Business & Finance - Tobacco Reporter

Walmart to Limit Tobacco Sales

Walmart will stop selling cigarettes in select stores across the U.S., reports AP.

Cigarettes will be removed from some stores in California, Florida, Arkansas and New Mexico; however, Walmart did not make it clear how many of its stores will remove tobacco entirely.

In place of cigarettes, the chain has added more self-checkout registers and items like candy and grab-and-go foods in some of these stores.

Decisions on removing cigarettes will be made on a store-by-store basis according to the business and particular market, Walmart said. “We are always looking at ways to meet our customers’ needs while still operating an efficient business.”

March 29, 2022

SWM and Neenah Paper Agree to Merge

Neenah Paper and Schweitzer-Mauduit International (SWM) have agreed to merge, creating a specialty materials company with a combined $3 billion in sales. The new company does not have a name yet.

The combined company would be headquartered in Alpharetta, Georgia, USA. Neenah President and CEO Julie Schertell will lead the new company while SWM CEO Jeff Kramer will take a role as a strategic advisor. Five SWM board members and four Neenah board members will make up the combined company’s board of directors.

The two companies expect to trim at least $65 million from their operating costs over the next two to three years. It will do so through production synergies and “highly complementary technologies, geographies and product portfolios in specialty materials,” the companies said in a news release. The new company would have strong market share in growing categories like healthcare and wellness, protective and adhesive solutions, industrial solutions, packaging paper and specialty paper.

“This merger is an exciting next step on our journey and one that will deliver significant shareholder value,” said Kramer. “The combination with Neenah is a continuation of our strategic intent to solve our customers’ most complex design challenges. We are excited by the numerous benefits of this merger, including the significantly broadened customer base, product lines and technical expertise.”

“This combination is a unique opportunity to accelerate our growth strategy and continue the transformation of our business, creating a global leader in specialty materials with strong and defensible positions in attractive end markets,” said Schertell. “Merging our two companies enhances our ability to grow and solve the needs of our customers for demanding, innovative products that address global challenges, such as the necessity for clean water and air, sustainable alternatives, and enhanced health and wellness.”

The deal has been approved by both companies’ boards but still must be approved by shareholders for both companies and regulators.

Neenah was founded in 1873. It was acquired by Kimberly-Clark in 1902 and operated until Kimberly-Clark spun off its regular paper-making operations under the Neenah name in 2004. Schweitzer-Mauduit is also a former division of Kimberly-Clark that was spun off as an independent company in 2015.

March 29, 2022

RAI Announces Site Closures

Reynolds American Inc. (RAI) will reduce its U.S. manufacturing footprint and close of some sites to position the company for future growth, the company announced.

The decision follows a detailed strategic review of the company’s operations.

“These decisions are never easy,” said RAI President and CEO Guy Meldrum in a statement. “We are focused on delivering long-term, sustainable growth in a rapidly evolving environment. While these changes are necessary to support the future of our business, they will be extremely difficult for our employees at the manufacturing sites that are closing and today we are focused on providing support to them through this transition.”

Beginning next month and progressing through 2024, Santa Fe Natural Tobacco Co.’s operations in Oxford, North Carolina, and American Snuff Co.’s operations in Winston-Salem, North Carolina will move to Tobaccoville, North Carolina. ASC’s Traditional Oral operations in Memphis, Tennessee, will move to Clarksville, Tennessee.

More than half of employees across the closing facilities will have the opportunity to transfer sites. These changes will reduce the company’s full-time employee workforce by approximately 350 roles by 2025.

“After our review, it became clear that we had to align our manufacturing footprint with our growth strategies,” said Bernd Meyer, executive vice president of operations at Reynolds. “Many of our employees will be given the opportunity to transfer sites. Our employees displaced through this process will receive a comprehensive severance and benefits package, including outplacement support to help as they transition to the next phase of their careers.”

March 25, 2022

PMI Scaling Down Russian Operations

Philip Morris International today announced the concrete steps it has taken to suspend planned investments and scale down its manufacturing operations in Russia, following that country’s military invasion of Ukraine.

PMI said it has discontinued a number of its cigarette products offered in the market and is reducing its manufacturing activities accordingly. It has also suspended marketing activities in the country and canceled all product launches planned for 2022 in Russia, including the launch of its flagship heated tobacco product IQOS Iluma, originally planned for March 2022. In addition, PMI has canceled its plans to manufacture more than 20 billion Terea sticks (for IQOS Iluma) in Russia and the related ongoing investment of $150 million.

PMI’s board of directors and senior executives are working on options to exit the Russian market in an orderly manner, in the context of an increasingly complex and rapidly changing regulatory and operating environment.

