Andrew Romeo - An Insider's Perspective on the Industry

"What is to be Done?" is the title of at least two pre-Communist treatises, one written by Nikolai Chernyshevksy in 1861 (while in prison in St. Petersburg), which called on the working classes of Russia to unite under a vanguard party, and another, written by Vladimir Lenin, which claimed that this would lead to worker-led 'trade-unionism' and not allow the intellectuals to create a Workers' Revolution based on intellectual scientific principals.

It's nice to know even the Communists hated trade unions.

Now before all you chaw-chompers get in your F-150s lookin' for me, you'll have to admit that all that homework has long been filed away. Russia today sits perpetually on the brink of uncertainty, and through the ups, downs, ups, and downs of its contemporary post-Soviet life, many industries have been altered forever, including tobacco. In a big way.

In the early 1990s, the US led Poland through economic 'shock therapy,' which allowed individuals to buy shares of the state-owned companies that employed them. It worked, and Poland transitioned quickly with many bumps into a dynamic capitalist society. It helped that they had been capitalist and democratic before WWII and the subsequent occupation by the USSR until 1989.

Read more: Russia, Cigarettes & Snus: What Is To Be Done?

Starting next week, I will be posting from my old 'stomping ground' of Russia.

Specifically, I have accepted a consultancy appointment with a drinks company in St. Petersburg, and will be primarily focused on business in the "regions."

In Russia, the "regions" is everything outside of Moscow and St. Petersburg.  I will be spending time in the Ural Mountains (Yekaterinburg, Tyumen, Chelyabinsk, Ufa), the Far East (Vladivostok, Khabarovsk), Siberia (Novosibirsk, Krasnoyarsk, Irkutsk), the Volga region (Samara, Volgograd, Saratov, Nizhniy Novgorod) and the South (Rostov, Sochi, Krasnodar).

I have spent time in all these cities, and because packaged drinks occupy the same retail shops as tobacco products, I will be able have a look first hand at how that business is doing.  At last glance, Russia had a 360 billion stick cigarette market.  Once, the Big Boys competed with over 60 local factories, of which perhaps a dozen still exist today.  JTI leads the market after its acquisition of Gallaher in 2007, followed by Philip Morris, BAT and Imperial.

The last great local fighter, "Donskoitabak" missed out on all the fun in the 1990s (BAT bought 'Yava,' Liggett bought "Ducat," (and Gallaher then bought "Liggett-Ducat," the reason for the brand-name 'LD' I kid you not).  JTI bought the largest factory in St. Petersburg, and PMI built from scratch.  Donskoi continues to work on reduced local share in Rostov and the South, and a few factories still churn out non-filtered traditional products.

Snus is available in outlets all over Moscow, St. Pete's and the western half of the country, and I will do my best to send in reports from time to time as to what is going on in this turbulent industry.  What I know now is that, after a mass consolidation of hundreds of local wholesaler/distributors in the early 2000's to three, the Great Recession has given rise to an unraveling of this secure environment.  Small distributors are popping up again, and the cash-driven open markets or "bazaars" which were so prevalent in the 1990s have begun re-appearing.

Russia lives in "interesting times" and I am happy to be going back.

Желаем всем вам мои наилучшие пожелания,

ANDREW ROMEO
Soon Reporting from Russia for SnusCENTRAL.org

In discussions on-line about the impending PACT act becoming law, it has become obvious that American snusers feel they are getting a raw deal.

In a sense, American consumers of Swedish snus have been basking in a "duty-free" zone for the past few years, many weening themselves from cigarettes in the process.  Your lungs, God and the Greater Good think this is wonderful.  The US Government does not.  Tobacco is taxed. Period.

Swedish snus consumers in the USA will eventually be forced to pay taxes on their snus purchases.  They will most likely see in the next few years an increase in availability in US 'bricks & mortar' shops, and a drastically reduced portfolio.  No more Gotlands Julesnus or Offroad Limited Edition 'Spam with Egg, Bacon, Sausage and Spam' Flavor, for sure. But that's another article.

Many have poo-pooed an underlying reason for the passage of this legislation:  smuggling as a source of funds for terrorist groups.  Many have laughed that this is as ludicrous as the 'for the children' banter which has led to a lot of pain for legitimate adult tobacco consumers now unable to procure their favorite flavored smokes.

Read more: Tobacco Smuggling and Terrorism.

Swedish Match AB is in PR Emergency Mode today, Monday, October 26th.  Why?

An American researcher from Harvard, Greg Connolly, read a snus ingredient label in 2008, and found a smoking gun called "E500" which regulates acidity in food products, and has been in traditional use in snus for many decades.  It is all snus products produced in Sweden.

Read more: No News is Good News