Tag: Russia

  • Firms Scale Back in Russia and Ukraine

    Firms Scale Back in Russia and Ukraine

    Photo: BAT

    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.

  • Multinationals Continue to Monitor Situation in Ukraine

    Multinationals Continue to Monitor Situation in Ukraine

    Photo: JTI

    Multinational tobacco manufacturers have not stopped their operations in Russia but have done so in Ukraine.

    In the wake of Russia’s invasion of Ukraine and the stance taken by companies such as Apple and Stora Enso in halting sales in Russia, Tobacco Reporter asked the multinationals whether they had stopped sales of their products in Russia or when, if ever, they intended to do so. They were further asked why they had not stopped sales, given that this was the case. 

    “Our priority is our employees, and we are taking the necessary measures to ensure their safety,” said a spokesperson for Japan Tobacco International. “Our operations in Russia are fully functional and we have contingency plans in place to ensure business continuity if the situation were to change. As a responsible international company, we are fully committed to complying with all applicable national and international sanctions.

    “We are closely monitoring the situation and cannot comment any further.”

    Meanwhile, a spokesperson for Imperial Brands said: “We are monitoring the situation in both Ukraine and Russia very closely. Our prime concern remains for the welfare of our people in Ukraine, where we have suspended our operations for safety reasons. We will continue to update our plans as necessary.”

    And a spokesperson for British American Tobacco said: “We are deeply concerned about the conflict in Ukraine. The safety and wellbeing of our people in Ukraine and across the region is our first priority.

    “We have suspended all business and manufacturing operations in Ukraine and are providing all the assistance we can to our colleagues, including relocation and temporary accommodation.

     “In Russia, our wholly owned subsidiary has been in operation for more than 30 years. BAT always complies with relevant regulation and legislation wherever we operate, and we are aligned with all international sanctions.’

    “We continue to closely monitor the situation as it evolves.”

    Philip Morris International had not responded by the deadline. 

  • Stora Enso Suspends Operations in Russia

    Stora Enso Suspends Operations in Russia

    Photo: Stora Enso

    Stora Enso will stop all production and sales in Russia until further notice due to the ongoing invasion in Ukraine. Stora Enso has three corrugated packaging plants and two wood products sawmills in Russia, employing around 1,100 people. The company will also stop all export and import to and from Russia. A mitigation plan has been activated to secure availability of input materials from other sources.
     
    “The war in Ukraine is unacceptable, and we are fully behind all sanctions. We will now focus all our attention on supporting our customers and the well-being of our employees,” said Annica Bresky, president and CEO of Stora Enso, in a statement.
     
    Stora Enso’s sales in Russia are approximately 3 percent of total group revenues. The impact on Stora Enso’s sales and earnings before interest and taxes is not material.

  • Russia to Crack Down on Counterfeit Goods

    Russia to Crack Down on Counterfeit Goods

    Photo: Oleg

    Russian Prime Minister Mikhail Mishustin has approved new measures to prevent the illicit trafficking of counterfeit goods, which will be effective until 2025, reports Lexology.

    The new anti-counterfeiting strategy will include legislation aimed at raising penalties for the manufacture, storage, transport and sale of counterfeit and fake goods, including alcohol and tobacco. Rules are being drafted that require mandatory certification for nicotine-containing products.

    Lawmakers are also developing a new mechanism to hold property owners accountable for goods being sold in the commercial spaces they manage.

    Meanwhile, the Russian government is amending procedural and criminal codes governing the storage and destruction of seized counterfeit goods. It will also address what is to be done with the equipment used to produce the fake goods and transport them.

    Additionally, the government may develop a database of unlawful manufacturers, importers, suppliers and sellers.

    There is also talk of developing a labeling-and-tracking system. Beginning this year, random inspections of accredited businesses may take place in order to confirm that they are complying with requirements directed at preventing the sale of counterfeit goods.

  • Russia Lifts Ban on Malawi Tobacco

    Russia Lifts Ban on Malawi Tobacco

    Photo: Taco Tuinstra

    Russia has lifted its ban on imports of tobacco and tobacco waste materials from Malawi, reports the AK&M Information Agency.

    In 2021, Russia’s Federal Service for Veterinary and Phytosanitary Supervision detected five instances of the tobacco pest Megaselia scalaris in tobacco shipments from Malawi.

    Malawian authorities reported that the multi-eating humpback fly is absent on the territory of the country and has never been found in places where tobacco is grown and in tobacco raw materials. They emphasized that Malawi applies strict control mechanisms for exported products that meet international standards. Each batch reportedly undergoes a fumigation procedure twice before shipment, after which the containers with the cargo are sealed and sent to the port of Mozambique where they undergo another stage of disinfection.

    Given that the humpback fly prefers a humid climate, which is not typical for Malawi, as well as the fact that the import of tobacco raw materials from neighboring countries is prohibited, representatives of the Malawian departments suggested that the contamination of goods could have occurred during loading or transportation.

    Nonetheless, Malawian authorities vowed to strengthen control of tobacco exports, prompting Russia to lift its embargo.

  • Russia Lifts Embargo on Leaf Imports

    Russia Lifts Embargo on Leaf Imports

    Photo: Tobacco Reporter archive

    Russia has lifted restrictions on the import of tobacco leaf from Brazil, India, South Africa, Tanzania and Malawi, reports The Rio Times.

