Imperial Tobacco Stops Operations in Russia, Other Tobacco Majors Continue Sales

March 14, 2022

Par: National Committee Against Smoking

Dernière mise à jour: March 14, 2022

Temps de lecture: 3 minutes

Imperial Tobacco stoppe ses opérations en Russie, les autres majors du tabac continuent leurs ventes

Manufacturers Philip Morris International (PMI), British American Tobacco (BAT) and Japan Tobacco International (JTI) have announced that they are ceasing their investments in Russia following the invasion of Ukraine, but are reluctant to give up this large tobacco market.

The aggression against Ukraine by the Russian Federation has prompted many multinationals to cease all commercial activity with this country. The tobacco industry, for its part, has displayed divergent attitudes. Only Imperial Tobacco has, to date, taken the decision to stop all its commercial activities.[1]. An attitude that contrasts with its competitors Philip Morris International, British American Tobacco and Japan Tobacco International, which have announced that they are suspending their investments, without however withdrawing from the Russian market. BAT, for example, announced that it was suspending all its activities in Ukraine, where it has a factory and around 1,000 employees, but continued to sell cigarettes in Russia until March 11.[2].

The Russian market, a real boon for cigarette manufacturers

As in other Eastern European countries, smoking prevalence remained high in Russia, standing at 29% in 2019, including 26% of daily smoking.[3]. The Russian Federation also ranks fourth among tobacco-consuming countries in terms of volume. According to PMI, it is its second largest market, behind Indonesia.

Tobacco multinationals occupy a significant place in the Russian economy. Philip Morris International stands out in particular by being the first foreign company in terms of profits made in this country, ahead of Japan Tobacco International, which moved from seventh to fourth place.[4]. BAT is ranked fourteenth in this ranking by Forbes. Imperial Tobacco is only ranked 41st.th position, which probably explains its greater ease in giving up the Russian tobacco market.

While PMI only generates 2% of its turnover in Ukraine, Russia represented 8.4% of its cigarette deliveries and 17.1% of the sales volume of IQOS, its heated tobacco device.[5]. Its turnover in Russia increased by 8% in 2020 alone, as PMI took advantage of the COVID-19 health crisis to strengthen its presence in the country. However, the war in Ukraine could reduce PMI's activities in Russia, as the lower performance expected in this market could impact its overall turnover and lead to a defection of some investors.

In 2021, Japan Tobacco International strongly opposed the Russian authorities' planned increase in tobacco taxes, arguing that the COVID-19 crisis had fueled the illicit tobacco trade.[6].

Keywords: Russia, Ukraine, PMI, BAT, JTI, Imperial Tobacco, tobacco

©Tobacco Free Generation

M.F.


[1] Matsuyama K, Gretler C, Japan Tobacco Suspends Investments in Russia, Joining Rivals, Bloomberg, published March 10, 2022, accessed March 11, 2022. [2] Davis R, British American Tobacco halts Russia sales after U-turn, The Guardian, published March 11, 2022, accessed March 16, 2022. [3] WHO, Russian Federation, FCTC report, 2020. [4] Popov I, Philip Morris has become the leader in the rating of the largest foreign companies in Russia, Forbes, published October 4, 2021, accessed March 11, 2022. [5] Maurer B, Philip Morris: The Russia Problem, Seeking Alpha, published March 1, 2022, accessed March 11, 2022. [6] 10th tobacco industry observatory in the face of the COVID19 pandemic, Generation Without Tobacco, published October 20, 2021, consulted March 11, 2022. National Committee Against Smoking |

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