‘Bloody Complex’: PMI’s Tricky Exit From Russia

Exiting Russia represents a considerable headache for Philip Morris International, according to an article in The Wall Street Journal. The process, begun in March shortly after Russia’s invasion of Ukraine, includes navigating Moscow’s shifting regulations, avoiding missteps that could prompt the government to seize the business and trying to protect employees from becoming targets for arrest.

Russia’s February invasion triggered Western sanctions, and hundreds of businesses, including tobacco companies, have pledged to exit or cut back operations in Russia. In early March, PMI announced it would suspend its investment and scale down its manufacturing operations in Russia. Later that month, the company announced it would exit the market altogether.

PMI is trying to sell its Russian business and has had talks with suppliers interested in buying it. However, from the outset, it hasn’t been clear which Russian authority would approve such a sale or what the process was for seeking that approval. “It’s so bloody complex,” The Wall Street Journal quoted PMI CEO Jacek Olczak as saying. “This one is really mind-blowing.”

Russia is a significant market for PMI. In 2021, it accounted for almost 10 percent of PMI’s global volume of cigarette and heated-tobacco shipments and around 6 percent of its $31.4 billion in net revenue. At the beginning of this year, PMI had more than 3,200 employees in the country.

The company entered the Soviet Union in 1977, when it signed a licensing agreement with the state-owned industry to manufacture Marlboros. It now has a factory in St. Petersburg and sales offices in about 100 cities.

Because of the withdrawal, the company will meet a global sales goal for its smoke-free products a year later than expected, Emmanuel Babeau, the company’s chief financial officer, said at a conference in May.