    The restrictions were implemented after the presence of humpback flies in shipments were discovered. In particular, it was found in raw materials from Brazil five times last year and seven times since the beginning of this year.

    The decision was made after a report from the National Plant Protection Organization of Brazil stated adoption of “comprehensive phytosanitary measures” for the resumption of tobacco leaf supplies to Russia.

  • Russia Bans Brazilian Leaf Over Pest Concerns

    Russia Bans Brazilian Leaf Over Pest Concerns

    Photo: Tobacco Reporter archive

    Russia has banned tobacco imports from Brazil and four other countries as of Monday, July 19, reports Datamar News, citing authorities’ concerns about infestation.

    The announcement was made on July 15 by the Russian federal service for veterinary and phytosanitary surveillance, which cited concerns about the phytosanitary status of tobacco from various countries destined for the Russian Federation and the systematic violation of the phytosanitary requirements of the Eurasian Economic Union (EAEU).

    To date this year, Russian inspectors have detected the Megaselia scalaris fly in 28 tobacco shipments, according to a statement published on the website of the Russian Trade Representative in Brazil. Megaselia scalaris is considered a quarantine pest throughout the EAEU.

    Brazil’s Ministry of Agriculture said it had not been officially informed about the decision. According to data from the ministry, Brazil exported almost 20,000 tons of leaf tobacco and related products valued at $43.7 million to Russia in 2020.

    The ban comes at a bad time for Brazil’s leaf merchants, many of whom are in the shipping stage of the tobacco season and have been forced to postpone shipments to a major market. 

  • Russia Pushes for Self-Extinguishing Cigarettes

    Russia Pushes for Self-Extinguishing Cigarettes

    Photo: JTI

    Tobacco companies selling in member states of the Eurasian Economic Union should be required to manufacture cigarettes that self-extinguish when not smoked, according to a proposal by the Russian Ministry of Healthcare.   

    “A draft resolution of the board of the Eurasian Economic Commission, setting forth requirements to consumer packaging and information placed on tobacco product packs and the requirement to inflaming capability of cigarettes released for circulation on the market of Union member-states, was sent by the Russian Ministry of Healthcare to interested federal executive authorities,” Tass reported.

    Negligence during smoking is the cause of many fires, including with fatalities and material damage, the Ministry of Emergencies noted.

    “Bringing cigarettes with lowered inflaming capability in circulation may significantly influence prevention of a portion of fire outbreaks, lowering fatalities and injuries of people during fires due to negligent smoking, and saving property of citizens,” it said.

  • Russia Mulls Tobacco Tax Hike to Boost Budget

    Russia Mulls Tobacco Tax Hike to Boost Budget

    Photo: Alexander Smagin

    Russia wants to increase the excise tax on cigarettes by 20 percent next year to help plug holes in its budget, reports Reuters. The government is also eying the oil and mining industries for additional revenues.

    The move, estimated to bring in around RUR340 billion ($4.54 billion) a year, comes as Russia faces a prolonged budget deficit amid weak oil prices and after Moscow offered Belarus a $1.5 billion loan.

    “When it is difficult, everyone should be involved in solving the problems which the country and its people are facing,” Prime Minister Mikhail Mishustin told a government meeting on Wednesday.

    He described the proposal, yet to be finalized, as “slightly increasing taxes on a number of profitable sectors.”

  • KT&G Start Exports to Russia Under PMI Deal

    KT&G Start Exports to Russia Under PMI Deal

    Photo: KT&G

    KT&G started exporting its Lil tobacco heating devices to Russia last month, according to The Korea Times. Earlier this year, KT&G and Philip Morris International (PMI) signed an agreement under which PMI would commercialize certain KT&G products outside of South Korea.

    During the announcement of its second-quarter results, KT&G confirmed that KRW12.5 billion ($10.54 million) worth of e-cigarette devices were exported to Russia in July.

    The partnership is calling for KT&G to export its tobacco heating devices and tobacco sticks worldwide through PMI’s global sales network.

    The exports to Russia come as heat-not-burn (HNB) appears to be losing steam in South Korea, with category penetration decreasing for the second consecutive quarter. The rate stood at 13 percent at the end of last year but declined to 12.6 percent in the first quarter and 12.4 percent in the second quarter.

    The company, however, said this does not mean a deadlock in HNB products’ growth, citing the expansion in overseas markets.

    “From a future business standpoint, the overall heat-not-burn tobacco market is expected to grow,” a company spokesperson was quoted as saying. “When the new products are introduced, the market is bound to grow. While there would be some minor impact from governments’ policies and market events, there is no doubt about the growth trajectory.”

    KT&G said conventional tobacco sales this year will likely exceed its annual goal set earlier as demand remains strong. In exports, the firm has already secured shipping volume destined for Middle Eastern markets in the second half of the year, while other overseas markets are showing signs of recovery from the impact of Covid-19.

    KT&G reported KRW1.32 trillion in consolidated sales during the latest quarter, up 4.8 percent from a year earlier. But the operating profit contracted by 1.1 percent year-on-year to KRW394.7 billion, due to the decline in duty free sales.

    Overseas tobacco sales increased by 14.1 percent to KRW286.4 billion, as its main export markets in the Middle East show solid recovery. The company expected growth will continue as its sales are increasing in Latin South America and Africa.

    KT&G’s international ambitions were examined in-depth in Tobacco Reporter’s June 2020 issue.