U.S. Tobacco Firms Blitz Russian Market Companies Find Lucrative Business, Few Regulations
A popular cigarette introduced throughout Russia last year carries the brandname “Peter the First,” after the great czar who in the 17th century introduced Western customs, including tobacco, to Russia.
While the cigarette’s name is purely Russian, the product is essentially American - manufactured by R.J. Reynolds Tobacco Co. at a plant near St. Petersburg.
Under fire in America from anti-smoking campaigns, costly lawsuits and stagnant sales, U.S. tobacco companies have found stable and lucrative markets in Russia and eastern Europe, as well as the Middle East and Asia.
In the former Soviet Union, U.S. tobacco companies do not face billion-dollar demands for health compensation or expansive government regulations. They enjoy a market where people, particularly men, love to smoke and Western-style anti-smoking crusades are virtually unknown.
The Marlboro Man, that Madison Avenue icon of rugged American individuality, today looms across Moscow’s billboard-filled skyline in much the same way Lenin’s visage once commanded the view. Marlboro’s maker, Philip Morris, has invested heavily in Russian cigarette-making plants and the consumer market.
Russian imports of tobacco have tripled since 1990, making it the world’s largest importer of tobacco leaf for cigarette manufacturing, ordering it primarily from the United States and also from China, Brazil and India.
Two of every three Russian males smoke, a rate higher than any other nation in Europe. More than 250 billion cigarettes are consumed every year.
The risks of smoking are generally acknowledged in Russia, but public health officials have too much more to worry about - industrial pollution, alcoholism and inadequate medical services - to address the nation’s nicotine habit.
“It is certain that more Russians are smoking now than ever,” said Galina Tkachenko, who heads the anti-smoking efforts at the health ministry.
Liberty has its risks, and among them since the Soviet Union collapsed in 1991 has been a glitzy, promotional blitz by Western cigarette manufacturers. Health officials worry the tobacco campaign is enticing more Russians, particularly teenagers, to smoke.
The estimated 66 percent of Russian men who smoke is up from about 53 percent in 1985, according to figures compiled by the health ministry and the World Health Organization. Some 26 percent of women smoke, compared with only 10 percent in 1985.
Since it acquired its first Russian factory in 1992, the Winston-Salem, N.C.-based R.J. Reynolds claims to have captured about 20 percent of the Russian cigarette market. Philip Morris declined to provide an estimate of its market share.
Both companies have invested millions of dollars in Russian plants to produce their American brand names and less expensive local brands. The local brands, which sell for as little as 15 cents a pack, still represent about 60 percent of total sales.
The tobacco industry says it is doing nothing different from what scores of other American companies, from General Motors to Pizza Hut, are doing in the new, lucrative consumer markets where communism once ruled.
“Russians smoked before we got there,” said Philip Morris spokeswoman Elizabeth Cho in a telephone interview from New York. “We export cigarettes. We don’t export smoking.”
R.J. Reynolds sees a “clear trend” among Russian smokers for higher quality American brands and thus an “ample opportunity to capture a greater share of the adult smoker population in the years to come,” said company spokesman Andre Benoit in Moscow.