From: Executive-Magazine.com
The Syrian crisis could provide an unexpected boost to Lebanon’s finances
This article is part of an Executive special report on industry. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.
The cedar tree may be the national symbol, but when it comes to smoking the national cigarette brand Cedars, it is the Syrians that have the strongest affinity.
In fact, a correlation can be drawn between the number of Syrians in the country and sales of Cedars: more Syrians in Lebanon equals more Cedars sold. Back in 2005, in the months after the Syrian military withdrew along with thousands of Syrian non-military personnel, sales of Cedars plunged by 50 percent. Government-owned Régie Libanaise des Tabacs et Tombacs (RLT) attributed the drop directly to the withdrawal, with soldiers and low paid workers the main consumers of what was then — and still is now at LBP 750 ($0.5) per pack — the cheapest smokes on the market.
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Last year’s drop was due to a rise in smuggling into the country, a negative spinoff from the Syrian conflict, estimated by international manufacturer British American Tobacco (BAT) at 800 million sticks, while the legal market is 10.7 billion sticks per year. The rise in smuggling and a downward shift in sales of Class A cigarettes in favor of cheaper Class B smokes — rising from 27 percent of sales in 2012 to 37 percent in 2013 — prompted RLT to introduce a new brand, Maestro and Maestro Light, in May.
“It’s at a low price to combat cheap smuggled cigarettes. Our goal was to sell it at LBP 500 ($0.3) per pack, but you have to give a share to the retailer, so Maestro is selling for LBP 750 ($0.5),” says Hedari. Although in its early days, sales so far have been below expectations, with Maestro accounting for no more than 10 percent of RLT’s sales. Even if the new brand does not boost consuming, RLT’s overall revenues to the state treasury from $565.2 million in 2013 to $1.1 billion are expected to rise.
