‘Made by UTC’ breaks into the Egyptian cigarette market

Doaa A.Moneim , Saturday 24 Sep 2022

The United Tobacco Company (UTC), a subsidiary of the American multinational tobacco giant Philip Morris International (PMI), has started manufacturing cigarettes in the Egyptian market, ending the decades-old monopoly by the state-owned Eastern Tobbaco Company on the manufacturing of cigarettes.



The company had secured a license from the government to establish a cigarette manufacturing factory in the country earlier in 2022.

UTC follows the Egypt-based Philip Morris Misr LLC, which was established in 2013 as the licensee for PMI products in the Egyptian market.

Marlboro, PMI's leading international cigarette brand, has been manufactured in Egypt by Eastern Company since the 1980s.

The CEO and Managing Director of Eastern Company Hany Aman told Ahram Online that "his company has acquired 24 percent of the UTC in an EGP 100 billion deal."

"The two companies are working together in an integrated manner," Aman added.

“We have not been affected negatively by the work of UTC in the market. Our acquisition transaction in the UTC compensates for the absence of PMI proper in the Egyptian market. PMI products are available in the local market under the label Made by UTC," he stressed.

Eastern Company’s revenues grew by six percent in FY2021/2022 to post EGP 67.9 billion, up from EGP 63.8 billion in FY2020/2021, he noted.

After reaching the acquisition deal, Eastern Company submitted a disclosure to the Egyptian Exchange (EGX), which outlines agreed-upon regulations for the UTC production operations.

According to this disclosure, UTC is obliged to lease the building and the current production lines previously allotted to the manufacturing of Philip Morris products from Eastern Company for a period of three years. Meanwhile, Eastern Company is obliged to manufacture Philip Morris products on the same production lines until the end of FY2021/2022 in June 2022.

In a statement following the deal, PMI affirmed its full commitment to all existing contractual relationships with traders and suppliers in order to ensure the availability of its products in Egypt. PMI added that it will continue to provide all of its products at the same prices with no changes to packaging.

Philip Morris Misr LLC was not available for a comment on the deal.

Both Eastern Company and Phillip Morris Misr LLC have raised their cigarette prices twice so far in 2022 due to increased production costs and the depreciation of the Egyptian pound against the US dollar.

“Eastern Company is trying to absorb the rise in production costs that were caused by recent increases in raw materials costs and also disruptions in supply chains amid the ongoing conflict in Europe," Aman explained to Ahram Online.

Philip Morris products continue to be the leading high-end brand in Egypt, offering a wide range of products at costs ranging from EGP 28 to EGP 52 per pack.

According to PMI 2022 first-half results, the company's shipment volume to Egypt recorded 10.2 billion units (9.9 billion cigarettes and 0.3 billion heated tobacco units) in the first six months of 2022, claiming 22.5 percent of local market share.

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