“Our focus and all our efforts over the last four weeks have been to ensure the safety and security of our Ukrainian colleagues. We stand in solidarity with the innocent men, women and children who are suffering,” said PMI CEO Jacek Olczak in a statement. “We employ more than 3,200 people in Russia. We continue to support them, including paying their salaries, and we will continue to fulfil our legal obligations. We will continue to make decisions with their safety and security as a priority.”

Russia accounted for almost 10 percent PMI’s total shipment volumes and around 6 percent of PMI’s net revenues in 2021.

March 25, 2022

Dubai Businessman Buys Mostar Tobacco Factory

Jassim Abdullah Ibrahim Alhuwai is buying the Mostar Tobacco Factory in Bosnia and Herzegovina after making the best offer at public sale, reports the Sarajevo Times.

Alhuwai will pay BAM6 million ($3.4 million) for the factory. He has already paid BAM10,000 as a deposit and has been given a deadline of April 22 to pay the remainder.

“I hope that the investor from Dubai will pay the money by the appointed deadline and that our agony will end, that there will be the bridging of our service periods and that some money will be paid to us,” former Mostar worker Aida Kajtaz said.

This was not the first attempt to sell the factory. Previously, Mirsad Rahimic, a Swiss entrepreneur and Mostar native, attempted to buy the factory, but there were a number of complications that arose during the purchase process.

Production at the factory ended in 2007, but workers campaigned to restart manufacturing.

Mostar Tobacco Factory complex has an estimated value of BAM21 million, but due to lawsuits and debts, the Mostar Municipal Court declared that the complex should have been sold for BAM3 million.

March 24, 2022

BAT in Talks to Transfer Russian Business

BAT is in advanced talks to transfer its Russian business to Russia’s SNS Group of Companies after Moscow suggested it could nationalize assets of foreign firms that left the country, reports Reuters.

BAT controls just under 25 percent of the Russian tobacco market.

“The process of transferring the management of BAT business in Russia to SNS GC is well underway at remarkable speed,” said an SNS spokesperson.

BAT declined to comment but said last week that it was looking for parties interested in the transfer of the Russian business. Kingsley Wheaton, BAT’s chief marketing officer, stated that BAT’s distributor could be interested in a transfer, adding that exiting the business or stopping sales or manufacturing would be seen as a criminal bankruptcy by Russia and BAT would face legal consequences.

The level of production and the supply and distribution chain will be maintained with a transfer, according to the SNS spokesperson. Whether BAT will pull out completely or continue to supply SNS with raw materials or manufacturing support is unclear.

March 21, 2022

Imperial Negotiates Transfer Russian Assets

Imperial Brands has begun negotiations with a local third party about a transfer of its Russian assets and operations.

“We believe that, in the current circumstances, an orderly transfer of our business as a going concern would be in the best interests of our Russian colleagues,” the company wrote in a press release. “We employ 1,000 people in Russia in our sales and marketing operations and in our factory in Volgograd—and their safety and well-being is our key priority in this process. We will also continue to pay their salaries until any transfer is concluded.

“Meanwhile, we are also supporting our Ukrainian colleagues and their families, including with transport and accommodation to enable them to escape the areas most severely hit by conflict as well as [with] resettlement assistance for those who have left Ukraine.

“We have evaluated the financial impact of an exit from Russia and the previously announced suspension of operations in Ukraine on our full-year guidance for FY22. We now expect full-year constant currency net revenue growth of around 0 [percent] to 1 percent. While there will be some ongoing costs related to the suspension in Ukraine, we expect a relatively small impact on our constant currency adjusted operating profit, reflecting the limited profit contribution of the two markets. In FY21, Russia and Ukraine represented in total around 2 percent of net revenues and 0.5 percent of adjusted operating profit. Any transaction relating to our Russian business is subject to agreement being reached.”

March 15, 2022

Shenzhen Locks Down Due to HK Covid Surge

China’s health authorities have locked down Shenzhen to prevent the spread of Covid-19 from Hong Kong, which is experiencing a surge of the virus.

Shenzhen is a significant manufacturer of consumer electronics, including vapor hardware, for the global market. The city houses tech powerhouses, such as iPhone manufacturer Foxconn, and more than 170,000 vaping-related businesses. The local vapor industry employs more than 3 million people and supplies more than 90 percent of the vapor hardware used around the world, according to some estimates.

The Shenzhen lockdown will last for at least seven days. All nonessential workers must stay home, adults must take PCR tests and public transportation is being halted.

A lockdown in Shenzhen might further disrupt global supply chains because Shenzhen has one of the world’s largest ports. An outbreak in Shenzhen in late spring of last year held up port operations and caused a steep spike in global shipping rates that helped drive up prices for imported goods in the United States and elsewhere.

