.

Saudi Arabia Tobacco Market Future Outlook

Over the next five years, the Saudi Arabia tobacco market is expected to experience steady growth driven by product diversification and the increasing demand for reduced-risk tobacco products such as e-cigarettes and smokeless tobacco. Government regulations may continue to challenge traditional cigarette consumption; however, companies are likely to invest heavily in alternative products and marketing strategies to align with the changing regulatory landscape. This dynamic will lead to a more innovative market with new opportunities for local and international players.

Market Opportunities

• Innovation in Flavored Tobacco Product: Despite regulatory challenges, the demand for flavored tobacco products, including shisha, remains high. In 2023, the flavored tobacco segment accounted for 60% of the overall tobacco market, particularly in urban areas such as Riyadh. Tobacco companies are increasingly innovating to cater to local tastes, introducing flavors such as mint, rose, and tropical fruit, which resonate with consumers preferences. This product diversification provides significant opportunities for tobacco companies to capture market share through innovation.
• Expansion of Reduced-Risk Products: The market for reduced-risk products, such as heated tobacco and nicotine pouches, is expanding in Saudi Arabia. In 2023, over 1.2 million units of heated tobacco products were sold, with many consumers preferring these alternatives over traditional cigarettes due to perceived health benefits. This shift provides an opportunity for tobacco companies to invest in research and development, partnering with international companies to introduce more reduced-risk products into the market and meet growing consumer demand for healthier alternatives.