Bloomberg News

Russia Accuses Tobacco Makers of Hooking Women, Children

October 16, 2012

Russian Prime Minister Dmitry Medvedev

Russian Prime Minister Dmitry Medvedev vowed to implement a public smoking ban and higher cigarette taxes, saying a proposed anti-tobacco law is “just the beginning” of a campaign to counter high mortality rates. Photographer: Alexander Zemlianichenko Jr./Bloomberg

Philip Morris International Inc. (PM:US), British American Tobacco (BATS) and other cigarette makers hooked Russian women and children on smoking, Prime Minister Dmitry Medvedev said, vowing to crack down on the habit.

A ban on public smoking and cigarette advertising that will take effect under a proposed law and higher taxes on tobacco products are “just the beginning” of a campaign to counter high mortality rates, Medvedev said in a video posted on his blog today. Four tobacco companies have controlled the Russian market since the early 1990s, he said.

“Unfortunately in the 1990s, the government didn’t evaluate the risks of foreign tobacco companies’ investments” that went into advertising and designing lighter cigarettes that harmed women’s and children’s health, Medvedev said. The anti- tobacco bill, to be submitted to Parliament this month, is aimed at “protecting all these and other people,” he said.

In Russia, the world’s second-largest market for cigarette makers after China, 39 percent of the population are regular smokers, according to the World Health Organization. About 400,000 Russians, or 0.3 percent of the population, die each year from smoking-related diseases, Medvedev said. That compares with 114,000, or 0.2 percent in the U.K.

The government is due to submit a bill to lawmakers by Nov. 1, proposing to outlaw all cigarette advertising and sponsorship as well as kiosk sales immediately, with bans on cigarette trade in all smaller retail outlets and smoking in public places taking effect Jan. 1, 2015.

Last-Ditch Battle

Philip Morris, BAT, Japan Tobacco Inc. (2914) and Imperial Tobacco Group Plc (IMT) have been fighting a last-ditch battle to water down the measures. The companies have asked for smoking sections in bars and restaurants, fewer restrictions on sales and a continuation of sponsorship.

“Many people claim these measures discriminate against smokers, but today almost 60 percent of adults and all children, including new-born babies, are discriminated against by smokers themselves,” Medvedev said. “They are forced to inhale poisonous cigarette smoke even though they didn’t choose to be smokers.”

Regional Sales

Philip Morris, the world’s largest publicly traded tobacco company and BAT, Europe’s biggest cigarette maker, generate about a third of global sales in eastern Europe, Africa and the Middle East. Japan Tobacco Inc. relies on the region encompassing Russia, the other ex-Soviet states excluding the Baltic countries, the former Yugoslavia, Bulgaria, Romania, Croatia and Mongolia for 46 percent of global sales volumes.

Tokyo-based Japan Tobacco, whose brands include Camel and Winston and is Asia’s largest listed cigarette producer by market value, has about 37 percent of the Russian market. It’s followed by 26 percent for Marlboro-maker Philip Morris, 21 percent for BAT and 9 percent for London-based Imperial, according to the companies.

The proportion of female smokers in Russia increased threefold from 1992 to 2010, to 22 percent, according to Medvedev. Two-thirds of Russian teenagers aged 13 to 16 have tried cigarettes and one-third smoke regularly, he said.

Japan Tobacco shares declined as much as 1.9 percent today in Tokyo trading. BAT was down 0.1 percent and Imperial up 0.5 percent in London at 11.25 a.m

BAT and Imperial, the maker of Davidoff cigarettes, fell the most in about a month in London trading on Oct. 8 after Russian health regulators suggested raising cigarette taxes almost eightfold.

Tax Increase

The Health Ministry proposed raising the tax to 4,000 rubles ($129) per 1,000 cigarettes by the end of 2015 from 510 rubles this year, according to a letter dated Sept. 22 from Health Minister Veronika Skvortsova to Deputy Prime Minister Olga Golodets obtained by Bloomberg News.

The move escalates Russia’s anti-smoking efforts. Excise taxes were already scheduled to increase about 40 percent a year between now and the end of 2014 under current government policy. A pack of Marlboros now sells for about $2 in Russia.

The tax increase, if it becomes law, may push Russian cigarette consumption down by as much as 20 percent in 2015, according to Erik Bloomquist, an analyst at Berenberg Bank, compared with his current estimate for an annual decline of 1 percent to 2 percent.

The Institute of Law and Comparative Jurisprudence, a government agency that vets legislation and whose board of trustees is headed by the speaker of the lower house of parliament, Sergei Naryshkin, in August criticized the anti- tobacco law.

‘Constitutional Principles’

The institute, which last year gave its stamp of approval to the bill, in a new assessment criticized the planned ban on tobacco sponsorship and advertising and restrictions on the sale and display of cigarettes.

The tobacco companies’ efforts to overturn the anti-smoking legislation are “worrying because they have hired some very expensive lobbyists,” said Dmitry Yanin, head of the Moscow- based International Conference of Consumer Societies.

Russians spent 600 billion rubles ($19.4 billion) last year on cigarettes, Deputy Health Minister Sergei Velmyaikin told reporters today.

Smoking-related diseases kill 23 percent of Russian men and cause economic damages equal to 6.3 percent of gross domestic product, according to the health ministry, which says the law may save 200,000 lives a year and cut smoking in half.

“Neither the government nor the state are fighting against the smokers, it’s the smoking habit we oppose,” Medvedev said. “Let’s be frank: more than 80 percent of our citizens, including two-thirds of smokers, support the fight against smoking.”

To contact the reporters on this story: Stepan Kravchenko in Moscow at skravchenko@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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Companies Mentioned

  • PM
    (Philip Morris International Inc)
    • $87.0 USD
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