According to The New York Times, Hong Kong has reported nearly 3,780 Covid-19 deaths and nearly 700,000 new cases since late January. Shenzhen reported 66 new cases in a population of 17 million on Sunday.

March 14, 2022

BAT Withdraws from Russia

BAT is withdrawing from Russia, the company announced on its website.

“Building on our announcement of 9th March 2022, we have now completed the review of our presence in Russia. The context is highly complex, exceptionally fast-moving and volatile,” the company said in a statement, referring to the Russian military invasion of Ukraine.

“We have concluded that BAT’s ownership of the business in Russia is no longer sustainable in the current environment,” the company wrote.

“Today, we have initiated the process to rapidly transfer our Russian business in full compliance with international and local laws. Beyond continuing to pay our 2,500 employees, we will do our utmost to safeguard their future employment.

“Upon completion, BAT will no longer have a presence in Russia.

“Following our decision today, and in light of the continuing uncertainty related to Ukraine and Russia and the possible indirect impact on the rest of the group, we consider it prudent to revise our guidance for full-year 2022. We now expect constant currency group revenue growth of 2 percent to 4 percent and mid-single figure constant currency adjusted diluted EPS [earnings per share] growth. In 2021, Ukraine and Russia accounted for 3 percent of group revenue and a slightly lower proportion of adjusted profit from operations.”

BAT faced heavy criticism for an earlier decision to continue operating in Russia. “If you are a member of the board of British American Tobacco, courting popularity was probably never a top personal priority. Even so, the people overseeing a large and widely held FTSE-100 company might still feel obliged to explain why, amid the broad boycott of Russia by multinationals, they think its fine to carry on business in the country roughly as normal,” wrote Nils Pratley in The Guardian.

Earlier, Philip Morris International, Japan Tobacco International and Imperial Brands announced the suspension of their operations in Russia.

March 11, 2022

Firms Scale Back in Russia and Ukraine

The leading tobacco companies are adjusting their strategies in Russia and Ukraine following the war between those countries.

Philip Morris International announced the suspension of its planned investments in the Russian Federation, including all new product launches and commercial, innovation and manufacturing investment. PMI has also activated plans to scale down its manufacturing operations amid ongoing supply chain disruptions and the evolving regulatory environment.

“We have watched with shock the war in Ukraine and condemn the violence in the strongest possible terms. We stand in solidarity with the innocent men, women and children who are suffering,” said PMI CEO Jacek Olczak in a statement. “We join the many voices calling for an immediate end to the war and the restoration of peace.”

Olczak said PMI had helped evacuate more than 800 people from the most impacted areas; provided critical aid to employees who remain in Ukraine; and provided those who have left the country with logistical, medical, financial and other practical support in neighboring countries. PMI is continuing to pay salaries to all its Ukrainian employees during this period, the company said.

Ukraine accounted for around 2 percent of PMI’s total cigarette and heated-tobacco unit shipment volume and under 2 percent of PMI’s total net revenues in 2021. The company has one factory and approximately 1,300 employees in the country.

In 2021, Russia accounted for almost 10 percent of PMI’s total cigarette and heated-tobacco unit shipment volume and around 6 percent of PMI’s total net revenues. The company employs more than 3,200 people in the country.

BAT, which employs more than 1,000 people in Ukraine and around 2,500 people in Russia, said it had suspended all business and manufacturing operations in Ukraine and suspended all planned capital investment into Russia.

“In Ukraine, we have suspended all business and manufacturing operations and are providing all the support and assistance we can to our colleagues, including relocation and temporary accommodation. Our businesses bordering Ukraine are providing assistance to the humanitarian relief effort,” the company wrote on its website.

“In Russia, we have a full establishment of our people right across the country, including substantial local manufacturing. Our business in Russia continues to operate. As a key principle, we have a duty of care to all our employees at this extremely complicated and uncertain time for them and their families.”

Japan Tobacco International, which has four factories and nearly 4,000 employees in Russia, announced the suspension of all new investments and marketing activities as well as the planned launch of its Ploom X heated-tobacco product in Russia, citing the unprecedented challenges of operating in Russia at this time. “Unless the operating environment and geopolitical situation improve significantly, JTI cannot exclude the possibility of a suspension of its manufacturing operations in the country,” the company wrote in a press statement.

Imperial Brands also suspended all operations in Russia, halting production at its factory in Volgograd and ceasing all sales and marketing activity.

“We have already suspended our operations in Ukraine in order to prioritize the safety and well-being of our 600 employees in that country,” the company wrote in a statement.

Russia and Ukraine are relatively small markets for Imperial Brands, representing around 2 percent of net revenues and 0.5 percent of adjusted operating profit in 2021.

March 10, 2022

Category: Business & Finance