Tobacco in Iraq

Tobacco in 2024: The big picture

Tobacco saw a return to volume growth in Iraq in 2024. Government policies and taxes are pushing the market to rely more on local production for both cigarettes and smoking tobacco. The number of factories in both categories has increased rapidly and is expected to continue growing in the coming years. There is an oversupply across all categories, leading to a drop in prices. To remain profitable, suppliers are focusing on high-volume sales, often cutting prices to gain market share. This has resulted in a price war, with no supplier willing to raise prices. Market fragmentation is increasing, not only due to a growing number of suppliers and wholesalers, but also because more product categories are entering the market. Consumers are more open to trying new products. This has slowed the growth of the cigarettes and smoking tobacco categories, while e-vapour products consumption continues to rise. Smoking is becoming more common amongst Iraqis. Unlike in the past, the social taboo around smoking is weakening, especially amongst the youth population. Despite formal government policies, the number of teenage smokers is rising, and little has been done to address this issue.

2024 trends

Cigarettes remains the leading category, accounting for around 90% of the market in both volume and value terms at the end of the review period. Unit prices continue to decline due to oversupply and ongoing price wars amongst major suppliers competing to expand or maintain their market share.

Competitive landscape

BMJ Industries FZ-LLC is the largest player in tobacco in Iraq, thanks to its leading position in cigarettes with a portfolio including the Mac and Oscar brands. It is notable that the top three players in cigarettes - BMJ Industries, KT&G Corp, and Grand Tobacco – each saw a fall in volume share during the final year of the review period, while the combined share of smaller players that did not individually register a share rose markedly. This reflected the rising significance of local production and local brands in the market. Ranked fourth, Philip Morris registered growth in 2024, driven by the strong performance of its Marlboro and L&M brands.

Retail developments

Small local grocers remains the leading retail channel in the tobacco market, dominating cigarette sales and maintaining strong control over the smoking tobacco segment. However, there has been notable growth in categories where small local grocers has a weaker presence, such as e-vapour products and alternative products. This shift is expected to continue in the coming years as consumer preferences diversify and new distribution channels expand.

What next for tobacco?

Tobacco is expected to see steady volume growth in Iraq over the forecast period. Some fluctuations may occur on the value side, as the strength of the local currency and ongoing price declines continue to influence the market. Nonetheless, overall, a stable outlook is anticipated for the forecast period. During the forecast period, local production is expected to gain greater control over the market, largely due to government policies introduced in recent years, including higher import taxes and various hidden costs affecting imported brands. Companies will focus on two key areas: price and quality. Local products will compete in terms of affordability, while imported brands will need to offer higher quality and better functionality to maintain their market presence. This dynamic will primarily shape the cigarettes and smoking tobacco segments. In contrast, other categories will remain heavily dependent on imports, with price continuing to be the main competitive factor.