BAT will close the plant in Saratov

Due to the fall in demand for cigarettes in the Russian Federation, the company will have only one tobacco factory in St. Petersburg, and Saratovskaya will close in 2019.
The reduction of the legal market and the drop in consumer demand are forcing BAT Russia, the third largest cigarette manufacturer in the Russian Federation, to close its factory in Saratov. Until the end of 2019, its capacities will be transferred to the St. Petersburg enterprise “BAT-SPb”, it will remain the only production site of the company. Over the past few years, international tobacco corporations have already closed three factories in Russia.

By the end of 2019, BAT Russia will transfer production from its Saratov factory BAT-STF to the BAT-SPb factory in St. Petersburg, the company said on Thursday. “BAT-SPb will remain the only production site of BAT Russia,” said a press release. Managing Director Attila Kundrak said the decision was carefully thought out and “will be implemented gradually to minimize the negative consequences.” They have not yet decided what to do with the factory premises after its closure, at BAT Russia, its representative said.

Saratov tobacco factory was founded in 1828. In May 1994, after it was privatized and transformed into a joint stock company, British American Tobacco (the head office of BAT Russia) acquired the factory’s shares at a tender.

From the data available to Kommersant of Tabakprom, which, in turn, refers to Rosstat, it is clear that BAT Russia reduced output volumes by 2017 BAT-STF by 30.1% to 17.75 billion pieces

Over the period, taking into account BAT-SPb (33.4 billion pieces), the company produced 51.15 billion cigarettes. Thus, the share of the Saratov factory in the volume of production for the last year was 34.7%.

BAT Russia is the third largest cigarette manufacturer in Russia after Japan Tobacco International (JTI) and Philip Morris International (PMI). According to Nielsen data available to Kommersant, in August the company's share in the Russian market was 21.3% in physical terms against 22.1% in the same month of 2017. In the portfolio of cigarette brands Kent, Vogue, Java Golden, and others.

The decision on the transfer of production capacity to BAT Russia was explained by “a reduction in the tobacco market due to the continuing rise in cigarette prices”, as well as a fall in consumer demand and an increase in the share of illegal products. The chief editor of the Russian Tobacco tobacco industry news agency, Maxim Korolev, believes that among the reasons could also be pressure from the authorities and the public. “Although the factory has the most modern cleaning equipment, there have been claims that it is located in the immediate vicinity of residential buildings,” he says.

The contraction of the legal market is also fixed by BAT Russia competitors. PMI reports indicate that in 2017 in Russia it decreased by 7.2% (to 260 billion units), in the first nine months of 2018, the rate of decline accelerated to 8.6%. Among the reasons for this dynamic, the company also indicated an increase in the illegal trade in cigarettes. According to TNS Kantar, in January — February 2018, the share of illegal cigarettes in Russia was 7.7%, an increase of 1.7 times over the same period last year. In real terms, such volume of tobacco companies estimated at 20 billion cigarettes per year (see “Kommersant” of April 20). Mr. Korolev notes that since 2009, the legal tobacco production in Russia has decreased by 40%. “At the same time, our consumption of cigarettes since that time, according to WHO, has decreased by only 16%. This may mean that most consumers have switched to illegal products, ”said the expert.

BAT-STF is not the first factory closed by BAT Russia. At the end of 2012, she stopped the production of the Moscow enterprise BAT-Java. Other large tobacco companies also closed down Russian production. In the middle of 2016, JTI closed the Liggett-Dukat factory in Moscow, shifting cigarette production to the St. Petersburg enterprise Petro. This year, JTI after the purchase of "Don tobacco" appeared two more factories - in Rostov-on-Don and Pereslavl-Zalessky. In January of this year, Imperial Tobacco closed the factory in Yaroslavl, transferring its capacity to the only site in Volgograd that remained in Russia.

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