Imperial Brands Becomes First Tobacco Major to Suspend Russian Operations

Imperial Brands issued a press release today stating it will suspend manufacturing and sales of its tobacco products in the Russian Federation. The company operates a manufacturing facility in Volgograd and is estimated to be the fourth largest tobacco company operating in Russia, holding approximately 8.4% share of the market during 2020. Imperial Brands stated the following regarding their decision;

“this decision comes amid a highly challenging environment in Russia as a result of international sanctions and consequential severe disruption. We will be supporting our Russian employees, who continue to be paid while operations are paused.”

Other international tobacco companies operating large subsidiaries in Russia, including Philip Morris Intl., Japan Tobacco and British American Tobacco, have so far not released public statements regarding their business operations in the country. A significant number of multinational corporations including IKEA, Apple and Coca-Cola have announced withdrawals or curtailment of business operations in Russia, following that country’s military invasion of its neighbour Ukraine.

Whether other tobacco companies will follow Imperial Brands remains to be seen. Imperial Brands’ Russian operations contribute only to a very modest degree to its sales and operating profits, estimated by the company itself at roughly 2% and 0.5% respectively. The modest financial impact likely made the decision to suspend operations somewhat easier. Companies like Philip Morris Intl. and Japan Tobacco are facing a different situation from a financial perspective; not only do they have larger financial exposure to the Russian market, but Russia has also been an important market for so-called ‘reduced-risk’ heated tobacco products. The large tobacco manufacturers have made large investments in marketing these products in an effort to distance themselves from controversial cigarette products.