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Medium Market Entry Revenue Sizing

Shisha: Just Blowing Smoke?

#Public Sector #Food & Beverage
ProHub Comment

This case requires a structured approach to revenue forecasting, combining multiple data points like market size, growth rates, adoption rates, and different fee structures. The candidate must not only perform calculations but also make a recommendation based on maximizing revenue over a specified period, taking into account the nuances of one-time versus recurring fees and business lifespans.

Estimated Time 15 minutes
Difficulty Medium
Source Darden
50 / 100
Over the past five years, the government of Saudi Arabia has been focused on reducing economic dependence on oil by diversifying the domestic economy. As part of this effort, the government has evidenced a willingness to relax certain social norms. As part of the diversification initiative, the government hired us to forecast the potential revenue impact of taxing shisha consumption.

Clarifying Information

  1. What is shisha? Shisha is an instrument for vaporizing and smoking flavored tobacco. In the Arab world and Middle East, people smoke waterpipes as part of the cultural traditions.
  2. How will the Saudi government make money off of shisha? Institutions must apply and pay for an annual license to sell shisha. Additionally, sales tax and import tariffs are levied by the government as appropriate.
  3. Is there a specific revenue target in mind? No, the Saudi government only wishes to maximize revenue over a 3-year period.
  4. How much revenue does the Saudi government currently earn? 2.5 trillion Saudi riyal annually. Tobacco and other related products currently generate 500 million SAR in revenue.
  5. Are there any social norms we should be aware of? Islam is widely practiced by Saudis citizens and governs their personal, political, economic and legal lives. Additionally, public consumption of shisha is currently banned but is widely consumed at home.