As for withdrawals from Moscow, those of the tobacco companies since the invasion of Ukraine have been half-hearted. While other brands have ceased operations and left the country, the makers of Marlboro, Lucky Strike, Rothmans, Kent and Gauloises have not given up hope.
Philip Morris International says it is suspend investments in Russia and “reduce” production, while British American Tobacco and Imperial Brands will do so transfer their business to local partners. What will happen to the brands and how it will work financially remains vague.
“I think they’re wrong. My expectation is that Marlboro and Lucky Strike will continue to be sold there and they will keep the brands and take the profits,” says Anna Gilmore, Professor of Public Health at the University of Bath. She has reason to be suspicious after studying how they invaded Moscow after the Berlin Wall fell.
They would leave a lot behind if they left completely: brands like McDonald’s have it well done in Russia, but the tobacco companies triumphed. Philip Morris and Japan Tobacco who own Winston and Cameldominate the world fourth largest marketalong with BAT and Imperial.
Russia is also a testing ground for the big shift cigarette companies are trying to make: transform to become manufacturers of steam and heat-treated tobacco products. With millions of smokers getting sick and dying every year, anything sounds better than selling cigarettes.
Their record doesn’t inspire confidence in the health claims they’re making now. They came to Russia in the 1990s by buying state factories – BAT acquired Java and Saratov in 1994 – and used it as a platform for international brands that had previously been smuggled into the Soviet Union.
There could hardly have been a more receptive market. Men were heavy smokers and many were addicted to it papirosi — high-tar, unfiltered cigarettes such as Belomor Canal. The brand had hardcore origins, named after the White Sea-Baltic Canal in 1932 built by prisoners from Gulag camps under Joseph Stalin.
Russians were eager for something nicer, and global tobacco companies made it available. But they also used advertising to encourage smoking among women and young people: a study found that smoking among women doubled to 15 percent between 1992 and 2003, while smoking rates among men rose to 63 percent.
In a way, the companies’ push into Russia was a classic case of consumer globalization: they made sophisticated products, marketed them expertly, and raised quality standards. It would be fine except for one problem: the product was cigarettes and the World Health Organization estimates that more than 19 million Russian smokers will die prematurely.
Hence the global pivot that companies have attempted to make to vaporized and heat-treated tobacco devices, including that of Philip Morris IQOS and BAT’s Glo. Russia has been vital to the “smoke-free future” Philip Morris is now promising and a leader last year welcomed his “really very spectacular progress” there.
It’s not clear how much safer it is to heat treat tobacco to create a nicotine vapor than to smoke it in cigarettes. A analysis concluded that users of the devices inhale “substantially fewer” toxins, but the results have been mixed and most of the studies are conducted by tobacco companies.
Also, the purpose of heat treated tobacco devices is not obvious. Philip Morris says so 72 percent of IQOS users switched from cigarettes completely in 2020, but many remain who continue to use both. There is an echo of the past transition from Belomor Canal to Marlboro Golds: better, but not good.
What is clear is that Russian smokers embraced the technology early on. Phillip Morris started IQOS in Japan in 2016, but it is growing rapidly in Moscow and took off 15 percent of the Moscow market in 2020. According to JPMorgan, Russia and Ukraine (another country with heavy smokers) account for nearly a quarter of global sales of Philip Morris heat-treated products.
That’s why Philip Morris and others are reluctant to pull out of Russia entirely: it’s not just a smoky emerging market where they can sell products that are in long-term decline in the US and Europe. Until Vladimir Putin dashed a multitude of political and financial hopes, it was the future.
Russia’s convergence with the West goes beyond brand integration. It places strict controls on cigarette advertising and smoking in public places, and Putin extended the policy to heated tobacco in 2020. The proportion of men who smoke has fallen stays high.
Waiting in the wings is China National Tobacco Corporation, by far the world’s largest cigarette manufacturer. When Putin longs for Russia’s past papirosi No longer will satisfy smokers, it has a chance. Many factories may need support.
What’s best for Russians, aside from kicking the habit, is another matter. History proves one thing: the present is unhealthy, but the past was worse.
https://www.ft.com/content/c5848985-7fe5-4a21-b071-2c3a94d77357 The future of Big Tobacco in Russia is up in smoke