Japan Tobacco Suspends Investments in Russia, Joining Rivals
(Bloomberg) -- Japan Tobacco Inc., the largest cigarette producer in Russia, said it will suspend investments and marketing in that market, after rivals Philip Morris International Inc. and British American Tobacco Plc took similar steps.
The company said Thursday it can’t exclude the possibility of halting production in the country unless there’s an improvement in the operating environment and geopolitical situation.
Russia’s invasion has drawn international condemnation and triggered trade restrictions and financial penalties, leading to a dramatic reversal of three decades of Western investment following the collapse of the Soviet Union in 1991.
Firms from Apple Inc. and Nike Inc. to Exxon Mobil Corp. have already pulled back from Russia and the pressure is mounting over companies keeping operations.
Tobacco companies have taken divergent approaches in Russia. Imperial Brands Plc is the only major cigarette producer in the market to stop all operations there. Larger rivals Philip Morris and BAT haven’t gone as far, continuing some business even as they suspend investments.
Japan Tobacco estimates it had a 37% share of the Russian market as of December. Russia is the world’s fourth-largest cigarette market by volume and nearly a third of its adult population smokes.
For now, Japan Tobacco will halt plans to introduce its latest heated-tobacco product in Russia.
Immediately after the war began, the Japanese company suspended operations at its plant in Ukraine to ensure the safety of its employees. The factory, located in a industrial city of Kremenchuk in central Ukraine, makes cigarettes for the local market.
Japan Tobacco paid about $1.6 billion in 2018 to buy Donskoy Tabak and has about 4,000 employees and four factories in Russia. The company said all workers will be retained for the foreseeable future.
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