Western Smokes Flood Ex-Soviet Union
Shiny packs of Camels and Kents have almost crowded out drab gray boxes of Russian cigarettes at a kiosk on busy Pushkin Square.
“Russians buy more foreign cigarettes now because they are much nicer,” said 18-year-old Valery Naumov, puffing a Marlboro. The popular American brand sells for 150 rubles a pack, or about $1, five times the price of local brands.
“We are tired of Russian cigarettes with no filters, bad taste and bits of tobacco that stick in our throats,” Naumov said.
As more people in the West kick the habit, U.S. and European tobacco companies have been drawn east by the passion for cigarettes in what used to be the Soviet bloc.
The former Soviet republics are a bonanza. At least 70 million smokers consume 450 billion cigarettes a year, making the region the third-largest market after China and the United States.
In Russia, from 40% to 70% of men and about 30% of women are chronic smokers, according to the All-Union Cancer Research Center in Moscow. The heaviest smokers are blue-collar workers in industrial cities.
“We see tremendous opportunity here,” said Dale Sisel, president of RJ Reynolds Tobacco International. The company’s brands include Camels and Winstons.
“Even if our business in the United States wasn’t declining, we’d be investing here anyway,” said Sisel, announcing the purchase in June of a 52% share in the Uritski Tobacco Factory of St. Petersburg.
Supply outstrips demand in Russia alone by at least 50 billion cigarettes a year, Sisel said. Russian estimates put the figure at 100 billion.
Reynolds and Philip Morris International, the world’s largest tobacco company, began shipping cigarettes to the Soviet Union after tobacco shortages set off protests in 1990. Philip Morris also manufactured Marlboros here in the early 1980s.
Filling an order for 14 billion cigarettes accounted for about one-third of Reynolds’ exports last year. Philip Morris filled an even larger order, for 24 billion cigarettes, in 1990 and 1991.
That gave the two American companies a combined 7% share of the cigarette market in the 15 republics last year, according to Diana Temple, an industry analyst at Salomon Bros. in New York.
Tobacco firms have had to deal with private buyers instead of the government since the Soviet Union collapsed in December, but foreign cigarette sales remain brisk.
Reynolds has spent more than $15 million on new equipment for the Uritski factory. Sisel said the factory will continue to produce Uritski’s own brands, including the popular Kosmos and Belomorkanal, then start making Camels and Winstons in three years.
Philip Morris has started producing Marlboros at a converted plant in the Samara, southern Russia, in a joint venture with Avtovaz, a huge auto manufacturer. A second cigarette factory is to open this year in Krasnodar.
In the early 1980s, the company made Marlboros in Moscow, Kishinev and other cities.
Not everyone is pleased with the developments.
“The impact of foreign cigarettes here could become incredible because smoking is already an epidemic in this country,” said David Zaridze, deputy director of the All-Union Cancer Research Center.
More than 400,000 people die in the former Soviet Union every year of diseases linked to smoking, and lung cancer rates are among the world’s highest.
Jerie Jordan of the American Cancer Society, which held a “smoke-out” in Moscow last year, said Russians show comparatively little interest in quitting.
“The idea of being healthier doesn’t seem to have gotten to the former Soviet Union yet and shortages don’t seem to cause any decrease in demand for cigarettes,” Jordan said.
