Iggesund Paperboard—Europe’s third-largest manufacturer of high-quality virgin fiber paperboard—is expanding its services for Eastern Europe by establishing a new freight terminal in Riga, Latvia, as well as a sales office in Moscow, Russia, to boost Russian sales. Construction of the two new facilities is part of Iggesund’s long-term plan to cultivate its delivery services on a global scale.
“We need to be near the customer both in terms of deliveries and other services required by today’s customers,” says Rikard Papp, director Asia Pacific & Merchants Europe at Iggesund.
Iggesund will also take part for the second time in the RosUpack exhibition, which will be held June 16-19 in Moscow.
“The intense interest we met with last year convinced us that we should establish a sales office for the Russian market. It is a major market that definitely has room for a high-end product like [our flagship product] Invercote,” says Papp.
Iggesund Paperboard’s terminal in Riga became operation in April, and the sales office in Moscow will be inaugurated in July.
The Crimean government has announced that a visiting delegation of Chinese businessmen intend to invest in tobacco cultivation within the territory, which was annexed by Russia in March 2014. Chinese equipment and technology would be supplied to the semiautonomous territory, which has been fighting to secure foreign investment amid trade sanctions imposed by Ukraine, the United States and the European Union following Russia’s annexation of the region.
“Tobacco is in huge demand in China, and Crimea has a suitable climate and soil for tobacco cultivation,” the delegation’s leader, Chen Zhijun, was quoted by news agency TASS as saying at a meeting with Crimean leader Sergei Aksyonov.
Aksyonov and Chen on June 4 signed a protocol on investment cooperation, according to a press release posted on the Crimean government’s website.
Philip Morris International and Japan Tobacco International are acquiring equity stakes of 20 percent each in Megapolis Distribution, the holding company of CJSC TK Megapolis, a major distributor in Russia.
The companies are paying $750 million each for their stakes. If Megapolis’ operational performance meets certain benchmarks during the four fiscal years following the closing of the agreement, PMI and JTI will each pay an additional $100 million.
Megapolis is one of Russia’s leading consumer goods distributors focusing principally on tobacco and beverages. It employs almost 15,000 employees and commands a direct store delivery system that reaches more than 150,000 points of sale. Megapolis handles approximately 70 percent of the cigarettes sold in Russia through its distribution agreements with PMI, Japan Tobacco International and Imperial Tobacco Group.
“We are delighted to reach this agreement with Megapolis, our proven distribution partner, which will support our business expansion in this profitable market,” said Miroslaw Zielinski, PMI’s president, Eastern Europe, Middle East & Africa Region and PMI Duty Free.
“Megapolis has been our partner since 2007 and has contributed to JTI’s success in the important Russian market,” commented Kevin Tomlinson, JTI’s regional president, commonwealth of independent states. “This acquisition will strengthen their distribution platform allowing us to implement our growth strategy in the region more efficiently and effectively.”
Tobacco factories feature prominently on a list of leading Russian exporters recently published by Expert Severo-Zapad.
According to the business magazine, British American Tobacco in St. Petersburg leads the pack with export revenues of $91.9 million last year. Philip Morris Izhora exported tobacco products worth $70.9 million in 2012, up 15.1 percent from the previous. JTI’s Petro factory came next with exports worth $57.2 million, up 20.7 percent from 2011. JTI’s Kres Neva tobacco processing plant saw its export declining 56.6 percent to $14 million.
Russian cigarette maker Donskoi Tabak on Nov. 20 reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of RUR1.86 billion ($ 59.3 million) in January-September 2012, up 26 percent from a year ago, reports Prima-Tass.
Net revenue jumped 71 percent year-year to RUR19.7 billion, volumes rose 2 percent to 23.5 billion cigarettes, and the company’s average cigarette price increased 16 percent to RUR25.60 rubles per pack following an excise tax hike.
In January-September 2012, Donskoi Tabak’s cigarette output, at 23.5 billion pieces, was flat compared with the same period in 2011. The company exported 4.4 billion cigarettes worth $34.8 million in the nine-month period, up 8 percent from like 2011.