Posted by: nuweiba | May 7, 2008

Smokers won’t quit but they might shift

By Abdel-Rahman Hussein
First Published: May 6, 2008

CAIRO: After a period of relative stability, cigarettes will now be sold at higher prices as part of the newly declared price hikes the government instituted to finance public sector wage increases.

The ubiquitous local Cleopatra brand will now sell for LE 3 up from LE 2.25. At the opposite end of the spectrum Marlboro brands have seen a LE 1.5 increase from LE 7.50 to LE 9.

Brands such as Rothmans and L&M have also seen an increase of at least one pound to reach LE 5.5.

However, due to the inelasticity of demand on a product such as tobacco, it is not believed the industry will be adversely affected by the price changes.

“We brand cigarettes as an inelastic commodity, which generally means it’s not affected by price movements as much as anything else. Demand is not determined by price. It will drop but not as much as expected,” a market analyst told Daily News Egypt.

Smokers themselves seem resigned to the price increase and will not vary their habit too much in the face of the price change.

Taisseer Nasry, a human resources specialist at an international bank who smokes Marlboro Reds, told Daily News Egypt, “A pound and a half increase wont make too much of a difference regarding how many packs you buy over the month, but if it is LE 12 for example, then people might stop.”

“People accepted when the price went from LE 4.5 to LE 7.5 overnight, so they will accept this too,” he added.

But it is the smokers of Cleopatra, the cheapest and most popular brand amongst Egypt’s working classes, who feel the price increase more strongly.  

Mamdouh, a building porter and Cleopatra smoker, told Daily News Egypt “LE 0.75 increase is big. We will have to see how we can deal with this.”

Asked what he would personally do, Mamdouh responded, “Well, at first you can decrease the number of cigarettes you smoke. So instead of smoking a pack a day [20 cigarettes maybe we can smoke 10 cigarettes. The best solution is to quit of course.”

With only one company — the government owned Eastern Tobacco — producing cigarettes in Egypt the revenues will all end up in the same place.

“It means higher revenues for the tobacco industry,” the market analyst said, “Eastern Tobacco has the monopoly and is majority owned by the Chemical Holding Company, which is basically the government. Even though there will be a slight dip [in consumption], it will be more than offset by the price increase.”

“We could possibly see a shift in the type of brands consumers smoke, but as it is a monopoly it makes no difference. A drop in Marlboro just means an increase in another brand,” he added.

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