Saudi Arabia Tobacco Market Analysis by Distribution Channel, Product, and Product Type - Size and Forecast 2024-2028

Saudi Arabia Tobacco Market Size 2024-2028

The Saudi Arabia tobacco market size is forecast to increase by USD 1.61 billion at a CAGR of 3.2% between 2023 and 2028. The market is experiencing significant changes due to various factors. The rise of modern retail outlets and the growing e-commerce sector are driving market growth. Moreover, the increasing popularity of alternatives such as vaping devices and e-liquids is attracting a large consumer base. However, health concerns related to tobacco use and tobacco-related cancers continue to pose challenges. The Saudi Arabian government's public consumption ban on tobacco products, including heat-not-burn tobacco products in certain areas further impacts market growth. The vending machine system is also gaining traction, providing convenience to consumers while ensuring regulatory compliance. This dynamic market requires businesses to stay informed and adapt to the changing landscape to succeed.

What will be the Size of the Market During the Forecast Period?

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The market has been witnessing significant growth due to various factors. Despite the acknowledged health risks associated with tobacco use, the addictive nature of nicotine continues to attract a substantial consumer base. Tobacco consumption in Saudi Arabia primarily revolves around cigarettes, with smokeless products, such as cigars and cigarillos, water pipes, and new nicotine products like e-cigarettes, vaping devices, and e-liquids also gaining popularity. Health concerns and the addictive properties of tobacco products have led to various marketing campaigns aimed at reducing smoking prevalence. Offline sales remain the primary distribution channel for tobacco products, with retail outlets and kiosks being the most common points of purchase. Tobacco users in Saudi Arabia consist of both adults and youth. Traditional advertising strategies have been employed to target these demographics, with cigarette advertising being a significant contributor to the market's growth. Cigarettes form the major product in the combustible tobacco products segment, followed by traditional shisha or hookah tobacco, which has traditionally dominated the market.

However, there is a growing trend towards youth marketing, which has raised concerns among health organizations. The addictive nature of tobacco products, particularly nicotine, is a significant concern. Nicotine is a highly addictive substance that can lead to various health issues, including tobacco-related cancers. Despite these risks, the tobacco industry continues to innovate, with the introduction of low-tar products and new nicotine delivery systems. In conclusion, the market is a significant and growing industry. While there are health concerns associated with tobacco use, the addictive nature of nicotine continues to attract a substantial consumer base. Marketing strategies, both traditional and innovative, play a crucial role in the market's growth. As the industry evolves, it is essential to address the health risks associated with tobacco use and find ways to reduce the harm caused by these products.

Market Segmentation

The market research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in "USD billion" for the period 2024-2028, as well as historical data from 2018-2022 for the following segments.

• Distribution Channel
  • Offline
  • Online
• Product
  • Combustible tobacco products
  • Smokeless tobacco products
• Product Type
  • Cigarettes
  • Cigars
  • Smoking tobacco
• Geography
  • Saudi Arabia

By Distribution Channel Insights

The Offline segment is estimated to witness significant growth during the forecast period. In the Saudi Arabian tobacco market, various tobacco products are sold through both offline and online channels. The offline segment comprises traditional retail stores where tobacco items are sold. These retail channels include convenience stores, supermarkets, hypermarkets, tobacco specialty shops, and gas stations. Tobacco companies sell their products through vending machines and automated kiosks in these offline retail outlets. Convenience stores and supermarkets are the major contributors to offline tobacco sales, as they strategically place cigarettes and other tobacco products near the checkout counter to encourage impulse purchases.

Moreover, discounts and promotions are commonly used by these retailers to attract customers and boost sales. Tobacco specialty shops and gas stations are also significant retail channels, particularly in rural areas. In contrast, online sales of tobacco products have gained traction in recent years due to the convenience and accessibility they offer. Smokeless products, such as Cigar and Cigarillos, Water Pipes, and Flavored Cigarettes, flavored cigars are also popular among consumers in Saudi Arabia. The demand for these tobacco products is considered inelastic, meaning it remains relatively stable despite changes in price.

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The offline segment was valued at USD 7.44 billion in 2018 and showed a gradual increase during the forecast period.

Our market researchers analyzed the data with 2023 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.

Saudi Arabia Tobacco Market Driver

An increasing number of organized retail outlets selling tobacco products is the key driver of the market. The market has seen significant growth due to the increasing number of health-conscious consumers seeking alternative nicotine products. Online distribution channels have gained popularity as consumers look for convenience and discreetness in their tobacco purchases. Vapor products, such as e-cigarettes and vape pens, have become increasingly popular among this demographic.

