Prokofiev: «The Neman factory may stop for several months»

3 mins

На русском языке: Прокофьев: «Фабрика «Нёман» может остановиться в течение нескольких месяцев»
На беларускай мове: Пракоф’еў: «Фабрыка «Нёман» можа спыніць працу цягам некалькіх месяцаў»

Nikolay Prokofiev, a member of the economic team of Sviatlana Tsikhanouskaya’s Office, told what consequences the termination of British American Tobacco (BAT) relations with the Grodno tobacco factory Neman have.

According to the expert, BAT has already stopped almost all transactions with GTF Neman, including placing orders for the production of cigarettes. Consequently, GTF Neman can no longer produce products of BAT brands.

Two basic scenarios can be assumed:

  • Either the products of this brand will disappear from stores;
  • Or they will become more expensive, since they will be imported from Russia via indirect means, or other countries where excise taxes are significantly higher than in Belarus (in Russia, on average, 2-5 times higher depending on the product category).
"In future, people close to Lukashenka, who had exclusive rights to trade in products produced at the Neman factory, will be in a situation where earnings will be significantly lower",– Prokofiev says.

At the moment, GTF Neman owns about 70% of the shares of the tobacco market in Belarus, and the industry itself is among the top taxpayers in Belarus.

Just according to official data for 2016 (after that information about the tobacco industry is actively hidden), BAT sold 186.5 million packs of cigarettes, in subsequent years the company regularly reported on the constant growth of the Belarusian market.

It is worth mentioning that BAT annually invested tens of millions of euros to modernize production in Belarus, as this was a requirement of the authorities. In 2020, BAT invested €20 million in the Belarusian partner. The quality of products can decrease without these investments.

It should be understood the factory already has serious problems due to the refusal of European suppliers of raw materials, flavors, paper and the company for the supply and commissioning of equipment to cooperate with the factory.

All these factors also complicate the production of cigarettes for smuggling, since any analogues greatly reduce the characteristics of the product, and this already affects the demand for these cigarettes. It can be assumed that the profit from smuggling will decrease quite seriously.

Prokofiev: «The Neman factory may stop for several months»

«We can say from experience that finding analogues of raw materials for production is a very difficult task», – says Prokofiev.

The most obvious choice is Chinese raw materials, but its quality is lower and you always need to make an advance payment for it, and there is not enough money for these prepayments. With the momentum maintained to date, there is a very high probability that the plant could stop for several months if funds could not be found. We can say absolutely confidently that the situation at the plant is very close to a complete collapse.

It is necessary to stress once again the important role of tobacco industry in Belarus, according to statistics for 2020, excise taxes (fuel, alcohol and tobacco) amounted to more than $1 billion.

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