24 Mar 2022 17:14

Philip Morris considers business restructuring in Russia, including transfer of assets

MOSCOW. March 24 (Interfax) - Philip Morris International (PMI) is considering business restructuring in Russia, including the transfer of assets, the tobacco giant said in a statement.

The decision is due to ongoing logistical difficulties and changes in the regulatory environment, which have a direct impact on the pace and volume of the production of tobacco and nicotine-containing products, the company said.

PMI's board of directors and senior executives "are working on options to exit the Russian market in an orderly manner, in the context of an increasingly complex and rapidly changing regulatory and operating environment."

Honoring all social obligations to Russian employees, all current tax and business obligations, as well as strict compliance with Russia's current legislation remain PMI's key priorities Russia, the company said.

PMI said on March 9 that it was suspending planned investments in Russia, including new product launches, investments in innovation, as well as commercial and manufacturing activities. PMI has also stepped up plans to reduce manufacturing operations in Russia amid supply chain disruptions and changing regulations, the company said at the time.

It announced concrete steps it has taken to suspend planned investments and scale down its manufacturing operations in Russia on March 24. PMI has discontinued a number of its cigarette products offered in the market and is reducing its manufacturing activities accordingly; suspended marketing activities in the country; canceled all product launches planned for 2022 in Russia, including the launch of its flagship heated tobacco product IQOS ILUMA, originally planned for March 2022; and canceled its plans to manufacture more than 20 billion Terea sticks for Iqos Iluma in Russia and the related ongoing investment of $150 million.

PMI's Russian business in 2021 accounted for nearly 10% of cigarette and heated tobacco sales, and around 6% of PMI's global revenue.

The company started operating in Russia in 1992, opening a representative office in the country. PMI has more than 3,200 employees in Russia.

PMI owns a tobacco factory in the country's Leningrad Region, CJSC Philip Morris Izhora; and it owns Philip Morris Sales and Marketing that distributes cigarettes through a branch network in more than 100 Russian cities. Last autumn, PMI decided to close a factory in the Krasnodar Territory amid a shrinking tobacco market.

The brand portfolio includes Marlboro, L&M, Bond Street, Parliament, and others. The company also produces tobacco sticks for its Iqos tobacco heating systems.

PMI's share in the Russian tobacco market is 31.7% according to data for the fourth quarter 2022.

Japan Tobacco International has said it will suspend all new investments and marketing activities in Russia, as well as the launch of new products. British American Tobacco has also said it is halting investments. Imperial Brands has suspended business in Russia