Also, according to market research, the market is expected to witness steady growth, with new nicotine products and low-tar alternatives gaining traction. These retailers offer companies the benefits of increased product visibility and broader consumer reach. Supermarkets, convenience stores, drug stores, and pharmacy outlets serve as the primary distribution channels, ensuring easy access to tobacco products for consumers.

Saudi Arabia Tobacco Market Trends

The growing e-commerce in Saudia Arabia is the upcoming trend in the market. In Saudi Arabia, the tobacco market is experiencing significant shifts as alternative tobacco products, such as tobacco heating products (THPs), gain popularity.

Moreover, harm reduction through THPs is becoming increasingly important for consumers seeking healthier alternatives to traditional smoking. Consumers prefer the ease of shopping online and paying via credit or debit cards, thereby avoiding lengthy shopping trips and waiting in lines. As the trend towards online shopping continues, tobacco companies can capitalize on this trend to expand their reach and revenue.

Saudi Arabia Tobacco Market Challenge

The increasing popularity of substitutes is a key challenge affecting the market growth. The market faces significant changes due to the rising preference for alternative nicotine delivery systems. This shift is primarily influenced by growing health concerns among consumers and the introduction of innovative products like e-cigarettes, heat-not-burn (HNB) devices, and vaping products. These substitutes, which include e-liquids, are perceived as less harmful and offer appealing flavors, making them popular among younger demographics. Moreover, nicotine replacement therapies such as gums and lozenges are gaining traction as consumers seek healthier alternatives to reduce or eliminate tobacco use. The market trends reflect this shift, with next-generation products (NGPs) experiencing faster growth than traditional tobacco items such as cigarettes and shisha. The public consumption ban on tobacco products in various public places further encourages the adoption of these alternatives. Modern retail outlets and a vending machine system facilitate easy access to these products.

However, it is essential to acknowledge the potential health risks associated with these alternatives, particularly regarding the long-term effects and the impact on lung health. In conclusion, the market is undergoing a transformation as consumers seek healthier alternatives to traditional tobacco products. The emergence of e-cigarettes, HNB devices, vaping products, and nicotine replacement therapies is disrupting the market dynamics and presenting new opportunities for manufacturers and retailers. It is crucial for stakeholders to stay informed about the latest market trends and consumer preferences to adapt and thrive in this evolving landscape.

Exclusive Customer Landscape

The market forecasting report includes the adoption lifecycle of the market, covering from the innovator's stage to the laggard's stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their market growth analysis strategies.

Customer Landscape

Key Companies & Market Insights

Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.

Altria Group Inc.: The company offers tobacco products such as Heated tobacco products which include bonds by Iqos, Iqos iluma, Iqos iluma prime, Iqos originals, and many more, under the subsidiary of Philip Morris International Inc.

The market research and growth report includes detailed analyses of the competitive landscape of the market and information about key companies, including:

• British American Tobacco Plc
• Imperial Brands Plc
• Japan Tobacco Inc.
• Eastern Co. SAE
• Golden Tobacco Ltd.

Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.

Research Analyst Overview

The market is a significant sector, driven by the high prevalence of smoking among the population. Tobacco products, including cigarettes, cigars and cigarillos, water pipes, smokeless tobacco, and next-generation products (NGPs) like e-cigarettes and vaping products, are widely consumed. The addictive nature of nicotine and health concerns associated with smoking have led to increasing public health concerns and anti-smoking campaigns. Despite these concerns, the demand for tobacco products remains inelastic due to their addictive properties. The Saudi Arabian government has implemented various measures to reduce tobacco consumption, including taxation and public health education.

However, the market continues to grow, fueled by advertising strategies and youth marketing. Offline sales through retail outlets, including supermarkets and hypermarkets, remain the primary sales channel. However, online sales are gaining popularity among health-conscious consumers and those seeking convenience. Flavored cigarettes and low-tar products are also popular among consumers looking for alternatives to traditional cigarettes. The market is diverse, with a range of products catering to different consumer preferences. Harm reduction products, such as heated tobacco products like IQOS technology and nicotine replacement therapies, are also gaining traction. The market is expected to continue evolving, with new nicotine products and alternative tobacco products emerging to meet the changing needs and preferences of consumers.

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What are the Key Data Covered in this Market Research Report?

• CAGR of the market during the forecast period
• Detailed information on factors that will drive the market growth and forecasting between 2024 and 2028
• Precise estimation of the size of the market and its contribution of the market in focus to the parent market
• Accurate predictions about upcoming market growth and trends and changes in consumer behaviour
• Growth of the market across Saudi Arabia
• Thorough analysis of the market's competitive landscape and detailed information about companies
• Comprehensive analysis of factors that will challenge the growth of market companies

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